♪ >> our base case in the u.s. is for every company second half of 2024. >> i think the next leg of the recovery is where you start see cuts. >> there definitely is cover for them to start to cut. >> it will come in the beginning of the summer, june, maybe july. not only do i think that is what is going to happen, i think that is what should happen. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and

annmarie hordern. jonathan: this is bloomberg surveillance alongside lisa abramowicz, together with annmarie hordern. the equity market in the s&p 500 totally unchanged after three weeks of gains. what a week we've got coming up for you. the fed on wednesday, payrolls on friday. we begin with breaking over the weekend, it got to go straight to it. a big revaluation of risk in the middle east. lisa: three u.s. troops were killed on the border of jordan and this is a true escalation, that's what all of the notes are saying. 34 injured on that particular base including critical brain injuries which is a deep concern not only for now, but also for later. the question is how does the u.s. respond to something that quite clearly does materially shift the calculus for how much the u.s. gets involved in this war? jonathan: foreign policy hawks immediately over the weekend saying hit iran hard, hit them

now. is the message from senator graham and others. annmarie: republicans are going after this to take a strong approach. this ministration has for months been saying they don't want to see an escalation in the middle east. they are going to have to take a stronger approach. not deterrence, an actual approach. jonathan: things are pretty calm. in the commodity market, crude is totally unchanged. wti right now about $78 per barrel. lisa: this seems like boiling a fraud. there is one tit-for-tat and another and another and any one of them could be escalation but a lot of people are just shrugging it all off. they need to europe, but more broadly has created something of existential crisis with supply disruptions.

how long can that complacency continue? jonathan: there's two ways you can go. you can go hard on iran or push israel to go back. they are these decisions that the administration has got to make. annmarie: the last sentence of that statement was have no doubt we will hold all those responsible to account at a time and manner of our choosing. there will be a response. but what is this response going to look like? if they want israel to back off in gaza, there are peace talks happening as well over the weekend. jonathan: i mentioned things were pretty calm, they are in the equity market as well. we are positive by 0.03% in the bond market, terry haynes of

pangea policy and president biden facing pressure to confront iran looking ahead to the big earnings, the fed pat forward and why he thinks this s&p 500 could break below 4k. that story a little bit later. we begin with escalating risk in the middle east. three u.s. soldiers were killed and at least 34 injured after a drone attack in jordan over the weekend. iran's foreign minister the country's involvement. the president saying have no doubt we will hold those responsible to a time in a manner of our choosing. terry haynes joins us now. good morning, let's get straight to it. the events of the weekend, how does that change foreign for this white house? >> i think it changes it incrementally but not any major way. it's important to say what this isn't and what it is. what it isn't, it isn't world war iii as some presidential candidates have it.

i think what you will see from the white house is they continued proportional response and they've got to thread the needle pretty carefully. a devastating and strong response but at the same time threads the needle to make it clear there is not going to be huge escalation. i think they will probably take a little bit of time. that is more or less the standard language and what it means diplomatically is to expect a more or less standardized response from the white house. lisa: how cohesive is the approach of this white house? i ask this in a time when there is been working 150 attacks on u.s. soldiers and iraqi, in syria, with a lot of people wondering whether the u.s. is going to pull some of these troops out.

how much has the administration really talked about that? terry: i think it implies a couple of things. this would imply weakness which is the last thing the white house wants to do particularly because it is stepping up attacks to defend the red sea quarter. you had a united states presence in the region for a very long time and to pull troops out at this point would send a very bad message about the nature of the united states commitment to countries that are allied with us in the region. i will include not only saudi arabia but independently and importantly, jordan here. and i would look for jordan's response to be a good bellwether , but that is an independent country with its own independent interests, united states is

going to have to continue to engage carefully to make sure whatever the united states does, better damien interests are not unduly pressured as well. annmarie: lisa mentioned these hundred 60 attacks service members have been under, but now we have three service members dead and dozens other wounded. will washington view this as a new redline? terry: that's a very good question. i think the answer very likely is no. i think it probably increases the force of the united states response. annmarie: you've worked a lot in congress and been a liaison as well between congressional lawmakers in the white house. you see republicans pushing biden to attack iran directly.

would he need to go to congress for that type of approval? terry: he will say no and congress will say yes. the interpretation of the war powers usually varies depending on whoever's parties and the white house, whoever's parties in congress. what will end up happening is that biden will take an action, inform congress quickly but in its own time. elements in congress will complain in the world will go on as before. jonathan: the former president would say this wouldn't have happened if he was still in power. how has iran changed over the last few years and what kind of iran with the former president have to confront if he did indeed come back into power? terry: you got two kinds of issues here. i want to get to the second one that i think is unappreciated markets, i yesterday. one is that you've got an iran that not only has this variety of proxy networks but now is

interested in using them very aggressively to try to make its points in its conflict with both the united states and with arab countries that are western allied. secondly, and the point that people unappreciated, is we are now up against more warnings of the potential for iranian nuclear capability. iran is going to have the ability to have nuclear weaponry. there are a number of credible people in washington and elsewhere that are warning about that. the administration is going to have to thread a needle here, not only in terms of the iranian proxies, and biden was very careful to blame proxies for this, but also the looming question of iranian nuclear capability which could put it into a different category among nations.

annmarie: the international atomic energy agency director joined us in davos and told us iran is at a level where they can build and generate these atomic warheads. what is the biden policy to 60% enriched uranium under this iranian regime? terry: your interview was one of the sources that i cited on that. the policy is that they don't want to go above that. but the reality is they are powerless to stop that. that can be seen as a failure of biden policy and john's question, can also be a trump policy because trump with the one who decided not to negotiate with iran anymore. regardless of the blame game, what you have is a muddled united states policy for about the last 10 years with iran and the priority has to be not only on figuring out the immediate response here, but also kind of rightsizing u.s. policy with iran and engaging our allies and

friends in the region in a creative and individual sort of way, not treating them as a monolithic block, but individually to see how we can best push back and best sure of our interests and those of their allies in the region. jonathan: great to catch up as always. that last point i think is so important. the iran of four years ago is very different to the iran of today. annmarie: because now you have iran enriching uranium at 60%, this is weapons grade. this is a massive concern for the biden administration but also when they came in they actually took away the iran mission center at the cia and made that part of a more regional, cohesive desk at the cia, and some say that was a mistake. there should have been a select group of people that just focus on to run. jonathan: things felt really unsettling over the weekend. equity futures basically unchanged on the s&p 500.

in the commodity market, a rally last week. wti this morning just about positive by one quarter of 1%. let's get you in up that on stories elsewhere this morning. here is your bluebird brief. >> oil is on the move following escalating tensions in the middle east. a tanker carrying russian fuel was struck by a missile is a left the red sea on friday and the most significant attack yet by rebels on an oil-carrying vessel. meanwhile, the uss three service members were killed and 34 wounded in a strike on a u.s. base in jordan by iranian-active militia over the weekend. tehran has sought to distance itself from the attack. shares in china's evergrande plunged 21% and within halted in hong kong trading following a liquidation order from a hong kong port. the judge saying the property developer will be taken over by new management in order to carve up $300 billion of liabilities. as of friday, evergrande's dollar notes traded at just 1.5

cents on the dollar. the chiefs and 49ers are set to meet at this year's super bowl. kansas city aims to be the first nfl repeat champions in almost two decades. it is not clear whether taylor swift will be there to support her boyfriend, cheese tight end travis kelce as her tour schedule has her in tokyo through february 10, the day of the super bowl. jonathan: can they move the concert a little bit earlier? >> are you ready for it? it is iteris with reference. annmarie: the nfl, they will want her here. i have friends who do not care at all about football and on the week and are like i need to find a part the chiefs game. jonathan: the taylor swift game specifically, not the chiefs game. lisa: this to me at the most hilarious point. there is an entire article written about how they show taylor swift less last night and they had in the past and that was controversial for all the people who were just watching the show for her.

i've got to feel the heartbreak for the detroit lions because they will be did lose a game that they were poised to win and on the other hand, we see this movie before and the chiefs won. i don't know. kelce, mahones, are they going to come, taylor swift comes? jonathan: great for advertisers worldwide. very, very depressed about that second half. i went to bed, it seemed ok and then it turned around in the wrong direction. up next on this program, a pivotal week on deck. >> the senate has been very clear in terms of its forward guidance in the market is saying we are going to listen to you. that's very problematic. jonathan: live from new york city this morning, good morning.

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city, three weeks of gains on the s&p 500. equities right now just about positive by 0.03%, yield a little bit lower. 4.1%, tension in the middle east. positive by one quarter of 1%. $78.21 on wti. brent crude, 83.80. a pivotal week on deck. >> the fed has been very clear in terms of its forward guidance in the market is saying yeah, sure, but i'm not going to listen to you. that's really problematic. >> when is that first rate cut coming? >> june, maybe july. jonathan: investors hoping for clues on the fed's rate cut timeline on wednesday's meeting and that is conference with chairman powell. the decision sandwiched between a slew of events including microsoft and alpha that earnings tomorrow. apple, amazon and meta on thursday, payrolls on friday. on all of this, sophie, what a

week ahead beef got. that's kick it off with tech earnings. can big tech keep carrying this equity market on its back? sophie: to be honest, yes, i think they can. i don't think we are going to be without challenges, and the flipside to that is i think we are in a situation where there are a more nerves in the market, so i do think any misses are probably going to be more punished than they are usually, but that said i think that the fundamentals for a lot of these names, particularly the likes of microsoft are actually still in strong. i'm actually going to this with some pretty broad optimism, so let's see how that pans out. lisa: a lot of people disagree. heard a lot of pessimism in some of the notes. jonathan krinsky noting that 12 the last 13 weeks, the last time that happened was 1985. clearly upset demented and strong but darting to show some exhaustion signals. how much are you pushing back against that? you aggressively buying into a pause as people reassess ahead of this really pivotal week?

sophie: i think there's a couple of ways to look at this. i don't necessarily think we are going to see this gangbusters huge increase necessarily off the back of these earnings. i do think there is a little bit of fatigue. you are hinting that that kind of exhaustion wording. but i do think that fundamentally the strength of these companies are still going to be pretty robust. i will just caveat that with more so than usual. the outlook statement is always important, but even more so at the moment and particularly for me, obviously cloud ai is going to be the thing that is moving the dial. but what is kind of an unknown at the moment is the rate at which corporations are going to be reopening the pursestrings and that obviously has huge implications for those cloud players but fundamentally, i do think that the demand, the margins that they underpin still remain in play in my opinion. lisa: so what do you think at the most important of the events

this week, do you think it is earnings or do you think is the fed or the economic data? sophie: equally both. really when we look ahead to the fed now, as much as things are broadly moving in the right direction, and we look at the inflation information we got on friday, that preferred measure, things are moving in the right direction. i think the fed is probably going to remain on a pause and i think there could be some upset, but the outlook of course is still relevant. jonathan: clearly some encouraging news on the inflation side of things. can we talk about payrolls a little bit more? some come on the program who point out the weakness, the breadth of labor market gains have narrowed over the last six months or so.

sophie, do you identify the same thing and are you expecting to see that weakness come to the surface anytime soon? sophie: not really. i think things come -- might be coming off the boil in some respect but i don't think we are going to be seeing this broad-based weakness that policymakers are looking for. i don't think we're there yet. particularly when we started looking at some of the consumer data coming around, that obviously needs to be read in tandem with these figures. broadly speaking, unfortunately this macro print including things like the job reports is still going to be supportive of the fact that we're not ready for a pivot just yet. jonathan: what is your view, your interpretation of the fed approach to all of this? is this something the fed tries to get in front of, or weights to see? sophie: i think we are in a wait-and-see approach at the moment. they are in this kind of circling pattern, they need to see how much heat is coming out of the economy and the current state of play, and the answer is it is not enough.

they are waiting and seeing which i think is the prudent and correct way to be doing this. we cannot be going too fast too soon because we are going to reverse a lot of the stability. at the moment, they seem to be doing the right job between calling things down a little bit without triggering a very hard landing keep that on the course, they need to keep this kind of observatory going, as it were. lisa: it's kind of further tory and people are trying to assess which way it is going to turn, but it feels like purgatory. i love some of the acronyms. next cap over hsbc this morning talking about roro and yolo, risk on risk off and you only live once. while we are not going to either of them, how do you sort of characterize where we are and how you maneuver at a time with such bifurcated risk and such lack of clarity?

sophie: certainly a lot of uncertainty. as i know, i've kind of beaten this drum on the show a few times. more so than ever it is a time to remember the basics, so this is things like making sure diversification is where it needs to be because value metrics are being slightly left by the wayside. for example, i think europe valuations are looking relatively compelling. that is the forgotten region at the moment. certain risks of certain areas of the globe, for example. it's making sure you have that broad base of assets diversified . if you want to invest in game changing trends like ai, that's fine. go about it with a company that has also got a proven track record of the fundamentals and my personal favorite, cash flow. please don't forget that.

lisa: when you talk about european equities this is something that we keep hearing. how concerned are you? your opening the show with geopolitical risk and that has a much greater impact on european inflows and in particular, inflation in regards to the red sea and shipments from there. how closely are you paying attention to that is a potential plex one -- black swan event? sophie: let's not forget there's a lot of big oil players in europe as well. the volatility there is intrinsically linked to this oil price but we are seeing. there are bumps in the road and we can't say for certain with a very short-term is going to look like, but longer-term evaluation-wise it is looking quite compelling. also i would just say that there are some very strong businesses, not particularly the most fun. a lot of broad economic modes in

the european region. things like telecom, defense, names of that nature. that said, the inflation landscape is a tricky one. jonathan: sophie, great to hear from you. tons of earnings tuesday, federal reserve wednesday. let's begin with tech. the only thing that has worked as may be u.s. tech and japanese equities. wall street journal over the weekend writing the s&p 500 is back at record levels for the first time in two years. it is the only one of the index 11 sectors that can say the same. lisa: i saw that, and i thought it was interesting there were a couple of stocks outside of it but also had record in this art of surprised me. talking that berkshire hathaway, visa, mcdonald's and marriott. but you're right, this is held up the entire market in the span of three days.

people take notice, given all the other catalysts in addition to this. holy affront risk, batman. jonathan: it is five companies, just to be very clear. kind of crazy. lisa: more than 30% of the s&p reporting earnings this week. have earnings been good? it has been a mixed bag. we are not talking about a screamingly amazing situation for all companies. jonathan: kicks off with microsoft and alphabet tomorrow. do you actually be legal the -- it will be exciting? lisa: this is real, come on. jonathan: a massive setback in china's property prices. damien joins us around the table. equities just about positive on the -- s&p 500. this is bloomberg. that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you.

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♪ jonathan: you'll hear this a few times this week, massive week ahead. a big week ahead. going absolutely nowhere, posited by 0.07%. lisa mentioned the stat, $10 trillion in market cap across five names reporting tuesday and thursday. tomorrow, microsoft and alphabet. thursday, meta, amazon and apple. two-year, 10 year, 30 year. really needed price action.

yields lower by something like three basis points across the curve. 4.1% on a 10 year. lisa: this is a massive week and not just because of the fed, not just the jobs report. because we are getting the treasury refinancing announcement coming on wednesday where they are going to talk about how they are going to borrow money this year. we know that november was actually really market moving. if you are going to have such a market moving week, what do you do other than just sit on your hands and prepare, get enough sleep of the weekend and get ready for some drama? it is hard to know which weaknesses going to break given what yellen did in november some of the concerns of the market. jonathan: and looking to catching up with don constant of mizuho who things maybe this can break below five k which is quite a call from where we are now. lisa: a long stretch given the fact that the economy looks pretty good. a lot of people saying the economy has to crack for something to get to that place

or some terrible earnings from "the magnificent seven" jonathan: let's turn to crude. a big move higher, brent crude 83.76. strong rally to the week last week off the back of the tension in the middle east. i was expecting another move this morning. lisa: it was russian oil, not a russian tanker but to me, that is sort of the indicative moment where even russian assets are necessarily going to be immune to some of the conflict. does that sort of represent the fact that people are complacent or does it represent the fact that people are realistic and ultimately, nobody has an interest in trying to disrupt the oil transport in this section? jonathan: another escalation of the weekend, pressure mounting on president biden to respond after a drone attack in jordan killed three u.s. soldiers and injured at least 34 over the

weekend. iran denied any connection. u.s. and allied forces and iran- backed militants in the area are to brain -- blame. president biden sang have no doubt we will hold those responsible to account at a time in any manner of our sick -- choosing. annmarie: this obviously going to be a menu. the defense department has these strategic attacks already outlined. depends what the president wants to do. they do what the trump administration did, which is hit a high-level official, and that would send a very clear message to tehran about what level of engagement the u.s. is willing to go for. the lisa: more people scream and make it dramatic, the less the market cares. given the fact that there is real potential disruption. right now it feels like things are escalating. this-- jonathan: there's two broad options you. one, go on iran.

in israel, i'm not sure which choice this administration ultimately goes with. lisa: they've already talked about possibly not shipping as many weapons. it's an open secret, there is a fissure between netanyahu and biden. the question is, how do we really set of push forward in a conflict where you have a deeply unpopular leader pushing ahead with a real hardline policy? jonathan: let's get to the latest with the israeli prime minister singh significant gaps remain in talks for hostages, all looking to broker a deal. a two-month pause in fighting in which women, children, and the elderly with the return first. israel in return would release more palestinian prisoners and additional aid into gaza. annmarie: the u.s. is pushing for this deal to happen, likely potentially moving to the middle east, you have to ask with this recent attack on u.s. soldiers

and potentially waiting for how the biden administration is going to respond, can this also ruin this potential path? could that be shrugged off now because we might see more escalation within the region. jonathan: lisa mentioned the news that the biden administration is considering slowing or aussie deliveries of some weapons to israel. is that the base case now, the next development here? annmarie: they need to get an agreement when it comes to sending aid to foreign allies like israel, like ukraine, like taiwan. that is still being dragged on in congress and once they get to it, this administration is being pushed to have strings attached when it comes to sending those weapons to israel. jonathan: former senior u.s. intelligence officer in the later on this morning. look out that conversation. the country's property crisis deepens, a hong kong judge saying the company will be taken over by new management to carve

up $300 billion in liabilities. as of friday, 1.5 cents on the dollar. that is not even a penny stock anymore. this was a bear's dream 10 years ago. it's materialized and the whole thing hasn't collapse. lisa: the whole thing being the housing market but you seen a number of sales in china to the lowest level since 2015. you're seeing the slow burn. if this some sort of controlled unwinding of the housing market or is this just that they don't have control anymore? jonathan: i will frame just how bad chinese markets at the end of the to the u.s. equity markets. eric robertson with this to say, the nasdaq 100 is up more than

60% since january 23, more than 150% since march 2020. china's index is down 15% since january 23, 6% from the march 2020 letters. 6% down vs. 150% up. night and day. lisa: how do you have any confidence to invest in china given the fact that there economy has a lot of major hurdles to overcome and there isn't a cohesive way to do so? one of the contrarian causes to go into chinese equities and is not getting a lot of traction, i will say that. jonathan: chief emerging-market credit strategist for bloomberg intelligence, good morning. what do you make at the evergrande news over the weekend? >> morgan same, a real test of chinese debt sector. this is the first real test of how liquidation is going to perform with offshore creditors specifically able to come out of

this with any money whatsoever, any equity state whatsoever. this is a true test. whether or not mainland china agrees with the ruling, my goodness. all the operating assets are onshore. if you were a creditor you would say stop everything, let's liquidate, let's get our money back. but it is just not there. >> china has its own ways of changing the rules as we go along and this is the fundamental issue preventing offshore creditors of getting comfortable investing into china. the judge in hong kong said enough is enough. doesn't china need to take that on board if it wants to attract foreign investors? >> you would think so. it is a very interesting development going on, and you would think that the judge has some sort of communication with beijing and the powers that be.

it just seems like this is where the rubber meets the road and what comes next? there is no blueprint for taking a company of this size to the economy. you are going to need help from the authorities and they are dealing with $650 million in debt that has got to be repaid this year from the local government finance vehicles. if they don't get their ship sorted, these issues could just configure. lisa: there's no blueprint. there's two ways to take that. we don't have this is going to pan out, so that's a problem. the other one, this is exactly what a lot of creditors have been looking for, some sort of unwind, a healthy kind of corporate debt market with our workouts. >> when it happens for the very first time when the court system is truly being tested, the responsibility incredibly of a judiciary making those on whether creditors get something or nothing, you are right.

it is a tested, but it is not going to be smooth and certainly not easy. what we are talking about is a fundamental shift in how decisions are made of the top levels within china and how that relationship between -- is tested. lisa:lisa: how much did you buy into the idea that this is just the predecessor to some sort of big bazooka? >> something we are seeing is not just china, talking about and, we are talking about the boe, china. -- i got to talk to my asset class, but the expected policy has this year were celebrate, going from 20 to 50. they are picking up steam and dare i say, and a lot of others who are way smarter than i, that

this is a very good environment to carry and emerging-market and i can't disagree. lisa: if you can go back to a china's doing, that going to make a difference? they tried to do this as well in 2015 and it seemed to fall flat. >> in the past, it has tickets and believe the corrections and given or investors an opportunity to enter at better levels. we just have not seen for interest in china at all. it is beyond issue, beyond fundamentals, beyond value. it has gotten to be the conditioning of investors to just right now stay away. it is difficult to justify to a fiduciary in the japan or otherwise that china is a good actor, end of story. jonathan: should we have a moment of silence for floyd and mark what was that second half? >> i was sleeping, but i read about. it is a real shame because detroit could really have done some wonderful things. apparently dan campbell made some questionable calls. some of them work, some don't.

you are playing the san francisco 49ers, it is tough. jonathan: thank you, sir. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> u.s. and chinese officials are set to discuss a fentanyl crackdown. high-ranking members of the dea, homeland security and more are set to meet with their chinese counterparts tuesday. it's the first six meeting following president biden and president xi's november pledge to restart counter narcotics operations. biden is eager to make progress on the issue with opioids and order control becoming two hot button issues in the 2024 election. nikki haley has vowed to stay in the gop primary race through at least super tuesday. she is expecting a better showing in her home state of south carolina. saying in an interview with nbc "i need to do better than i did in new hampshire."

the former u.s. ambassador stopped short of committing to remain in the race through the republican nominating convention in july. and a red it is being advised to seek evaluation of at least $5 billion in its ipo according to bloomberg sources. that is despite private traits of the social media company valuing it at less than $5 billion. reddit is considering going public as soon as march. that is your bloomberg brief. jonathan: lynn martin of the new york stock exchange and the next hour. can that grease the wheels and carry more ipo's down the road? lisa: it depends, but she's going to enter this better than i would. i just keep thinking about the idea of what people are valuing some of these companies that and how much they are willing to give to some of the valuations. i'm just saying, people have been talking about the reset that hasn't happened and whether people come out to markedly depends on whether the evaluations they like or whether

they want to sit on it until they do. jonathan: up next, the race to get into bonds. >> the client said get me out of bonds. every single one is saying how do i get it, when do i get it, where do i get in? jonathan: that conversation coming up next. good morning, you are watching bloomberg tv.

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we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. old school grit. new world ideas. morgan stanley. jonathan: live from new york city, good morning. equities shipping on this follows, positive by 0.1 yields lower by three basis points on the 10 year. under surveillance this morning, the race to get into bonds.

>> i've not had a single conversation over the last couple quarters of a client who said get me out of bonds. every single one is saying how do i get in, when do i get in, where do i get in? can you see it everywhere. you see it in money market fund assets. they are still at $6 trillion. you talk to corporate treasurers, and pension fund cios. they are looking to do you everyone wants higher yields. jonathan: everyone wants higher yields, they are not getting them now. good morning. i this high-yield connect anytime >> not anytime soon i don't think. the issue is basically there is a cyclical story that is evolving, is definitely going to bring down pressure, but there is a lack of fiscal consolidation, the election, the return of a higher term premium. i think that will come back later.

it is a question of how you wait with cyclical or fiscal structure based. lisa: let's find out about the tea leaves that can guide you. a lot of people talking about the balance sheet and how important any kind of guidance on quantitative tightening could be, when they stop doing that the balance sheet has contracted. still $7.7 trillion. how important is that? >> quite important, but not the most important thing. models show that if they start tapering, they can get some downward pressure on long-term yields, and they definitely would do that to extend the long-term balance sheet reduction. but the big issue is obviously the front end, is the fed going to recognize that it is going to need to start cutting rates at some stage fairly soon this year? potentially quite aggressively, and that is going to dominate anything they say on the balance sheet i would argue, definitely. lisa: what is the link between

stocks and bonds at this? we seen stocks move regardless of where the bond market is in the past couple weeks. >> we do a lot of work looking at transition cycles. in the fed has doheight, risk ao pretty well through that transition cycle. you have to wait until earnings will be turned down and that can happen after they start cutting. so i sort of feel that right now, risk assets are in a relatively safe base. obviously when we get the extent to which there is a harder landing, that is when you worry about risk assets. maybe the s&p makes a few more new hires and takes a bit of a tumble later this year, but we have to wait and see the extent to which the earnings get hurt. lisa: a number of guests have come on to say they prefer equities over bonds, that bonds kill riskier because of some of the structural concerns. diva agree with that -- do you agree with that? >> right now, your risk assets are ok, and the long end is

going to struggle to perform really well. my guess is 10 years will go to 3.5%. you are better off like five years and those of the things that can rally a lot more. but people have got to get out of cash. at some point you are going to go into some mix of bonds and maybe stay long equities until you know exactly what kind of hard landing you're going to get, because you are going to get a hard landing. a soft landing -- hard landing looks soft until it is hard. it is going to be hard, i'm sure if that. right now it is a timing thing. jonathan: what makes you so sure? what is a hard landing to you? >> the heartland will be a sharp increase in unemployment. the reason why it is going to happen with a high degree of confidence is the way this cycle works, it come through inflation. a lot of people get the long way around, and the idea of the

basically inflation might be a lagging indicator. this time i think it is a leading indicator. the decline in inflation will hurt profits and earnings and that will lead to the shedding of labor because basically there's a lot of paper holding and you're going to see the cracks in the labor market evolving relatively slowly, they are going to evolve and companies will have to respond to that. on the contrary, the inflation decline to is what is going to happen six months down the road, and that is why some say they don't have the confidence to that basically. they may miss march but that is kind of the issue. inflation is that indicator. jonathan: unemployment right now 3.8. >> the fed has its own models which suggest that there is a decline in vacancies and if you see layoff rates going up by around 1%, you could easily

double unemployment ticket up, and that is chris wallace model from 2022. that is kind of my concern. lisa: when you see a hoarding of labor and employees, business across the board sectors? >> will look at trends, short-term and long-term trends, and you can see where there is excessive employment. a good sector, very much so. service sector, less so. professional business is, dare i say little bit. the fully just got back to train city kind of know which sector needs to give it up first, and there are clearly signs that they reduced their employment quite a bit, but they haven't it started laying off. the unemployment rate only goes up with a combination of no hiring and layoff the just stop

hiring, unemployment is not necessarily going to go up. annmarie: when you said that needs to cut in march, the issue i take is that that data is not translating to the consumer. people still say they need to be making 5% more in their paycheck to afford everyday prices. if there is risk that the fed would cut too soon and it would be a mass in terms of inflation? >> the reason why the fed is cutting initially is because real rates are very elevated. they are cutting initially to maintain that elevation. they don't need to have real rates to even higher. from that perspective, that is the logic of them cutting. when they sort of pick up the rate cuts and they get more aggressive is when they really need to bring real rates down because by then, earnings will be slowing a lot because obviously the elevated elation is out of an earnings story. profit margin expansion.

it is really that kind of unwind, i think. lisa: what kind of downside is there in equities, given the fact that it is basically seven stocks, they are all going to report earnings this week. probably they will report with a good earnings because they are a transition spot and everybody can keep saying goodbye out regardless of what is happening everywhere us. >> in the end, we run models and we look at the interest rates first as equities and earnings. you are not going to get more than 20% or 30% downside, i wouldn't have thought, from a fair value elevated level. you may come back down to the mid-threes or something. that is your downside, i think. jonathan: you make 20% to 30% sound like it is nothing. when i listen to you, and i think many people have heard

this, the idea that we can double unemployment by the end of the year. the federal reserve doesn't see it this way at all, does it? >> not officially. they only have 4.1%, i think. you can look at chris wallace analysis, it is pretty clear, and you can look at a number of other things that are kind of looking at the extreme compared with previous cycles. bank lending has slowed massively. you certainly got elements of the service sector that is surprising. i don't think it is a shock to say. you would have to appreciate how extraordinary covid was and what it did to the labor market and therefore you shouldn't rule out anything in a sense. >> this was thought-provoking, let's put it that way. america is looking for employment potential he doubles, 3.8% right now looking for something that might have a six or seven handle around the turn of the year.

lisa: the most compelling part is that inflation is a leading indicator, not a lagging and this is what is telling people that maybe the labor market as we than people expect. we pray that from a couple of that officials as well but they are worried that there is going to be this is. we don't know. we've gotten it wrong before and we will get it wrong again. do you go with this idea of what you believe to be the case or do you just sort of stay in this purgatory and bet on ai? jonathan: seems to be what everyone has done. we will throw some of those questions a little bit later. u.s. intelligence official lynn martin, n.y.c. president joining us around the table through much of the next hour and as harvey of wells fargo weighing in on the equity market with a big, big week ahead for earnings. tech earnings, specifically tuesday and thursday. your equity market shaping us follows on the s&p 500, positive 50.07%. just a little lift here, yields a touch lower. the 10 year, -- $78 on wti.

from new york, this is bloomberg.

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♪ >> i would expect the big tech dollars to start flowing. >> the only factors that have positive earnings revisions in the last six months are tech and calm services, so those sectors that have led the market. >> that will definitely be a big issue this earnings season. it's driving much growth.

>> the newtek market, we think stocks are up 30% this year. announcer: this is jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning, good morning. this is surveillance alongside lisa abramowicz, together with annmarie hordern. your equity market on the s&p 500, just about positive by 0.1%. a massive week ahead with tech earnings tomorrow and thursday. the fed on wednesday. payroll on friday. lisa: there is this quote from a guy, are you kidding me with this week's event risk? and seems to be the feeling at a time when you get all three cylinders, the economy, fed policy and earnings. earnings front and center for me because to me that could be the change the whole narrative with tech continuing to be the bright spot in pumping out cash. jonathan: waiting for the chiefs game to finish, so he sent it out. i did text and.

i wanted to know. he talked about the earnings, the data, and the federal reserve. he said the most important thing for him with payables on friday. for him, good news is good news and he wants to see if the economic data on friday is indeed news. lisa: especially because referred from a couple people raising concerns about the labor market. we've seen the layouts from a host of different companies, not just big tech anymore. everyone is still getting higher. i will say, even though that is not necessarily the most reliable data point, are people feeling confident enough to quit their jobs? those are the kinds of indicators that shape the mood market. jonathan: this market is not moody. if you bring up crude, wti right now is basically unchanged. $78 per barrel. given the news we also yesterday, this is not where i thought crude morning. annmarie: and not just yesterday, friday when the attack on the cargo from russia

that was supposed to be off limits according to these iranian proxy groups the issue now becomes the oil market is believing that there will not be a serious confrontation between iran and the united states because it they did, you with the oil markets pressed much higher. lisa: today the issue is there all these potential tail risks that are getting louder. they aren't necessarily materializing, but there they are. our mike -- markets to the pricing in that risk or i the price perfection at a time and people are banking on the soft landing? that's the anxiety we are hearing from people but not pressing into the market. jonathan: we all asked the same question yesterday. so far looking at crude, not yet. coming up over the next hour, this is what things look like with the president under mounting pressure to act in the middle east. this harvey of wells fargo, and the president lynn martin on the ongoing volatility.

we begin with our top story, tension rising in the middle east. the president under pressure to act. killing three american troops in a drone strike, iran distancing itself from the attack. president biden saying we will all the ultimate to account at a time and in a manner of our choosing. the former u.s. intelligence official saying the lethal attacks against our personnel and international shipping will continue. these attacks will likely involve different weapons or locations including the u.s. homeland. let's start here. will we shift from this posture of defense at the white house and the state department for the defense department. will that change in the middle east anytime soon? >> good morning. it's unlikely we are going to see a change that takes us closer to confrontation with iran or any action that the administration would believe would involve the u.s. any long-term conflict in the region.

lisa: norman, do you think that is what has to happen to prevent this from happening again? >> we don't need to involve ourselves in a conflict in the region. we are faced with a scenario where iran and its proxies believe they've edified a series of action they can conduct found risk of serious reprisal. that has lethal consequences for u.s. personnel in the region, and that has significant prompt -- consequent is for global economy. we need to change that perception that inherently requires more significant kinetic response. lisa: so what is a more significant kinetic response that does not necessarily ignite a broader regional conflict? >> we could certainly take broader steps against iranian positions in siri and gammon and we could certainly undertake a more robust attack against all facilities in yemen. an international approach that destroyed all of the missile, minds, drone capacity would

provide us with greater confidence to move shipping through the area. but this takes allies, partners, cooperation and this is where the right half -- white house should be focusing. >> did you think we could see the u.s. go after high-level iranian officials the way the trump administration did? >> no. the trump administration actions took place only after a considerable period of time where there is evidence and escalatory approach awarding your bond not to conduct a massive terrorist attack. there is reason to believe the united states could go against iranian facilities in siri and gammon and iranians are located there and bad things happen to bad people doing bad things. annmarie: there's been talk of a timeline being set between iraq and the united states about u.s. troops being withdrawn. where does that leave u.s. troops in syria and iraq, and jordan at this moment? >> we should be careful about

confusing a conversation regarding withdrawal within nashua -- with an actual withdrawal that u.s. forces in the region have a prominent role. if you're sick to's withdrawal would send a terrifically poor message. region already shocked by the afghan rall and concern. i don't think we are going to see any sudden shifts with the -- regarding withdrawal in the near-term. jonathan: i'd love your insight and perspective on this. how iran has changed, the former president is going to say this would not have happened under my watch. if the former president becomes the next president, how different is the iran that he would have to confront today then he confronted yesterday, four years ago? >> iran's nuclear program has expanded significantly. it expanded during a period when iran had the best chance of a diplomatic solution. their use of proxy says not only expanded but does seem that the international community will tolerate this.

the question is how the international community has changed its tolerance of iranian activities, and that will be something i think the trump administration might seek to address. to shock iran into a position where it would say we are no longer confident our actions to produce a predictive response. jonathan: what would they have to do to change that perception? >> consistent attacks against iranian facilities and those facilities involved in terrorist operations against partners in europe to support us. i think the trump administration will have difficulty getting bipartisan support given the politics, but the biggest thing we can do to push back is a bipartisan position on strategy and our partners abroad. lisa: you said they would be pretty significant economic consequences if this does escalate in any material way. can you walk us through what you foresee being economic disruptions? right now markets really aren't

responding. >> that's true and i think it is because they've seen oil flows, natural gas flows have not shaped of the consumer countries are reacting. but imagine a scenario where you see military operations in the persian gulf, the iranian sea with greater frequency. talking about massive disruption of energy as well as container traffic in the world, and that would be difficult for people to get around. for example, the saudis and others able to use a pipeline ticket oil above the red sea chokepoint. iranian might conduct terrorist operations against that pipeline. expanded regional conflict would have significant consequences. lisa: we haven't seen the markets moved significantly. at the same time, we do see companies starting to move out of the red sea, move out of the gulf and actually take that longer trip around africa. what can be done to really open up the red sea to make sure that

there is a low of energy and good tankers? >> a massive disruption of missile capability and drone capability followed by consistent pressure against their explosive vote in any naval line capacity they might have. this would be a long-term effort which would require a significant decision by the united states and britain, our primary partner to do this. jonathan: unfortunate that i have to ask this question, but given some of the areas on the international stage by this administration of the last number of years, are you surprised the president hasn't changed the personnel around him? >> i don't comment on personnel decisions but i did work in a world where consequences came from certain actions and where we were meant to achieve certain levels. the bottom line is i'm not sure we are hitting that market at present. but that is a decision obviously for others to make.

jonathan: appreciate your response and great to get you on the program this morning. the vice the president is receiving, is that the right advice? annmarie: he had a cia director out of country. these are individuals trying to deal with peace negotiations in gaza when actually, americans were hit in jordan. next question that needs to be asked of the deer day and the cia, with this and intelligencefailure? how did we not know about these groups attacking our servicemen and women in jordan, which is really a training facility, and an antiterrorism facility? jonathan: we will speak to the pentagon a little bit later this morning. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> boilers on the move following escalating tensions in the middle east. it catered carrying russian fuel was struck in the most

significant attack yet on oil-carrying vessel. meanwhile, the uss three service members were killed and 34 wounded in a strike on a u.s. base in jordan by iranian-backed militia over the weekend. charon has sought to distance itself from the attack. shares plunged 21% for they were suspended from trading: a liquidation order from the hong kong port. the judge saying the property developer will be taken over by new management in order to carve up $300 billion in liabilities. as of friday, the dollar note traded at just 1.5 cents on the dollar. london homes of the most affordable they have been since 2014. the latest data shows homes cost 30 times the average earnings of a u.k. worker. that is down from 50 times at the peak in 2016. however they are still by far the most expensive in britain. that is your bloomberg brief. jonathan: thank you. 13 times average earnings.

that is the cheapest, the most affordable since 2014, but 13 times average earnings. lisa: this basically tells you the story of the housing market globally and the reason people have been surprised that we haven't seen a bigger correction. people were hoping for and it happened. where does that leave us? jonathan: things are getting better, they are getting less worse. lisa: i think you could say that any lot of plight -- places which is why i don't think people are celebrating. jonathan: quick snapshot of the market for you, equities look like this, just about positive on futures this morning. lisa mentioned the numbers earlier across five names reporting across two days. microsoft and alphabet on tuesday. thursday, meta, amazon and apple. >> we have to balance the fact that the names that outperform so much, eventually there will

come a point where that becomes a headwind. jonathan: that is coming up next. good morning, you are watching bloomberg surveillance.

jonathan: live from new york city this morning, good morning. the stage is set as follows, slightly positive by 0.07%. yields lower by three basis points. tension in the middle east not showing up in the commodity market. crude just slightly higher. 20% higher. brent crude, 83.70. under surveillance this morning, headwinds in the equity market. >> we have to balance the fact that the name that outperform so much that i having earnings revisions are crowded and expensive. eventually, there will come a

point where that becomes a headwind. there are so much momentum right now, wednesday think it's private and expensive, you are in the area for downside surprise. jonathan: investors watching for a range of headwinds in 2024. the president of the new york stock exchange outlining three printable trends that initiate global market this year all the remaining cash volatility remaining legal world. for morning. >> great to be with you. jonathan: that start with geopolitics. the risk in the middle east is in center. how does that contribute to this theme of high volatility sticking around for longer in your view? >> the geopolitical environments are quite complicated, i think the delivery. it clearly impacts the u.s. equity markets, global equity market by two to volatility. the surprised anchor, that is what is going to contribute to

volatility and this weekend's events were one of those surprises, unfortunately. jonathan: we talked about this before. regionally, geographically, a situation for u.s. capitol market in u.s. companies, chinese market for chinese companies. these the same way? >> i don't. the u.s. capital markets are the envy of the world. they listed multiple pandemics, multiple wars, and they really shown to be the best source of liquidity for a founder, and entrepreneur teresa capital that they need to change the world. that is true more than ever, in fact. you see the ability to tap the u.s. capital markets as aspirational, but also when you look at the cost of capital, it is the most efficient. lisa: do you think that because of the potential volatility, because of the unknowns later this year, are people moving

forward their plans for ipo's? >> absolutely. we have a tremendous amount of companies on the road. we are about to vote in a large one this week which is the holding company for wilson, for louisville slugger, for a lot of brands are children and we use every day. just let it today we are about to welcome a u.k.-based company who is transferring their listing out of their regional market over to the new york stock exchange a little bit later this morning. lisa: one of the reasons why ipo's haven't been as active as people expected is because of just a lot of private equity companies not wanting to take the valuation cuts. even with reddit, 5 billion-dollar capitalization, lower than with some of the previous private market valuation said been. how much are people accepting knocked in the price that they wanted in order to get cash out of those investments?

>> you have reasons impacting the ipo markets. you have the increased volatility. it is not that founders couldn't get deals done, it is what is my stock going to do the day after i ipo? what macro economic factors are going to influence the way my stock is trading? now, you also see that there is a recalibration of valuations in the market. i would make the argument that there are valuations in the market. the last two years with the other side of tail risks on the bell curve. jonathan: there is this structure as well and we talked a lot about it around this table and at the world economic orem, that we are seeing regulations shift, putting more private equity into markets.

do you think the lifespan, the ark of the company's lifespan, the timeline of it is going to change in terms of how long they stay private? >> i think companies are going to be more disciplined about when they tapped the public park it's. obviously they are going to want to be able to articulate a path to profitability, so i think what you're going to see is when companies come to market, the public markets, they are going to the public market-ready. they are going to be able to articulate a very clear message to investors, to their shareholders, that will enable them to thrive. i don't think there's any substitute for the public markets and that has been proven time and time again. jonathan: have you seen that change already? >> absolutely with the amount of companies we have on the road. we have a tremendous medic companies on the road, that we are working with at the moment to tap the public markets, so we are really excited about the prospects for 20 when he for.

-- for 2024. jonathan: i've asked you about this before, let's go through it again. confronting an era of misinformation. for someone in your position how do we go about doing this? >> i'm really glad you made the point because ai is just a continuation of data-driven trends that have existed for more than a decade. you've got good data, that is going to enable models to add efficiencies to markets. it is something that we seen in production for more than a decade now with ai or large language models that we employ. data transparency to the energy markets. we've seen more opaque parts of the energy market have a tremendous about of transparency, a tremendous amount of liquidity added them, particularly over the last couple of years.

lisa: did you guys see what happened with taylor swift and x? the ai renditions of her and it was preventing you from googling taylor swift. you couldn't searcher on x because they were pornographic, ai-generated images. but it shows you some of the challenges and misinformation. i am curious how many companies are planning to ipo our tech companies billing themselves as such? 100%? they are a tech company even if they sell furniture? >> in this digital age, everyone uses technology. everyone is a technology company. he sort of missed the boat if you are not employing technology in some way, shape or form to drive your business forward. lisa: who do you think right now is your biggest competitor? the private markets, we've been talking about that for a long time and there with this discussion about some sort of transfer. is it another stock exchange or another avenue of financing? >> i don't really think we have a competitor because the role of the new york stock exchange is just airee different than a

traditional stock exchange or a listings venue. our job is to be the stewards of the u.s. capital markets, and since the u.s. is such an important part of the global capital markets, we really are the stewards of the global capital markets, allowing entrepreneurs and innovators to tap the markets to raise the capital they need in a cost-efficient fashion and to democratize investment. lisa: i'm expecting there to be a much more active year in the ipo? activity this year, how much is that predicated on significant rate cuts by the fed? >> i think the market is already pricing in the rate cuts to a certain extent. the one thing that i'm watching is the discrepancy between the u.s. equity markets and how it is pricing in two or three rate cuts and then you look at the fed future markets. toward the end of the year, pricing and probably five or six rate cuts, so there is a bit of

discrepancy. the reason i'm watching is because that is what is going to impact volatility. volatility is what is going to impact the ipo markets, but for the short to medium term, i think we are going to cease and good ipo's. annmarie: you wrote last year that 70% of ipo's executed couldn't meet the provisions on the new york stock exchange. what is the biggest provision holding some of them back? >> we've got a variety of quantitative standards. a lot of those are focused on minimum amount of shareholders, the size of companies float that they actually put into public markets as well as the minimum market cap of the company. and you are right, more than 70% didn't qualify for us last year and that number was even higher in 2022. jonathan: amazing. you're going to stick with us, i'm pleased to say through the next 30 minutes or so. let's touch base on the financial markets. equity teachers on the s&p 500

slightly positive by almost 0.1% on the s&p. if you are not familiar yet, it is busy for the week ahead. it starts tomorrow with earnings. after the close, numbers in the likes of microsoft and alphabet. then medic, >> basically you're talking about potential volatility. jonathan: i say all the time this is my favorite week of the quarter. this is it. lisa: and it is earnest, i agree with you. jonathan: it is not like your description of being excited for the ecb. lisa: you're going to keep harping on that. jonathan: i share that view. coming up, chris harvey from wells fargo. you are watching "bloomberg surveillance."

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jonathan: three weeks of gains on the s&p 500. equity futures slightly positive by .1%. .11 percent on the s&p 500. nasdaq positive by .2 5%. russell and small capes unchanged -- small caps unchanged. on market looks like this. 10 year yield lower by three basis points. 4.10. 4.3324, the refunding announcement was a big deal this

time around. we are not talking about it anymore because the 10 year has a four handle and not a five. lisa: everyone was saying the treasury department was going to have to increase their issuance. yields are going to surge and janet yellen said i'm going to alter the t-bill market and everything was good. she is not expected to surprise. the expectation is for the u.s. to announce four point $1 trillion of treasury sales for 2024. $4.1 trillion. there are not enough bonds according to some people. there are others watching this closely to understand how they are going to be sold. jonathan: you mean bob michele's clients at j.p. morgan? lisa: yeah. [laughter] jonathan: crude of you tie and brent both look like this this morning. wti unchanged. brent crude, as well. 83.60 on wti -- on brent.

under surveillance this morning, president biden under mounting pressure to confront iran directly after three u.s. troops were killed in a drone strike by the country's proxies. iran has denied involvement in the attack. a person familiar with the u.s. position said the strike would warrant a stronger response than anything they have done since hamas militants attacked israel in early october. the what if happened over the weekend. what next? lisa: this is the problem. gop lawmakers coming out, some saying like lindsey graham hit iran hard now. it is a level of explanation this administration has been trying to avoid. annmarie: is this going to be a redline where they go more aggressive on iran or is it going to be the continuation of deterrence? jonathan: we spoke to norman a while ago. he not use the word to torrance. he used the word defense. lisa: the message if they do not take some sort of harder action is they can keep having these

levels of lower grade altercation and it is not going to warrant some significant response. i want to understand, what are the red lines? i do not have a good understanding of what iran's red lines are. jonathan: we are expecting this to spill over into the campaign trail. nikki haley refusing to quit the gop race, vowing to continue until super tuesday despite back-to-back losses to trump in iowa and new hampshire. >> as long as i keep growing per state, i am in this race. i have every intention of going to super tuesday. through super tuesday, we are going to keep going and see where this gets us. i take it one state at a time. i do not think too far ahead. jonathan: haley and trump going head-to-head. we will see if she makes it to south carolina, never mind march. annmarie: she says she wants to keep gaining momentum and her

baseline at this point is not beating donald trump in a caucus or primary. it is making sure she does better than the prior date. it is going to be embarrassing for her if the polls show what may potentially happen to her in south carolina where she is lagging by 30 points. jonathan: we talked about politics in davos. the room one quiett. does this change your world? >> it is impacting violent to liddy -- volatility and the ipo window. our job is to make sure particularly in years like 2024, our systems are reliable, resilient and open so that people can efficiently manage risk. jonathan: that is how you diplomatically dodge that question without precedent. [laughter] lisa: they are going to lift markets and not address the politics. saturday night live is going to be funnier because they seem to enjoy this. they had a picture of trump and biden and said, well, it is

2024. is it? that is how we all feel. jonathan: it is sad, isn't it? the weekend is interesting. microsoft and google set to report after the bell tomorrow as our apple and meta following thursday. the companies have a combined market value of $10 trillion with the tech giants at the forefront of a rally in stocks which has the s&p on track or its third straight month of gains. lisa: it has just been nvidia. there is a hierarchy of big tech. nvidia is the top. microsoft and google to some degree. at the very bottom, you have tesla. you have some of them that are at the bottom. how vulnerable is this market to disruption, given that so much of a rally has hinged entirely on seven stocks? jonathan: chris harvey of wells fargo is going to make it interesting for us.

ain't painting its year-end s&p price target of 46.25. the path to 46.25, how difficult is this year going to be? chris: not so easy, but we expect a lot of volatility. we have not seen volatility. credit spreads at 92 basis points over? that is dampening a lot of volatility. you have idiosyncratic information despite some geopolitical, put on the geopolitical side it is starting to get to be a bit of a worry. jonathan: you went straight to credit and talked about how tight spreads were. do you have to assume for your work to play out for things to get harder, we are going to see credit issues sometime soon? where do they come from? chris: credit and volatility go hand in hand. in the bid for -- i think you're talking about bob michele's, the bid for rates for duration, now all of a sudden at 5%, nobody

wanted to buy duration. at 4%, everybody wants to buy duration. you are seeing all in buyers, it is less attractive now. at the end of the year, you saw shorter duration. it was hard to lose money. you have people not buying because of credit, but because of the factor yields and they can make a lot of money on that. the breakevens are attractive. lisa: the balance of risks seems to have shifted. at the end of last year, people were talking about maybe there is risk rings will be better than expected and you will miss out on the rally. now, it seems to be on the other side if employment starts to ache up, that is coming to draw into question these tight credit spreads. am i right? chris: we have seen a different mentality. it used to be you wanted to buy low and sell high. now, you buy strength and continue to buy strength. when you see weakness, you start pushing things down, but not until you see we this.

with credit spreads this low, we do not see weakness with credit spreads this low. you do not see a recession with credit spreads below 100 basis points. a lot of assumptions, 1.5% gdp, unemployment going higher, that is not associated with these kind of credit spreads. those credit spreads are telling you the economy is strong and the corporate market is even stronger. lisa: does that mean you are bullish? how do you wrap yourself into it if you are basically painting a goldilocks scenario? chris: we are not bullish. we are putting a lot of our focus on positioning what we think is -- we want you to be growthy. we are looking for communication. communication stocks have done well. we are trying to be a bit more conservative and say, you have oversold situation in the market. health care and utilities. use that and balance it in the portfolio with more -- with

something more defensive end oversold, that is health care and utilities. lisa: when you talk about volatility, how much is driven by an unexpected weakening in the economy? is that what you are referring to, potentially the greatest supplier of volatility or a lot of different things? >> it is a lot of different things. the important thing to look at when you think about volatility -- vix, but also the move, which is our index, which is the treasury market. those levels are still elevated. above 100, if i look at the move index, which i do every day. chris: the move at the front of the two year, the bouncing around of the two-year. if we do not know what the cost of capital is, why are equities so classic crack jonathan: do you think that has settled down more recently as the fed starts to engage in conversation about cutting

interest rates? chris: did you see what happened after cpi and ppi? a couple days later, we are backup. will it change once the fed starts talking? maybe, but that is a lot of volatility. jonathan: one is 10 basis points between friends? lisa: i am old enough to remember when it was 25 basis points. jonathan: there were massive moves in october. lisa: exactly. jonathan: relative to then, things are,. lisa: a friend of yours said, equity guys talking credit? you know spreads are too tight if that is the case. [laughter] someone who is bringing that up. jonathan: equity strategists focused on the bond market. lisa: what is the message from the bond market? this is the lack of clarity. lynn and chris talking about volatility in the two-year. if you look at credit, it is saying the all clear. how do you know which it is? chris: you do not know which it

is. it goes back to this, some of the kids shows you used to see, which one of these things does not belong with the others? 92 basis points over does not belong with a lot of the other fed cutting. it does not belong with gdp of one point 5%. there are a lot confusing situations in the market, which is why we are focused on positioning. the macro is at this point hard to get a handle on. eventually, we are going to see perception change. we are going to see volatility continue in the market. lisa: this is jon's favorite week. i do not blame him. what is the most important thing on the three cylinders markets will pay attention to? chris: we are focused on what janet yellen has to say about issuance. [laughter] lisa: thank you. chris: we are focused on what powell has to say in the press release. it is always interesting.

you can have some new information coming in the press room. jonathan: did you say yellen just to please bramo? [laughter] lisa: you don't think that is interesting? jonathan: it was not in my top three, but i agree. it is interesting. chris: it is what started the rally. she came in below expectations on november 1. the market was beginning to rally, but it was that, that helped settle down the bond market which helped rally. jonathan: good to see you. chris harvey of wells fargo. equities on the s&p 500 positive by .1%. here is your bloomberg brief. >> it is a key week ahead for the u.s. economy. the fed is expected to keep rates on hold on wednesday, but jay powell's press conference could offer clues as to when they will begin cutting rates later this year. that comes ahead of the january jobs report due out on friday. low cost carrier ryanair

lowering profit guidance for the fiscal year, citing higher fuel prices and issues with third-party booking websites. the airline, a major customer of boeing planes, also claiming they do not foresee any disruption to their aircraft delivery schedule. and are seeing improved quality out of boeing seattle factory over the last few weeks since the alaska airlines incident. the chiefs and 49ers are headed to las vegas for the super bowl. kansas city aims to be the first act about champions in almost two decades. it is not clear whether taylor swift will be there to support friend and chiefs tight and travis kelce as her tour schedule has certain tokyo through february 10. day before the super bowl. jonathan: thank you. i love for so many people, that is the only part of the story that matters. can she make it here? lisa: i got heat for calling the super bowl a show. [laughter] annmarie: i will tune in for the

halftime part. jonathan:, the commercials too. annmarie: if taylor swift is going to be there, one of the commercials will be geared toward people like me. jonathan: the average nfl game is about three hours long. the action is 15 minutes long. the whole thing is a marketing ploy. lisa: what do you think is better, american football or british what paul? jonathan: what do you think? [laughter] >> we are in the sweetest spot of the inflation reduction ramp down. it is going to get tougher going forward. jonathan: that is next on the program. you are watching "bloomberg surveillance." ♪

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jonathan: stocks on the s&p 500 a touch positive to kick off monday morning. we are of mere .7%. yields lower by three basis points. one eye on crude all morning. basically unchanged with tension in the middle east. lisa: people are learning to shrug it off until they can't anymore, unclear what is going to trigger that. there is no signal the u.s. is going to materially change its offensive stature. jonathan: unchanged on wti and brent. the outlook for inflation. >> we are in the sweetest spot of the inflation reduction right now. it is going to get tougher going forward. it is not out of the question that not only if inflation stabilized, but once in a while going up, that would impact perceptions. it is getting harder to grow in this global environment. jonathan: u.s. core pce showing

inflation cooling as 2023 came to a close. after major economies showed surprising resilience and 2023, we anticipate a downshift towards stagnation or mild contraction in 2024. the standout strength of the u.s. is likely to fade. andrew joins us now. new slick a goal -- new cyclical outlook, how to navigate the dissent? how much of a dissent are we about to encompass, confront over the next year? >> globally in the u.s., and europe across most markets, we are expecting interest rate cuts this year. this comes after the very big hiking cycles that he saw and we see inflation peeking and growth peeking. there is a lot of uncertainty as you go into this year. the u.s. is being a standout in

2023. stronger than the consensus expected, and a lot of people thought there would be a recession last year. we think probably the u.s. is going to slow down this year, catching down with what we are seeing in europe. the baseline is benign, i would say. a slow down, but not a deep slow down, a rise in unemployment but not a big rise in unemployment. that should be enough for inflation to come down towards central-bank targets. we have had good news already on inflation. there is very big uncertainty about the different parts of the puzzle and how it comes together. it is going to be an interesting year for active managers and a lot of risks to guard against. lisa: you talked about underperforming, or a right sizing of the u.s. economic outlook this year. you talk about things slowing.

do you think right now, investment grade corporate credit in the united states with a spread of 92 basis points, 12 basis points away from the cycle those week saw two years ago, three years ago, do you think that is overpriced, priced to perfection, not something you would want to buy? andrew: baseline investment credit looks ok. i agree, you are not going to see an awful lot of tightening from it than the income and high-quality issuers. very default, remote. then, you have the risks around the outlook and while economies are slowing down, you can get more than anticipated, judging the impact of the tightening cycle that we had before is something which is very difficult. i think investment-grade credit looks fine, but it makes sense to guard against lower rated credit, more economically

sensitive, more leveraged parts of the market. when you have really good respective returns, the returns on sovereigns look good here, the return on investment grade credit, u.s. agency mortgages. when you can do well, up in quality with these high quality fixed income instruments, you do not need to go down in quality. you do not to go to the more leveraged, more economically sensitive parts of the market. good returns are possible. keep your options open as we go through to see the balance in terms of growth and inflation risks. lisa: before we get into outside of the u.s. and where you are shifting instead of the u.s., i want to sit on the sovereign debt point for a second. you think that is a sturdy place to go at a time we are about to get a refunding announcement from the treasury department with potentially 4.1 billion dollars -- trillion dollars in

spending dollars. what is the risk? do you agree with bob michele there is a shortage of bonds, or do you think there is some sort of deficit in structural risk with yields potentially going higher in the u.s.? andrew: there is a lot going on. in terms of high-quality fixed income, the yields is close to 4%. the yields look attractive. you look at aggregate type bond indices, 6% with more credit type of yields for high-quality bond funds look very attractive. you have supply, the supply information should be known and it should be priced in. supply is something that is something to keep an eye on and you have at the front end of the curve the big uncertainty over the path of the fed. a lot going on overall. i think there are medium-term

concerns on the u.s. fiscal policy. we have u.s. election coming up this year with implications over time for fiscal policy. when you are getting 6%, 7% nominal yields, this is an indicator of future returns. one of the best indicators there is in that context, high-quality, fixed income looks very attractive. jonathan: high-quality, let's talk about the rest of credit. we caught up with j.p. morgan asset management last week. constructive on credit. taking credit risk. we heard the same thing from amanda lyon of blackrock. not all the way down to triple c's. where are you and the team? where are you in high credit do you want to be? andrew: in high yield, it is always the case of picking the names, rising stars, the issuers which you see on the path to

investment-grade over time. one of the key things our analysts are looking for. i would take a step back and say that you can get with a high quality instruments, if you use government debt, investment grade credit, u.s. agency mortgages, private label mortgages, you can get a high quality portfolios which give you attractive yields, 5%, 6%, 7% type yield without needing to go down in quality. there is going to be lots of opportunities in high yields, but in terms of asset allocation, that up in quality makes a lot of sense in this economic environment. if you get a lot of -- say we get worse than expected macro outcomes, equity market outcomes, more being priced in for the federal serve, in that negative tail which is something you should pay a lot of attention to, there may be a good opportunities later to add

to low-quality credit in a market where you see were pressing. for now, you can achieve a lot of what you want to achieve up in quality. jonathan: let's finish on the fed briefly. i want to go to the secular outlook. you said chairman powell would expect to point something on inflation, that was controversial at the time. less so now because a lot of people have moved in that direction. we are at that to point something after the read of last week. is it sufficient to say, let's go in march? andrew: they have optionality. you have talked about this on your show, but the gap between cpi and pce is something which is important and it gives them optionality. overall, i do not see why they would be into much of a rush. inflation data is improving. gdp data reminds -- remains strong. the labor market remains strong. our best guess is they keep

their options open for march, but they go later in the year. if the pc -- the pce does give the medical related costs there if they wanted to ease earlier, that certainly gives them cover. inflation coming down below 3%, it gives you the wherewithal to start easing monetary policy over the year. you do not need to come down to 2.0%. there is enough and the inflation data now that this is a matter of timing for our taste. there is quite a lot priced in for this year, given the ongoing strength of the labor market data, the brighter data this could change through the course of the year. jonathan: andrew balls of pimco. thank you to lynn martin, the n.y.c. president. from new york city in the next hour, major general patrick

reiner of the u.s. department of defense. david leibowitz of j.p. morgan asset management. a massive week ahead, a preview next hour. ♪

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♪ >> our base case in the u.s. is

for a rate cut in the second half of 2024. >> the next leg and recovery is when you start to see cuts. >> june is where the market is gravitated to. >> there is cover to start to cut. >> it will come at the beginning of the summer, maybe july. not only do i think that is what is going to happen, i think that is what should happen. >> this is "bloomberg surveillance" with john -- jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: payrolls on friday, that on wednesday. earnings, tuesday, thursday. treasury refunding later this week. top story later in the program. lisa: it might not be the top story. did you hear from chris harvey, this is what ignited the rally november 1 when treasury secretary janet yellen decided not to issue long-term bonds. just saying. jonathan: it contributed to the move. chris harvey of wells fargo on

with us earlier looking for 3600 on the s&p. unemployment could climbed 6% or 7% by year-end, that is a different call than what we heard so far this year. lisa: it was predicated on this idea inflation is a leading indicator and disinflation is a leading indicator of weakness we will see and economic figures. i am watching jewels. sleeper indicators, the idea that the rate has been climbing. people feel confident enough to quit their jobs, no, they do not. jonathan: commodity market wti, you look at brent after the offense of yesterday we are expecting a move higher. unchanged on wti. brent crude 88.30, negative on the session. annmarie: an escalation that would potentially bring the u.s. and iran face-to-face but everyone is starting to say, we

are probably going to see more defensive structure from the united states but they are not going to do what lindsey graham is saying, which go into iran and go hard. president biden said over the weekend, we shall respond. lisa: how do you price out the risk premium of all of these potential tail risks that seem to be percolating out there? a lot a people are saying, priced to perfection. to me, what is the premium and why are we not seeing it baked into things hitting record highs? annmarie: we are seeing premium when you want to ship to the gulf of eden and through the red sea, which is why you are seeing so many consumer good vessels but cutter sending lng to europe. this is europe's lifeline given the fact they ditched russia natural gas. they are now going around africa. this could start to become a bigger problem. jonathan: prices basically back to where they were in november. triple digit calls for crude in

-- by halloween, we got an additional dose of risk in the middle east after the terrorist attacks in early october. here we are. we did not rally in the way people thought we would in crude. lisa: that is one of the contrarian trades right now, to lean into oil. it has not worked. some people say it is because of the u.s. oil production. other people say right now there is not anything that would disrupt oil shipments. that is why friday's move was probably more notable than today's in response to an attack on an oil tanker carrying some russian oil. jonathan: last week crude rallying by more than 6% on the week, the biggest weekly gain going back to september. porter crisis on the s&p 500, and the bond market yields lower by three basis points. 10 year 4.10. euro slightly weaker, dollars stronger. coming up this in the third hour of "bloomberg surveillance,"

david leibowitz of j.p. morgan azteca earnings began. robert sockin later this week. patrick ryder on increasing pressure by president biden to act in the middle east. we begin with our top story, markets showing caution ahead of the fed decision in big tech earnings. the combination of more moderate growth, softer inflation, lower rates leaves us constructive on the outlook for u.s. equities. at the same time we recognize how aggressively markets have moved since the fed's december pivot. david joins us around the table. good morning. bramo has done this already. let's go through the top stories of this week. fed, payrolls, treasury refunding. thank you. what are you focused on? david: we need to separate the data into two pieces. one is the earnings and the other is macro, the payrolls, the fed data and so forth.

on payrolls and the fed, i do not think the fed is going to move this month. they may seen -- send a signal to help people ground their expectations and build a base case for what easing looks like this year. we are going to have the jobs report friday. the reason the fed is going to be cautious is because the economy is running hot. jobs numbers have been good. they do not want to paint themselves in a corner and end them -- end up with a print. you have earnings. markets have moved aggressively. the earnings need to come through. i think got is where we are spending a lot of time thinking, look at expectations particularly for the big growers, the tech companies. they are pretty solid. earnings need to be delivered. this is our first glimpse into what that looks like into next year. lisa: earnings have not been consistent across the board. it seems like with each earnings

report, it is viewed as a company specific story, not necessarily a broader market trend. do you expect that to continue, or do you think these big tech names have a different patina around them? andrew: if you look at the reaction to big misses, companies are being punished for missing but not necessarily being rewarded to these same extent for delivering earnings. big tech is different because given the weight in the benchmark, rates are going to dictate what the market does in the fourth quarter earnings season. to me, it is a micro story but we need to be cognizant -- what was the sentiment overlay if they missed, even if they are not missing significantly, that could change the tone that has been positive the past couple of weeks? lisa: this is an incredible event driven type of week. i wonder if you think there is enough of a risk premium baked into certain equity valuations some people are saying, are priced to perfection. i take issue with that. in a broad sense, have rallied in the face of a lot of uncertainty. david: the bigger problem is

that the market broadly is doing a victory lap on inflation. everybody is, look, it was transitory. it is where we want it to be. what they are not recognizing, two things. one, economic growth is every solid. it is going to downshift over the course of this year, but given the numbers last week, things are not falling. the other thing people need to weigh is the balance of risks is becoming more balance. it is not just about inflation. it is about the top and downside risk to economic growth going forward. i'm not sure that is accurately priced in the current environment. jonathan: dominic from as well was emphatic over what he things about inflation. he says it is a leading indicator. earnings next, unemployment follows. he has called for unemployment potentially by year end -- have barely heard any of that around this table on this program over the last 12 months. your thoughts on that? david: i would push back on the

idea that in placement -- inflation is a leading indicator. tying into earnings is interesting. if you look at corporations, they say we only raise prices if we think the demand is there. the leading indicator is what pricing power is doing. what shows up in the bls numbers is a lagging indicator at the end of the day. there are more people pounding the table saying, we think road is going to slow to really. some people saying growth may have slowed into the end of last year, though the numbers do not confirm that. the question going forward is, how much cooling do we need to see in the labor market and can we destroy job openings without strong jobs? if we can do that, the path to 2% without a recession should be smooth. if we boil the toad and get that back up in unemployment, i think we move interiorly higher from here. lisa: i love the expression, boil the toad. it feels we are in this moment of boiling things.

he was saying disinflation creates smaller profit margins for some of these companies and will lead to layoffs. it is not necessarily a leading indicator, but that itself could cause a greater degree of on appointment. how much are you seeing disinflation coming through in the numbers being a negative for the bottom line for a lot of these companies reporting? david: i would make two comments. one, yes, logically that may -- your earnings may come down. you either need to come back on your capex or reducer labor bill so you let people go. what we have seen over the past couple of years is hesitancy to part ways with labor. we are in an environment of labor according to some extent. when you look at headline job cuts, they have been made in a preemptive way, rather than a reactive way. i'm not sure people are willing to let people go the way they have been in the past. that said, when it comes to the economy, it is important to

remember the s&p 500 companies are not going to dictate what happens with the unemployment rate and payroll job growth. one of the things we are focused on going or word is, are we seeing a growing divergence between what the fortune 500 and the s&p 500 names are doing and what is happening on mainstream across the united states? annmarie: we had all of this household income, covid money was piling up. now, people are going back to credit card debt. at some point, when is that going to be impacting the data? david: we have seen the rise in credit card debt. you can see that from the data. if you normalize that based on cash flow, the overall income ratio does not look all that nefarious. we are seeing late single singles. i do not want to be suggesting we are at the beginning of some new, economic expansion. we are seeing begin to move towards that late cycle environment. the deterioration in sentiment,

the increase in credit card debt, the lower savings rate, the list is becoming longer and more distinguished. that is why bringing it back to the fed -- do they go in march, probably not. but, they likely ease at some point in the second quarter to get ahead of weakness. if the fed keeps the policy rate where it is an inflation is coming down, things are getting inherently tighter. jonathan: before you go, favorite idea right now? what is it? david: we like high quality u.s. equities and large-cap in the united states. for investors looking to add more risk to portfolios, look at the equal weight benchmark. small caps need to be rated further before we are willing to step back and take another swing. jonathan: thanks for joining us. david of j.p. morgan asset management on the latest in this equity market. equities now posited by zero point 1% on the s&p 500. an update on stories elsewhere this morning.

yahaira: oil moving following escalating tensions in the middle east. a tanker carrying russian fuel was struck by a missile as it left the red sea friday. in the most significant attack yet by houthi rebels on a vessel carrying crude. the u.s. says three servicemembers were killed and three or four wounded on a strike in a u.s.-based in jordan by an iranian backed militia over the weekend. shares in china's evergrande plunged 21% before they were suspended from trading. all of this following a liquidation order from a hong kong court. the judge saying the property developer will be taken over by new management in order to carve up $300 billion in liabilities. as of friday, evergrande's dollar notes traded at 1.5 cents on the dollar. blackstone betting big on ai through its 25 billion dollar investment in data center operator gtx. the private equity giants over

qps in 2021 in a $10 billion deal. it is bankrolling the development of new data centers across the u.s.. project is facing backlash from local communities. many of whom do not want the ugly buildings in their backyards. that is your bloomberg brief. jonathan: next on the program, pricing in the fed's first cut. >> you probably need more weakening in the labor market. you need both to slow for the fed to get back to 2% in a sustainable way. we are not seeing growth slowing that much. jonathan: that conversation is coming up next. you are watching "bloomberg surveillance." live from new york city, this is bloomberg. ♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states

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minutes away from the opening bell. equity futures on the s&p 500 positive by 0.05%. bond market yields lower by three basis points on a 10 year. 4.1027; tension in the middle east, 77.64. crude is lower even with development over the weekend. down.5% on wti. i want to pick up on ryanair. here is the move right now on the screen. positive intraday by .5%. we have been asking the question, michael o'leary and his position on boeing. if these planes got delayed anymore, would he canceled the order? lisa: not at all, he would welcome more. ryanair is putting out the signal, the that signal that if anyone wants to sell their boeing and 737 max 10 jets or otherwise, he will be there to buy them. if anyone cancels them, he will be there.

he says the price is right, we would love to get more. that is his position. annmarie: he is a contrarian character. apparently, he is saying united comments last week about boeing were "stupid." jonathan: i imagine united do not want to make that happen. ryanair might have things to say. i imagine united do not. under surveillance this morning, pricing in the ed's first cut. >> you probably need more weakening in the labor market. you need growth to slow for the fed to get back to 2% at a sustainable way and we are not seeing growth slowing that much. the balance of risks has become more balanced, but maybe still more on the side of inflation risks three accelerating, which suggests to us midyear cut is more reasonable. jonathan: investors awaiting clues on when the fed could begin cutting. robert sockin writing, one month

to june and we expect 100 fund to five basis points in -- 125 basis points in cuts this year. robert, good morning. great to catch up with you. let's talk about how challenging the federal mandate is on the inflation and unemployment side. robert: the fed is in a tricky spot. if you look at the amount of progress on inflation, it has been substantial, core pce running at target over the second half of last year. if you look at some elements on the services side, not -- it is hard to have confidence that is going to fall back to target in a sustainable way. you are seeing signs that the labor market is weakening a bit. you are seeing strains among lower income consumers, stresses and credit. when is the fed going to put more weight on that second leg of the mandate, given that core pce is running your target? jonathan: have we seen peak soft

landing optimism? robert: i think we are at that point where as mentioned, the growth data has been resilient with almost no cost from that fall in inflation that i mentioned. this is probably that peak goldilocks scenario. the next few months are going to determine whether that soft landing story becomes the base case, or whether we move back into that recessionary scenario market. we are going to see the fed grapple with that at the next meeting. they are going to open the door for rate cuts, but be aware there are risks to the outlook. lisa: dominic was on earlier and he said the disinflation we are seeing is actually a leading indicator and is leading the weakness we may see in the labor market. do you agree? robert: it is hard to separate how much of this is demand driven versus supply driven. on the one hand, yes, it could be a sign things are weaker than we expect. you are seeing some softness in the labor market and that is

what we think you need to crack that services inflation. it may be the supply side has been improving enough over time as labor force supply has been coming back. that has been cooling wage growth. maybe that is what is helping bring down services inflation. it is the demand versus supply debate that is hard to come down one side or the other. lisa: do we have an understanding of the economic impact of the fed's balance sheet, of other aspects of the fed's tightening program that some people will firle reference -- that some people reference when trying to pay attention to every granularity of the statement? robert: in the background, the fed's balance sheet has been pushing up long-term rates. that is another important story. it has not been the primary story. you have seen the fed start to shift that narrative. we think they are going to start talking about it more, start the unwind sooner than expected. that should mean less pressure on long-term rates and that should support growth.

i think you need to signal that they are moving in the same direction. you can start cutting rates and signaling that you are slowing down the pace of running off your balance sheet. it would be awkward if we are moving in opposite directions. jonathan: last time around, it was that in reverse. what is sequence -- why do sequencing like that matter to them that much? robert: they are trying to learn from their past mistakes. i think they want to send a consistent message to markets that is policy is going to start moving in the easing direction, it is consistently moving in the easing direction. lisa: do you think it has been a consistent message to markets that they matter for the fed to achieve its ultimate goals? the december news conference with chair powell, the fact he did not push back against the easing we saw in financial

markets. do you think is going to try to walk that back? robert: this is a fed that pays a lot of attention to financial markets. they have paid attention to either trying to walk it back, or ride into the right pricing. what you have seen is a fed where communication has been in a fair amount of disarray. you have saw at times the fed chair come out dovish. other people with the committee trying to walk that back a bit. how much do they do that in january? i think what they do is recognize that they probably do not want to cut in march and they are seeing reflective market pricing, but do not want to shut the door completely. lisa: friday, the jobs report survey calls for 180,000 jobs created. where is that number? where does it have to be to put march on the table for your team? robert: that is a great question. it has to be looked at with a combination of data. it is not just dog gains but

what is happening with the unappointed rate and wage growth. if it comes in 180,000 but you see softening on the unappointed side and see wage growth continue to come down, that starts to feed into that soft landing scenario and maybe that puts margin on the table. another scenario will be, a weak report and then the growth side comes the dominant story and that puts the march cut on the table. it could go either way. jonathan: base case is june start and we get more than 100 basis points cuts this year. robert:.yes jonathan: that is the back half of the year, more than 100 base points of cuts. i am sure you are getting questions from clients. how relevant is the election calendar to your call? robert: it is a important question. there is an argument to be made that the december meeting where chair powell came out more dovish than expected that if he knows he is going to have to start cutting rates this year,

why not signal it a bit sooner to get as far away from the election you're are going to start that process? in our call when we have the economy going into recession midyear, that dominates the discussion for the fed and they are going to cut if they need to cut. it is not a good political scenario to be in, cutting that much right into an election, especially the closer we get to an election, that is when voters start to form their opinions. it is a tricky balancing act. jonathan: i am thinking about that september 18 meeting when they put out the projections. are we going to get a rate cut in september, two months before we have got an election? robert: it sounds crazy right now, but if the on up limit rate is moving up, then we are in a recession is our call, that is what is going to dominate. however, if the economy is much more resilient, that trade-off becomes much more extreme. jonathan: i think it is going to

be absolutely fascinating. you try to avoid the politics, but ultimately, the politics brings you in. lisa: there is no way to avoid politics. if we are doing this general campaign for the longest period ever when the campaign is already been run before, at a certain point they are like, you guys have figured out what you want. jonathan: they are in a tough spot. robert sockin of citi. major general pat reiner on mounting pressure for president biden to take action in the middle east. that conversation is just around the corner. your equity market, one hour four minutes from the opening bell. crude lower on the session by .7%, $$77.50.

j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy,

with a partner that puts you first. godaddy. jonathan: live from new york

city, 60 minutes away from the opening bell. see we can add to that. 20 of obstacles.

fed meeting, payrolls on friday coming up. equities go nowhere on the s&p, nasdaq higher by 0.4%. on a two-year, down a basis point to 4.33. crude at the moment is negative on the session. session lows unbelievable, down .6 percent on wti to $77.50 on brent crude. -.6% even with this developing story. busy week for markets. fed expected to hold a wednesday, but investors are expecting guidance about when rate cuts could begin. expected slower job growth and unemployment to take up slightly. netanyahu saying significant

gaps remain in talks to release hostages. looking to broker a deal this week, including a two month pause in fighting. women, children, and the elderly would be released first and israel would release more palestinian prisoners and allow additional aid into gaza. that takes you to our top story. the question mark is about prude. president biden under mounting pressure after a drone the cap killed three u.s. soldiers. iran has denied involvement in the attack. they traced to punish the perpetrators could push the u.s. into direct confrontation with tehran. that is a big issue for the administration. annmarie: is this a redline because of the fact that now three u.s. service members are debt?

-- dead? dozens wounded, some evacuated from jordan. jonathan: john -- general, thank you for joining us. dustin update of the 34 wounded? i think the number we had was 25. >> thanks for having me. three u.s. service members killed at the facility in northeast jordan along the syria border. injuries have risen to at least 34. 8 had to be evacuated from jordan. there is the potential that the number of injuries could rise as more are diagnosed. i want to offer thoughts and

prayers to our families of those who lost loved ones, as well as those who are injured. annmarie: is it now the case that we need to prepare ourselves for more deaths and iran? gen. ryder: as we have said, we will take necessary action to protect u.s. forces around the world. i am not going to forecast any potential response from the united states because of this attack, other than to say there will be a response. this kind of action will not be tolerated. u.s. forces are in this region for one reason, to focus on the defeat of isis. we will do whatever we need to do to protect our forces going

forward but at the end of the day, we are not looking to engage in wider conflict but to ensure security and stability. annmarie: because the administration think proportional attacks will change the situation in the middle east? gen. ryder: we will take deliberate, appropriate action. our focus is not to broaden the conflict. we have been focused on ensuring that the situation in israel does not broaden into a regional conflict. what you have here are iranian proxy groups exploiting the situation and conducting illegal attacks against forces that are in the region to preserve peace and stability. we are going to do what we need to do to protect our forces while cognizant of the fact that we do not want a wider regional conflict. annmarie: would you consider what happened over the weekend, given the fact that there is a

training facility in jordan and we have americans dead now? is this a redline? gen. ryder: test i highlighted -- as i highlighted, any attack against u.s. forces is -- saddens us. our focus in the region is not to be there to widen conflict or to create more instability. it is the opposite. we will take necessary action to protect our forces while looking toward security and stability. lisa: any attack on our troops would be unacceptable? there have been more than 150 since october 7. how much do you think of what the administration has done so far has subdued additional attacks, sufficiently protected these trips? gen. ryder: there has been over

150 attacks. to this point, those air defense systems have worked well in terms of protecting our forces. we are taking a look at the situation and how this ua us was able to kill and wound u.s. service members. but everywhere that we have forces we will take all necessary measures to protect them. lisa: is this an act of war by iran? gen. ryder: it is a horrific act and unacceptable. we will respond appropriately, but the u.s. focus is not to go into these regions to instigate war and escalation. our focus is to work with regional partners and allies to ensure security and stability. it is why these forces are there. you remember when isis was 24 from -- 24 commenters from

baghdad. you do not want that again. when forces are attacked, we will take appropriate action. guy: who conducted --jonathan: who conducted these attacks? gen. ryder: what we know right now is we are confident that this particular attack against this facility was by iranian- back proxies. we are working through the attribution piece right now, but it carries the signature of hezbollah. that this is something we continue to look at specifically. jonathan: when you look at this, how big is the difference between those groups and iran themselves? gen. ryder: for a long time, time has used proxy groups around the region -- iran has used proxy groups to enable itself to have plausible

deniability and to try to expel the u.s. and other countries that are at odds with its own policies from the region. in large part what you are seeing in iraq and syria is that these proxies into to a degree iran are exploiting the tension in the middle east in an effort to try to expel the united states from iraq and syria. again, those forces are there at the invitation of the government of iraq to assist in the defeat of isis. that is what we continue to remain focused on. jonathan: does iran have plausible deniability this morning? gen. ryder: we know that these groups are back by iran. jonathan: you will hold iran accountable or these groups? this is the issue. which is it? gen. ryder: i am not going to

telegraph or forecast our response. we know that iran is behind these groups. we do not seek war with iran, but we will take necessary measures to protect our forces and we will respond in a time and manner of our choosing. jonathan: that is the position of the government this morning but does iran seek war with the u.s.? gen. ryder: i will not speak for iran. we know that their actions are contrary to peace and stability, but we will continue to remain focused on our goal, which is regional peace, security, and stability, but if our forces are threatened, we will take action. lisa: lloyd austin is expected to return to the dod today. can you give us an update on his health? gen. ryder: i would not say he

was missing. we have known where he has been, that he is expected to return to the pentagon today and will be hosting with the nato -- hosting a bilateral with the nato secretary general. as you saw in the statement last week, he continues to recover. his prognosis is excellent. the continues to have physical -- he continues to have physical therapy but he is doing well. annmarie: besides the nato secretary-general, what meetings is he expected to have with congress to build some bipartisan support around policies going forward when it comes to the issue that jonathan is talking about on how to deal with iran and their proxies? gen. ryder: the secretary has been actively engaged with multiple leaders to include the

white house with the u.s. central command and chief of staff and maintains regular contact with congress on a variety of issues. we all understand that the serious nature of what we are dealing with here. working hard to prevent a wider regional conflict while at the same time ensuring that forces can operate safely and securely will continue to be our main focus going forward. the secretary is actively engaged on those matters as well as other issues including ukraine and gaza. jonathan: appreciate your update this morning. hopefully we can continue the conversation or the week ahead. patrick ryder on the middle east. our hearts and minds are with the families affected by the events over the weekend. what will the response look like? annmarie: that is the question we asked and he did not want to forecast it.

the question is whether or not the u.s. will do a responsive deterrence or an actual attack against one of these proxies? i am not just talking about taking out their missile equipment and degrading how much they can strike american individuals or vessels in the red sea but actually going after senior leadership. lisa: senior leadership of who? one of the proxy groups or iran directly? how do you have a tit-for-tat when you do not cross a redline when you do not know what it is? they are trying to escalate on a smaller level. difficult situation. jonathan: that is the latest on the middle east. an update on stories elsewhere. >> amazon will back a one-point form billion-dollar deal -- $1.4 billion deal with irobot.

they said the burden was on the companies involved. >> in any merger, it is true that if we have concerns it is for the businesses either to address these concerns by debunking them or by addressing them by coming up with remedies that will solve the problem. if a company is saying we will not come up with remedies, then we expect that they have good arguments. >> the e.u. warned amazon would be tempted to demote similar products on its marketplace. amazon is expected to pay ir obot a $94 million termination fee. ceo stepping down, company cutting jobs. company is suspending sales of sleep apnea devices in the u.s. making a deal over its faulty

medical equipment. the ceo said the company does not see any harm after extensive tests done on the devices. still, phillips is facing thousands of lawsuits. u.s. and chinese officials are set to discuss a fentanyl crackdown. they are set to meet with chinese counterparts on tuesday. first sit down meeting following the november pledge on narcotics operations. biden is eager to make progress on the issues. that is your bloomberg brief. jonathan: coming up, it is bigger than the market cap of most benchmark indices worldwide. five names in america reporting earnings, $10 trillion of market cap over tuesday and thursday. next, big tech on deck. >> what has been propelling us

higher is those big tech companies. jonathan: you are watching bloomberg surveillance. ♪

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unchanged. opening bell 43 minutes away. yields lower by four basis points. crude, $77.45, even with tension in the middle east. big tech on deck. >> when you think about what has been holding up the market is those big tech companies. they have an outsized influence not just in terms of price

performance but earnings. we hope those companies deliver. jonathan: five of the magnificent seven do this week. microsoft, apple, medicine on -- meta-. these stocks have had quite a run. are these burnings going to back that up? mandeep: i think so. in the case of microsoft and meta, growth expectations are the highest. compare that to apple. there is a divergence in expectations. the key for me is how much incremental revenue is meta-going to get from generative ai or microsoft? 2% from generative ai workloads. it will be interesting to see how much they ramp up their capex and what that would mean in terms of topline dictations. jonathan: we use to say you cannot cut your way to growth. mandeep: their business model is

such that they can cut a lot, which they have shown in the past year. they keep launching new products. the core business, they are ramping up ad loads. locate your add feed. still, they have 2 billion users logging into the app every day. they are able to deliver. that is what is driving the stock. lisa: when it comes to meta-and some degree apple, how much are you listening for what they say around artificial intelligence? how much is that going to be noise versus the advertising you're talking about revenue reducing aspects of? mandeep: generative ai monetization right now is around workloads. these clouds are the ones buying. there is inflation on the ship side.

microsoft could say gross margins is going to take a hit. they cannot match the revenue but these workloads are sticking. once they have the customer, the margin expansion will happen. lisa: are you saying that nvidia's gain is microsoft and google's pain? mandeep: software is an 80% gross margin business. it will hit all the software guys who rely on ships. the gross margins will come down. the question is can they pass it to the customers? microsoft has the best mousetrap because they have the openai partnership. they give you the best club. over time, they will be able to monetize it the others are figuring out the way to use open source approach. jonathan: where is alphabet in this race? years ago some of us would've

set up alphabet and google. mandeep: alphabet has that integration where they have their own model and they want it across their cloud portfolio and the devices. they want to bundle the large model with your android ecosystem. it is a good strategy. the problem is getting attacked from all angles. they have partnered with meta-, partnered with every company that provides searches. some models are not real-time searches. you need a real-time search component. jonathan: when i want to find out about being, i probably search on google still. lisa: i did not enjoy it as much is google. i did the being. -- bing. jonathan: it is the personnel views that count. lisa: it the default on any pc.

google is potentially in trouble. that is what i have heard from other tech people at davos, who were saying that this could be disrupted. do you believe that? mandeep: the narrative is google is getting attacked because they have a 90% share in search. technically, yes. but when you look at the engagement metrics, google still has the engagement. clearly, there is a trend that complexity is an app that has become popular because people feel that it is a better way to summarize content. in some use cases, you will use a large model instead of a google search, but that does not take away the overall use case of search. lisa: we have not mentioned apple. i find that interesting.

dear talking about ai, search and advertising. this apple along in the magnificent seven or with lvmh? mandeep: apple's reliance on the iphone is obvious. the fact that they do not have a cloud pivot. but they still the distribution. need distribution. they will still call the shots. they would love to but a company with a large model. it would be a great strategy given that there are so many models out there. all these companies that amazon has partnered, or google has had a minority investment in. they need to be fat up. they have the distribution. users will use what they offer. jonathan: we have talked lots about market caps. can we finish on valuations? how stretched are they? mandeep: look at what happened

to tesla. everyone thought they would keep growing over 20%. when you have that kind of lowered expectations, multiples compressed. right now, all these companies are priced for double-digit growth. but the math does not work. some of them will disappoint. tesla was the first. expectations are low for apple. that is in their favor. meta, 21% topline growth. can they sustain it? jonathan: as i believe lesson -- has that been the lesson from earnings season so far for you? mandeep: the bar is higher this earnings season than last time. with the multiples where they are, that genai component is huge for microsoft. it better contribute at least 3% to growth. jonathan: good to see you. the bar is high for them.

i am with you. we have got two downgrades to start the year. apple downgrading after being 48% higher in 2023. lisa: everybody is still buying iphones. the most interesting one for me will be google. how much they compete -- can they compete with microsoft? jonathan: what does it say that you ask a have to say that i binged and there is a thing? lisa: i just like saying that. is it "i bing" or "binged"? it is a default search. to be they will switch the name to "moogle." jonathan: that coverage coming up later this week. do not miss it.

reports on tuesday thursday, federal reserve decision wednesday. payrolls on friday. tomorrow, brian lovett, jill castillo, nicholas turgen, and stephanie ruff. all of that and more from new york city. thank you for choosing bloomberg tv. this was bloomberg surveillance. ♪ that always puts you first. (we did it) start today at godaddy.com get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside - and the other goals along the way. wealth plan can help get you there. ♪

j.p. morgan wealth management. ♪ ♪ ♪ ♪ ♪ ♪ ♪ >> caution on the markets.

the wrecking ball arrives for the fed and tech. >>