♪ >> i think the market is already pricing in the rate cuts to a certain extent. >> i think the fed may send a signal to help people begin to ground their expectations. >> they want to send a consistent message to markets. >> i don't think we are in a situation where we are going to be seeing a pivot, or family, which is what the market has been broadly expecting. >> markets haven't fully adjusted. announcer: this is "bloomberg serveillance: early edition" with jonathan ferro, lisa abramowicz and annmarie hordern.

jonathan: in many ways, the week begins right now. good morning, good morning, this is "bloomberg serveillance." equity market pulling back just slightly. later on today, tech reports. microsoft and google after the bell. lisa: this is really the kick off of the real earnings season that account for the vast dirty of the gains that we seen so far this year in market and a lot of people are saying because this market is of disproportionately hinged to seven companies, so too will be performing the earnings of said firms. jonathan: not just on the s&p 500, but on some of these single lanes. microsoft up 57%, google up 58%. just how high the bar later on this afternoon? lisa: some are saying the bar has already been lowered particularly for google and particularly for apple. i think it depends on which

company we are talking about. there is nvidia which everyone expects to come out and then some and then blowout the water, and then you have the likes of apple where people are hoping that they hang tight. it's going to be unclear. i'm curious to see how people take some of the projections. jonathan: likewise we will talk about u.s. exceptionalism later on today. stagnation on gdp. talking about how high the bar is for u.s. equities, how low with the bar for europe right now? lisa: did you see that italy and spain were the outperformer's? this is a reversal of fate of the eurozone outperforming germany which is the sick dog of europe and continues to be in contraction as expected, and yet still may be avoiding some sort of recession. this is a call for some sort of victory. jonathan: surprise yesterday, crude lowered by 1.6%.

closing at 76.70 eight on wti after the tension of the weekend. annmarie: one thing at the oil conference today with the fact that the supply is still there, dishes have is getting to the destination has changed because one -- of what is going on in the red sea. the backbone of supply right now is the united states of america. jonathan: still calibrating that decision. what is your view on what we've been told over the last 24 hours. annmarie: retaliation is going to be much bigger given the fact the iranian proxy to u.s. bases in iraq and syria some 160 times. this will be much tougher. the question is when the u.s. response, how that response ruby and how fierce. the biden administration is going to be walking a very tight rope when it comes to this because they've made it very loud and clear they do not want escalation in the region and they have to respond fiercely to this because three americans are dead.

lisa: i'm struck what tony blinken said yesterday, i would argue that we've not seen a situation as dangerous as the one we are facing now across the region since at least 1973. how do you calibrate a tinder box with a necessity to respond? jonathan: do the compare and contrast of what they were saying in september. what they were thinking about the region four or five months ago compared to where they see it at the moment. annmarie: september 29, 2023. jake sullivan said the middle east has never been quieter in decades. to be fair, he likely didn't live through the 1970's as and dealt and in policymaker form, but blinken yesterday saying it is the most dangerous we seen in exactly four months time. this administration has changed have views the region. jonathan: $77 on crude right now. wti, 76.95. equity futures on the s&p 500 pulling back just a touch, down

by 0.1%. yields lower by a single basis point. 4.06% on a 10 year. treasury refunding, shaking up this market yesterday. lisa: we get a full kahuna on wednesday but to me, the fact that they asked for $760 billion of net borrowing this year, below the hundred $60 billion ignited a rally. again, how much is this because tax receipts are going to come in bigger, and how much are people going to say this is a den of political maneuvering, give a little bit of support to a bond market that may have other issues later this year. jonathan: that if the story of the past 24 hours. the next 60 minutes, brian leavitt is turning assuredly and then later, jon lieber on heightened tensions in the middle east. constance hunter and washington, d.c..

the equity market at all-time highs. brian levitt of invesco writing this. naysayers warned of economic hurricanes, five years of unemployment above 5% and the worst earnings recession since 2008. fast forward 10 years -- two years and we are now submitting the s&p 500 index hitting a new record. brian joined us around the table. brian, i remember the conversation. he looked at the camera and you said to us ima fomo guy and we all laughed. are you still? >> i am. i want to be exposed at the end of tightening, after the interest rates. that's not to say that every day or every week is going to be glorious or i'm going to be missing out every day or every week, but we are an environment where over the next few years, markets should perform well. that is typically the pattern. lisa: let's define fomo in 2024.

last year it was amc. now you basically lean into big tech and out of small-cap? >> use the challenge. when you do what i do for a living were asked to write outlooks in september and october in the story of 2024 was supposed to be interest rates are going to come down as a starting price in rate cut. that normalization will lead to them -- some small-cap and mid-cap outperformance is. i wish he had played out over a longer time. what we are in now is an environment where the economy is hanging in, that is still in the short term favors the more, higher quality cap stocks. what we look forward to is normalization and the broader market rally. lisa: people who are paid to have angst recently talking about the tech bubble and

raising questions that we are similarly concentrated. do you adhere to that, this idea that we could be hinged to some sort of massive disappointment and downdraft these earnings disappoints? >> maybe in the short term but we are not partying like it is 1999. if you look at a bot names, those names were trading at either valuations you couldn't calculate because the earnings weren't there, or extreme valuations. this is not the same picture. many of "the magnificent seven" are actually delivering on the promise. valuations might be extended that these are also the companies going far beyond the broad market and far beyond the economy. what i'm looking forward to come and give an average valuations in the other 490 names can we see this broaden out because that expectations of a

normalized yield curve? maybe we don't get six cuts this year but over the next couple of years we should expect that normalization and the yield curve and finally getting out of this covid cycle, this covid environment. if i have fomo, i feel like it would be in the cyclical, the small-cap, the value international over the next couple of years. jonathan: it makes people nervous when they see all-time highs. you've written about why they shouldn't be nervous. why shouldn't they? >> i think we had 1001 hundred 86 new highs in the s&p 500 since 1957, so that is once every two weeks. so you should expect a new high every fortnight. i've always used the line only small minds are impressed by large numbers. let's not be impressed by this. the averages -- lisa: i take that personally. >> i'm insulting everyone,

right? if you think the world is going to be better for most of us and for the 500 largest businesses in america, you should expect many new highs of the course of your life. jonathan: which will are we talking about, the u.s. economy, europe as well? we talked about europe. what does that tell you about how things might be for multinationals? >> if you think about it from where those countries are relative to trend and where they are likely heading based on their leading indicators, you look at europe and china, things might be improving a little bit, albeit off of rough levels. as i've always said, these markets care about that are or worse, not good or bad. when you are seeing in the u.s. and what you should expect to see is a little bit of a slowdown. so the slowdown favors these top-heavy names that we've been seeing outside. annmarie: but what we see going

on in china, why are we seeing that impact in the u.s.? >> why aren't we seeing the impact of slower chinese growth? you are seeing at a little bit in the broader market, you are seeing less so in the companies that are able to grow irrespective of the macroenvironment globally. for some of the companies that are more cyclically exposed to china, you are seeing it, but these markets this month are being driven by a handful of names again. jonathan: let's talk about this single name. ups out with numbers. the guide for 2024, not great. lisa: expecting revenue to be $92.5 billion against the estimate of $95.7 billion rounded up. looking at weakness both domestically and abroad with respect to just in general, some of the activity also talking about a fourth quarter impairment charge of $84 million. looking through the numbers,

i've got to say this is usually a bellwether type of stock. is this about people shipping around goods that necessarily is independent of the economy, or does this indicate a lack of willingness to spend to the same degree? jonathan: we will come back to that story. the early reaction is the stock is down by about 4.9% in the equity market. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> more signs of waning demand for ev as volkswagen pushes back plans to seek outside investment for its battery unit. according to bloomberg sources, they also scrapped plans to publicly list the ev business this week. walmart's offering a new incentive for u.s. store managers. starting in april they will receive an annual grant of as much as $20,000 with the potential to make over $400,000

if they are high performers. it is the latest effort by the retailer to attract and retain staff. just last week the company announced it will raise the average store manager salary 9% from $170,000 to $128,000. fans hoping to attend this year's super bowl in las vegas will have to fork out a record amount. the average ticket price coming in at $9,800. the most expensive ever. that is just to attend the match between kansas city and san francisco. rooms at some hotels are going for more than $1000 per night. no word yet on whether taylor swift will be in attendance. jonathan: i know you are tracking that, thank you. the latest on taylor swift. $12,000 basically for the weekend. if you're a drinker, if you like gambling. it is ridiculous. lisa: at what point we hear about the taylor swift inflation

phenomenon once again? everyone is going to say that. annmarie: she might not even show up. lisa: it doesn't matter, how much is she responsible for a 70% increase? jonathan: she's the reason we got to pay these high ticket prices. up next, big tech taking center stage. >> i do think that fundamentally the strengths of these companies are still going to be pretty robust. obviously cloud ai is going to be the thing that is moving the dial. >> that's coming up next on the program. good morning, you are watching bloomberg surveillance. how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun!

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is both a volume store and profits per package which is not really encouraging when it comes to margin pressures. u.s. package revenue was down 7.3% year-over-year, came in almost $1 billion were half a billion dollars before the expectation. international package revenue kind of the same, down 7% year-over-year. what i thought was interesting was that the revenue per package came in at $13.11 vs. an estimate of $13.30. are we seeing people not wanting to shift things around, not wanting to pay the extra cost union, and basically having to take a hit as you pay higher costs to some of your workers and to all of the other supply chain issues? how much is this a bellwether type of name? jonathan: stock down by a little more than 4%. is that more important to the economy then maybe the tech numbers we get a little bit later? we should get numbers from general motors, so look out for that as well. big tech taking center stage.

>> fundamentally the strengths of these companies are still going to be pretty robust. we know that obviously cloud ai is going to be the thing that is moving the dial. what is kind of an unknown at the moment is the rates at which corporations are going to be reopening the strings and obviously has huge implications for the cloud players. jonathan: apple, meta, amazon throughout thursday. combined market value exceeding $10 billion. big, big afternoon coming up a little bit later, then again on thursday. what i do and the team focused on later on today? >> the biggest thing at the contribution of ai to microsoft workload. that is the single biggest thing we are going to focus on is how much they are getting a push because of that. for the last two years, we've

seen cost rationalization, spending on resources. this is the year we are going to see a rebound. lisa: where do you think is going to be the winning recipe, microsoft or google? >> i think microsoft is a little bit ahead in terms of cloud performance only because of their relationship with openai, but having said that, google has a lot of intellectual capital behind them. i think in the long run, they should see the benefit also. lisa: we were talking about this yesterday and i got some feedback. i'm curious how much we end up seeing microsoft gain traction with some of their artificial intelligence around bing vs. google. >> google will still dominate. is going to be a lot of fluctuation in the midterm. i hate saying it is not going to have that big of an impact but at the same time i think will

needs to show that they can have a product that is very similar to chatgpt and it works pretty much the same. jonathan: can we talk about a product coming out of microsoft? i keep hearing about this copilot software. what is that and how hopeful should we be? >> pretty much you take any software that you have, whether it is your office or if you are writing code, this particular product helps you increase your productivity. if you are starting to write code, it will help you write code. it is like chatgpt, but for that particular product. and i think that is how microsoft is looking at monetizing a lot of products. is the first one in the market to go out with a lot of these add-ons because of their relationship with openai, and you are seeing other companies follow. one of the ones that has done it with a good job of using the copilot. across the entire software

ecosystem you're going to see copilot show up for the next seven years. jonathan: the geopolitics specifically, click clearly some of these companies that you've identified are surfing the ai wave, the cloud business is absolutely exploding. do you think that we do start to see this polarization between the companies that can serve companies in china and ones that can't? >> i think it's going to be more reflective on the cloud players to work with companies in china. the fallback is not going to be on the likes of amazon, they don't generate that much money. but the bigger problem could be if they go after apple, that is bad news for apple in the long term because they make most of their products in china. jonathan: interesting. those earnings coming up a little bit later on this afternoon. apple, microsoft on deck and then the rest of them, amazon, meta and apple on thursday. lisa: i'm wondering how much

quiet attention and he is going to get because a lot of people are saying they should be the magnificent eight including amd or boot out one of them. i think it might be interesting in light of the chip focus and how much they are the accelerating that production. jonathan: is that the pitch coming from amd, just to be clear? lisa: it's a couple investors including one investor of facebook. jonathan: brian, let's build on some of this. the geopolitics, how does that shape your view of some of these multinationals right now? >> i try to look beyond the geopolitics to the best of my ability. i asked myself two primary questions. one, is it going to affect the trajectory of the u.s. economy and is it going to change with the federal reserve is going to do? as long as these events remain relatively regionalized, the answers to those questions are generally no, and so far the market has looked past it. if they get broader, it may get different answer.

i'd heard 1973 mentioned. 1973 is a scary thing to think about the if the markets were down 50, 60%. he didn't recover for a long time. there are some critical differences between now and 73, one that the u.s. is a primary driver of supply in the oil market and the federal reserve having significantly more red ability at this point than it did back then. annmarie: but outside the oil market, the red sea is really used for also consumer goods. isn't that a concern when you look at inflation, the prospect for potentially bottom lines having to have an impact? brian: 15% of goods estimated going through the red sea, 12% of oil. it's not ideal. it's happening at a time that is not ideal, but to me the critical difference that investors should think about is between now and 2021-2022 when we did get significant inflation. back then, people have money in

their pockets, and workers had just slashed a bunch of inventory workers. that is really what led to the 9% inflation. so today we are dealing with what is going on in the red sea, but businesses have inventory, businesses have workers, so it is a very different story than a couple years ago. lisa: how much is not paying attention to this basically just conditioning of markets? scott shelton said it has been one of the more toxic trade for last two years. every time you buy because of geopolitics, you lose money and that has basically been the story. how much are you concerned that there isn't the same risk premium, that might be baked into markets that some people say are priced to perfection just aced on the fact you do have the potential for a flareup that we cannot foresee? >> we always seem to have these potentials for flareups. even recent history, syrian civil war, when the russians initially went into crimea, even

thinking back to u.s. troops in iraq and afghanistan. if you look, typically draw down early and then over the next. come out of it -- next period come out of it. what i would say to investors is don't make it your base case in your portfolio that the world is going to implode because history tells us that that is a losing proposition. if you want to hedge, think about exposure to gold or commodities. you don't need significant -- 5%, 10% exposure to help provide some insurance. jonathan: the earnings from ups, stock is down by 4.625%. i think it present an obvious question, do i want exposure to these big secular themes, ai, or cyclical names? brian: over the intermediate-term time period, you are going to want more exposure to the cyclical names. what we are challenged with right now, everybody has to

remember this, the federal reserve want to slow down the economy we need to slow down this economy. we are seeing the effects of all of it, and so far we've been generally stable but this economy will slow. the question is soft landing, hard landing, there doesn't seem to be enough excess, enough leverage to have a hard landing but in the near term this market is going to focus on a slowdown. as we come through that slow down and normalize the yield curve is when you are going to want more exposure to cyclical names. jonathan: thank you, good to catch up. ups down by something like 4% in the premarket. up next, the u.s. response to the deadly drone attack in jordan peele that conversation coming up next. coming up next.

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♪ jonathan: for many market participants, the week does indeed begin today. the two-day meeting beginning to the fed down in washington, d.c. in the native this morning and then this afternoon, earnings from microsoft and alpha that, or google as you might say. we are -0.1%. on the nasdaq, down by 0.06. a heavy weighting of these benchmarks goes to big tech.

we fed numbers from ups, the outlook disappointed. numbers from gm just dropping across the bloomberg. lisa: and bidding expectations, $9.50 against the estimate of $7.70. just going through the numbers here, they do expect to cut expenses by $1 billion. i'm curious about exactly where. they expect industry sales of about 16 million units but just going through this, it looks like north america did outperform. i just want to point out this comes at a time when it is not just north american many actors experiencing. byd, some disappointing earnings as a result of profit margin contraction, because of their competitive advantage. we will keep going through the numbers but to me, the idea that they actually beat highlights the fact that they are maneuvering, albeit with cost cuts that we hope to hear more about. jonathan: ups dropped about 4%,

gina -- gm is up about 4%. positive if i more than 5%. the good news if they got a better story to tell because the broader environment, not great right now. gm chair and ceo, production of the f-150, hasn't been great. lisa: there's been a retrenchment and expectations, we've heard that from ford and general motors and the expectation that they will be that adoption, but it will be slower. the net profit cr better than expected. how much of this is hinged to the big trucks and the fact that people haven't made that transition yet? the net income for 2024, 9.8 billion dollars against the estimate of $7.1 billion. really coming in pretty strong. jonathan: positive in early trading. later on today come around 10:00 eastern time. don't miss this conversation

live on bloomberg television. iran urging diplomacy as tensions rise following the deadly drone attack on a u.s. base in gordon over the weekend. the country's foreign minister continuing to deny involvement in the attack which killed three service members and injured dozens more. political pressure is building a president biden to respond. john kirby telling reporters yesterday the president is weighing the options before him. what are those options? annmarie: those of the big questions, we know from our reporting that it is likely it is going to be more forceful response and we have seen the u.s. take given the fact that you mess troops have been hit on the basis. 100 60 times we seen these iranian proxies target u.s. troops. but they continuously say they do not want to invoke a wider regional conflict, so it is not going to go as far as may be some republicans want.

jonathan: a question we can ask this morning, to prevent a war to you have to show willingness to engage in one? annmarie: show that you are willing to go on a massive attack. this is what the trump administration actually did when it came to going after iran. they didn't attack but the iranians were frankly freaked out about it. they did some retaliatory measures in iraq and then on back channels they went through a number of interlocutors and said we are done, we do not want more bloodshed in the region and then that was it. then covid hit and the story quickly went away, and that was why. jonathan: we will send that question to jon lieber in just a minute. the quarterly borrowing estimate now sitting at 760 billion dollars down from a previous production of $816 billion. the treasury saying the estimate was reduced thanks to higher net inflows and more cash on hand than previously expected. lisa: and just remember that

what ignited the rally or at least turbocharged it was that treasury refunding announcement back than that really concentrated more of the borrowing. and a lot of people are going to be talking about the political aspects of this, and peter came out and said there is also political maneuvering on the part of janet yellen and not wanting to spook the treasury market. we will hear in the coming days that of the issue is to come out, but the truth of the matter is later this year the u.s. is expecting yields to be lower big that is probably going to be cutting. why not wait until then to actually increase some of your issuance if the yields are better? you got to handed to her, she she understands the markets. jonathan: she understands other things as well based on what i heard in the podcast she did. did you see that? annmarie: she did a podcast with npr and was asked a number of questions. she plays candy crush and she loves brick breaker, but she prepares for everything.

she said the first time she smoked weed she prepared than that gave her an addiction to cigarettes. jonathan: two or three packs a week, with that right? it was nice to see janet yellen share in lieu of personality on this podcast. very different. super chill, apparently. let's see how chill about the story, elon musk announcing the first human patient has received a blaine impact -- implant from neural link to one day hope to allow people to control computers with their minds. the first human received an implant yesterday and is recovering well. initial results show promising neurons fight detection. last year they said they expect to perform 11 surgeries in 2024. thoughts? lisa: i don't think it sounds so good. this isn't necessarily going to be the future for our computer use anytime soon. this is sort of an experiment and kudos to him for thinking

brightly. i personally would not have a neuralink in my head but people who are doing and have problems with their limbs. it is geared toward people who actually might get some real use. annmarie: for people who are paralyzed, this could be incredibly optimistic for their lives, but the fact that elon musk also talks about one day helping merge humans at artificial intelligence, that is when that is a little bit unnerving. i know you must be nervous because you don't like ai. jonathan: stage ii two concerns me. stage one is super promising. lisa: i think down the line as somebody who does enjoy science fiction occasionally, it is nice to have big dreams and see how it plays out. whether any of us wants to become a robot right, not clear, but later on, let's go. jonathan: i'm not ready for that just now. let's turn back to the latest in the middle east. ivanka continuing to deny

involvement in the deadly attack on u.s. troops in jordan. active diplomacy is underway, writing the white house knows very well the way to end the war is political. jon lieber, former policy advisor to senator mitch mcconnell joins us now for more. wonderful to catch up with you. let's start here. have you developed a base case as to how you think the u.s. will respond to the attack over the weekend? >> the u.s. has to respond here. they can't allow the death of three troops to go unanswered and that is what the problem for the biden administration and foreign policy in the middle east and also a pretty big political problem for him in the united states. the key question we are focused on is whether or not that retaliation and escalation starts to touch the oil markets. the way it would do that is by taking iranian oil off the market which we don't think is likely. so what is more likely is targeted strikes against these militia groups that are operating out of syria and iraq

to degrade their capabilities, to continue attacks against u.s. forces which are spread across the region. this will probably come in the coming days and even weeks. it's going to have to be a become a public show by the biden administration to make a difference but the biden administration can't just sit back. obviously there risk the threat of stoking a broader regional war with iran, but nobody wants that. iran doesn't want that, the u.s. doesn't want that. sometimes they are funded, sometimes they are not, sometimes they had military support. attacking the militia groups should be enough to satisfy the political desire in the u.s. to get back and it is up to the iranians at that point how this escalates. annmarie: are they already doing that, degrading the capabilities of these iranian proxies? what would be different, it would come in stages and we would see more of them? >> you are going to get a more forceful response. you look at the escalatory ladder that the u.s. has and

striking these groups is the first step in that ladder, figuring out ways to cut off their funding and their support is where the u.s. is going to his right now. but there's a lot more they could do. they know where they are operating out of an they could attack them more directly. part of the story here is that the u.s., the group slipped in this drone behind another u.s. drone that is landing according to some wall street journal reporting, so part of this is going to be defensive as well to make sure that future attacks don't threaten the lives of u.s. service members, but there has to be some kind of visible response, kinetic force response against these groups in the region. annmarie: the biden administration has gone out of its way to make it clear that they do not want a showdown with iran. if the message to iranian proxies that if they keep it at this level in terms of hits on u.s. troops that that is acceptable? >> no. this is obviously -- no, this is why they have to escalate.

in some ways the groups got a little lucky here because they were able to exploit this weakness in the u.s. defenses. there's been hundreds of these attacks over the last several weeks, and the u.s. continuing to try to degrade, but there is more than they could do in that is what we are looking for. lisa: i was struck by a columnist writing this piece today, america subsidizing iran's fight against america talking about how the sanctions have not worked and if anything, iran has turbocharged its production it is making billions of dollars extra each year as the amp up some production. do you think that sanctions have completely failed and that right now, in effect, some of these are allowing your bond to keep financing some of these french troops? >> i wouldn't say sanctions that failed, i'd say the biden administration is made a deliberate choice to allow the iranian wheelbarrows to continue to flow primarily to chinese purchasers because of the fact that they are concerned about the overall effect on global gas prices and they are attempting right now a thawing in relations

with china overall that has limited their option set for out to go after these iranian barrels for that going after chinese entities. that is probably the next step on this latter if the u.s. decides to crack down on the sanctions that are allowing the iranians to sell barrels of oil. the u.s. is the world's biggest producer of oil right now. that is going to help the biden administration take these steps as they think appropriate to squeeze the iranians. lisa: is the effort to keep oil prices low in the u.s. harming the national sick area of the country if you are having this issue where it is basic reading off its two iran and potentially severing certain relationships with europe, with respect to the lng bans for the pause that we seem recently? >> the lng bans is a different story, more about the mess the climate politics. iran is a growing threat in the middle east, a growing threat to u.s. interests. for a while the u.s. could

afford to look the other way at the iranians continue to sell barrels, but now it seems like that calculus is shifting and this is going to be a delicate balance for the biden administration to get right. jonathan: none of us want to see a war develop between the u.s. and iran. i just want to get your final thoughts on how you think the administration should approach this. they always caveat everything they've say and they said repeatedly we do not want a war with iran. after the attacks of the weekend, does iran want to conflict with the united states? how would a future president, if it is different than joe biden, deal with this in a different way? to prevent a war, do you have to show some unpredictability here, and willingness to engage in one if you have to? >> it's not clear how much control iran has over these proxy groups that are launching these attacks. they could probably get vented stop, trump attitude was we are going to escalate to get them to stop. that seemed pretty effective.

covid did intervene, but the iranians didn't retaliate in any meaningful way after that incident, so i think it is an important question for u.s. foreign policy, how aggressive and provocative can the usb without forcing an escalation backwards from iran? the biden administration has been much more cautious than the trump administration has been. they are worried about this escalatory cycle, but i think the trump administration based on the action of killing soleimani gives us some reason to believe that an aggressive attack of the way of actually de-escalating the situation. jonathan: interesting, appreciate your input as always, you're one of the best. wti almost totally unchanged. let's get you an update on some of the stories elsewhere this morning. here is your bloomberg brief. >> ups shares are falling in premarket trading after lowering its revenue estimates for 2024. the company also reported a

bigger than expected revenue decline in the fourth quarter with the ceo calling 2023 a " unique and difficult year." five of the so-called magnificent seven are set to report this week with microsoft and after that deck after today's closing bell. investors will be looking for expansion of ai and earnings to justify higher valuations and microsoft's over $3 trillion market cap. andy also reports this afternoon as it looks to compete in the chip space, especially against nvidia in the race to power artificial intelligence. apple ,meta, amazon report on thursday. the pga tour is reportedly close to receiving a historic investment from billionaire sports team owners. steve: and mark lacerate are among the group of investors set to inject about $3 billion into the lead. the deal may not initially include -- with talks still fluid on how to include the rival organization.

that is your bloomberg brief. jonathan: thank you. coming up next, the fed's two day meeting begins. >> the next few months are going to really determine whether that soft landing story becomes the base case or whether we move back into that recessionary scenario and i think you're going to see the fed grappling with that at the next meeting. jonathan: a preview of the next meeting including tomorrow. that preview coming up next. this is bloomberg.

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-- the fed's two day meeting begins. >> going to really determine whether that soft landing story becomes the base case or whether we go back into that recessionary scenario markets. i think you're going to see the fed grappled with that at the next meeting, open the door for rate cuts but the aware that there are still risks to the outlet. they want to send a consistent message to markets that policy is going to start moving in and easing direction, is consistently moving in and easing direction. jonathan: investors looking for clues on the next move and whether we get a rate cut in march. democratic senators would like one right now. writing in a letter to chairman powell, we urge you to consider the effects of your interest rate decisions on the housing market and to reverse the troubling rate hikes that have put affordable housing out of reach for too many. constance hunter, senior advisor at macro policy perspective joins us now. we will get into the actual preview of the federal reserve in a moment. how unhelpful is it to get that kind of letter to chairman

powell at a time when he's probably going to start talking about reducing interest rates anyway? >> precisely. powell has threaded a very fine needle, to do the fed's job of just looking at the economics and not having it be a political decision and to defend the independence of the federal reserve. it just undermines that work that he has done, -- maybe undermines is too strong, but it gives fuel to the fire for those that want to make an argument that the fed is making political decisions when they're absolutely not. lisa: a lot of people saying it is going to be a snoozer with adjustments to some of the language to allow for a hike maybe in march if they see it necessary, but more likely in may. >> given the bond market volatility we had with every little tiny minutia of data and information, we don't think it is going to be a snoozer.

we expect them to lay the ground. we have pce on a six month annual, already at the target on a six-month annualized basis. they've already laid the ground as we know, the job market is softening. we are seeing a narrowing in the sectors that are hiring and our proprietary research suggests the first time that layoffs are coming at a higher level than hiring, so earnings reports, but we see a big shift in our data that we are collecting. lisa: this is really important especially given some of the commentary that referred even from that officials recently, echoing some of your concerns. the last time credit markets rally this dramatically, the

summer of 2007. since the consensus has coalesced around any of the rosy scenario, and a double-digit breakout in earnings, it makes sense to consider alternative scenarios. from your perspective, what is the alternative scenario that is most idly? -- most likely. >> i would say there is no lending which would be the ideal situation with the fed cuts. we managed to avoid some months of negative job growth, and the economy kind of comes along. then there's the soft landing which is to a landing, let's not forget. we would be looking at sort of near zero gdp growth for a quarter were two and then we would be able to progress. of course, there's the hard landing which would be a recession. and i would actually say they are fairly evenly -- the risks are fairly evenly balanced across those three. there are some unknowns.

what is happening in the middle east, how that is going to impact oil prices and shipping supplies. there's only that possibility that you are going to have a recession. but i do think the soft landing scenario is the most likely, given the fact that the fed is sort of indicating that they are willing to move on interest rates in a timely fashion. jonathan: let's do some of that. equities at all-time highs, critic spreads were the type. a ton of issuance for january. talking about a massive month for credit issuance for the month of january. the financial lane witness economy is that efficient? >> that is an excellent question and i think it is somewhat unclear. there are pockets of the economy or we know there is significant stress. we see this surge that we had over the last several years that

is pushing down rent crisis, overall a good thing for prices and overall a good thing for the consumer, but because of stress in the residential housing market and of course, the layoffs are coming, we think. once you start having negative job trends, if we get to that point, that can spiral into some pretty negative results for the economy. i think it is a very, very tight rope that the fed is walking in that equities are walking, quite honestly. while i'm overall bullish because i think we are having a huge productivity surge, productivity surges are unevenly distributed and there could very well be significant packets of disturbance that ripple out and cause a wider problem. jonathan: so you are looking for that first move in march. that in mind, you hear people say the chairman powell tomorrow will be noncommittal, how

noncommittal can he be given the federal reserve likes to do this in a predictive fashion? >> he wants to keep all options open because of course this only surprises, but i think he also wants to lay the ground so the market isn't completely shocked if the fed moves in march of he expect. and let's not forget, one of the things that he's mentioned is that policy is very restrictive. we've seen that from williams, we've seen that from other fed speakers, so do they need to be very restrictive? can they move to only moderately restrictive, still putting more pressure on prices but also using financial conditions a bit more? i think that is the direction of travel he's going to talk about. jonathan: thanks for jumping in front of the camera for of this morning, appreciate it. macro policy perspective, looking for that march rate cut ahead of tamara's meeting. lisa: i love that you were talking about with respect to the credit markets being wide open and how that changes them

of the weakness people are talking about. almost $190 billion of sales just in january, a new record. the likelihood of that crossing $200 billion some people are saying is pretty great and this comes at a time and spreads have hit the lowest for that particular asset class going back to january of 2022. so you put all this together and you wonder how much that is going to have an effect on the overall economy ahead of whatever the fed does or doesn't do. jonathan: we talked about whether they would need to survive until 2025. looks like they are getting in front of 2025 already. lisa: seems like this isn't really an issue. i'm wondering how much is for the lower rated companies were seeing some of them come to market. if this just a window and seeing this opportunity before volatility? jonathan: busy, busy january. lisa: it was 188 $.57 billion. jonathan: coming up next in the next hour, the ceo of citizens bank of edmund, the ceo of

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>> we see inflation and growth peeking. >> this is probably the peak and goldilocks scenario and the next few months are really going to determine if the soft landing story becomes the base case. >> the probability of recession has pretty much vanished over the last couple of quarters. >> i think there are improving prospects for a soft landing

that has been improved materially in my view. >> is going to be hard, i'm sure of that. it will happen at the end of the year. >> this is bloomberg surveillance. jonathan: so bearish yesterday it was unreal looking for employment of 6% to 7% year end. 20% downside on the s&p 500. from new york city, good morning. for our audience worldwide this is bloomberg surveillance alongside lisa abramowicz alongside annmarie hordern. two stocks, two stories with earnings different than ups versus gm ups is down by more than 6%. gm is higher by 7.5. lisa: ups underwhelming by a pretty significant margin. how much of this is because their packages are going down and profit margins are going down? how much is competition with

amazon? general motors seeing additional profits in 2024. speaking of cost cuts but defying expectations of a much poorer outlook even with all of the concerns about higher labor costs, a transition to ev's that is being stymied. potentially a more difficult scenario for consumers. jonathan: we will speak to mary barra. we still need to speak about a future for ev's given the setbacks. ford pulling back from production of the f-150 lightning. we have had news in europe on the likes of vw as well. the news is not good at all. lisa: this comes as people are saying that it's not necessarily completely thrown out of the water but just delayed in terms of the transition. i want to hear from jm how are they adjusting the mix? all trucks all the time including gas guzzlers? if you have money, they are the ones buying too because no one wants to take out a loan for 7%. annmarie: dealers not only wrote

a letter to president biden saying that the ev's are sitting on our lot, but the advisory board for the wall street journal says that people want hybrids. they are transitioning slower. they want to mix to make sure that they have the range capability. maybe they are moving into hybrids? jonathan: this is the intro moment for the auto industry and mari barrette has pushed fact that you need this because it pushes back on the ultimate destination of ev's. ford seems to have taken a different position based on what we heard a few months ago. lisa: he had a longer-term ratcheting down of expectations in terms of total delivery for electric vehicles and manufacturing. i'm curious how much of this is coming at a time when chinese manufacturers have an upper hand and even though they have the upper hand they are not making profits because they are driving out competition by lowering prices? it is a complicated story and it's not clear.

jonathan: mary barra is coming up later around 10:15 eastern time. equity futures on the s&p 500 are negative by 0.1 percent. five names, $10 billion in market cap, unbelievable. we hear from alphabet, microsoft this afternoon. on thursday it is apple, meta, and amazon. lisa: this is the make it or break it moment. a lot of people are talking about how top-heavy the market is. if we have ridden all of the gains on these particular names, how vulnerable are we to a disappointment that moves us in the opposite direction? everyone that we put that question two says that they won't disappoint so stop thinking that way. jonathan: in case we run out of time do you want to look at the bond market briefly? a move lower yesterday? do you want to give us the why? lisa: there was a preview as to what kind of treasury financing would be necessary this year and it came in lower than expectations because of tax receipts and other factors that

janet yellen was looking at. this is basically saying that the supply is a going to be there to the same degree that people thought. it means that there is a rally in the bond market. jonathan: or .06% on the 10-year. coming up this hour, the ceo of citizens bank of edmond on the outlook for regional banks. the ai driven surge in tech and some weakness in commercial real estate. annmarie: the diversification when it is the consolidation among a few names that are winning. jonathan: we will get back to the ev story. gm's better than estimated fourth-quarter earnings. regional banks looking to bounce back from a tumultuous 2023 but risks remain.

>> i am concerned about small and midsized banks. they have several risks happening at this time. they have commercial real estate and the refinancing in that space and a refinancing wall in their commercial and industrial loans. i think this will cause them to really have to take risk considerations very carefully. i think that the lending capabilities and the capacity they will have two land will be very limited. jonathan: we can get you a stronger story with the ceo of citizens bank of edmund. good morning, jill. you have a powerful story to tell. it is not that gloomy. talk us through it. jill: i think relationship bankers that have intimate knowledge of their borrowers and have been disciplined the last five to 10 years are not going to see the type of weakness in the commercial real estate market that others are anticipating. i think that those who have more distance from borrowers or are outside the banking system have vulnerability. lots of regional impacts as well. larger centers with large multitenant buildings have more susceptibility to some of these weaknesses and higher interest rates and potential vacancy issues than may be smaller-type of commercial real estate.

the lender knew this borrower and was able to structure appropriately. focusing on debt service coverage for the last few years. those types of lenders will come out ok. jonathan: in the spring of last year for smaller banks, a lot of people concluded that the bigger banks will get bigger and smaller banks need to consolidate. do you have a different view? the reason we need more than 4000 banks in america? jill: we talk about smaller banks, small banks, ones like mine, were fine. we didn't see the deposit runoff because there is a diversity of deposits. average deposit amounts are low. you weren't counting on hundreds of millions of dollars to concentrate on very few depositors. also, you had more, like we had, two thirds of our deposits are non-maturing deposits. you had some loss and now competitive pressures, you didn't have those same pressures

as some of the large regional institutions. brokered deposits also increased quite a bit due to the demand early last year. we have seen that soft and quite a bit. again, it goes back to relationships. looking at having 4000 plus banks in the united states is great for us. oath and having a bank in your location if you are in rural areas who may not have access to a bank and in a suburban area with over 50 or 60 banks and 100,000 in town that there is relevancy for a small bank because we are the ones who are sponsoring the football stadium and the little league games. we are putting on a big street festival to revitalize downtown. there is social capital there that you did not find in larger institutions. or that you see represented in tv and movies how important that a bank can be. consolidation yields distance which yields risk. we are seeing that as we talked about commercial real estate and deposit potential loss when you have a tie to your bank and your

banker it lessens the risk overall, even though may be small institution systemically makes the difference. let's talk about some of the relationships when fed officials are talking about anecdotes and how important they are to understanding the economy. how much is the economy slowing? do you get a sense that the relationships that you have are expressing a greater degree of concern than some of the macro data may suggest? jill: i don't see that in my locality but regionally you hear that. it has an impact on small business as we have rates increasing for them, especially those with variable rates where they are not having to refinancing because this is hit with each rate increase. they're starting to have that pressure. as commercial real estate has the higher needs, we are seeing the rents go up quite a bit. some of the small businesses has been more of a struggle. for consumers, the higher cost of putting food on the table and to operate a household have been really challenging. annmarie: we talked about the

ability to diversify in the way that you want. how venerable do you feel to some of the new capital rules that could come down the pike that we hear about in congress? jill: the new capital rules do not necessarily impact me because they are targeted at larger institutions but there will be some trickle down. where we are the most concern is where we have greater specificity that this will cost you more capital versus it being that you need to have more capital. you have unintended consequences. you potentially have some transactions that would occur within the banking system get moved out of the banking system. that could have more harmful impacts to the economy and less ability for regulators to have an impact. jonathan: you think the proposal meets the moment? last year, was that a failure of regulation or oversight? jill: as we need to hold banks accountable regulators are accountable too. we have great regulations and decentralized regulatory structure in the united states.

it's a great strength. where we have seen failures or vulnerabilities is one that hasn't been executed well. that is what i would say. that we have great regional examiners that are on the ground who understand the local economy and what kind of risks banks are taking. it is important they continue to do that. i think that changing the structure can penalize and take that at the me out and then you're not able to take risks -- take autonomy out and then you're not able to take risks in the same manner as before. jonathan: deposit insurance reform? what would you like to see? jill: there are so many different tools with marketplaces to exchange deposit insurance, to pledge collateral to deposits. to me, there is no need to really change anything. we have 5% uninsured deposits in our organization. when we saw organizations be over 90% uninsured deposits, there was no reason. there were plenty of tools to use. now you see banks shifting and

making sure they don't have that exposure on uninsured or un-collateralized deposits. jonathan: meets the moment of nine or 10 or 11 months ago. the message that i keep receiving is probably not. annmarie: a lot of people are saying in washington they will start to agree. morgan stanley started to turn bullish on u.s. banks because she didn't think that the capital rules would be as harsh as some people were expecting. that pushback is pretty widespread. maybe some people are pricing in that it won't be as applied as initially proposed. jonathan: let's get an update on stories elsewhere. here is your bloomberg brief. >> iran is urging diplomacy as tensions in the middle east rise. following the death of three american soldiers in a drone attack over the weekend. iran has continued to deny involvement in the attack which the u.s. said came from iranian-backed militia.

ups shares are falling in premarket trading after lowering its revenue estimates for 2024. the company's fourth-quarter revenue fell short of estimates with the ceo calling 2023 and a "unique and difficult year." it comes as ups tries to win back delivery business lost during tense union talks last summer. general motors is reporting better than expected fourth-quarter earnings and expected 2024 profits to grow unimproved u.s. sales. gm is expecting demand for vehicles to stay robust in part due to optimism about a soft landing for the u.s. economy. gm is struggling to build out its ev line. it's legacy business of gas-powered vehicles continues to be a cash cow. the ceo mary barro saying "consensus is growing that the u.s. economy, the job market, and auto sales will continue to be resilient." that is your bloomberg brief. jonathan: impressive numbers from gm for sure.

next, the ai-driven tech rally extended into 2024. >> we have the ai boom pushing through last year may be retaining a little bit of that enthusiasm at the start of this year. jonathan: that conversation is next. we will catch up with the norway sovereign wealth firm ceo around the corner. ♪

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jonathan: live from new york city, good morning. stocks are pulling back on the s&p 500 by 0.1%. the bond market is down a single basis point. the ai-driven tech rally is extended into 2024. >> earnings optimism can temporarily outweigh what the impact is on the higher discount rates. we have the big ai boom that is pushing through for tech stocks

last year. maybe we are seeing a little bit of that enthusiasm at the start of this year. jonathan: earnings for alphabet and microsoft do for this year. saying despite high inflation and geopolitical turmoil the equity market in 2023 was strong. technology stocks in particular performed well. nicolai joins us for more. we have to do a range of things, but the first two is to talk about tech and then commercial real estate. for tech, you said that the return assumptions are lower going forward from here. does it apply to the cohort from the u.s.? nicolai: we had a huge rally last year and a large proportion were from the top seven companies. right? if you adjust the s&p four that the return was something like 12% instead of 26%. you will have to ask how long that will go on for.

i am a diehard believer in ai and the effect that it will have on our operations and the world, but in terms of valuations on other companies, that's a question. lisa: there is a question of how fragile it makes the market to have such a group of stocks driving us. jp morgan warned that there was a greater risk to the equity markets. the key takeaway is the extremel concentrated markets pose a risk to 2024, a very limited number of stocks responsible for the majority of gains. drawdowns on the other hand could pull equity markets down with them. do you agree? do you think that ultimately ai is the only game in town and it doesn't matter how consolidated the entire equity valuation of the global market is to it? nicolai: the first thing is that this has been going on for a long time. it hasn't happened overnight. these large companies have become stronger and stronger. it is natural when you talk to

platform companies that it really is a winner takes all economy. it is amplified by ai, because it is so incredibly expensive to train the models. you really have the winners becoming even bigger. it is not a new phenomenon and i think that it will last for some time. lisa: winner takes all raises diversification. i wonder if diversification was responsible for the underperformance this year? i wonder if it is consolidate your bets and what you believe in? nicolai: we are, given that we are very large, we have to be diversified. we own a bit of all of the listed companies in the world. we are participating in 9000 companies. we have big bond holdings. we have big real estate holdings. i think that it is the only way to be as a big and long-term thinking shareholder. jonathan: i saw a real estate holdings drop more than 12%. let's talk about that a little

bit. something that you set a long time ago has stuck with me. when you are as big as you are it is not what you are in but what you choose not to be and that really counts. does that apply to real estate going forward from here? nicolai: well, we have a bit more than 2% of the fund in unlisted real estate. you are right. clearly the results were negative last year. but there will be some years when it is positive. we think that it will be an opportunity to look to add to some assets. if you are a long-term investor it is part of your mix. jonathan: would you be actively looking to enter real estate or would it be too early? nicolai: it is difficult to say. we are always looking for good opportunities. jonathan: the reason that i ask is because you've already told us that you think that maybe inflation is stickier and rates stay higher for longer. when you have that kind worldview on the macro side of things for central banks, how does that amplify your thoughts of what you want to be in and

what you want to steer away from? nicolai: i think that inflation could be tougher to get down than what some people think. we are seeing wage demands across the world being pretty strong. it is something that hits all of the companies. typically what we see after a round of wage increases is price increases to offset the cost pressure. geopolitical risks, it doesn't add up to a very happy cocktail. i think in that world you really need to be diversified across asset classes. annmarie: in such a geopolitical moment, how much do you find yourself picking winners in terms of regions? with respect to artificial intelligence but also with respect to being able to beat inflation? is the u.s. still the brightest place for more investment? nicolai: we have nearly half of the value of the fund invested in the u.s. and we think that we own tremendous american companies. i lived in new york for the whole of november and i met with 30 ceos.

wow, things are going pretty well they are compared to europe. it seems like a good place to be with a large part. lisa: you would be interested in increasing allocations to the u.s. versus europe on the margins understanding that you remain diversified? nicolai: we have been doing that over the last year or so. we have been pretty happy with the mix that we have now. lisa: going forward, there is a question around how much returns will be lower and how to be given -- beat them given that the goal is to marginally increase returns based on the index. where do you see the outperformance coming from other than artificial intelligence? nicolai: well, you have to pick the winners in all industries and all categories. you basically will have winners in the luxury industry, winners in the cosmetics industry. you have to have portfolio managers who understand these sectors really well and pick the winners. we have some great portfolio managers, and that is what they

are doing all day long. jonathan: you said in january that the way to make money in the long term is that you have to be contrarian. what is the contrarian bet for you right now? nicolai: if you want to be contrarian, you walk down main street, ai on all of the different windows. the contrarian thing now would be away from ai. lisa: are you doing that? nicolai: not in a big way, but if you want to be contrarian that is probably what you do and you pile into property stocks. lisa: when you talk about some of the pharmaceutical winners, how much are you betting on the ozempic existence in our future? nicolai: it is one of the biggest holdings that we have. now it is the biggest company in europe. they do a tremendous job and it is really exciting with this can do. not only for obesity but for all of the various illnesses which are related to it. jonathan: what are your thoughts

of rebalancing than a name becomes the biggest or one of the biggest holdings that you have? do you stick with your winners? nicolai: we tried to stick with winners. in psychology, many people want to sell the winners. the way to make money is too often ride the winners. we do that anyway because we are a relatively index near fund, so that is what we did. jonathan: wonderful to get your input and fantastic to catch up. bramo, where do you want to begin? one of the biggest holdings, real estate? i like the idea if you want to be the ultimate contrarian right now pull away from ai and pile into property. lisa: he said, not necessarily doing that. i wonder how contrarian he is if he is going into artificial intelligence and betting on the u.s.? jonathan: you mentioned earlier, do you have a different view on

commercial real estate? is your view on commercial real estate different from your overall view on cre across the nation? your bank exposure might be one thing, but do you think that that speaks to the broader story of the moment? jill: i saw banks confident with their own holdings but not confident broadly. it has to do with there aren't as many banks in commercial real estate. looking at the whole portfolio, only 50% or so is financed by banks. i feel really comfortable with our portfolio. we have always been a real estate concentration bank and have great risk management tools. as a banker, you have to be an expert risk manager. it requires discipline going into higher risk-type of lending. that you understand the coverage surface ratio and is this price we got reasonable? what is the value looking like over time? jonathan: does it make you nervous that everyone else thinks that their bankbook is ok

and everyone else is the problem? jill: it would on the surface, but if you look at how real estate is financed there are lots of deals that we have passed on that non-banks have financed. there's a lot of that makes. banks have great tools so that we have flexibility when it comes to restructuring rates. we have all been through workouts before. as long as you go in with your eyes wide open and are working with borrowers that have great integrity, you should be ok. jonathan: the s&p 500 negative by 0.1%. next, gm's blockbuster fourth-quarter earnings are that stock is up by almost 8% in the premarket. from new york city, you are watching bloomberg surveillance. ♪

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jonathan: live from new york city, stocks pulling back on the s&p 500, negative by 0.1% and the nasdaq down by 0.7. the russell a little softer lower 0.1%. tons of earnings later this afternoon. we talk about big tech through the program. in the bond year, down a basis point. 0.6%. 4.31 on the two-you're down not even a basis point after the treasury refunding announcement

in the last 24 hours. lisa: the treasury department isn't going to borrow as much as people previously thought. particularly during this quarter. this alleviate some of the pressure with respect to supply that could have potentially pushed up -- it is kind of a smart move. you have to think that later in the year that yields will be lower simply because the fed will be cutting and extensively the economy is supposed to be slowing down. jonathan: what is the deal? was the bar too high? they set the bar too high and then they could come under expectations? lisa: everything. they said that tax receipts came in a little higher. some people speculate that that could be the sleeper surprise. tax receipts could come and better because of returns of the market. there are questions around whether this is just clever maneuvering again because it keeps the pressure off of rates and it helps the economy and potentially you could deal with it later. jonathan: the numbers are pretty

staggering. these are massive numbers. coming in below expectations and then there is still a number that is out there. lisa: $760 billion being borrowed down from the expectation of $800 billion. we are talking $4 trillion in bond sales this year to keep financing. that only continues to increase. jonathan: looking at wti and brent, crude is shaping up as follows. -0.5%. the surprise for many of us. monday morning, the first thing that i looked at and many of you looked at was the price of crude after the attacks over the weekend. to see the price down yesterday and down again today? annmarie: pretty astonishing given what we are seeing in the middle east and that people are starting to look at the risks of this extending, a wider conflict, because the u.s. is promising to respond to the attack on u.s. troops in jordan. crude has not bounced at all. there have been 160 attacks. there has also been an attack on

a vessel and crew did not move. this is where we are in the world until things become very volatile. jonathan: this give you an update. iran is urging the u.s. to use diplomacy as pressure mounts on president biden to respond to the attack that killed three american soldiers in jordan last weekend the u.s. blames iran-backed militia and iran is denying any involvement. still trying to figure out what the response is going to be from the white house. lisa: there has to be a response. it is clear that no one wants an escalation. this is an x collation. at what point -- we talked about 170 attacks on u.s. military personnel in iraq and syria since october 17. you have to wonder? one slipped through. but there have been 100 70 attacks. what are we talking about and how do you prevent some of this? annmarie: when you look at what we could see, secretary blinken said yesterday that there would be multilevel stages. politico is reporting that the

biden administration is considering one option, which would be a bigger escalation. that is attacking iranian personnel in iraq or syria. that would send a serious message. jonathan: markets in china are sending clear signals to beijing that more needs to be done to revive investor confidence with stocks falling for the third consecutive day with the lowest level in more than two decades. the central blank will deploy more stimulus to produce growth. china is any different position than the u.s. over the last year. lisa: maybe this would be the third contrarian bet. go long china. how much that will hinge on the idea of additional stimulus. what can they actually do? if this is an issue of consumers not wanting to spend money, cutting rates isn't going to help. it hasn't been an issue of credit supplied. it has been credit demand. it is a harder nut to crack.

jonathan: they have to instill confidence and that is difficult to do. we have been talking about the u.s. exceptional growth versus stagnation in europe and trouble in china. the three legged stool global growth. two are not great right now at all. lisa: how long can the u.s. continue to be on its island with ai-fueled growth? this has been the outlook, which is the reason people have been continually surprised by the ongoing strength. jonathan: gm in the premarket is climbing much higher than i think that any of us anticipated. close to 8% in early trading. the automaker says that adjusted earnings before taxes came to $12.4 billion. at the height of its november forecast expecting auto sales declined to 60 million vehicles powered by the core business of gas-powered trucks. i should say also predicting growth in ev sales. mary barra later today with a better story to tell based on what we have seen for the sector for the last 12 months. lisa: surprisingly when people

have previously said that autos were previously uninvestable because of uncertainty and policies to electric vehicles. it turns out that is less relevant because at the end of the day people are buying gas-powered cars. they want their trucks. they are buying them a greater volume potentially or a higher price point than at a time when rates were higher and borrowing costs were higher. i'm curious to hear how much rate cuts will help their sales. jonathan: i was surprised and i think that you were too. what does auto lending look like for the bank? jill: we have seen less demand for car loans so the rates are driving consumers not to purchase on the ground. there is demand from those who could not buy a car the last few months and now it is time to buy one. we will see great demand. there is demand pent-up because the rates had been high. we have seen consumer debt go up as well and it being more difficult to have savings that we saw during covid and pre-covid.

this is surprising data for me. jonathan: what greases the wheels for you? moves a 50 basis points, 100 basis points, fed funds coming down getting things going again? does that move the dial for you when you drop rates that much? do people start lining up to borrow money to buy cars? jill: not necessarily cars. we are seeing a lot of auto financing incentives from dealers and manufacturers, so i don't see that as much. i think that the other debt is causing stress. it is not necessarily getting the new car loan. you would have a higher debt, higher rate associated with that. the other demands and perception of what the rate would be i think is keeping folks from purchasing. jonathan: can you give us an idea of rates to borrow? i'm not paying 550 which is fed funds. jill: you are maybe a little less than that. you can still go to dealer financing and get quite a bit

lower. so, i don't know what gm is doing, but they may have incentives to look at that. jonathan: surprised to see the strength in gm with stocks doing better than good. lisa: how much is fueled by people buying all in cash? when the prices are not going up as much, if you are going to have to pay an 8% to 10% rate on a car it is not going to be that attractive for a lot of people. jonathan: it is like an apartment in new york city or an ev. one or the other. lisa: on one you get a tax rebate. jonathan: the strength was a surprise to a lot of us. where is it coming from? craig: this is a company that is hitched to the stronger u.s. economy. we didn't think that we were going to see a soft landing. we have managed to see some real strength in the u.s. this is a company that has lisa was saying is really reliant on big trucks and suvs. it is not necessarily what

generates the headlines anymore. we pay more attention to electric cars and self-driving vehicles. honestly, the execution in those areas for gm has been pretty weak. what we have seen is a company that had some real disruptions late last year with the uaw strikes. a lot of makeup production towards the end of the year after the strike by the uaw. once that was resolved. looking into the new year, not having as much investment going into the self-driving unit and not having to worry about disruption on the labor front. you don't have to account for that for another four years. lisa: we were talking about how high auto loans have been. a lot of people having underwater loans with their car values depreciating at a faster pace than their loan. how much do you think the rosier outlook for gm is hinged on the idea that rates will be lower

and it will be easier to borrow to make those purchases? craig: i think to the point that you raised earlier, the fact that gm has an in-house financial lending arm allows them to do some subsidizing a borrowing costs for customers. of course, there is not quite a situation where you can entirely offset the fact that borrowing costs have increased, but there is some ability to have flexibility if you are gm or ford. these are lending units that are extremely strong. as much as we have seen some weakness in some of the numbers looking at the health of the auto borrower and the fact that a lot of loans that we've seen, some underwater loans soon after the point of sale, we are seeing some pretty strong demand for cars in the u.s. when we are talking about 16

million unit outlook on gm's part, that is basically roughly peak sales volumes for the u.s.. i think that we have gone through a few years now of customers not being able to go to the market because of the supply chain issues, the lack of supply of vehicles out on the dealership lots. now that those are no longer depleted, customers are seeing deals out there and deciding to pull the trigger. jonathan: let's talk about hybrids. where the market isn't where it's going. we are moving away from the internal combustion engine. policy is pushing us in that direction. the ultimate destination seems to be ev's. the question is whether you want to engage in an interim step and leaned into hybrids. some manufacturers do. gm has pushed back. you think that we will see a subtle shift in the quarters to come? craig: i think that we are

seeing an aggressive shift on the part of ford. to your point, gm has been an all ev or bust company. we have interestingly picked up on dealers really pushing back against going all ev. they really sort of want to be the gatekeepers. there is a question of how much of that is a reflection of what the consumer wants and is asking for and how much is it a matter of dealers or texting where their bread is buttered. if electric vehicles have fewer parts that break down, that means less parts and service revenue for the dealers. this is not a transition that they want to make. how much of that is coming into play for the incumbents i think is something we have to look at closely given how many challenges that they've had with executing this transition. jonathan: thank you. be sure to watch our interview with the gm ceo mary barra at 10:15.

where is the wayne gretzky school of management? you want to skate to where the puck is going? they haven't moved back in the direction quick enough or we will be there for -- full-scale ev's? lisa: a lot of people say that it will be terrible for u.s. auto manufacturers of chinese auto manufacturers can sell without barriers. at the same time, a lower price point is necessary to bring people into the electric market. you are between a rock and a hard place because the manufacturing is too expensive to sell at the price point that people want. how do you get there? it won't be that simple. jonathan: general motors firm are in the premarket by 7%. elsewhere, here is your bloomberg brief. yahira: a british this triller is showing lower-than-expected earnings. recently, demand has cooled in

the u.s. and canada. the ceo speaking to bloomberg earlier. >> we are looking for improvement in the second half on our topline versus what we delivered in the first half. we are looking at gradual improvement off of the back of gradual improvement in north america. yahira: jetblue is reporting a smaller than expected loss in the fourth quarter. its revenue topped forecasts. the carrier is citing continued strong demand during peak periods fueled by holiday travel. jetblue reporting as it undergoes a c-suite shakeup of chief operating officer taking the reins as ceo this week. it is a possible merger with spirit airlines that is becoming increasingly unlikely. both appealed a ruling blocking the deal. fans hoping to attend the super bowl in las vegas will have to fork out a record amount with the average ticket price coming in at $9,800, the most expensive ever.

that is just to attend the match between kansas city and san francisco. rooms at some hotels are going for more than $1000 a night. there is no word on whether taylor swift will be in attendance. that is your bloomberg brief. jonathan: lisa says that you can blame taylor swift for the price of the tickets. lisa: hold on. jonathan: $10,000 to watch usher? lisa: my kids didn't even know who usher was. that tells you exactly -- annmarie: all that i can say is that people will be writing about the taylor swift effect. this is going to be the barbenheimer moment. it will be the swift bowl or something that we will be talking about with the economic reports. i'm just suggesting that we will hear about that. jonathan: up next on the program, equities hitting all-time highs with tech earnings on deck. >> valuations might be extended, but these are the companies that are growing far beyond the broad market and far beyond the economy.

jonathan: that is coming up next. live from new york city, good morning to you all. this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! so many options. xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now.

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jonathan: live from new york city, equity futures on the s&p 500 are looking like this. negative by 0.16 percent send yields totally unchanged. the surprise of the week so far, crude is not rallying. it is selling off. it was down yesterday by more than 1% and this morning by 0.16%. $76 30 five cents. this morning, equities hitting all-time highs with tech earnings on deck. >> in many cases, the magnificent seven, or many of the magnificent seven, are delivering on the promise. valuations might be a little

extended, but these are the company's growing far beyond the broad market and far beyond the economy. what i'm looking forward to, given average valuations in the other 490 names come and of the international markets, can we see this broaden out? jonathan: the s&p 500 topping 4900 with microsoft and alphabet do after the closing bell. jp morgan saying that tech earnings will be crucial in determining if valuations are sustainable. as long as the market stays narrow, heavily concentrated, tech-driven the u.s. is likely to have the upper hand. lisa: let's put numbers on how much they have outperformed. it was put out there that if you take out amazon, alphabet, meta, microsoft, nvidia, s&p earnings would be down 11% in the fourth quarter of last year, flat in the first quarter of this year. that is why big tech continues to rally. it is not just a pipe dream. this is a 2000, 1999, it is

companies getting it done and delivering profits that other companies are seeing in terms of growth. jonathan: let's build on that . it is narrow and problematic in the minds of so many, but is it a problem if that is where the earnings growth is? emily: it is critical that tech can hold up here. you look at the s&p 500 growth index trading at a 45% premium to its 20 year average. it makes sense that tech and quality more broadly have been rewarded in this environment. you are thinking about companies that do not need to tap the capital markets to grow. we know the cost of capital is elevated. these companies have tons of cash. ai, ai, ai come you can't say it enough. productivity will be the key to growth. they have the financial metrics. they're pushing up against

valuations. flat is the new up. tech is up modestly while the rest of the s&p 500 is decelerating. this is a big test. you were talking about the super bowl during the break. this is the super bowl for investors this week not only with tech earnings but with macro data as well. i'm sure that you are having a hard time sleeping at night this week like i am. lisa: a lot to unpack there. i'm curious going forward if we will have vulnerability of a market that is so top-heavy? the fact that you have this level of concentration in these names, the bar is incredibly high for them to continue to push up some of their forecasts. if they do not outperform, that will be a problem? emily: yeah, it is a key reason why we think that diversifying away from those names are critical. we are not downgrading tech. it is still ranking the highest on quality which has been a key factor that we are emphasizing, but we are looking at areas

trading at a discount. areas like u.s. midcap equities are trading at about a 25% discount to their large-cap counterparts right now. we are looking at mid-cap equities that are benefiting from on shoring trends and fiscal stimulus. we are still spending. we are spending quite a bit as far as things like the infrastructure and jobs act and the chips act and inflation reduction act. that is being funneled into industrial production in the united states. i have been on the road a lot lately. the midwest is booming. we are looking to play that on shoring by investing in industrials companies in the mid-cap space in the united states. lisa: what do you make of the fact that given that strength and of the fact that you're talking about a booming midwest that we have seen disappointments in earnings, punished in markets, and outperformance has not been incredibly rewarded even with the discounts on share prices?

emily: we are certainly seeing that. again, even though the bar is being lowered, you look at earnings growth broadly for the s&p 500 and it is up only modestly over the past three years. the market is really being driven by multiple expansion. you look last weekend you saw earnings revisions come down for the first time in a while with the same kind of prices continuing to go up. the macro environment has been a key driver. the soft landing. now we are back to you know landing. i think that that has been the key driver pushing sentiment higher. now we are up against the 20 times forward earnings. we have not been this high in terms of pe multiples since 2002. we are at this place where macro was driving sentiment. we have to see that fundamental piece kick in in order to see the big upward move that a lot of investors are expecting. jonathan: i went to turn to --

i want to turn to jill. is that what you see? is this conversation about recession foreign to you? jill: it is. the onboarding when we look at battery manufacturers coming in to states, the small business initiative, many coming from the treasury that is yet to be distributed, there is so much. we need more engineers. we have this mass influx of people moving to oklahoma, where i am, in the midwest, and we still do not have enough workers to fill the jobs that we are anticipating being there. not even the ones that we currently have. jonathan: if the midwest is booming in the u.s. is doing so well, why do i not want to small caps, domestically focused small caps, rather than being exposed to the multinational story and avoid places like china and europe that cannot put up the growth in the same way?

jill: to us, it is about rates and the debt burden that a lot of the smaller cap companies have. about 50% of the russell 2000 index is comprised of companies that do not make money. in the environment where we think that the lagged impact of said tightening is going to cause challenges, because markets to compress, we think that going up and market cap make sense for investors as balance sheets are better, as interest burdens are lower. we like mid-cap equities for that reason. open market cap you will get more multinational exposure. we are underweight china and emerging-market equities. one of my favorite economists nancy liz are from pieper sandler told me that her favorite emerging market was middle america. i thought that that was so powerful. we are using that as a way to lean into areas that are not only benefiting from these trends but trading at a discount. jonathan: i'm not sure how middle america would feel about that, but i understand that it is meant to be a compliment. i will clarify that for everyone. i think they are talking about

the degree and level of growth in middle america right now. lisa: not necessarily that things are not run well. jonathan: have not developed. lisa: that the of a structure is lacking in quality. i'm hearing incredible strength. i am hearingnicolai tangen that things are booming. is that commiserate with inflation coming down? i don't know. this is a key question. are the stories fitting together? jonathan: i know that the white house often listens to this program so i know they are hoping that this shows up in the polls soon because this is not how people have been responding in the previous 12 months. annmarie: partly because you have seen a 19% increase in cpi and consumer prices since 2020. that is tough to swallow. jonathan: jill, thank you for being with us. send our love to george, the former kansas city fed, the absolute best. jill, thank you. s&p 500 slightly negative this

morning. coming up in the next hour, from new york city, this is bloombergtv. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

>> i think that the market is

already pricing in the rate cuts to a certain extent. >> i don't think the fed will move this month. they may send a signal for people to begin to ground their expectations. >> they may send a message that policy is consistently moving in this direction. >> i don't think we will be seeing a pivot which is what the market has been broadly expecting. >> you take the punch bowl away and markets have not adjusted. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. for our audience worldwide this is bloomberg surveillance alongside lisa abramowicz and annmarie hordern, i am jonathan ferro. the s&p down 0.1%. nothing against the big banks on wall street but this is the week that really matters when the big market cap tech players report earnings. lisa: i'm guessing that they are not offended. i am curious to see how much

some of the big tech names can deliver after the bell. we do get microsoft and google, alphabetic you want to call it that. it is interesting to see if people will be looking to some monetization of ai or a monetization of advertising youtube and some of the cloud spending that we have seen in the past. jonathan: does talk about the risks for the bulls and the bears. the bears look to ubs down something like 7% and the outlook is not great. for the bulls gm, the stock is up by more than 7% and the outlook is better. pick your poison. annmarie: there are a lot of stories underneath this. ups is dealing with stiff competition for amazon. it is the physical world versus everything else. not getting a clear read on if they are hitting a recovery or not. it seems clear that the physical world when it comes to auto manufacturing and consumer goods seem to have been doing a bit better than expected. again, a pretty mixed picture right now.

jonathan: this is what we heard from a small community bank in the last hour, that the economy is doing well. just five to 10 minutes ago, annmarie turned around and said that the midwest was booming. booming. annmarie: unbelievable when you point out what is happening with people continuously saying they are not feeling it. the latest morning poll of their wages to go higher to combat inflation. look at all of the fiscal many coming out of washington on these and the structure projects. a lot of it you are seeing in the midwest. it is a good timeline from now until november. jonathan: compare that with europe, stagnation. china, a struggle. the imf raising the growth outlook to 3.1% from two point 9%. i imagine that there is a certain country responsible for some of the shift higher. lisa: i think that it rhymes with yomerica. this is driving growth and artificial intelligence. we are talking about stagnation in the euro zone. that is a win.

it is not a recession. we are talking about better-than-expected gdp results from italy and spain. at a certain point around the world, even the laggards, have been doing a little better than a lot of people expected. jonathan: equities right now in the equity markets, futures negative by 0.2 percent. bond market lower by not even a basis point. 4.0662%. to finish on crude, it is worth going over again. to see this -.06%, $76.30, down today and yesterday. annmarie: part of this is the fact that you still have tankers with the supply. supply has not been impacted. just gone out and how long it is taking to get to its final destination. there is a risk in the oil market that it can change on a dime of the middle east escalates with this tension.

jonathan: brent crude also lower. coming up, j.p. morgan asset management looking ahead to tomorrow's fed decision and stephanie roth on fridays payroll reports, and derek wood previewing microsoft and alphabet earnings. multi-asset solutions portfolio manager and jp morgan asset management writing that we expect rate hikes to start in either may or june -- rate cuts. we expect three to 425 basis point rate cuts. it's hard to imagine a margin rate cut with a combination of cpi and jobs, but it could change quickly after a few rounds of payrolls and inflation data. let's talk about the rate cuts in march. you have said before that we have moved from the hope of a soft landing to the reality of one. why does that allow the federal reserve to reduce interest rates? >> i have seen the first week of january and everyone is happy because hope is not an investment strategy and we are

in the reality of that soft landing. i have been impressed. i think that this month was critical because we got a very strong payroll number the first week of the year. a very strong retail sales number. an above consensus cpi number. also jobs in the 100,000's. equity markets continue to make a new high. march, the probability for march went from 85% to below 50%. equities were still able to continue to march. our take was that good news is good news. it is not good news is bad news. we are done with that. chris waller said it the best two weeks ago when he said as long as inflation doesn't accelerate from here we will carefully and methodically, two very important words, move interest rates down. march it seems a little premature. 50-50 is a good probability because we get payrolls on

friday and another cpi number. nevertheless, they are on the move downwards. i think that that is what is leading to the financial condition easing, resiliency of the consumer, and us having a 20% probability of a recession. we are embracing this environment. jonathan: are you upping your exposure to equities? phil: we have our largest overweight to equities in over two years right now. since before the first hike in march of 20 22. later that year, 475 basis cut hikes. -- 475 basis hikes. diversification makes sense now. bonds where the problem when the ag was on pace for three negative calendar years in a row through halloween of last year. now the bonds could be a solution as long as all of this goodwill doesn't lead to an acceleration in inflation. lisa: how are you most

overweight stocks in two years? on an index level that has hinged to some of the big tech names or broader? phil: we are staring at the charts. things like small-cap, the mother of all contrarians right now versus nasdaq, however, it is hard for us to compete with the s&p 500 now.it is hard for any allocation to compete with that. our largest, highest confidence overweight is the s&p 500 looting cap waited. we are looking at cap weighted versus equal weighted. we know that it is a decade cheap to cap waited, but we cannot yet look ourselves in the eyes and say let's underweight those. let's continue to pile into the s&p. lisa: he would say that finally people agree with me that good news is good news. there is a question about what could go wrong. i'm sorry to be that person, but -- i am wondering, when you look at

all of the economic data, what would signal to you that we need to reassess? phil: the labor market both ways. recession or too much good news leads to the acceleration of inflation. labor markets, specifically wages. we have been very pleased that when we topped out at 7% the average wage growth is 4.5%. we were on the precipice of a wage price spiral two years ago when the fed started raising rates in march of 2022. wages are now roughly 4.5% sitting on top of the long-term averages. that is the picture of the soft landing, the wage growth. the other way, if you see claims going up to 200 50,000, 300,000 -- 250,000, 300,000, no jobs created, we would say that there is something to worry about.

we are in this base case of soft landing. annmarie: you have a 20% risk of inflation? when would you see this in 2024? phil: 20% is on top of a normal probability. every year we come into his 15%. it is never a 0% probability. on base case is that we don't see it. with what we know now about the inflation data, i think that the easing of financial conditions that the fed will bring on actually prevents that from happening. we are overweight high-yield and equities. these are no recession trade so we don't expect it lisa:. overweight these things does that mean overweight full faith credit u.s. bonds? phil: yeah. our core bond allocation if i have to wake every day to try to beat a 60-40 portfolio we only have 20%. we are underweight bonds by

pretty significant amount and we are replacing that with yield jonathan: jonathan:. you have been underweight em as well. why isn't this lifting all boats? phil: good question. i think that the emerging markets have the biggest vulnerability, good or bad, to global growth. you mentioned that the imf upgraded the global growth forecast. i guess that we have more confidence thinking about how we deploy risk in the developed world, specifically in the u.s. there are stock-specific examples. like samsung and taiwan semiconductor. there are stock-specific examples that we are interested in but from a pure data perspective allocating customer cash, the u.s. jonathan: stay with us. the broader market is negative by 0.2%.about one hour and 20 minutes from the opening bell. elsewhere this morning, here is your bloomberg brief.

yahira: the imf has raised its global growth forecast citing strengthen the u.s. economy and more fiscal support in china. it says the world economy will grow 3.1% this year up from 2.9% in october. >> we see a lot of resilience in a number of economies, the u.s. and china and many large emerging market economies like brazil, india, southeast asian economies and russia. this together is lifting the number this year. yahira: despite that, the imf warns that inflation and geopolitical tensions post downside risks to the global economy. general motors is reporting better than expected fourth-quarter earnings and expecting 2024 profits to grow on improved u.s. sales. gm is expecting demand for vehicles to stay robust in part due to optimism about a soft landing for the u.s. economy. gm is struggling to build out its ev line. it's legacy business of gas-powered vehicles

continues to be a cow scout -- to be a cash cow. mary barra is saying that sales will continue to be resilient. elon musk says that the first human patient has received a brain implant from the neural link startup posting on x the first human receive an implant from neural link yesterday and is recovering well. initial results show promising neuron spike detection. they expect to perform 11 surgeries this year. the end goal is to one day allow humans to control computers with their minds. that is your bloomberg brief. jonathan: i think that phil is hoping that jamie dimon does not get any ideas soon. lisa: if the younger generation wanted a chip implanted in their brain to remove a barrier of looking at a screen? jonathan: no thank you. pressure mounting on the biden administration. >> we will respond decisively to

any aggression and we will hold responsible to people who attacked our troops. we will do so at a time and place of our choosing. jonathan: president biden walking a tight rope after the deadly attack on u.s. forces. that conversation next. you are watching bloomberg tv. ♪ hey you, with the small business... ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy. with everything from managing your social posts, and events, to email and sms marketing. constant contact delivers all the tools you need to help your business grow. get started today at constantcontact.com constant contact. helping the small stand tall.

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what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. jonathan: live from new york, one hour 15 minutes from the opening bell with stocks pulling back a touch from all-time highs. krudys lower again -- crude is lower, believe it or not. $76.02. pressure is mounting on the biden administration. >> anyone looking to take advantage of conflict in the middle east and try to expand

it, don't do it. we will respond decisively to any aggression. we will hold responsible the people who attacked our troops. we will do so at a time and place of our choosing. jonathan: that is the latest this morning, iran denying involvement on the attack on troops in jordan. saying that active diplomacy is underway, writing on x that the white house knows very well the way to end the war. the current crisis in the region's political. annmarie: the iranian foreign minister talking about the fact that they want the u.s. to put pressure on israel to end the war in gaza. antony blinken shedding light yesterday on how dire the region is becoming saying that i would argue we have not seen a situation as dangerous as the one we are facing now across the region since 1973. exactly four months ago september 29, 2023 jake sullivan

, the president's national security adviser, said that it was the quietest that it has ever been. i think potentially they decided to claim victory on the region before the end of their term was up. they have been hesitant on a response because this administration has made it clear that they do not want a showdown directly with iran. jonathan: to weigh in is the u.s. marine corps veteran and former white house senior fellow and co-author of the novel 2054. wonderful to get your perspective on the program after the tragic event over the weekend where three u.s. servicemen died. your view on what took place and ultimately your base case if you have one established on how the u.s. will respond. >> i agree with what was just said. that we have seen a serious of escalatory strikes by iranian proxies against u.s. targets in order to try to leverage the u.s. to apply more pressure on israel. that has been going on since the october 7 attacks and it has

reached a crescendo with three dead u.s. service members. their deaths demand a more forceful response on the part of the united states. president biden right now has got to thread the needle on what our response should be. generally speaking, he can respond in one of three buckets. the first bucket being a response against iranian proxies in iraq and syria and yemen who have been launching these attacks. the second bucket would be a strike on iranian targets abroad, military targets. the third would be strikes inside iran. he is going to have to launch a strike in one of these three buckets or a response that combines elements of each. that is the decision that the administration has to make right now.

annmarie: secretary blinken said it will be multileveled and come in stages. do you think that they will go for the least offensive response and work to something harsher or come out with something strong to send a message to iran and their proxies to back off? elliot: i think that they could do both. i think that it could be a very forceful response that arrives in the coming days. most forceful and visual response would be against iranian proxy groups responsible for this. potentially uniformed military assets that iranians have in places like syria. you can also see a slower and quieter response either inside iran itself, a non-connecticut response like a cyberattack inside of iran, or potentially the targeted killing of high level iranian assets. i would say probably not inside iran. akin to the killing of soleimani

a couple of years ago. annmarie: there is a lot of reporting on my own account and from other sources that when the trump administration went after soleimani that the iranians were frantic telling enter lockers to tell the united states we will back off. we will send retaliatory strikes in iran for a show of force. will that attack play out here if the biden administration was willing to go after someone from the force? elliot: i think that soleimani is worth reflecting on, because that was probably an example where the u.s. response cloth the iranians on the back foot. they didn't think that the u.s. would respond so forcefully. we saw iranian de-escalation. that is the type of response that we want to see now. the question becomes, what is the target or that set of targets in which the united states' response would give the

iranians pause and say that maybe this strategy putting leverage on the u.s. in these strikes, we think that that will get them to push the israelis, maybe this strategy is not working or has become too painful for us and we need to adapt to different measures and de-escalate these attacks. i think that that is what the administration is hoping will be a result of our response. lisa: in 2020, the response from iran to the killing of soleimani was a red italian tory attacks that did not asked was retaliatory attacks that didn't kill troops but did cause brain damage. we have heard of similar cases of brain trauma to certain troops still stationed in syria and jordan in the latest attack. how concerned are you about some of the brain trauma that is happening among some of our 42 thousand troops from the u.s. stationed in the middle east amid an escalating conflict? elliot: listen, i think to put

it in a larger context, we have been fighting a proxy war with iran for decades. i served as a u.s. marine in iraq and afghanistan and as far back as 2004 we were fighting iranian proxies in iraq and western afghanistan in 2008. iranians have been causing brain trauma and worst u.s. service members for decades now. now we have three dead americans and the blood is on iranian hands. the most important thing is to adopt a response and make sure we don't see more dead americans killed by iranians or frankly americans who are wounded. whether those wounds are loss of limb or brain trauma. we need to get out of this cycle. i think what we have seen is a gradual escalatory response. gradual responses from the u.s. have not worked and i think that

the administration needs to respond forcefully and do so in a way that leaves the iranians pausing saying maybe this strategy is not worth it. maybe the juice is not worth the squeeze on poking the americans. jonathan: i wonder from your perspective if you think that this administration will continue to draw a firm line between iran and iran-backed groups?when you say that iran is responsible, does the white house see it in the same way when they formulate how to strike back? elliot: i think that they do. i think that most administration officials, or anyone who has worked in the national security space for a while, is clear on how they see the iranians.i think where there is more disagreement is what is the button that you will push that gets you the response you want.

i'm sure those conversations are happening within the white house now. anyone who tells you that this is simple and easy and that they know what the response is is probably not being totally honest with you. it is a very complicated decision. we have to hope that our leaders are going to do their best to formulate a response that gets us that result. these are the tough ones that they are dealing with now. jonathan: this is a tough one. thank you for being with us. u.s. marine corps veteran. phil, this is the question that we have been asking for months. what is crude doing in the 70's given the conversation that we just had? elliot: i think from the standpoint of u.s. independence we are much less reliant than we have in prior decades. we have seen that in prior conflicts. there is also an element of outside of geopolitics, what does global growth look like. what is the demand for commodities from places like china worried about their property market more than anything else?

crude in the 70's is just one other story that is adding to the soft landing. the biggest tax on the american consumer is the gas prices spike. gas prices are some of the most attractive prices that we've seen in a long time. jonathan: does that make you hesitant to take exposure to energy stocks? elliot: we would not be allocating to energy stocks. i think that that is similar to the emerging-market question. if we get a position like in 2017 with coordinated global growth and demand for energy, sure, but that is not where we are. jonathan: not where we are now for sure. good to catch up. coming up next, stephanie roth counting us down to this week's fed decision and friday's payrolls report. from new york, this is bloomberg. ♪

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opening bell, equity futures rounding up.

-- let's call it a half of 1%. slice of the treasury market for you, unchanged on a two-year. nothing changed about this market yesterday, all about the treasury. lisa: which is what happened back in november. they expected to borrow $760 billion in that borrowing session. is this their tactic? is this because tax receipts are coming in or because you expect that rates are going to be lower later? might as well by your time now. jonathan: is this going to be an actual issue? lisa: the treasury borrowing? everyone talks about it but it seems like brothers are but we also want our entitlements. >> also, it is binding versus

trap -- trump. they both added to the deficit. jonathan: i like that we see through that. anyone who gets into power is a hawk until they get into the white house. then they are no longer a deficit hawk. lisa: no one is talking about anything that would actually make a difference to the deficit. but here's the question -- at what point are people going to care when you actually have to pay more? annmarie: they actually have to go after medicare and social security. no politician on television is going to talk about it. nikki haley did talk about it with joe and i. she got -- he talked about 65 as being too young and she got hammered on it. it is a losing issue. jonathan: boomers are in the driver's seat. pressure mounts on president biden to respond to the attack on u.s. troops in jordan.

they have been somewhat cagey over the last 24 hours. annmarie: they will not say exactly what they are going to go after but i thought elliott ackerman did a job explaining what it could be. do you go for something much harsher? which is actual personnel in iraq or syria. that would send a massive message to tehran. jonathan: down on crude. wti $75.90 after a rally just last week. this will move markets later. microsoft and google reporting later today five names exceeding

$10 million. looking to compete with nvidia in the race to our artificial intelligence. lisa: cairo question going forward about how potentially vulnerable the market is to a downside surprise. everyone we have talked to has said they will not be a downside. this has been the source of strength and it consist -- continues to consolidate revenues, potentially reviving some of the cloud investments. jonathan: that number is $10 trillion, not $10 million. it was an unthinkable number if you years ago. lisa: it is fictional. this to me, the size of these is the reason why people are so focused. jonathan: i will give you a another fictional number. a ticket to the super bowl this year will cost an average of $9800, the highest price on

record, plus $1000 a night for a hotel, plus food. and it taylor swift attendance to cheer on her boyfriend, are we blaming swift? or are the teams just going to end it is in vegas and that is why it costs a much? lisa: i think there is this feeling that this is swift-f lation. annmarie: apparently she has added the equivalent brand value of $331 million or the chiefs. unbelievable. one of my best friends does not care about the nfl. she brought me to hs game once because her dad had a sweet. the sushi and did not see a swingle all. lisa: hisn't this -- isn't this sort of the playbook for content

providers? you need some sort of drama, a story? like david beckham and pop spice? jonathan: that all over again? i -- maybe david beckham was more well-known in america than travis kelce. annmarie: now. but not when he started dating victoria. jonathan: this is not something we should spend time on. lisa: we just did. [laughter] jonathan: the fed, first decision of the euro tomorrow. stephanie expects it to be a snooze. she is calling for the fed to begin cutting in the second quarter. she anticipates the tapering of qt will begin in june and finish by year end. stephanie, good morning. how boring the market going to be? stephanie: kind of boring.

chair powell will be data-dependent. two more inflation before the march meeting. i still do not think they will be cutting in march. the data has been pretty good we talk about talking about qt. that will probably kick off in june. the bigger thing is probably payrolls. jonathan: that is on friday. what do you expect? the headline about the jobs gains. the breath is narrower. stephanie: i think that is the one blemish of the u.s. economy, the one piece of data that gets me worried. but it is not my base case. but if you look, about 70,000% of job gains have been driven by health care, government, and social assistance. not the sign of a healthy labor market but it is a deterrent this time of year. lisa: let's push that forward, this idea of the rolling

recession moving to a recovery or. do you see some of the recovery and strength coming from a couple of key sectors leaving some behind? stephanie: totally. this ruling recession is one reason why the u.s. economy has been resilient. now we will get that in reverse and you will see some cyclical sectors come back. housing is one of the most obvious. but the more cyclicals that are tied to interest rates should see release. lisa: redfin put out the statistic that home buyers on a $3000 monthly budget have gained in purchasing power since last fall when mortgage rates peaked. that is the equivalent of what kind of shift there has been given that we have seen borrowing costs come down. how much further do they have to come down before you start to zero strength in certain sectors and consumer cyclicals and even

more strength in the homebuilding sector? stephanie: if mortgage rates fall by another 50 basis points, they will follow her. we are starting to see signs of it. mortgage applications are looking better. he was starting to see signs of the housing market come back to life. even with the rally we have seen so far. if we get more of that, it could do fairly well. jonathan: this idea of passive tightening. as inflation starts to come down, will rates go higher and monitor thatry policy get tighter. deutsche bank said as inflation slides, it will not boost real disposable income. and supports will wealth. inflation is running ahead of goods and services inflation. what should the fed be emphasizing? what is the impact on markets? stephanie: i think the most

important one is on inflation coming down. you have seen people starting to feel better and acknowledge that inflation is coming down. that is probably the most important part. real incomes will start feeling better. the risk to this year is growth could be better than people think, rather than the opposite. jonathan: so they should not be concerned about will rates going up. stephanie: it would become a problem if defendant is not willing to pivot but they are. the fed will be cutting this year. lisa: we are disinflation -- where does inflation fall into this? if everyone has more money to spend? stephanie: so far inflation has proven to be somewhat transitory. nobody likes that word, but it has just taken longer than anybody thought. that you had a strong year for economic growth -- but you had a strong year for economic growth

last year. there is a risk that inflation could pick back up but a strong economy does not necessarily mean that inflation cannot come back down. lisa: we are seeing inflation and super bowl tickets. we were hearing about -- jonathan: stephanie is worried about where this is going, taylor's questions. lisa: you were talking about the barbie and oppenheimer effect. stephanie: last year we not see the impact of taylor swift on inflation. i think we will be ok. i think vegas is probably a big reason why ticket prices are so high. jonathan: bigots is a mess -- vegas is next, insane. i have no idea why anybody would go there -- $10,000 for a ticket? lisa: it used to be that hotel prices were lower and people would just gamble a lot. i think they changed that. jonathan: pressure has been

playing in vegas for a while now? annmarie: he is there. if you care to see him, just go to an usher concert in vegas, save money area jonathan: is anyone going to the super bowl just to watch usher? lisa: my kids do not know him. jonathan: they are not the target audience. that is what the advertising is about. annmarie: we knew all the words but our nephews or kids did not. jonathan: stephanie roth, thank you. an update on stories elsewhere. >> more signs of weaning demand

for evs was volkswagen pushing back plans to seek outside investment for its battery units. the carmaker is facing doubts it can make its own batteries or scale. also scrapped plans to publicly list its ev business this week. jetblue reporting a smaller than expected fourth order loss. they cited strong demand during peak periods. they are undergoing a c-suite shakeup. chief operating officer joanna garrity taking the reins this week. possibly a merger with spirit airlines is becoming increasingly unlikely. both companies appealed a ruling blocking the deal. the pga tour is reportedly close to receiving a historic investment. steve cohen and mark lasley are

among the investors set to inject billions of dollars into the league. still fluid on how to include the rival organization. jonathan: coming up next, microsoft's massive expectations. >> we scream from the cloud. jonathan: that is next. numbers for microsoft and alphabet after the closing bell. equities negative by .25%. ♪ xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. jonathan: breaking news, the

usher residency is over. any updates? annmarie: seems he broke down

during his final las vegas residency on december 3. jonathan: which is why the tickets cost so much. equity futures on the s&p 500 negative by 0.2%. yields unchanged. in about 44 minutes, looking ahead to tack. -- tech. earnings from gm and ups. outlook for ups not great. outlook for gm better. ups is down 5.6%. lisa: incredible bullishness on the u.s. one person after another talking about how they see this continuing. gm seeing strength in north america. this is about strength in selling their bread and butter, which is gas powered trucks.

that seems to be something people want to buy at a time when rates are coming down and the economy is chugging along. jonathan: what would be like to know from mary barra? lisa: what could go wrong? how worried they are about chinese competition and what about the outlook for ev's? do they expect to ratchet it down? do hybrids? annmarie: she is talking about uncertainty in the ev market because they have not seen both in demand, but she is still saying they will sell about 250,000 dvds this year. stellantis is pulling back until they figure out who wins the election. jonathan: interesting. here's what elon musk had to say last week. -- unless we have big tariffs to stop chinese competition. lisa: in order to get more people involved in the electric

vehicle market, prices have to come down. the second point, you are legend will continue. supply chain lithium here in the u.s. jonathan: ups has cut 12,000 positions for a $1 million cost reduction. lisa: that is a lot of positions after some of the union negotiations and higher wages. will question -- is this a more macro issue or an amazon competition issue. people should a different way? jonathan: different stories with gm and ups this morning. ups down in premarket trading. microsoft has massive expectations. >> the biggest hardware business we have is our cloud. we stream from the cloud. justice in the past we were known as an office or a windows company or a cloud company, going forward, we have a

copilot. jonathan: tech giant reporting after the ball, expected to see a jump in revenue stood by demand for those services and personal computers. derek would writing, "microsoft appears well positioned in secular growth markets, which we expect to be the company's main growth driver. digital transformation trends should continue to benefit every microsoft cloud." tell wins for cloud, how strong the part of into 2024? derek: azure growth is their largest business today, about $50 million in revenue. we are looking for 27% growth. but we got from last quarter coming out of the september quarter was that the cloud

really seemed to be -- core ip spend is coming back. there is an incremental tailwind from ai. ai is expected to produce over 3% of the growth or about 2 billion dollars in annualized revenue on azure. we are eager to hear how things are going, what the outlook will be going into march, all they are feeling about budget loosening and continued improvement in azure growth? in september, azure growth accelerated at one point. we did see a path for continued acceleration. jonathan: the cloud business itself, are they getting a bigger share of the pie? derrick: aws is about a $95 million company. azure is at $70 billion.

there growth rate is by far the highest of the industry. they are certainly gaining share. that has been the case for a while. cloud has taken over more and more of i.t. still a lot of workloads on comments -- on premise. lisa: how much do you expect monetization of the whole ai craze? how much is that going to be important in these particular earnings? derrick: i think the first order of monetization is coming through azure. that is the platform where companies are building large language models, developing new applications, paying microsoft structure to do that. there will probably be about $2 billion in incremental spend on azure. next is the office business. copilots came out, generally

available in november. we will only have a small part of the quarter where we will see incremental revenue. commentary is going to be important. copilots will take time. legal has to go through and analyze the risk of using some of these models. there will be testing by different work groups. there will be some mad rush to see the adoption -- over the next 12 to 18 months, we will see them bills. lisa: how high is the bar for google? some suggest that the google search engine is the most destructible of all technologies -- disruptable of all technologies? derrick: i do not cover google but last quarter they did see a

big deceleration in their cloud business. this quarter, people will be looking at their trend rate from here but it did drop below azure growth rate for the first time in the september quarter. in terms of what microsoft is doing with being in the ability -- with bing, i do not think we have seen a lot of share gains from microsoft. it is tough to break the google domination. the expectations for microsoft to gain a lot of share -- lisa: are you curious about what they say about openai and how much the partnership fuel what comes next? derrick: there has been a lot of questions, the new york times bringing litigation to openai

and microsoft. in is some regulatory reviews on the charter ship between those vendors and a few others in cloud and ai. i doubt that will get brought up much on the conference call. i think we will just see more press releases down the road but it will be interesting. if microsoft feels like they need to strike partnerships with other content providers to avoid litigation from the likes of the new york times, that could be something to touch on, but it has not been that topical in the investor community. jonathan: appreciate it. thursday, we will hear from amazon, apple, and meta. more than $10 trillion of market cap. i am not used to saying trillion. this headline from gm is

interesting. mary barra to speak on the earnings call that gm would develop plug-in hybrids to cut emissions. we've got the sequencing. you go from the internal investor desk combustion engine to fully v. -- full ev. we have seen some companies leaning in that direction. gm has been hesitant to do so. this is something we can talk about with mary barra later. lisa: very much so given the fact that if people get an upper hand, it is a way to distinguish the u.s. market from china in terms of the supply chain as well as some of the antigens. annmarie: also pushing executives to offer a hybrid. wall street journal reported this. then she says we are going to do it. jonathan: it is not a reality check for the ultimate destination yet but it certainly is when it comes to the pace at

which we get to that ultimate destination. we are going to slow down. lisa: this headline suggests maybe shift gears about how to wean people into this area. jonathan: he said more than 13 million barrels a day of crude production is necessary. coming up, sebastian of t. rowe price and a former fed economist on fed decision day. ♪

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equities cannot get it did from gm. tech, what will it do, fill or