Katie welcome to Bloomberg Markets. You take a look at these markets and you can see there is green on the screen. The s p 500 is up by about 0. 5 . Compared to what we been seeing, its exciting. The nasdaq 100 is seeing a bigger game, up about 0. 8 . Weve been talking that inflation data coming in as expected with a bit of a relief there and you can see that in the bond market as well. Not huge moves that its the direction of travel. You have yields moving lower right now to the tune of four basis points on your 10 year treasury yield after the feds preferred gauge of underlying inflation, the pce rose in january as expected, supporting the feds patient approach. For more, were joined by mike mckee. After what we saw in cpi, this is probably good news for the fed . Mike its good news for wall street. You probably heard that big whoosh at 8 30 a. M. In the pc was a little higher than its been in recent months but it is not too high and a yearoveryear basis, inflation is still going down. Pce rose by 0. 3 on a headline basis during the month of january and 2. 4 down a to confirm the yearoveryear perspective. Both of those are lower than they had been in the disinflation story continues in personal income was up 1 due to the Dividend Payments that went out at the end of the year. Wages and salaries were also up a decent amount. The dividend thing is interesting because what we saw was a big increase in portfolio management. L street has been doing so well that it is contributing to inflation. We were up 5 for that category of inflation, helping drive it but the percentage changes different. Housing and health care did not get a big pop in the cpi. Weve got more data coming up but jay powell is going to be the issue going forward. He testifies on wednesday and thursday of next week and we will carry that live. That will be the risk moment for markets in terms of the fed trying to reset perceptions. Katie he will be testifying during this show so a lot to look forward to. What can we expect him to say . What will the tone of that testimony be . Mike after the pce report comes out relatively decent and we sought december revised lower, he can make the argument again that progress is being made on inflation but there is still more work to do. We have a little bit higher monthly inflation in january so we want to wait and see. I that continues into february. I dont expect a whole lot different but markets have been very interested in whether the fed will give them guidance about may, june or even in july as the first rate cut. We will see what he has to say. Katie its fun to hear what lawmakers ask of jay powell. Michael mckee, thank you so much. Lets dive into the markets more. Were joined by the head of Derivatives Market intelligence at sebo. Its great to see you. Great to be here. Katie its a big macro day and if you look over the course of 2023, it feels like the fomc and the cpi have turned into nonevents. That has changed a little bit year to date if you look at some of the numbers. What does that tell you . Is that a sign the broader volatility is coming back . What stood out to me was in the lead up to todays pce is how much there was a lack of fear across all asset classes. If you look at equity, vixen the low teens, its not just equities but if you look at credit volatility near historic lows. What that shows is that investors think inflation is still an ongoing risk but against that, people are weighing betterthanexpected Economic Data and thats why markets are so resilient. Even though inflation is coming down and making progress, its still sticky but Overall Economic growth is picking up. Within equities, earnings have been great so against his backdrop, people have gotten more constructed. Katie when you think about the vix and some of these skews, do you view that as complacency or exuberance . How would you characterize not a lot of demand for downside hedges . To give you some perspective, measures of skew in the s p versus upside calls, that hit a 10 year low recently. Low demand for the protection and a lot of demand was upside calls. It might be a sign of exuberance but one thing i would point out is what is underpinning this flat skew environment is over the past two years, markets have been more vile dez volatile on updates and down days. When we think about stocks crashing lower and grinding higher, over the past two years, its been the opposite. Weve seen grind lower moves and then rip higher. Against this backdrop, its not surprising that people are turning more to call options to manage the upside volatility in the market. Katie should that make me worry . It sounds like maybe we are entering this crash up environment and you are not seeing the demand for downside protection. How do you feel . It comes down a little bit to positioning and how overweight people are in equities. A lot of it comes down to people using options to help express tactical views. Because there is so much uncertainty in the macro environment, instead of galling dez going all in, they are using options. You can use call options if you think the market is going to rally. How does that defined risk reward with options . Thats what striving some of the dynamics we see in the Derivatives Market. Katie the increased use of options and you are seeing shorter and shorter term options, zero day options, what does that mean for the Market Structure of this market . Do you view that as distorting some of the traditional measures of risk we look at . Thats a great point. People talk about zero day options and weve seen tremendous growth in that segment is comprising about 45 of s p volume up from 5 eight years ago. People look at that growth and it must be taking chairs from the traditional shares but thats not the case. The overall derivative volume is growing. Its growing faster but the rest of the high is growing. If you look at regular expert rees, thats also growing in terms of volume. People are stilling this are still using one and sixmonth options. It opens up new risk premium for investors to get what they want. Katie who is actually using zero day options . They say its mostly retail players going into these beds. Is that true or are we seeing some of these professional Money Managers using this . Absolutely the second case. The narrative that this meme with zero day options, its balance between retail and institutional at the balance between trading of puts versus calls. The put call ratio for zero day options has hovered around one. It tells you that in terms of the activity we are seeing with zero options is not oneway speculative flow. People are using it for hedging purposes and using it for yield harvesting and selling these options to generate income. That will be a growing use case. People are trading futures of given the diversity of use cases, thats why we continue to see a balanced flow in zero day options and the net Market Impact is fairly minimize. I would say what you see out there is fairly exaggerated. Katie when we talk about his lack of demand for downside protection, should there be people picking up protection on the cheap . If you are concerned about downside risk, now is when the now this is what the volatility market is giving you. It is a Good Opportunity if you are looking to hedge. One area i want to call out if you talk about no demand for hedges, we see demand in vix options. The volume hit a record high last year. It continues to be very elevated. People look to fix options to hedge tail risks. Its the black swan of hitting the market and driving volatility higher. Thats different from your traditional portfolio hedge. We are seeing increased demand for those hedges and decreased demand of traditional hedging strategies. Katie the vix has been going nowhere fast. A little bit counterintuitive. Stick with us a lets look at whats moving underneath the markets. We will do that with emily griffeo . The biggest drop on record for the Cloud Software company, down over 20 after the Sales Forecast missed after the bell yesterday. They say their product revenues coming in at 745 million and estimates were 769. Snowflake said there ceo is stepping down. Now the Senior Vice President of ai will be stepping in as ceo. Maybe there will be more ai headlines out of snowflake. Katie they can use an ai headlines right now. Sales this years down quite significantly at this point. Not exactly the same story for salesforce. Its been a choppy trading session and it was down in the premarket. Now its just a little bit in the green. Its slipping into the red as well. There next year forecast missed estimates and investors were hanging onto that in the premarket. They see revenue at 37 point 7 billion up to 38 billion which is worse than expected. Salesforce were up over 30 in the last 12 months and now many investors seem to be focused on what is the growth rate going forward. One analyst said is this a Sustainable Growth rate in the Single Digits or double digits. A similar story for snowflake. Companies have been pulling back their spending on software so all of the Software Companies are now trying to pivot their strategy and look for what they can actually do to get the market share back. For salesforce, they announced a new ai tool that involves generative ai. The buzz word seems to be their strategy to get those enterprise customers back into their market share. Katie we will see if that leads to more engagement. Salesforce is not doing too much right now but when it comes to bath and body works, the direction of travel is pretty clear . The biggest intraday drop since november of 2022. They paired losses a little bit but their earnings missed expectations in the First Quarter forecast. Their net Sales Forecast, they see down 4. 5 . Thats versus estimates of loss of 1 . The fourthquarter revenue results beat their unadjusted eps but its been a tough go for a lot of these retail companies. We know bath and body works have candles and hand sanitizers and lotion. I just read they are trying to pivot more toward laundry products in a way to maybe boost their sales. Maybe thats a cyclical product. Everybody needs laundry. Maybe you will pull back on buying a candle. Katie i thought you said they were going to pivot into ai. Maybe next quarter. Katie thank you so much. Coming up, bitcoin soars over 60 thousand dollars, pushing toward a new record high. We will look at whats driving that rally and if it can keep up the momentum. This is bloomberg. Something amazing is happening here. Retailers are moving inventory quickly and securely. Thats because cdw designed and built a solution with cisco security. End to end protection, defends against attacks and makes better decisions in real time. So warehouse and Customer Data stay protected every step of the way. Make amazing happen. Cisco and cdw. Katie bitcoin is on its way back to the moon with prices of the cryptocurrency climbing back toward record highs as billions of dollars flood into the newly launched spot etfs. For more on this, you take a look at the numbers and the fact that we are well above 60,000 once again on bitcoin, do you think we would have this conversation had you not finally seen the launch of those spot bitcoin etf . Being virtually at alltime highs, six or 7,000 off of that, but the catalyst has been the etf approval. If you look at when it started looking positive, this thing was still under 30,000 so a lot of the runup to the launch was due to people expecting an etf launch. The flows have just been living up to the hype. Katie and the flow is fascinating because as you know, when it comes to a lot of the lack forms and the big wire houses, is not necessarily that these products are approved with the full stamp of approval and yet we are still seeing billions of dollars of net inflows. We are at 7. 4 and basis. We have ishares its over nine billion in assets. If you look at the year to date numbers, ibid is number three. Its taken more money and you dont have to go very find very far. Some of things are the most traded etfs in the world. I dont know how much longer this can go on but if these things said they were going to be a flop, they been proven wrong. Katie plenty of people also taking a victory lap right now. Thank you so much. Tune in today at 12 30 p. M. For interview with mike nova gratz, Galaxy Digital ceo, perhaps also taking a victory lap now. We are back now with mandy zute. I wont ask you about crypto but lets talk about china. I comes to china related etfs, you see a lot of excited action particularly in the options space. We know the chinese stock market has been a big question all year. How are you viewing the activity you see there . We noticed very bullish sentiment in the chinese etfs and a lot of outsized call buying. Its more bottom picking rather than High Conviction view that china is headed for adorable rebound. There is still clearly a lot of policy risks and a big question in terms of their Economic Growth outlook. What stands out to me in the Derivatives Market is that people are using options to play this potential running out of the equity rally. Its been dominated by the mega cap tech names. We are seeing core allocations with tech but using options to look for potential laggards and where we could see a rally. In the u. S. Its been smallcap equities and internationally, a lot of x u. S. Indices. Europe, japan etc. Have been a noble a notable theme. We are excited to be launching options on three new ms ci acquisitions. That will help investors navigate and play that. Katie lets talk about emerging market specifically. Weve been talking about low volatility in the u. S. But when it comes to emerging markets, the ball has the bar has been low which is not what you would associate with em. If you look at the vix, the spread versus the vix really blew out early january with what china was going through. Since then, it has come in quite a bit. Is the outlook for china improves as we see more policy support for the region, if em can decouple from china and im not sure if it can, when there is heightened china risk, em volatility picks up. It has not decouple. Katie i feel when it comes to em especially in the last couple of months, i have this unbundling conversation and i talked to people bullish on em but its em exchina. For sure and one thing to keep in mind is if we take a step back, i think whats going on with china could have a dampening effect. Weaker Growth Prospects coming out of china is why Commodity Prices have been retained despite the geopolitical risks. China has industrial policy subsidizing exports means we will probably see greater than expected goods deflation. When we talk about fed policy and the path forward, china will play a big role in that. Katie we talked about china and the u. S. And em more broadly but we havent talked about europe. You hear the random call for europe outperforming the u. S. This year. Are we seeing any positioning along those lines . Not so much in europe because the european backdrop and growth story is not there yet. Recent data has come in better than expected but the outlook for the year is weaker growth out of europe. Its also more persistent and sticky inflation there. We will see what happens in that region but europe is a region that is most exposed to is more exposed to china than the u. S. If europe is exposed to china weakness, thats probably not where you want to be. Katie i really enjoyed this conversation. Still ahead, we will look at the Companies Making the most social was today. Thats up next. This is bloomberg. Super excited to open up my diploma from Southern New Hampshire university. Im nervous, im excited. [man] okay, lets see it. Lets see it. Oh my gosh. Jesus suarez, i did it and its here. group cheers [narrator] next term starts soon. Visit snhu. Edu. Visit snhu. Edu. Katie time for social climbers, look at the stocks making waves on social media. First up we have c3 ai effort reporting cells that suggested customers a responding positively to the companys new aibased apps. We will speak to the companys founder and ceo today at 4 00 p. M. New york time. Next up, best buy reporting sales that beat expectations. They are in the midst of reversing a twoyear slump due to softening demand for electronics and appliances. Finally, we have Weight Watchers international shedding more than its share price, Oprah Winfrey is leaving the companys board. That is a fresh blood to accompany struggling to compete against obesity drugs. It was recently reviewed revealed that oprah use these drugs as a maintenance tool. Weight watchers is currently off by about 24 . You can follow all the latest company buzz on tre go on your terminal. Its an update, small one nonetheless. The s p 500 is up by about 0. 3 . More if you look at big tech where the nasdaq 100 higher by about 0. 6 . Volatility continues to fall and so do yields. Coming up, hyatt on a sixday winning streak since beating a summons last week. An occlusive entity with the company ceo next. This is bloomberg. 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