♪ jon: i am jon erlichman, welcome to "bloomberg markets." sonali: and i am sonali basak. a second day of declines. the s&p 500 is down and the nasdaq 100 also down 1%. those names on the nasdaq, the bottom performers are impacted by ratings actions by the worried about valuations -- i have a feeling that will --.

basis points on the day on the back of strong economic data and the reduction of rate cut expectations. it is also setting the dollar higher, highest level since december last year. jon: aside from the interest rate story, overnight we saw some worries about the economic outlook for china. that has waited a number of stocks including caterpillar today, those shares off 3.5%. for developing story were also watching is bayer, the company is focusing on streamlining operations and ultimately, that will impact jobs at its business. deal stories have also been dominant this week. yesterday we were talking about the federal judge that said "no" to spirit and jet, together remember we saw the weakness in spirit stock yesterday. it continues to struggle today, down another 24%. and we have seen analyst commentaries fueling the parent company of instacart on the idea

that possibly could come together with uber, that it might appeal to uber. we will have to see if that comes together. sonali: also waiting on stocks, that strong economic data. december every telesales in the u.s. rising at the strongest days in three months, capping off a solid holiday season. it signals a resident consumer heading into the new year. investors are wondering what this means for rate cuts this year. for more we are joined by reporter matthew bosler. when you look at retail sales, how sustainable are those numbers given the strength to have seen? matthew: that is the big question. economist, have the past year been calling for recession, such a slowdown in consumer spending. we are not seeing that. that continues to be the big question we are waiting for but not seeing signs of yet. i think that is why you are seeing what you're seeing in

markets in terms of the reaction, maybe dialing back those bets on fed rate cuts a little bit. because the consumer is still strong and people don't seem to have a good handle on why their forecasts are not panning out. sonali: this data center yields sharply higher. how does it fair with other economic data that we are expecting? matthew: we had a push and pull the last few days with softer than expected inflation data that has been driving yields slower, than today, you get a stronger retail sales print, and it takes the edge off the bets for more extreme rate cuts, for example, of 50 basis soon as march there. was a bit of that in the markets before. that is being down back now. perhaps we are still going back with the easy -- still going forward with the easing cycle, but nothing to make the fed ease as much like if you had consumer

spending and inflation weakening at the same time. jon: signs of the resilient american consumer. some consumers were taking advantage of discounts with several retailers trying to shift through inventory at the end of the year. how big of a story is that going forward? matthew: it's a big story for a couple of reasons. it's a big story on the inflation front because we have seen goods prices actually going down at a rapid clip over the last six months. the latest inflation data in the month of december, we actually thought of flatten out a little bit so that would imply that perhaps the discounting was not as strong, say, in december as what we saw in the november data. that will be a big part of this question, too, as inflation goes down, do we see some of that consumer demand, unwillingness to pay higher prices, helping to put downward pressure on prices? or will we continue to see woody

have been seeing in the data for the better part of a year now, where consumer spending stays strong even as inflation comes lower? jon: i when i get another data point which you truck which is the employment picture. how much of this retail resilience will play to how resilient the jobs market is? matthew: that is so critical and it goes both ways. the labor market data also has important implications for consumer spending. that is particularly the case going into 2024 as economists really think we are to run out of that excess savings that was built up during the pandemic. so that linkage between the labor market and consumer spending should reassert itself and be important in both directions as we move forward into 2024. sonali: matthew bosler, thank you so much for your time, of bloomberg news. joining us now to talk about

this through a different lens is the founding partner and chief investment officer of attalaia capital management, which focuses on private credit. you think about what matt was saying about the resilience of the consumer, you think about how much debt is outstanding, do you buy that the consumer is that strong? guest: sure. first of all, thank you for having me. the things we focus on is the acid-based part of the private credit universe and a lot of that is spent in consumer spending with her they are lending against loans generated by other consumer platforms or buying those loans. so our data would suggest that the consumer is quite strong. we have a data science platform we have integrated over the years and rid of across dozens of platforms that refinance. the conclusion is, frankly, a bit boring but it is clear that the consumer credit profile at this point is strong and reflects some of the job and

spending strength matthew just mentioned. sonali: what would cause things to turn, think about the riskier parts of the market day, subprime and consumer auto, for example, what would make the dirtier? ivan: the number one risk is unemployment. think about the top five risks, one through four is unemployment. . those numbers are less than four percent. u.s. unemployment numbers are quite strong. we don't spend a ton of time worried over all the consumer credit profile. there are clearly some specifics . you mentioned auto, that is an area we are generates there is for a variety of reasons. it is structurally less attractive. one of the things you see in the auto length cake is asset prices, i.e. underlying car prices were quite high. people bought those cars and they are worth a lot less today. we have postulated that might be

some selective defaulting, people might say hey, i can default on this loan and essentially get the same car tomorrow and reduce my debt balance. so auto is an area that is unique instead of the consumer credit landscape. we think it is particularly uninteresting in the scheme of things, but it doesn't have for the overall picture of the consumer credit profile that is quite strong. jon: we were talking with matt about some of the inflation trends. you have done some analysis on the inflationary impact on consumers as well, what are your takeaways on the front? ivan: sure. we have spent a lot of time thinking about consumer credit strength as well as the impact drivers. inflation is definitely one of those. our basic takeover is that there has been real wage growth in areas, for example, the lower income consumers and that is providing some ballast to the part of the system. not to say it is not important

to the consumer credit, that as matthew before me was talking about, there's a lot of excess savings and consumers are continuing to work through that. but also going back to my earlier point, an employee consumer tends to pay their bills and tentatively flexible in their spending. for example, they may not buy that $20 salad in new york city, the light trade down to something lower-priced. we have seen that flexibility in consumer spending profile. inflation impacts it, but there has been real wage growth and that has been the driver of consumer credit held in that part of the ecosystem. jon: are there any data points you will be watching the next fix eight months to determine at what point will it comes to savings that are being spent, if there is that recessionary, at what point that consumer starts to fold back? -- to fullback?

ivan: i can tell you, there is a single point estimate that we are focused on. but we would say that historically speaking, yes, there's been a strong amount of excess ravings, no question, and that was driven in part by the covid and consumers have been looking through that. ultimately it comes down to, are people employed and how much of their disposable income is going to household obligations today? that is around 14% fed data historically speaking has been around 16%. the consumer is employed, they are not overspending in terms of the relative percentage of their disposable income, and we see a strong consumer there but there is no tipping point or inflection points that we can see in that data that points to

a crossover. sonali: there is the macro and then there is the idiosyncratic. as regional banks start to report results, are there opportunities presenting themselves with the witnesses you are seeing in the traditional banking sector -- the weakness you are seeing in the banking sector? ivan: we bought loons from big banks you would know and small banks you would know. i would say that today the result back fullback, driven in part by svb, has caused regulators to spend more time on what banks are doing. consumer loan portfolios, basic assets that are heavily risk-weighted. we think of it as a risk-weighted diet that banks are going on now and that involves selling both folios and business lines to reduce that because ultimately, one of the things dodd-frank did was get risk off bank balance sheets.

that continues today and almost as a limited group svb. so they are higher dollar price, closer to par to the 70% or 80% of part. they can sell those assets, real estate, that is, because the price would be much lower so the hit equity would be larger. so we are seeing people so "their best assets and quit first and we happily supply capital in those cases. sonali: a long way to go on the regional banks' diet" if you will. stephen tannenbaum says spreads are starting to narrow. >> i would be surprised in the next five years if it is like the last 10 years. the historical returns have gotten, 300 basis point of excess return, i am skeptical

you will get that in the future.

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sonali: the s&p 500 now hitting a sessional the time one treasury's 13 bill young 20 year auction to yield higher-than-expected. a second day of declines on the s&p 500. the 2-year yield shooting higher by a nearly 15%, 4.37 on the day. in addition to rate cut expedition starting to wane for the first march cut. jon: you alluded to the fact that we're seeing seeing a lot of sector struggle. got to our stock of our hour segment. within the financial sector,

charles schwab has been one of the weaker performers. third-quarter results showed profit challenges, certainly new asset. deposits were also a concern. its biggest shareholder is td bank which is coming of, orgreave it's tough is the arson dot-com bubble. that is a story we have been watching, the hangover since last year. sonali: a tough hangover. joining us for more on that is bloomberg's paige smith who covers schwab. looking at them having such a tough year, rudely a tough year since the dot-com bubble, what did the co have to say about woman script -- about performance paige: there was not a sugarcoating going on this morning. i think the executives were quite straightforward, as john mentioned. the ceo came right out and said

that it was one of the company's 's toughest years, maybe the toughest year since he had held that role. i think executives will continue to watch this and what messaging very closely. but it was a very frank discussion this morning on the earnings call. sonali: they had a tough year last year, down 17% on the year and they have been having a tough day on the market. what can they do to turn things around? are they making tangible changes? paige: definitely. some of this data back to the retail banking turmoil last spring. you look at today's earnings, there were some figures that were down, including the new asset deposits. but out of this dates back to last spring which was a period of time where depositors were sort of yanking their funds to try to seek higher-yielding alternatives. i think that the executives were just sort of trying to address those hangover items, as you

say. today shares fell intraday since march. they have since pared some of those losses, but it has certainly been a tough day for schwab. jon: there were some messaging around funding sources in the future. i tied that canadian connection in because of that deal with td ameritrade, and the integration of that business is something you have been covering as well. in terms of the business going forward, the size and scale, are they sounding out the about that>> to touch on td ameritrade, the executive did weigh in on that this morning. it is around 90% completed at this point in time and they said the balance will be completed, i would say, by may. in terms of moving forward, they are looking at taking some tangible steps such as

evaluating the duration of their securities portfolio, also looking at some other items that were detailed this morning on the call. jon: in terms of the inner workings of the funding sources going forward to try to avoid the scenario that unfolded last year, any more details that you can share with us? paige: certainly, another item to executives touched on that they were evaluating was just paying down those expensive funding sources that schwab turned to last year such as regional certificates of deposit, and also the more expensive federal home loan bank advances that they took out to, again, respond to customers who were looking for higher-yielding alternatives. as we all know, it has gotten much more expensive to borrow for everyone these days. sonali: our thanks to bloombergtechtv paige smith was -- bloomberg's paige smith who covers regional banks.

coming up, jp morgan is hiring. part of our interview with the bank president and coo next. stick with us. this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

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jon: this is "bloomberg markets." i am jon erlichman with sonali basak. sonali: jp morgan says they are hiring at the bank sees opportunities in everything from dealmaking to u.s. wealth management the international retail banking. president and coo daniel pinto sat down at bloomberg house in davos with francine lacqua at the world economic forum. take a listen. >> i think that we are focused in whatever is our core investment areas, some of the was that i mentioned. at the moment we are employing at the end of this year, around 320,000 people.

the number of people the employee has been growing. i think where we see opportunities, we can have our clients, for sure we will focus on that. >> so, hiring this year? >> yes. >> good bonuses is what we are expecting, right? is this your going to be good for your bank? >> i hope so. you never know. by the components are therefore a strong year. -- we know what the components are for a strong year. we see increasing well investment banking. that is our view for the last couple of years. markets will do well. we see more growth in payments. and when we look at our plans, we will increase our staff this year, for sure.

sonali: that was jp morgan president and coo daniel pinto. what is interesting is jp morgan in the united states, for banks, is the largest employer, 320,000 people last year with the purchase of first republic. number two was actually citigroup, and citigroup is dropping by tens of thousands in headcount. so the divergence between jp morgan's hiring versus the rest of the banks is stark -- bank of america, citigroup and wells fargo are all dropping in headcount. compensation costs rising even with less headcount. it shows you the conundrum of these banks to compete on talents today. jon: yes, it is helpful to point out some of those differences. exist one comparison that is worth making if we are talking about the size and scale of jp morgan, is that you have the head of the largest canadian bank, rbc, speaking to bloomberg in davos, and he also indicated that there is a willingness on his behalf to expand into the wall street business, into the

capital markets. so while all the big banks obviously, are doing with different realities, when you are the biggest in this case of jp morgan or canada royal bank, there is possibly an opportunity to expand. sonali: certainly is. i don't know if you saw this, royal bank of canada had made an impressive showing on the lead tables last year, getting on bigger deals, so to your point, maybe they want to take some of that income and put it back into new talent. before we go, the s&p, again, at or near record lows, about 1% lower on the day. the second day of declines. new economic data started to take some steam out of the potential rate cut story. now, the odds are the flip of a coin. jon: certainly on that point, some of the rate-sensitive names, real estate and utilities have been the weaker performers today. right now all of the subgroups tied to the s&p are in the red.

we will continue to watch that rate discussion payout on wall street. for sonali basak, i am jon erlichman. this is bloomberg. ♪ - super excited to open up my diploma from southern new hampshire university. ♪ ♪ - i'm nervous, i'm excited. ♪ ♪ - [man] okay, let's see it. let's see it. - oh my gosh. - jesus suarez, i did it and it's here. (group cheers) ♪ ♪ - [narrator] next term starts soon. visit snhu.edu. visit snhu.edu. how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

romaine: the markets finally seem resigned to listen to what central bankers have been telling them along. i am romaine bostick. >> and am scarlet fu. 2023 has given way to risk are generally as christopher waller's comments gratuity to elaborate. the s&p 500 is limited losses. two days of treating this week and two days