Here. S p 500 just flipping into the green. Really trying to shake off that third day of declines today. The nasdaq 100 still down more than. 1. You have the twoyear yields up about one basis points now, just under 470, very volatile. And then you also have crude oil still above 85 here, still up. 8 at the highest level since october. And we have some breaking data and Michael Mckee has the details. Life would be a lot easier if we didnt have contradictory situation coming in. So not as big of move down in prices paid for services as we saw a move up in the prices paid for manufacturing. The only people that cared about is im employment in the service ism employment. We are seeing some contraction in employment in the services of business. All in all, this is a good report but slightly weaker than it has been and that sort of breaks this chain of strong reports that we have seen all week. Sonali just as i was on the board there, you had twoyear yields above 73 for a moment there, getting back below 70s. How do you think about whats ahead . I suspect everybody is going to be focused on j. Powell this afternoon. Theres not enough data that would cause him to change his view. Maybe people are looking for more guidance on what theyll be looking at or how he describes the economy since the numbers that we have had have come in for the most part, strong or stronger than expected. Sonali yields now at 469, hanging that to a 470 level. A lot of fed speak ahead. Lets dive into those markets now. Because we are joined by chief market strategist. You look at this conflicting data and it is really throwing a wrench in a lot of the expectations that were seeing for rate cuts. But how do you read into the volatility for new money to put to work . The risks are underpriced as pertains to the uncertainties in this market. We could see a rising risk of a fed induced recession with too high nominal rates meaning that real rates really start to bite the u. S. Consumers. So those two fat tail risks are underpriced in the market. Sonali where do you think theyre most underpriced right now . The front end of the u. S. Treasury curve and if im right and the fed does cut this year two times, then were going to see that big swath of cash thats sitting in in money markets thats returning 5. 3 . Its maintaining some exposure to the equity markets which you can protect yourself with at the money for 12 months out. Sonali how do you think about the mag 7 where it stands today and frankly, even some of the a. I. Stocks . Kathryn i was looking at the numbers with our team and after the major breakout weve seen january 10 which is the highest the market top in the past two years for the first time in a year, historically, that implies around a 15 return for the next 12 months. And when you look at the breadth, 86 of the s p 500 companies are above their 200 day moving average. So thats a good sign. That shows that the breadth is widening. You hope you dont need it but when you have it, youre very happy that you do. And you can buy the protection pretty cheaply, around 4. 5 on the s p 500 for 12 months out at the money and you can protect those triple qs. The Technology Sector as well. So you maintain your exposure to this ongoing rally which is likely to continue without some flop in unemployment and consumer but youre protected. Sonali basically youre saying keep buying but hedge . Kathryn yeah. Complacency is pretty high. Everyones discounting this perfect landing underpriced risks. Sonali would you take profits further given that the breadth is expanding . Kathryn i think it makes sense to rotate out of the high flyers. And thats why i like the barbell approach. Maintaining exposure to the cyclicals but then buying those underloved sectors such as utilities and staples that have underperformed in the past year but in the event of some we were talking about oil prices potentially surging. Oil could jump 40. That would incite inflation. So it does make sense. Sonali with so many people concerned about that acceleration of inflation, do you start to almost bet on it at this point . How do you think about what role inflation plays in the market today . Kathryn 1. 8 of that last number of. 8 comes from housing. If we do see housing drop in terms of prices, which new tenant rents is indicating will happen with a fourmonth lag because new tenant rents have been dropping, that could take some of the pressure off of inflation. I do have a 2. 6 in core p. C. By the end of this year but thats going to be hard to get to that 2 trend. So the feds going to have to make some tough choices, higher target or break something to get to that 2 target. Sonali when you think about what could get hurt under higher inflation environment, where do you start to worry . Kathryn the Interest Rate sensitive sectors i think weve run the risk of recession. So then you see leverage loans for example, which have outperformed massively in the fixed income space get hit. High yields get hit. You see the bringing forward of the credit cycle which we have not seen play out as yet that one would expect after 525 basis pointses of rate hikes. Thats where we will see vulnerability where the fed would have to maintain nominal rates. Sonali jess, were seeing a pretty significant move. The lowest since november. Thats right. And its seeing its biggest percentage drop since late january. So when you are looking at intel, one of the biggest s p 500 and the biggest decliner, so this does come after it did disclose operating losses in its semiconductor business. And this is something that theyre having to push off those expectations. The stocks down 18 yeartodate which obviously underperforming the broader s p 500 and also if you look at intel and stock have been around 90 . Pulling back but in other corners, have to bring up tsmc. So if you look at the u. S. Listed shares for this dipping, pairing back from some of its earlier declines, given the earthquake in taiwan, even Bloomberg Intelligence or jefferies, theyre pushing back on how much concern because you do have more factories opening up. Sonali how is this impacting other players . Apple is shaking off some of the bad feelings that investors have in the market for that stock. Just the massive buybacks that apple tends to have. Also just the dividends and then also when it comes to tax laws harvesting and given the stock was up closer to 50 last year. Looking at those key thresholds, it might be getting close to a support level. Cal me foods. Calmaine foods. The biggest supplier of eggs in the United States. So looking at this stock and its gains today. Up close to 7 . This would be its best percentage gain of this year but this is al coming back of a steep decline. That was at that time, the biggest decline. Youre looking at whats happening temporarily after chickens at its texas point did test positive for that highly contentious and contagious bird flu there. But when it comes to an earnings perspective, so you are seeing that stock more supportive. This is something that wouldnt be an issue for this company. Sonali we thank you so much for keying an eye on all thats moving. Next, that boardroom battle at disney coming to a close. Vanguard coming in hot. Well bring you the latest next. This is bloomberg. How am i going to find a doctor when im hallucinating . What about zocdoc . So many options. Yeah, and dr. Xichun even takes your sketchy insurance. Xichun, xichun, xichun youve got more options than you know. Book now. You know whats brilliant . Boring. Think about it. Boring is the unsung catalyst for bold. 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Vanguard and blackrock, disneys largest investors are siding with the board. And while the battle might be nearing to a close, this could have a major impact of markets. A proxy battle in the Magic Kingdom does not go unnoticed. Disneys weight is over 2 . And nelsons proxy stock could move the dough. And joining us with the fallout is bloombergs ed ludlow. Is it in the bag right now for disney and what comes next . Its hard to say its in the bag. Good morning. Wow, thats a new one. Vanguard and blockbuster are in the bag. The institutionals has sided with bob iger but there is an unknown, a wild card which is the largest body or single entity is a group of frankly Retail Investors that make up 30 of the Shareholder Base and Retail Investors historically side with the activists thats bringing the proxy battle. At least 60 of the vote was counted and you factor in as well, the shareholder can change their vote at any time. As reported with george lucas backing iger, the force is strong with him right now. Sonali ha, ha. Coming back at me with a george lucas joke. How do you think about the challenge forward for bob iger even after this battle . The nelson peltz wants a Succession Plan and hes upset about the streaming business performance, which continues to lose money but bob iger promise left hand deliver a profit in 2024. Whats harder to tell is that in the 133page manifesto that nelson put forward what is fixes any different from what bob iger is going to do whether or not peltz is on the board. That is the question. The strategy from disney has been to raise prices for consumers on streaming while cutting the budget on comment spend. And peltz takes issues with dids issue with the linear tv business and the issue with fox buying to achieve scale. So, bob iger might not necessarily do anything differently and as you pointed out at the beginning, investors do pay attention. Succession probably being the biggest question that lingers if iger manages to ward off the activist threat. Sonali ed ludlow of bloomberg television, thank you for keeping an eye on the story. Were back with Kathryn Rooney vera. I love using disney to talk about the Dow Jones Industrial average. Were talking about breadth in the market here. How do you think about the indices . Kathryn the estimated Earnings Growth is 1. 3 . If it turns out to be the case would be the third consecutive quarter of Earnings Growth which is setting us off for a positive year this year. Historically outside of recession, sonali, who consecutive growth is rare. And i suspect that even if the fed isnt able to cut Economic Growth, the combination of Economic Growth and disinflation if 2024 is a repeat of 2023 means the s p could move higher. But this is a market that is so built on this fundamental concept of soft landing that were it not to occur the repercussions would be dramatic. Sonali lets talk about anything outside of the s p as well. Theres been that russell 2000 raid that has been brewing under the surface. That has constantly gotten beaten down at any sign of inflation. Kathryn yes. Sonali how do you think about how vulnerable those small and mid cap stocks are right now . Kathryn the truth is is that under the expectation of dramatic rate cuts, small caps would do remarkably well. And i had to steepen our calls. But those two calls do well with the fed that cuts rates. Were it not to, the growth is above potential and that is reinflationary then they dont do so well. Where inflation remains sticky, small caps underperform and we get an important retracement in duration as well. Sonali youre not the only one closing out trades out there. When you think about what were facing a week from now, what are the big earnings upsets or surprises that you might expect . Kathryn i think that if we get some surprising economic data, weve seen very mixed data as you pointed out earlier this morning. If we get some surprising data on the labor front, then i think the cyclicals could be hard hit, especially the high flyers. So we get nonfarm this friday. Its going to be a good number. But the labor market is what the fed is focused on. A billing upside or a dramatic downsize. That will bring a market. Sonali we say volatility but how much and to which markets . Kathryn yeah, i think tech, which is the leader would face the most downside under an environment where the fed cannot cut. And we interest a potentially stagflationary scenario which is the biggest risk. So i would say the equity markets, theyre almost breaking three deviations from the mean and in terms of their overvalued nature would be the hardest hit. Gold is doing very, very well. Thats one of my top picks as well as cash instruments. Sonali now its interesting when we talk about tech, is tech a monolith . Do you think there are some parts of tech that would be insulated . Weve seen prior parts of the cycle where almost some of those big tech names have been like a shield . Kathryn thats right. Thats a very good point. Where can we find the tech trade that hasnt already been priced in . And there are opportunities within financials, within health care, sub sectors of these areas which have companies where you can stock pick and go in and say these guys from actually deploying a. I. Because at the end of the day, what were seeing is corporations like to talk big game but they havent executed technology or a. I. So i think a. I. Has to deliver to maintain the maintain Earnings Growth and validate that multiple expansion, which drove the market last year. Sonali when were talking about tech spending, when youre an infer and youre looking at these companies, what do you prefer at this point . Do you want them to be spending their cash on dividends . Do you want them to be buying other companies, going out there and acquiring as m a markets come back . Kathryn theres a lot of profitless tech companies. I think that this is a different market. I dont consider at it bubble similar the tech rupture in 1999 principally because a lot of these companies are profitable. And i think there are legs to this rally. So i think the trick is to find those as you mentioned, i think you alluded to this, find those sub segments that have not yet priced in this improvement in productivity that i still think is in the offing from the actual deployment of artificial intelligence. Sonali the nasdaq 100 flee into green teraon the day territory on today. What is that interest level that will not impact the exuberance were seeing in the market even if you expect less rate cuts . Kathryn if we get 5075 basis points, thats going to be what the market is expecting. If we get zero, if Economic Growth does post 2 , and we get zero cuts, i think the s p can be up another 15 according to that major breakout theory. But then again, we have those fat tail risks. Were the fed unable to cut and have a hike, thats another story. So i think were my base scenario is 60 chance of a softer landing. 40 of stagflation coming into 2024. Sonali Kathryn Rooney vera, were going to have you back soon. Thank you so much. Still ahead, were going to take a look at the Companies Making the most buzz on social media today. Our social climbers is up next. Our social climbers is up next. This is bloomberg. Awkward que. Is there going to be anything left. Left over . Yeah. Oh, absolutely. inner monologue my kids dont know what they want. You know who knows what she wants . Me i want a massage, in amalfi, from someone named giancarlo. And i didnt live in that shoebox for years. Not just with empower, we get all of our financial questions answered. So you dont have to worry. 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