>> we are looking for a strong payroll report. >> deliver market is tight. we are not adding a lot of new jobs. >> it is slowing. >> if they start to weaken in a meaningful way, it would accelerate the thinking at the fed. >> similar softening in the labor market over the next couple of months. >> this is "bloomberg surveillance." jonathan: it is payroll friday. live from new york city, good morning.

this is "bloomberg surveillance." your equity market is positive on the s&p. only one main message, meta, up by almost 17%. a $1 trillion name here. the southside reaction, morgan stanley solid execution. jeffrey succeeded her expectations. lisa: it had to do with advertising and efficiency and the $50 billion increase this share buyback which was shocking considering a $50 billion increase in share buyback authorization led to a non-must 200 billion dollar increase in market capitalization -- in an almost $200 billion increase in market capitalization. it raises the question of ok, of a company that reported free

cash flow, $43 billion, increased advertising. are they growing in the ai space or is it just that the expectations were so low and the efficiencies got to a place where suddenly people -- jonathan: compared to apple. in the premarket, southside reaction to this, very different. vital knowledge, just ok. expectations need to move lower come yet again. the disappointment, china, china, china. annmarie: which is a different story from meta. advertising in china. when it comes to apple, 13% decline in china. my question is, how long will we see this weakness coming out of china for apple and what does it mean for the growth going forward? jonathan: let's talk about china. how much of this is fx competition or nationalism in

that country? that will give you 90 this is temporary or not. lisa: and raises the question of how much they're going to leverage the growth to china, given the fx, competition, some of the nationalism. if they are counting on this being their growth area, it is running into big problems. jonathan: meta, amazon, equity futures doing ok. the tenure at 38817. yields going absolutely nowhere. coming at this hour, the earnings field equity rally. greg boutle and alex webb and sarah house. it is payrolls friday. 185 is the estimate. lisa: i was looking to see if

anyone wrote anything particularly interesting. none of the notes have any more interest. basically, ok, decent. everyone will move on. it is essentially a nonstarter unless you get some sort of big surprise one way or another and then said that people change. jonathan: i'm going to say one way and not another. if you get a big downside surprise, i wonder how we start -- lisa: do you put march back on the table? on the flipside, what about wage inflation? prices paid surged. no one is talking about this. our people discounting the strength and inflation and looking for the weakness. jonathan: payroll duet 8:30 eastern time. earnings field equity rally, greg boutle saying "i preferred art of the market to belong of the body of the distribution like equal weight s&p 500.

this avoids the details that are either too risky or too expensive. the nasdaq 100 is our top u.s. index short." greg boutle, good morning. how painful is that? >> it feels like groundhog day. our view is valuations ultimately matter. we think the nasdaq as a whole is pretty expensive. we think there are more targeted ways to play winners and losers in exposure to like the circular ai theme. jonathan: betting against it and avoiding it are two different things. i bet against it? >> devaluations matter in terms at the nasdaq. will we look at the cyclical drivers, better at the start of the year. parts of the economy that have leg have been better -- like have been better correlated. get a better combination for

balance of quality and value. lisa: did you feel a little sick to your stomach when he saw the earnings yesterday? >> we have seen it for a while. it has been mixed. it has been mixed. the we look at the magnificent seven, there is an awful lot of dispersion. i think it is a story of relative winners and losers. we think if you want to play some of the more sustainable bull stories with tech, there are more targeted ways to do that. lisa: is it within specific industries that will be adopting to become more efficient or just to consolidate are your bets nvidia and going to small caps and the barbell approach? >> we created a targeted basket of names we think are exposed to the secular ai theme. rather than just buying any exposed to ai, we came up with the narrative to what are the second and third stages of the ai cycle? platform and software names?

the issue is those names are also expensive. we have been looking for shorts to kind of off against. taking the nasdaq names that have the worst momentum, put that is a barbell trade. jonathan: morgan stanley saying yesterday the difference between ai enablers and ai adductors. how do you frame those right now? >> the challenge with ai is it is such a fast-moving story and has been led by hardware. it is a question of where we going to go in the next couple of years? for us, trying to build a collection of starts we think have the exposure and momentum but for us it is finding hedges against that given elevated valuations. jonathan: can we introduce the fed? does it have a more risk friendly reaction function now given we know they welcome strong data and willing to

respond to week data? >> what we saw in november and december, the pivot from the fed was game changing. we saw a huge rally at the back end of last year. how does the marginal data affect markets from here on? with this cutting cycle now priced into the market, we think the fed, more dovish backdrop, constructive for equity markets but hard for the fed to introduce this kind of positive step change we saw in november and december. if anything, reaction, look or balanced. lisa: to put it another way, is bad news bad news? values economic italy and equity? -- bad news equity? or not to bet that it causes the fed to move forward? jonathan: if tom is awake, he is throwing things at the tv. >> i think bad news is bad news.

in terms of the timing of the fed cuts, i think what we saw was a big pivot in november and december that changed the narrative regarding the fed. whether it cuts in march or may, four or five cuts, i don't think changes the picture for equity markets. lisa: i have to go back to where he said basically the way you're going to hedge some of your bets is by shorting select companies that don't have the right momentum. are you shorting apple stocks? >> we don't make calls on individual names. we are trying to put a basket of stocks together. apple appears in two baskets this year. one is short -- a theme. and also in our basket of potentially at risk of more of a slowdown. lisa: so yes, basically. this is a theme you expect to play out over time that

basically this is an idea the trends are correct for some of the companies exposed to other things will be held behind. is that dependent on the fed? is that something that plays out in the first quarter, second quarter, third quarter? >> it is dependent on the fed but material change of what the fed has communicated for fed to become the prime driver. i think the growth is more important and some of those macro trends whether it is you a selection or exposure to china or growth in terms of the secular ai story. lisa: when it comes to exposure to china, doesn't matter if it is trump or china? >> i think it matters what they're going to enact in terms of policy. as we move toward or through this year and get into the election cycle, it is unlikely either side toward china or trade more broadly is going to be positive for equities without exposure. annmarie: going when it comes to things like trade tariffs, biden kept at the tariffs and place. isn't it the same policy and a

little bit of multilateral approach versus china versus u.s. approach? >> i think there is risk of escalation of that policy. i'm not sure there is a particular dovish outcome from trade from either party. i think as we move toward u.s. election, will get ramp-up on rhetoric and risk policy from either going forward. jonathan: talking about it for a while now. apple, that weakness is hard to ignore in the apple earnings yesterday. lisa: the fact they double down and still think china is an area growth. jonathan: what can i say? lisa: they are hinged on the employment and sales side. this is one of the reasons people are so concerned. jonathan: greg boutle of bnp paribas. let's get you some stock stories elsewhere. here's your bloomberg brief. >> russia struck a power

substation in central ukraine in a drone attack. according to local authorities, over 40,000 households and two mining operations lost power. initially, straining 113miners underground. a series of attacks the past several weeks targeting critical infrastructure in ukraine. nelson peltz has formalized his pitch to disney in a long-awaited letter to shareholders. he questions the company's planned investments in park and cruise line divisions. in response, disney's board says he brings no media experience and has presented no strategic ideas for disney. he owns around $3 billion in disney stock. meta ceo mark zuckerberg stands to receive a payout of about 700 million jobs a year from the

first ever dividend. he is already the fifth richest person in the world. this payout will be a nice boost to the $27 million he took him in 2022. that is your bloomberg brief.ats are more magnificent than others. >> you cannot question a spectacular financial management here. jonathan: 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! xi-chun, xi-chun, xi-chun! thanks, bro!

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jonathan: live from new york city commit is payrolls friday. 185,000. previous number, to 60.

some stocks are more magnificent than others. >> in terms of applying ai to advertising, meta was a little late. originally, they were thinking of it in other ways but they have done an extraordinarily good job of applying it. i think in this case, ai is helping drive revenue and profit growth more than for most of the other big companies. you cannot question the spectacular financial management here. jonathan: the latest, meta and amazon surging after blowout earnings reports. ai fueling both. sales in china continue to deepen. joining us now to discuss it, alex webb. what is going on in china with apple? >> not good news. the market was expecting it to be not brilliant but slightly worse than expected. they were looking for about 23.5 billion dollars in revenue from greater china which was china in the quarter but in the end, less

than 21. more than a 10% miss. it has to do with the rights and patriotism when it comes to the devices people are buying. six or seven years ago, apple experienced a bit of a dip, less the market share is there was a rise in other brands. we are seeing a similar phenomenon now and it is worse than people expected. annmarie: how did they fix this? tim cook to china believe last year twice. do they need to do more in terms of integrating products into the chinese economy? >> it is a challenge because they don't necessarily have the same ability to get their claws into consumers there because a lot of the online experience in china and large parts of asia is through super apps like we chat. of course they have a services business in asia but when you think about the apps you download on your smartphone in

europe or the u.s. were africa and south america come every time you download an app or take a photo, it makes it harder to pull every thing over to a device running on the android system. it is harder to do that in china. we did see apple still beat on revenue on the top line, part of that had to do with europe we did post better numbers that many expected. i think what we are seeing is leaning into other growth economies in the hope that starts to pick up some of the slack. lisa: i'm going to connect apple and amazon and meta, having people can apple cut from its workforce at a time where amazon and meta were extolled for the job cuts and talked about efficiency and operating in a leaner capacity going forward. >> it is a little bit harder for apple because it is been candy in the way it manages its work.

it doesn't have -- it doesn't mean it might be trimming around the edges but apple is just remarkably good at managing its cost space. even as we see is slowing down in the top line, margin expansion because they are candy in the way they manage costs. lisa: we walked past the apple store this morning and could see the huge sort of goggle light on the front of it and people are going out and maybe getting these virtual reality headsets. is that going to be the driver or is that one of the existential questions also underpinning some of the angst? >> i think in some ways investors have stopped caring quite so much about that question. i don't think the division pro and whatever come subsequently will be delivering a new growth, maybe in the medium term.

this is still the early days. look how long it took for the apple watch to gain adoption, probably four or five years. this device is a lot more expensive. what we have managed to see his expansion into services which has been the fastest growing part of its business for several years. also a higher margin part of the business. the challenge is, the registry fred. in europe, forced to open up the ability to download apps from places other than apple's own app store. that starts to chip away the edges of the business. you can never discount apple. they somehow manage to squeeze out a little more earnings growth even as the top line looks bad. jonathan: alex webb a bloomberg. bit of breaking news for you. the former president has alluded to this, in a foxbusiness interview, donald trump would not reappoint powell as fed chair. lisa, we have had a hint of this the last few months. back on the radar again.

lisa: and he will only be more front and center when he cuts rates it will be accused of trying to boost u.s. economy ahead of the election to give the biden win. that is what certain people will allege. it is not a huge surprise. it shows why this will be such a hot potato for the federal reserve and the upcoming months. jonathan: pal being reappointed as different question. annmarie: he attacked him so much even though he was the fed pick. i remember he said, who was the bigger enemy to the u.s., jay powell xi jinping. do you think jay powell was to be put in that position again? jonathan: when you start to consider these things? when does this get on your radar where you cannot ignore anymore? >> election is incredibly challenging. earnings season, how the first half plays out. the thing is try to find a

symmetry with the option surface or find structural traits such as u.s. names exposed to china where we think maybe some kalus for that to work and that is the kicker from the election. annmarie: do you have a playbook because trump was already in office? >> you can go back to 20's sake, what were the stocks that moved around the election? domestic cyclicals. the question is where are we now versus 2016? inflationary rally is probably less in the cards. the thing chasing something like russell given the move we saw at the backend last year from the small caps is less obvious. i think things like that, china exposed u.s. stocks is a bucket of 2060 replay. lisa: one of my frustrations with washington, d.c., it is difficult to get the noise from the signal. and to decipher the two. as someone who is putting money to work, when you take a policy

on face value, say 10% tariffs across the board, modeling out and trading? some of the rhetoric you know is going to be harder line now and later on when he gets watered down to put to the congressional hearings and then comes out? >> incredibly difficult thing is when you think about probability rating. the probability of the candidate winning, policy, and what impact does that have to markets? i think putting a trade on now is purely for the a selection is probably -- you need to try to fight other trait you think makes sense for another narrative in the election. lisa: trying to figure out where the economy is and i have to say, we had not really talked about payroll and how people are going to trade it. how are you going to trait it? jonathan: the macro data has continued to be much more resilient than people expected. we saw the better gdp and ism print.

i think one of the things we have suggested is looking at the parts of the economy that has lagged and if the data comes in a little bit better than people expected, how we play that from a rotation since. we seen the industrial cyclical parts of the economy on for correction the past 12 once. you can see the ism and contraction territory. potentially room for a catch-up. that is what drives our view of being long in terms of equities, equal weight s&p we think is more leverage potential for relative recovery. jonathan: the question lisa wants to ask, how low does the job sprint need to be today to talk about rate cuts again in march? >> i'm not sure today's job print will be the catalyst for that. jonathan: 50? 80? lisa: you don't know me. that is totally what i would want to ask. >> i think the inflation print will be as important as the job print as we move into march.

the equity market, people are fixated is whether to move march or may, cut four times, five times, six times. i don't think it makes that much difference. what matters are we in a cutting cycle? if so, i'm not sure the level of detail is when they kick that off is going to change where we are. jonathan: greg, thank you. greg boutle of bnp paribas. looking at the equal weight. i want to go back to stand up conversation yesterday, get 50 basis points cut this year. it will come after the election. you're not going to get a move until after the election from this federal reserve is the call. lisa: right now there is a 106% chance of a rate cut in june. basically your pricing in more than one rate cut fully into market expectation.

he is contrarian. jonathan: there is a belief can go further and further. what is so odd about his call, how foreign it felt. only one cut away from the dot plot, from the federal reserve in december. lisa: i think a lot of. especially of what he was saying is indicative of the new trend. jonathan: coming up, sarah house of wells fargo. the payrolls report is just around the corner. meta is absolutely flying in the premarket. live from new york this is "bloomberg." ♪ 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!

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jonathan: equity futures picking up. doing better than good on the week. even with the biggest one-day loss of the year so far. climb back to september. -- even going back to september. fourth consecutive week of gains. nasa cup by more than 1%. pretty impressive when you think about it. nasdaq 100 up and apple is down. you can thank meta and amazon. lisa: effect more than one trillion market stock is up more than 60% in the premarket

trading gives you a sense of just how massive the meta gains are. it is a 1% gain. hundreds of billions of dollars in market capitalization created in a heartbeat. jonathan: this is the excitement come in equity markets, not bonds. yields are up by three basis points. more on the jobs market a little bit later. the estimate, 185,000. unemployment rate, 3.8% is the gas. -- is the guess. here's the euro against the dollar. it looks like this. posited by 0.1%. -- positive by 0.1%. meta and amazon surging. the year of efficiency paying off. meta nesting $50 billion stock buyback and first-ever quarterly dividend. apple shares falling after

reporting a slump in sales in china. snapping a streak of four's great quarters of declines. down about 2.7%. down about 2.7%. it is all about china and the difficulties >> tim cook is

trying to say it is about this market but -- lisa: he was asked if you want to expand after becoming efficient and having all those job cuts. he said i've come around to thinking we operate better as i lean her company. it races the question about whether some of these the humans can continue to contractor staff while continuing to expand some of their profits and cash flow. jonathan: that is the latest in tech. the middle east, talks continuing an effort to de-escalate the war between israel and hamas. waiting on a mass respond to a deal that was the of 45 day pause inviting. prisoners and hostages would be released in stages. they see this as the best chance

to eventually end the war according to a usa official. secretary of state antony blinken said to make his fifth trip to the region in the coming days. annmarie: there's a lot of pressure domestic on the biden administration. we see that is actually in he states like chicken to try to write you back what israel is doing -- states like michigan to try to ratchet back what israel is doing. whether or not this will be accepted will be one of the longest pauses we have seen in the fighting since it began stop wait and see. likely why we will see pres. biden: to the region. -- biden to the region. lisa: we are not done. who knows. annmarie: sinex will tell you maybe benjamin netanyahu will way this out. jonathan: conflicting reports. two hours away from the payroll

report. looking for 180 5000. the latest data following the fed meeting earlier this week. here is a scheduling one, jay powell appearing on "60 minutes" on sunday. the interview was taped yesterday. i can always since the frustration from the people who follow the federal reserve so closely so i will do this for them. the new york times, financial times. give them an interview with the federal reserve chairman. "60 minutes" has its place but it feels like someone guiding them through various issues without really getting the penetration, the deeper stuff out of the chairman. lisa: he is not speaking to financials, he's talking to the average person sitting in their living room. i am wondering if he is trying

to basically put his message out, maybe a defense, but basically justify what he is doing as it comes under criticism in the financial media for being a little rogue. jonathan: he is not sitting across from an expert witness. no disrespect, but they have to be a jack of all trades. sitting down with people have to report every single day. lisa: i agree. it raises the question of what is his purpose? it is not to clarify things for markets. annmarie: he what's cover if they're going to cut rates, cover from, i think, one particular base in american politics. during covid, he did in interview with "the today show." he is trying to get in the homes of americans and will not set across from jonathan ferro. jonathan: i'm not saying make of anyone that was in the news conference.

jobs reports, goldman with the high-end, 250,000. sarah house and the team of fargo. writing come all the payroll growth has held up remarkably well recently, there several signs of further moderation in the months ahead. she joins us now. great to catch up. on the surface, it looks ok in payroll. the labor market in america. where should we be concerned? which spots give you concern? >> a number of spots. overall, the ongoing downward trend we have seen in demand for new workers. we can see that with january hiring planes that came out yesterday that were that more of a six year low. temporary employment declining for several months. layoffs remain very low but if you're not adding as many new workers, you need them to stay low in order to keep that rate

of hiring where it is. already in the past couple of weeks, we're seeing the layoffs pick up. that is an area of concern suggesting you will get the further downshift in momentum as well as other things like the overall mix of job growth, negative momentum in revisions that suggest that. 225,000 pace of job growth we saw last year is not sustainable. we're looking for that to downshift pretty materially. lisa: when you dig below the surface, where these jobs being created? what is a warning sign for you in terms of where the jobs are being created and where they are not? >> the fact we have seen essentially two thirds of job gains the past six months has been in areas like health care and government, suggesting more cyclically sensitive areas of the economy are weakening pretty dramatically under the fed's restrictive stance or policy.

if those industries can continue to hire at a good rate, that could keep us in positive territory. i think it suggests there is more fragility when you are seeing the more cyclically sensitive parts of the economy weakening. lisa: we've been talking about anecdotes and company after company talking about how they're going to be doing layoffs, potentially going forward. we hear how efficiency boosted the earnings of the likes of meta and amazon. how do you way that information? does that relate to the overall numbers or are these terns that happen as a result of technological shifts? >> we did see firms take a really good hard look at productivity and what they could do to improve efficiency, particularly given how difficult it was to hire workers over the past few years. some of that is coming through. getting to the bottom line in terms of their day to day business and maybe even in some segments adjusting maybe we

don't need certain pockets as well. particularly as we think demand growth is going to slow overall, that could put further pressure on headcount to the year. jonathan: i want to talk about price pressure. stephen stanley was with this yesterday. he said the improvement inflation the last six months was down. he shared the fear that chair powell alluded to in the news conference. he thinks maybe we can stabilize at a higher level. do you share those concerns? what are the one-off factors? >> i think over the past six months, we have had favorable things go to help bring network deflator on an annualized pace down so dramatically. a little below 2% the past six months. things like you did get some declines in financial services, given some of the price market action in the fall. that was weighed on that. payback in years like travel

services, still a pretty good correction going on in vehicle prices. there are questions about whether the downdraft we have seen from good prices, even energy prices more recently, can be sustained. i think there has been some better-than-expected news as well. i have been pleased with the effect you've seen that core services component begin to rollover and at least not shift up in areas like medical care -- which is one area of concern. to some extent, the downdraft we have seen has been a little exaggerated but at the same time, we are seeing signs at least on the services i which the fed is been concerned about, things are going well for them. jonathan: let's finish with where we started come how bad is the number need to be today to put a march rate cut back on the table? >> if you got something closer to 100,000. i think that would put it back in play.

this is not the only payroll report we will get before the march meeting so we do have one more. i think in terms of putting march back in play, it will come down to seeing that weakening in the job market. at the labor market keeps chugging along the next few months, i think you'll see the expectations for march reduce even lower. jonathan: sarah house of wells fargo. something around 100,000. just putting that out there for you. plenty of earnings after the close yesterday. big tech this morning. excellent out in the last 20 minutes or so. lisa: have in their second annual profit in decades. both beating across the board, chevron talking about the permian output and how much it is increasing. talking about share repurchases as well as some dividends. permian growth for chevron is going to be maybe about 10% this year. we were talking about california and how chevron has been vocal

about leaving california. exxons has taking $2.3 billion right down, people he knows is "result of company that prevented from coming back online." jonathan: easier to do in california than texas, which we have heard. lisa: easier in texas and california, which is why they're shifting gears. the key question, how much are they going to address this directly on calls and how much will display into some of what they lobby for? jonathan: update on things to get to. the bloomberg brief. >> until shares are lower in premarket trading on the reported delays to a $20 billion chip facility in ohio. the plant was originally slated to begin production in 2025 but the wall street journal reports it is unlikely to be ready until 2026. intel declined to report but says it remains committed to the effort.

jesus hasn't blocked a record $40 billion of suspected fraud last year. they say criminal activity culminated in a boom around the holiday season with blocked transactions up more than 450% year on year in december. online fraud continues to grow as a major expense for banks and payment firms. the star chinese banker that disappeared has stepped down from renaissance holdings. the chairman ezekiel reportedly stepping down for open health reasons" and to spend more time on -- "health reasons" and to spend more time on family affairs. he was detained by authorities as part of a broader crackdown on the financial sector. that is your bloomberg brief. jonathan: much easier to do business in texas and california. just to clarify. i can't believe those words came out of my mouth stop -- out of my mouth. lisa: i think you just like the

weather. texas is a little too high. jonathan: bank stress test under the spotlight. >> for the most part, everything is in the rearview mirror. things are starting to feel more normal. yesterday's announcement was a bit of a surprise. i think that is an outlier. jonathan: this is "bloomberg." ♪ ameritrade is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders.

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and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com jonathan: equities on the s&p 500 are positive. bond market unchanged. tech in the premarket come amazon, meta ridiculous.

$1 trillion. 17%. ridiculous. lisa: sewed of how much more can you rally after having an incredible rally last year and so for this year and beating it, causing this further rally? when people say tech is expensive, what are they talking about? where are those people when it comes to what their delivery and who is buying the day after? jonathan: up to and percent. of 12% so far today. we can add to that rally for 2024. $50 billion buyback increase committed and over at meta. take your pick. lisa: the cash flow is tremendous. this is sort of a joke. it does dovetail into the jobs moment because these are companies able to make themselves very lean and are able to capitalize incredible advertising and the ai boom, highlighting how different they are. jonathan: stock is up by 70%.

bextra -- stock is up by 17%. >> for the most part, everything is in the review mirror so there were a few idiosyncratic bank failures that related to the business model and how fast those banks group. things are starting to feel more normal. yesterday's announcement was a bit of a surprise. i think that is an outlier. jonathan: new york community bank, series of downgrades. the company facing a potential credit downgrade from moody's. concern spreading across the sector. regional banking index heading for its worst week since june last year. herman chan, good morning. how that is it? is it a single bank issue? >> going into the fourth quarter earnings report, the other regional banks that have spoken about the outlook for 2024 for

pretty optimistic about the back half of the year with interest rate cuts improving loan growth and stabilizing that interest market. the comets about credit quality were pretty sanguine so the new york community's reporting earlier in the week really up to the narrative and brought the focus back to commercial real estate risks. annmarie: it wasn't just them. it was as a talking about potential actual losses tied to commercial real estate. you can see office space being left for dead because people don't have the money or will to invest and it is losing value added dramatic pace. how do you say that has been priced in? >> we know it is coming down the pike over the day that sort of brings comfort to the banks, and when they talk about the risks involved with commercial real estate and office area, they

have underwritten pretty conservatively. around 50%, 60%. on top of that, built reserves the past few quarters ahead of the potential losses coming. lisa: people were looking for the boogie man and saying it will be in commercial real estate and still missed some of these. i think that is getting people nervous. even with what you say, we still missed some of this. how do we reconcile that? >> this is just an example of what is going to happen in 2024, 2025, 2026. there will be lumpiness and charge-offs. because these losses are a bit larger, they will create a bit of variability with credit quality across banks. annmarie: more than dubai 2027. is it basically between now and everyone is on eggshells? >> everyone is sort of knowing

the roles are coming through and there's going to be a few years of this happening. materializing. again, when the banks talk about their criticize loans, loans that have some sort of deficiency, those are increasing but citizen ceo mentioned the other day that is flattening out. so that is great to see. they sort of have a handle on the potential risks coming. jonathan: you stink to a ceo and they say, it is fine it is everyone else. we have heard that all week. lisa: that is why it gives me a little angst you had this issue of the surprises. i wonder how much this is going to come out of the woodwork? i'm not saying bank failure. there is a distinction between bank failure in the constrained credit and more potholes. jonathan: mike nailed it. you can draw distinction.

they're not going to finance the economy the same way. >> have seen that happen last year after the failures of signature and first republic where the banks pulled back on lending, were more conservative with who they were lending to. on top of that, you saw a decline because of where interest rates were. that is starting to ease a bit and banks are talking about reducing their loans and increasing their capital ratios. a lot of that has been completed. there is potential for loan growth. jonathan: the states are pretty amazing. 28.7% of the assets of small bags come 6.5% at bigger banks. another example of where we are looking at a problem not on the balance sheets the big banks. when we talk about regulation, we're talking about how to regulate larger financial institutions.

why do we keep doing that? >> i agree with you. i think the ceos of the biggest banks will say their capital ratios, liquidity ratios are much more goldplated versus the rest of the industry. the risks are in some of the smaller players at this juncture. lisa: some people speculate small banks and large banks are asking people to come back to the office full-time because they want to support office valuations. is there credence in that? >> you are saying that across the board. lisa: is it just because of efficiency? >> i am sure it is mostly efficiency but it can't hurt if you have folks coming in more and propping up the values on office e.r.a.. jonathan: herman chan. jonathan: lisa: how many times have you heard that? it will support the valuations.

i think there have been and i've had conversations -- jonathan: i have not heard that but it is funny. lisa: i don't want to be a conspiracy theorist but. i've heard that quite a bit. i do think if you talk to people in private they feel like people were not what is efficient so they would like people to come in and that is the reason why. jonathan: i think it is about the entry-level people have come up into let's say financial institution and can't really learn the trade without having the management around. lisa: that is a big part of it. i think there is something where people get sort of disassociated from the work from home. jonathan: culture thing? lisa: i did not want to use the "c" word. if you have friendships -- jonathan: family. lisa: it is hard to feel connected in the same way to a company if your home doing your own -- you are looking at me. i'm not going to say the "c"

word. jonathan: culture. you know the culture thing drives me nuts. lisa: we have seen studies were basically people who work from home more of the type are more likely to get laid off because they don't have those connections with people. jonathan: they feel disconnected from the company culture. lisa: i did not say disconnected from company culture. they don't seek out their mentors. jonathan: herman chan, thank you. everyone working from home today, lisa thinks you have no friends. connecticut governor was live from new york city on this payrolls friday come here is our estimate. looking for 185,000. that is the median estimate in our survey. the previous read was 216,000. thanks to meta which is flying in the premarket higher by more

than 17%. this is "bloomberg." ♪

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>> the underlying inflation piece is not as good as the numbers would suggest. >> for the fed, makes sense to err on the side of caution. >> he was appropriately cautious. >> if inflation moves in the right direction, they will be able to start normalizing. >> the fed is under no pressure to cut rates. it is under pressure to make a big decision in march.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: that moment when you insult people working from home, and. your manager is working from home. lisa: listen, if you're working from home, you have a. great. jonathan: life jonathan: it is pure -- if you're working from home, you have a great life. jonathan: it is pure envy. meta higher by 17% in early trading, a $1 trillion name in the premarket. lisa: it is bonkers that a trillion dollar market cap company is -- $43 billion in free cash flow, talking about a company trading above and beyond after all of the expectations and gains.

jonathan: not like it is coming off a bad year either. take a look at apple in the premarket. it is negative by something like 2% to 3% this morning following pretty meh numbers. the good news is they avoided posting a fifth straight quarter of declines. amh china down 13%. not great at all. annmarie: the bar was so low in terms of the quarter, but 13% decline china sales. the question is how pervasive is this for apple in china? where's the weakness going to come, especially we have seen more people go for huawei, where they get the same kind of access to a hardware but it is cheaper on the price point. jonathan: is a competition, is it nationalism, and will it last? lisa: and can apple address any of those issues, because frankly, all of them are out of their control and they are tied to a nation that is incredibly

fickle with respect to this technology. the answer is competition, not nationalism. fx, no one really cares. jonathan: equity markets still doing ok. we need to talk about payrolls. 185 is the median estimate. we are about 90 minutes away. we have talked about it a few times already this morning. what will it take to reduce the march rate cut? we had an answer from sarah house -- lisa: i am curious about wage gains. no one seems to be talking about wage growth, but we are expecting 4.1% wage growth year over tear -- year. i wonder if that is enough. jonathan: this is how the stage is set. we are firm following decent numbers from amazon, from meta. the stock market up by 0.6%.

bond markets unchanged. coming up, ellen zentner of morgan stanley, looking ahead to the payrolls report. governor ned lamont of connecticut. and you can see the divide front and center this morning. we begin with our top story. the u.s. jobs report just under 90 minutes away. goldman expecting the -- wells fargo calling for 155. priya misra is with us. good morning. reaction function of the fed. do they embrace strong numbers and maybe move closer to cutting rates? priya: i think they told us they just want more confidence inflation is heading north. i am grad -- i think reaction function is more on inflation.

if that wage number is a little weaker or any sort of revisions, i think that inches them towards march. i know chair powell push against much, but it is because he said the first cut is consequential. he did not push back the reason to cut or total amount of cuts. if it is mark torme, it really does not matter, but it is about the total amount -- if it is march or may, it really does not matter, it is about the total amount. even 2.3% on average earnings is enough to keep it on the table. the fed tells you they look at all the data. jonathan: how important are those cpi revisions that come later this month? priya: extremely important. we heard from chair powell. he sounded disappointed with them, because he said last year was a surprise. this fed is a data dependent

fed. the market never pay that much attention to revisions, but it is extremely important. we had negative revisions all last year, another set of revisions today. if the revisions are weak, it gives the fed that confidence to start normalizing. we are going from very high positive real rates north. i think revisions are important for the fed. the market still has to do some work to pay attention to it. lisa: we learned a lot from the press conference, the buyers towards cutting rates and no way are they going to be cutting rates. when we say data dependent, what are we talking about? yesterday, we saw ism manufacturing coming in stronger than affected with prices paid surging the most since december of 2020. where do you place that immaculate disinflation? priya: i am glad you ring that up. immaculate disinflation is key to the soft landing and key to why the fed is softening. the good deflation we have seen,

the fed thinks that is done that is why i took less out of the ism manufacturing, because that is goods deflation. now the focus is on wages and surface -- service inflation. we will get the cpi in two weeks and get cpi revisions. as long as the service inflation continues to head north, i think the fed may look through them. the good news is over on the supply front and the goods front. i think the fed will say goods inflation is actually cost push inflation, it is bad inflation. there confidence, they need more confidence on service inflation. annmarie: you talk about -- lisa: you talk about inflation -- priya: the standard error around

nonfarm payroll is around 900,000 on either side, so it could be anywhere from 100 to 300, and we should not take it seriously. the wage number is more important. chair powell did not really pushback on cuts because the economy is a strong. they realize the economy is strong, but it is all about inflation. i think wages are more important. jonathan: a single bank moved in this market more than chairman powell. you have become constricted on -- constructive on credit. anything give you pause this week? priya: what this tells me is active management. it is a lot of work understanding business models, understanding charge-offs, how much provisions are puts. that is so important. it is the guts of what we doing active management. it reinforces why you have to continue doing that. it is easy to say whether i like banks or not, but there will be winners and losers, or i guess losers are more losers, in terms of commercial real estate.

just making sure you know what you are buying. if the soft light -- if the fed can cut early enough to get a soft landing, you have to be very careful, diversify the portfolio, make sure you know what you are buying. there is a systemic problem with commercial real estate. if there is one bank, there will be more banks. we are all looking under the hood, who has that exposure, who has capital. what the fed had last year was help funding. that did not help capital. we are looking carefully at which of the banks are building capital, because that is ultimately what you need against these losses. annmarie: you said earlier what is a couple months among friends. what is a couple months among the two front runners for the election, trump this morning saying he will not reappoint powell, because he will do something to help the democrats if you lowers interest rates. does the timeline matter for you? priya: chair powell has been

talking about cutting rates. there's actually a remarkable amount of consensus at the fed, and i wonder if the statement this week, where -- they are having -- they are trying to have their cake and eat it, too. we are focused on that inflation target, is that a way to keep that consensus? i do not think it is chair powell against a bunch of other fed officials who do not think we should cut, they are trying to push back against the view they are politicized. they will be dragged into the election. they were four years ago. but the timing, they have set the market up. whether it is march or may or june, it is within that timeframe we expect the first cut. they are trying very hard not to be viewed politically. lisa: so why is chair powell going on "60 minutes" to talk about his feelings? priya: it is a really tricky environment. the economy is strong and the fed is cutting rates.

i am sure everyone watches bloomberg, but explain to people who may not be watching? there is a normalization aspect to it. in that press conference, he cannot really shape the narrative. here, he can come and say we are not easing, we are not helping stocks go up more, we are just trying to keep that soft landing going. just get that message across. lisa: he has clearly got a different audience, so what is the message and why now? he is under a lot of political criticism. he is saying he is not political, but he is trying to speak to the people. annmarie: i think he is looking for cover, because you know he will cut, and he will get dragged in to this political mess. so he's looking for cover for many -- maybe numbers of the republican party tend not to get political. jonathan: what about the democrats? it was the democrats who sent

him letters, never mind former president donald trump. let's talk about people in power, in congress, who have been setting him letters right before a big decision, the first decision of 2024? annmarie: again, it goes to why he is trying to speak to the people. i am curious if they are going to ask him, if "60 minutes" is going to ask him. do you open those letters? how do you feel when you read them? jonathan: in the shredder, hopefully. lisa: it is interesting to get that pushback. jonathan: priya misra, jpmorgan asset management. looking forward to chairman powell, "60 minutes," to talk about his feelings. [laughter] lisa: i just think he will put a message out there. it will be an important message, because disinflation is a very complicated topic. jonathan: let's get your bloomberg brief with yahaira jacquez. yahaira: according to local

authorities, over 40,000 households and two mining operations lost power, initially stranding over 100 miners underground. the strike follows a series of attacks targeting critical infrastructure in ukraine. chevron is higher in premarket trading after the company beat earnings forecasts for the first time in three quarters. adjusted fourth-quarter earnings of $2.48 a share were higher than analysts expected. the company's refineries processed more crude than ever before. meta ceo mark zuckerberg stands to receive a payout of $700,000 a year from the social media giant's first dividend. he is already the fifth richest person in the world. the payout will be a nice is to the 20 $7 million he took home

in 2022. jonathan: thank you. up next, the data dependent federal reserve. >> if the economy and labor market start to weaken any meaningful way, clearly, it would accelerate the thinking at the fed. jonathan: your payrolls report is around the corner. live from new york city, this is bloomberg. ♪ hey! sarah! if you had to choose would you listen to elevator music all day or deal with payroll compliance?

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get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. jonathan: live from new york city, it is payrolls friday. that number is around the corner. ahead of that, s&p futures, positive by 0.63%. the 10 year 3.8761. this morning, the data dependent fed. >> if the economy and labor market start to weaken in a

meaningful way, it would accelerate the thinking at the fed. or me, i am looking at -- for me, i am looking at the unemployment rate. i think we will eventually get above 4% this year, but it will come in the back half of the year. jonathan: here is the latest this morning. the january payrolls report coming up in the next hour. calling for an unemployment rate of 3.8%. ellen zentner and the team at morgan stanley calling for a print of 215,000, saying we expect widespread gains in payrolls with particular strength in construction because of warm weather. ellen zentner joins us now. are we looking for re-acceleration in this jobs market? ellen: not necessarily reacceleration, just continued strength. in the teaser you get, it sounds odd to say construction will be up because of warm weather. didn't january feel like hell?

but it was really warm the first half of the month, and that captures the survey week. we did create weather sensitive jobs at that time. jonathan: there is concern about the breadth of job gains. do you share that concern? ellen: yeah, job growth is narrowing. just like with the stock market, we like to see breadth. it means durability, stability. you do not say that jobs created are not valid, because we are short jobs needed in places like services, where we are creating a lot of jobs. immigration numbers are helping there as well. this is a labor market that continues to be healthy. there is no data there that says we are headed towards a cliff or we will have a sudden shift in growth. lisa: how long can we have a healthy labor market and disinflation and the idea of wages continuing to grow at a slower pace? ellen: the fed is pretty comfortable with wage measures

now. even as a when you look at the employment cost numbers coming close to 4%. if you think about productivity plus inflation is sort of a rule of thumb in terms of what would a normal wage growth be. we are in that range. there is no concerns there. and wage pressures on the way up were not contributing to inflation. they will not contribute to disinflation on the way down. what we are seeing play out in the data is even though wage growth is slowing, it still means labor costs are rising. what are we seeing tom if you look at the transcript from earnings season? companies are doing capital deepening. they are spending more, and you are getting those big productivity gains. lisa: help me understand with how you deal with things like what mark zuckerberg -- mark zuckerberg said yesterday of operating as a leaner company. he was responding to calls to potentially boosting some of the

staffing and infrastructure of his company. how do you view some of the focus on being lean and efficiency with ai and the labor market? how you translate that into an understanding of whether things are healthy or not? ellen: one of the concerns around ai or any time we have had changes in technological advancements is what does that mean about labor? who is losing their jobs? longer run, it is a positive development for the economy, but we gloss over there is an effect where people lose their jobs. companies, like you mentioned, are saying, no, we will lean into that and add jobs, but there are going to be certain sectors and health care, education that will really be impacted by ai and will have a shrinkage in labor over that time as it is being adopted. but we are not in the elon musk cap who said that is fine, why would any of us need to work at all?

let's just lay around like in the movie "wall-e." we are in the camp that technological advancements, like ai, will eventually expand labor and other areas where we can grow and see further productivity. annmarie: or the jamie dimon camp of three and a half workdays. if you look at some of the job losses we have seen, it is everywhere. it is banks, some of the tech space, levy's, ups. where do you see potential sectors that could be in? ellen: we can always point to sectors that are doing headcount adjustments, a full on laying off, however you want to call it. but broadly speaking, and, to me, what is important is the transcript broadly across earnings still show this, that companies overall are retaining workers but not doing broad-based layoffs. we can point to spots where they have over-hired and are

adjusting, and tech and fintech are a big area there. but companies are still feeling the distortions from covid, where it them so long to hire, and they are running lean headcounts, so they will hang onto those, so in the next upswing in the economy, they are prepared to respond to that. that sentiment can shift quickly, which is why watching weekly jobs claims reports are important. but this is one of the greatest areas of ai, it is helping us stay on top of, quickly, any shift in sentiment, and that can change the outlook on a dime. jonathan: let's turn to inflation and the federal reserve. you put out a piece about a noncommittal chairman powell because of revisions on cbi. can you talk us how important these revisions on inflation are going to be? ellen: on february 9, we get revisions to cbi.

it revises the data series k think about what we are speaking with payrolls. we are forecasting a number based on data that is about to change. anytime that is revisions, it creates a lot of uncertainty. we went back 27 years. revisions tend to be very small for cbi. but last year, the revisions -- chair powell, for the first time, said there was welcome news on inflation. then we got the revisions, and it revised up cbi by 120 basis points. all of a sudden, inflation was 1.2% higher than we thought. then you got two cbi prints after that that surprise to the upside. it was a complete game change to the fed, who thought we were drifting to the end of the hiking cycle. we do not expect this to be a big number. we think that was a big adjustment. we will be back to something in historical range. but the fed does not know. when there is uncertainty at the

fed, it creates policy paralysis. it is difficult to get consensus on starting cuts soon when you have not seen the full scale of data get. lisa: which raises the question, and we keep asking it -- and i am sorry we will have to ask you to -- how high is the bar to cut in march? ellen: instead of focusing on today, i would say the two jobs reports we get before march, an average of 50,000 over those two months, coupled with very tame inflation that continues to point to inflation staying as low as it is right now, that could do it. but it is going to take very convincing data, because, as you said, powell raised the bar extremely high. i was listening to the q&a, and as soon as he said i think it is unlikely my colleagues will come to an agreement in march, and

the team, we were cheering. because we have had a call for june for some time. i've been covering the fed for 25 years. that was a moment of clarity do not get often. he would not say that unless they took a straw poll in the room and there was not a lot of support or march at all. lisa: do you think it was a mistake on his part? ellen: no, i do not think so at all. i am not -- i forecast that i think the fed does the right thing and what i think they should do, and that is june. i can be wrong. we have to recognize we can all be wrong in calls. tongue-in-cheek, i said they hit the floor in march, but we are all wrong all the time. it come per -- it could come earlier. it could come in may. that could be an easy set up to

signal for may. if they say soon could be appropriate, to adjust policy, that means they are doing it at the very next meeting. jonathan: good to see you. ellen zentner of morgan stanley. payrolls about one hour and five minutes away. let's look at price action. equity futures bouncing back down to a couple of names. meta and amazon searching in the premarket. lisa: meta is up at 17.7%. a trillion dollars stock trading like a penny stock. boom, there you go. jonathan: boom is the right word. ♪

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jonathan: equities on the s&p 500 positive by 0.7%. on the nasdaq, higher, even with apple lower in the premarket. firmer by a full percentage point in the nasdaq. two-year, 10 year, 30 year. payrolls an hour away. the two year yield higher by two basis points. just a finish on foreign exchange, the euro against the dollar not doing much at all, the euro 0882 -- euro 1.0882.

big tech under surveillance this morning. amazon and meta flying in the premarket. meta is showing its first ever quarterly dividend and an extra $50 billion share buyback. apple shares falling after it reported a 13% drop in sales in china. down 2.7% in apple, meta almost 17% in premarket trading. lisa: it is crazy to think how much market cap is being created. they gain almost $200 billion in market capitalization overnight. how much further can this go? can people still talk about the sector being expensive if it seems like, despite the incredible gains last year and early this year, it can still eke out a mere 17%. jonathan: up to hundred percent

last year. lisa: people say the bar is really high, then they raise it even higher. at this point, how do you get away from the magnificent 7, or magnificent 5. jonathan: it is impressive. amazon pretty decent as well. let's talk about big tech and the middle east briefly. u.s. forces fending off two attacks on the coast of yemen as the conflict with houthi militants continue. the u.s. asteroid an unmanned a vessel stocked with explosives in the red sea. still waiting for that response from this administration. annmarie: we are all waiting for that response, but they have been telegraphing it. lloyd austin was asked why are you telegraphed -- telegraphing the so much. aren't you giving them the upper hand to prepare for this? he said he would not comment on the speculation, but they did

say it would be a multitiered response. this one felt very preventative more than the reactionary. jonathan: one to watch going into the weekend. want to watch later, the fallout from new york community bank continues. moody's putting it under review. concerns spreading. the kbw index down over 8% in the past three days. in japan, won there plunging a second straight day after saying it would have its first loss in 15 years tied to u.s. property. lisa: it is a known issue, and the fact that everyone knows it and you're still getting these losses -- i want to point out, i've and getting a lot of hate about working from home. i am just saying there is this question about office space and places that do not have investments, do not have owners willing to put anything into

them, and they are being left for dead. how do you deal with the space, that is why some people are looking into this closely. jonathan: ok, good. are you finished on the return to work stuff and working from home? lisa: for now. jonathan: good. with us around the table is governor ned lamont. this is a big story about people fleeing blue states and going to read states. you have a different story to tell. you're saying it is different for connecticut. why is it different? gov. lamont: the wall street journal keep saying everyone is fleeing blue states, they are raising taxes, that is why they are all leaving. just the opposite in connecticut. we had a bubbly and 70,000 people move into the state over the last few years. we did cut taxes. i think that is one of the reasons. but also, we kept things open during covid. our schools stayed open. people look at our suburban

lifestyle, saw our cities coming back. a lot of young people moving to the state. annmarie: you said last time that if new york catches a sneeze, we catch a cold in connecticut. how do you deal with a migrant crisis we are seeing now? are you seeing overflow into connecticut? gov. lamont: we see some overflow. we are not being overrun like, unfortunately, i see in new york city. we have our folks standing by. we have motels and nursing homes we have retrofitted to get people off the street. we are ready. thankfully, we still have things able to take care of people. lisa: do you need more support from the federal government? gov. lamont: i do. we need more support from the federal government. especially true in new york city. but we got to secure the border. we got to be a lot stricter on the border. you got to do both. lisa: we have been hearing from

this administration about what they can do going it alone. president biden has talked about possibly closing the border. are you hoping he does that? gov. lamont: i am. i called the republicans' bluff. they say, president biden, you're not willing to close the border. give me the tools to do it, and i will do it. i am not sure why they're pulling back now, we will wait until the next election. i think that is the wrong move. lisa: you manage to cut taxes, and you are in the black. new york has not, in part because of this issue. at one point does a challenge you being in the black and also deal with a dramatic influx of new people? gov. lamont: my heart goes out to eric adams. this is costing the city $4 billion plus per year right now. at the same time, your capital gains revenue is going down, so it is hitting the city hard. we are part of the new york city

ecosystem. everybody things we are frenemies and competitive. you do well, we do well. jonathan: it is amazing to hear democrats sound like republicans. you get the sense democrats are robbed by reality, that we are -- we have this big issue on the board for a long time, yet here we are, all of a sudden it is something we need to fix. why was it probably did not need to fix before? gov. lamont: yeah, mugged by reality. jonathan: forgive me. british. [laughter] gov. lamont: i will pull things back or one second. we have the most successful economy on earth. that is why people want to come to this country. but it only works if we secure our borders. maybe democrats will slowly get up to speed on this. some of his, from this part of the region, we were not hit as hard early on. we all know where we got to be

now. that is why it is so important the republicans do not pull back at the last moment. the ball is at the five yard line -- that is a football analogy. [laughter] real football. [laughter] jonathan: you want to go there? lisa: fighting words. gov. lamont: let's get it into the end zone, just to keep you confused. let's get it done and hold the president accountable. jonathan: how confused do you think the president is on this issue and how much distance is there between him and you? gov. lamont: i do not think there is any distance right now. he said, give me the tools. i will shut down the border on illegal immigration. maybe you wish he had said that sooner. he is saying it now. the ball is in congress' court. annmarie: wasn't he here on day one? on day one, he paused almost all deportations. people are saying it was a signal it would be easier to get into the united states was then

under former president trump. gov. lamont: people have been trying to get into this country for years. trump talked about caravans of terrorists coming into our borders. it was not like everything was ages and creams six years ago and then it changed. i think we are serious now. there should be strong bipartisan support. our senator chris murphy is helping lead those negotiations. let's get it done. annmarie: i think the reason we are all talking immigration's and migrants, and our poll, it is shown is becoming more of a top issue for polls. how concerned are you about president biden being able to win reelection? gov. lamont: at the end of the day, after we have exhausted all other alternatives, we go for the same course. i think that is president biden. but i think you are right. immigration is a big issue. people think it is about age. i think he gets immigration

right, congress gives people -- gives them the tools get it right, people will feel better about the border. annmarie: what about people like representative dean phillips. he is running to give people an option. should there be more options, given the fact that poll after poll americans think president biden is too old? gov. lamont: dean who? annmarie: dean phillips. i know you know who that is. gov. lamont: that is fine. i think in a primary process, i think a lot of options are good. i like a lot of different voices. at some point, you got to consolidate around who you think are the most reasonable choices who can get elected, decide who will make a difference on your behalf. lisa: not to shift gears completely, and i do want to finish on the work from home question. i know kate a lot of people working from home were able to move to connecticut come away from the city. as people go back to offices, do you think that inward migration will slow? gov. lamont: no.

i think it has changed forever. our real service as we are picking up more and more people coming in and out of new york and fairfield county. friday's are empty. tgif has a whole new meaning. thursday is now party night. lisa: you know it is friday. jonathan: except for you. [laughter] for connecticut, a lot of people say i can have a connecticut lifestyle and great schools, if i have to go to new york city, great city to visit, wouldn't wa nt to live there. jonathan: i hope kathy is not listening this morning. gov. lamont: hey, kathy. [laughter] jonathan: governor ned lamont there. here is your bloomberg brief with yahaira jacquez. yahaira: north korea fired multiple cruise missiles off its west coast in its fourth launch in some two weeks. the move came hours after kim jong-un called to step up war

preparations during a visit to a naval shipyard. kim was on hand last month to see the test of a news cruise missile that can be launched from underwater and inspected a nuclear powered submarine the state is trying to build. billionaire investor nathan pel tz formalized his plans for disney. he suggests bundling espn plus with a service such as netflix. in response, disney's board says peltz has no immediate screens and presents no strategic vision for disney. he owns around $3 billion in disney stock. carbone plans to open a restaurant in london. it lands to occupy a space in the former u.s. embassy.

and is your bloomberg brief. jonathan: thank you. amh has thoughts on carbone in london. annmarie: what a magnificent piece of real estate. that center in london, the former u.s. embassy there. -- love the location of the former embassy. it is a fantastic spot. jonathan: you ever been to carbone? annmarie: once, in miami. only because they do gluten-free pasta. jonathan: they lost their michelin star, though, right? lisa: because of the gluten-free pasta? [laughter] jonathan: you know, the italians are actually very good at addressing that need. annmarie: that is because a lot of italians have celiacs. jonathan: meta's magnificent year. >> 2023 was our year of efficiency, which focused on making meta a stronger

technology company and improving our business. jonathan: more on that inning -- more on that in a moment. this is bloomberg. ♪

jonathan: live from new york city, counting you down to payrolls. that report about 45 minutes away. s&p is on the -- equities on the s&p positive. yields unchanged. quite a move on the two-year so far, down by around 15 basis points coming into today's session. lisa: even with jay powell taking march all but off the table, the boom movement ellen zentner talked about. jonathan: the boom moment was yesterday afternoon, when meta earnings dropped. under surveillance this morning, a magnificent year. >> 2020 three was our year of

efficiency, which focused on making meta a stronger technology company and improving our business to give us the stability to deliver our ambitious long-term vision for ai and the metaverse. i think being a leaner company is helping us execute better and faster, and we will continue to carry these values forward as a permanent part of how we operate. jonathan: meta counting 22% of its -- cutting 22% of its headcount, and it is paying off. seeing a 50 billion dollars share buyback and issuing its first ever quarterly dividend. mandeep singh of bloomberg intelligence warning that topline comparisons are likely to get tougher in the second half as they will get a cyclical rebound in advertising spending and improve ad attribution. mandeep singh joins us now for more. how do you cut your staff that much and grow that much at the same? time? how impressed are you?

mandeep: that is where you know a founder-led team can always out-execute you. mark zuckerberg has shown time and again they are the most nimble product team when it comes to shipping new product, making those improvements in ad infrastructure. and we are talking about how user growth and engagement was decelerating. they are applying ai to accelerate user growth. the scale at which meta is at, 4 billion users across its family of apps, the fact they are able to accelerate user growth is telling you they have definitely got that ai part right, and that is what is helping them user and engagement growth. lisa: basically half of the globe is cooked into the meta ecosystem in one way or the other. given the fact it owns the world, it seems, in their eyeballs, how much -- they are deploying tools that

you see as highly effective. mandeep: look, one year back, we were talking about how this company was struggling, given the ad environment. there is a cyclical component, no doubt, but what meta did right was investments in building their own ad model . we know digital ads are the best businesses. the question remained about the relevance of apps and how much engagement they could sustain, given the competition, but they have shown they have applied ai the right way, and you do not need as many people to do it. and they are shipping new products and making those improvements that are needed to sustain that engagement. lisa: does it surprise you that, yes, they beat earnings and introduced dividend, but shares are up 17% after the gains we saw last year? are these moves shocking to you

in terms of how much has not yet in priced in verses this morning -- versus this morning? mandeep: there will be upward revisions for 2024 and 2025. from a stock perspective, you have to ask yourself, is this a recurring revenue business, or is it a cyclical business? the answer is the latter. with ad spending, ad spending is recovering, but we also note it is tied to recession or macro, and it is very discretionary. chinese advertisers are 10% of revenue, and they contributed to 5% of growth. if something happens or where to go wrong with the china aspect and they were to pull back from the u.s. market, that would make a big dent on meta's growth. clearly, there are those factors.

if something were to happen on the regulatory side, if they are restricted, which they are in the e.u., but it does not show up yet in their numbers, that factor is there. annmarie: we are seeing such high spending by china-backed advertisers. for meta, china was good, but for apple, china was terrible. mandeep: in the case of any e-commerce company that wants to develop a customer in the u.s., there is no better acquisition channel than meta's family of apps. meta is the platform where you acquire new customers as an e-commerce platform. they call that out yesterday. e-commerce advertisers around the board ramped up spending on meta. in the case of apple, we knew the units would be down, and they are probably losing some share to wally, but i would not be surprised if the refresh does come back, albeit at a slower

pace, because they have not launched a new phone. you know that is coming. jonathan: we have heard a lot about big tech and they have all delivered. who is doing best when it comes to ai integration? who is executing well, from your standpoint? mandeep: microsoft is definitely in the lead when it comes to integrating ai on their cloud and applying it to all their software, and it is recurring revenue. that is the key they will be able to sustain that growth, and that is high visibility. i would give credit to meta in terms of applying ai. they have their own foundational model. they have open sourced it, and it is helping them valid and ecosystem. meta has that ai part right. i hope it needs to improve their cadence, which is what meta has shown. alphabet would be the third one in terms of the ranking.

jonathan: how do you think apple that changes the perception of things right now? it feels like, for a lot of investors, they are looking at a company playing defense. there are big worries about the cloud business, or rather, the search business being decimated by something company -- something coming from another company. how do they change that? mandeep: clearly there is a risk because 90% search share comes from alphabet, and they are pitching response of the ai, because they do not want to be in a situation where something goes wrong with the large language model deployments, and then they have to pave it back completely. so they are taking a safe approach, where they want to apply large language models to queries where it is applicable but not to everything they do, because it will be disruptive to their search margins. that is where it is the right thing to do, given their position. i do not think they are behind. they seem to have caught up in terms of the large language

model technology. it is a question of how they deploy it. lisa: not to put you on the spot, but some people are talking about it is not the magnficent 7 anymore, it is the magnificent 3, magnificent 1, magnificent 6. which are going to be the growers and which will be the laggards in the next year? mandeep: the sustainable ones seem to be microsoft, amazon, alphabet. i would put tesla and meta as the ones that are vulnerable, which do not have the recurring revenue stream. to me, that is very important. that is why you see the market gap in these companies. hard to imagine how megacap names can move like this, as was the case with meta. the reason is a lack of recurring revenue. with ai, that does not change. the first three are diversified business. diversification helps when you get into a period of slow

economic growth, so i think microsoft and alphabet and amazon clearly have that diversification aspect. jonathan: thank you. mandeep singh of bloomberg intelligence. before we run away and jump into payrolls, let's sit on that stock move from meta. 17%. trillion dollar market cap yesterday at the close, so we are talking a move of about 170 billion. cut to the s&p 500, slice it up on bloomberg, and go to companies valued between $1 billion and $170 billion. verizon. you are adding verizon? you cannot overlook this. it is absolutely massive. lisa: which is the reason why michael harnack at bank of america says this is reminding him of the.com -- the dotcom

era. we have heard this for how many months, and we are still seeing this. you look at the cash flow, and it is incredible. what we heard is it is a cyclical business, and they are benefiting on the way up. jonathan: it is pretty amazing. the doubts at the end of this business around the end of 2022. talking about the year of efficiency, it is more than that. more than efficient, what we have seen in the last 12 months. lisa: they have 4 billion users across their platforms. 4 billion users. what percentage of earth is that? really, if you think about that? annmarie: daily watch time across apps increased already 5% from a year ago. people are scrolling more. jonathan: incredible execution. coming up on the program, nadia lovell, randy kroszner, mohamed

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>> we are looking for a strong payroll report. >> i think the labor market is chugging along.

it is tight. >> the labor market is slowing, weakening. >> if the economy and labor market start to weaken in a mini fully, it would accelerate the thinking at the fed. >> fleecy similar weakening in the labor market, the fed will be ready to cut come may. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: it is payrolls friday. live from new york city, good morning. for our audience worldwide, this is "bloomberg surveillance." alongside lisa abramowicz with an reordering, i am jonathan ferro. the median estimate in our survey going into payrolls. lisa: you have people with above that in terms of expectations who are more pessimistic and fuel -- and people below that who are more optimistic.

really, it will be under the hood about interpretive commentary afterwards. jonathan: we had so much of that last year, how this would decelerate. this is not where we thought we would be a year ago. 185 thousand median estimate. on employment at 3.8%. again, looking for unemployment to stay below 4%. annmarie: if it stays below 4% in this report, that would be two months exactly of unemployment under 4%. you heard what chair powell had to say. he said the best employment market in terms of this employment rate in 50 years. this is why, in the last payrolls report, janet yellen basically declared we landed. it is a soft landing. jonathan: i heard what chair powell said in august of 2022. if you talked about pain. we thought we would have to see pain to see inflation down. can't see pain. lisa: the pain happened in small

places and those were quickly erased. you pointed this out well, that we heard chair powell saying we do not need to see weakness in order for them to cut rates, that this economy can see the disinflation while also seeing some sort of ongoing strength. that is the shift. even if we get a good report, it does not mean they will not ease policy. jonathan: they do not have to push against it anymore. i think the market picked up on that. remember the cage match between mark zuckerberg and elon musk? lisa: it didn't happen. jonathan: someone wrote in and save the meta price is nearly four times the price elon musk paid for twitter. i think the cage match was won by meta. lisa: that will sting. jonathan: meta up 17% in the premarket. coming up this hour, nadia lovell from ubs, former fed governor randy kroszner, and

reaction to jobs data with mohamed el-erian. all of that and more in the next 60 minutes. stocks rising on big techs earnings lift. -- we believe the investment case on tech, including ai, remains intact, and recommend investors use any undue correction in quality ai leaders as a business opportunity. nadia lovell of ubs. let's start with this. what is not to like about this sector right now? nadia: exactly. we cannot agree with that point more. there is so much you can pick out. bars were high, and they exceeded expectations. we see that those that have ai

are better, but it is not just ai. were looking at cloud researcher spending as well. you have seen optimization is behind us. companies are seeing margin expansion, despite the fact you are seeing expansion, and what that tells us is some of the cost controls are mean tight, article earlier on headcount rationalization. when we look across in terms of the cap x outlook have gone from some of the hyperscalers, that is going to be a positive for some of those ai semi companies as well as hardware companies. we still feel good about tech paired we think this is a sector that will deliver very strong earnings growth this year. we know the mag 7 have been the one driver in s&p earnings, and they will continue that this year. --with a focus on those names

more enterprise facing. jonathan: these are not large-cap's. they are megacap spear that is what we call them now. you also like small caps. when we have all this growth in the megacap's, earnings growth -- what is there to like about small-caps right now? nadia: we saw a decent rally into the end of last year. we think there is an opportunity for small caps to catch up. the strength in the economy that is happening. we also know that is a fed in a position to cut this year, and that should be beneficial to small caps. look at the numbers yesterday, and also seeing a pickup in new orders. when we think a -- when we think of a broadening out of the performance, small-cap has sort of been left hind.

it is still about 20% below its all-time high set a couple years ago. we think there is an opportunity for small-cap to catch up here that is where we are taking our cyclical exposure. this should be beneficial for those smaller companies. lisa: there with me while i try to make this connection. -- was looking for less china exposed companies. how much are you looking for small caps to do that i'm a leveraged to the u.s. economy? nadia: absolutely. the strength of the global economy is coming from the u.s. and the u.s. consumer. we think that is a way to play that continued strength and buck the trend you are seeing overseas of weaker growth,

whether in china or europe. it is the u.s. carrying the global economy right now, and we think that will continue to be the case, and small-cap should be able to benefit from that. lisa: if you extrapolate that out, how much are you checking small-cap -- large-cap and megacap companies for avoiding those? is that something you are playing with, to move away from those companies and shift more to those who are more isolated to the domestic economy? nadia: we are quite selective in large-cap companies, even among the magnificent seven. we are quite selective around that. what we are looking for is companies that also have good self-help stories. when i talk about self-help, i am talking about companies that have restructuring opportunities , portfolio optimization, and cash use optimization, and you saw some of this among the tech

companies. a lot of them have benefited from those efficiency gains over the last year. we think this -- you can see those opportunities in other areas of the market. even some of the banks looking to streamline their business and headcount rationalization. your even seeing this play out among the industrials. remember, some of these industrial and material names also have the benefit of the potential of tailwind, if this economy continues to grind ahead and you are seeing that recovery in manufacturing. and you are seeing quite a bit of that investment in on shoring as well. i do not think it is just about tech, even though we think tech will continue to perform here there are opportunities in other areas of the market, but you have to be single stock minded and selective. jonathan: let's get to the

banks. regional banks down almost 9%. have we dealt with that issue now? nadia: yes. i do not think we have completely dealt with the issue, but we do believe what has been happening in terms of new york community bank seems to be idiosyncratic, but it is something that is worth watching, because there could be potential issues in the commercial real estate market as that wall of maturity comes over the next couple years. what is different versus what you saw last year in the regional bank is that everyone is talking about it, so that helps the market prepare better for any sort of potential risk, versus last year, i do not think people saw coming the impact of the potential out of the regional bank and the asset and liability mismatch in a higher interest rate environment. we have been talking about real

estate issues in that market the last couple years. and the large-cap banks have been building reserve, so they are better able to absorb, so we have to monitor the issues. jonathan: it would not being interview with you and i without talking -- [laughter] you knew where i was going to you became less constructive on crude. what was it that changed your mind? what is stopping crude from rallying? nadia: it is the u.s., in terms of amount of supply that the u.s. continues to produce. the concerns around the potential for oversupply in the market are not -- we think there is concern, but some of it is somewhat valid. but when we look at the

inventory data, we are seeing crude oil inventory come down and disruption as well, and even yesterday, we heard of higher compliance from the opec cuts. we think that will be extended. we are looking at modest upside at this point. we think the oil market will remain slightly undersupplied in the first half of the year, and that should help support prices. the reality is things will remain volatile because the market needs a bit more convincing, and we understand wide care that is why we lowered our targets because there is surprise to the upside. jonathan: good to catch up with you on payrolls friday. nadia lovell there on this payrolls friday. 185,000 is the estimate in our survey. let's get an update on stories elsewhere. here is your bloomberg reef with yahaira jacquez. yahaira: nvidia's ceo says countries around the world

aiming to build and run their own artificial intelligence for structure will only drive up demand for his company's products. he told bloomberg tv nations are talking about the important of investing in sovereign ai capabilities. >> it has become abundantly clear to each one of the countries that their natural resource, the data of their country, should be refined and produced intelligence of their country for their country. yahaira: tesla is recalling nearly every vehicle sold in the u.s. because some warning lights on the instrument panel are too small. regulators say they may be hard to read, increasing the risk of a crash. the move applies to nearly 2.2 million vehicles. tesla says it will be fixed with an over the air software update. the ev maker also seeing a slump in deliveries in china, down 24% , according to china's passenger

car association. harvard university is bracing for two bills in massachusetts that could change its robust endowment and legacy admissions policies are the first bill would hit harvard and other colleges with over $1 billion in assets with an annual 2.5% tax to fund state universities. the second would impose a fee on colleges that give legacy students an advantage when applying. harvard did not respond to a question asking for comment about the bills. jonathan: thank you. up next on this program, all eyes on the labor market. >> i think the fed's threshold for pain is higher than people are wanting it to be pure i think they want more cooling in the labor market and are ok with that, in fact even welcome it. jonathan: that is next. continue down to the jobs report. it is about 60 minutes away -- 16 minutes away. this is bloomberg. ♪

jonathan: equities on the s&p 500 doing ok. let's talk about the why.meta up 17% in the premarket. harley talked about amazon. that is doing ok. two different stories. you compare the success of meta to the disappointment from apple with what is happening with the iphone on the mainland, down 13% in china. lisa: even though it beat on topline earnings. just want to point out we are not talking about amazon at all. it is up 7%. we are talking about how meta is trading like a penny stock, up 17%. this is a $1.7 trillion market cap up just 7%.

jonathan: what's her name? tina. -- lisa: especially given they cut staff. it is important on payrolls friday we are talking tech companies have been able to cut staff and raise earnings dramatically. is this a tliv on what is to come? jonathan: it is what mike wilson talked about at morgan stanley. we spent the last year talking about ai and and -- and ai and ableist, not ai a adopters. lisa: potentially for investors, that is a positive thing, because it means they can invest in those companies. from an economy's point of view, there will be turbulent times. how do you look at the volatility in the data during a sea change technologically? jonathan: true. all eyes on the labor market. >> i think the fed's threshold for pain is higher than people are wanting it to be.

i think they expect more cooling on the labor market and are ok with it, in fact maybe even welcome it, to a sage the fears -- to assauge the fears of -- jonathan: a test of the fed's wait and see approach. former fed governor randy kroszner joins us now for more. governor kroszner, thanks for joining us. how much is the labor market holding up in the face of 5.5%? gov. kroszner: it is awfully resilient, more resilient than the fed or anyone had expected. dramatic, a rapid rise of interest rates. one of the things i think has helped to keep the labor markets run the economy strong is it is really in the last six months or so that real interest rates, that is the inflation-adjusted interest rate, has become

positive. even though non-interest rates went up dramatically, the inflation rate has now come down dramatically, but the interest rate is staying around 5%. jonathan: can you tell me what you think wage growth is not running away? gov. kroszner: we have seen much faster nominal wage growth, and that has persisted even as inflation has come down, so we are starting to see you wage growth, which is great for households, but her means it will be less attractive for firms to hire workers. it was great when they could hire workers with wages going about 4%. but now they're having to pay for percent more for workers, but they are only getting two or 3% more for what they are selling. lisa: how do you put into perspective, given that fact that people are marksmen so for a lot of these companies, the fact we have heard all of these layoffs announced by a slew of companies. a lot of people are saying it is normal, it is layoffs that were

put off during the pandemic. do you see it as anything other than that? gov. kroszner: i think the labor market is softening a bit. the number of job openings have come down quite significantly. it is still a very strong labor market, under 4% unemployment rate, although we will see if we will switch that. there are signs of softening, but so far, very gradual signs of softening. lisa: what is the threshold that puts march back on the table for the fed? gov. kroszner: it would have to be pretty devastating. the fed has made it clear from their statement that they want to be confident that inflation is coming down to their target. i think it was an artful move that they took out the tightening bias but did not suddenly have the expectations be they will move next time. they took up the tightening bias but said we are not ready to

move on we are confident. we will wait to see their fair amount of data we have this labor market report, the next labor market report. jonathan: ellen zentner earlier -- inflation continues to soften, they might be there. lisa: and people are trying to gain that out, but otherwise, people are taking powell at his word. i guess people are not really expecting that. but it would be a pretty high bar to cut in march. jonathan: i am sure you watched that news conference. what do you make of that? gov. kroszner: he has been trying to do that and his colleagues have been trying to do that for a while. i think he got a little bit over his skis in the previous press conference in getting people excited about a potential much move. then he and his colleagues spent the last six weeks trying to pull back from that. i think it was quite clear that they have taken out the

tightening bias, so the next move will be lower, but it will not be imminent. this is very much like when the fed pivoted at the end of 2021, beginning of 2022. it took them three meanings -- meetings. they got rid of the transitory language. in january of 2022, they said the move will come soon. here, they have gotten rid of the tightening bias. i think what they will do is, at some point in march or may, say they have confidence to move soon. lisa: it sounds like you do not think it was a mistake can we had so many people come on the show say stick to what the committee said. it seemed like he was doing that, then he said march is not on the table. you do not think it was an accident, you think he was reflecting what the committee was talking about and liberally taking that off the table? gov. kroszner: i think he on the committee members have been clear in trying to take that off

the table for the last six weeks, because i think there was a little bit of a mess up of communications in the previous press conference. as i said, unless there's something pretty disastrous now, next meeting, inflation comes down, i do not think march is on the table. but it is possible for may and certainly june. jonathan: you do think it was a bit of a mess up, then, the december meeting? gov. kroszner: in december, i think he got out a little bit over his skis, but i think they tried to pull it back, and yesterday was pretty clear it will take an awful lot for them to move in march, and the possibility of that is extremely low. jonathan: great to catch up. randy kroszner, the former fed governor. with us around the table, michael mckee. what are you looking for? michael: one thing that is not completely appreciated is we

will get revisions. we already got revisions to the unemployment rate. but we will get revisions to prior numbers to payrolls from 2019 to march of last year. that could boost the level or lower the level of jobs. plus, this is the time of year where we get the new population estimate, which we cannot really compare the household survey numbers to previous numbers. lisa: we were talking to ellen zentner, and she noted how cpi was revised so dramatically last year. why are they so messy? why are they getting it so much wronger, less correct? michael: it couple of reasons. they payroll reports are always revised because they do not get all of the responses that they send out surveys, then they can update it when they get new information. the trend can tell you something, if they are all negative.

the other is the pandemic really messed things up in terms of the seasonal adjustment factors. that is one of the things that went into the cpi revisions and may affect the payrolls revisions as well. diane swonk at kpmg things seasonal revisions will give us a -- a much bigger number because they have changed those. jonathan: mike mckee, stay close. did t.k. spike lee drink? lisa: this is what happens when i cannot work from home. [laughter] jonathan: payrolls report coming up. equity futures positive by 0.6%. from new york city, this is bloomberg. ♪ ach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach.

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25 seconds away from the jobs report, equity futures are near session highs of 0.6% positive by one full percentage point. going into the jobs market we look like this in the job market. year-to-year guilt is higher by three basis points at 423 your 10 year unchanged at 3.87. mike: the january pattern

continues with a big game in jobs, this has happened the past for january's, 216,000 was the prior month number revised from this point. i will get there in just a second. private payroll is up 317,000, a positive. here is the revision to payrolls 330,000 a big revision higher in december and this may be part of the seasonal thing we were talking about. manufacturing jobs 33,000 and unemployment stays at 3.7, that is two full years of unemployment below 4% and

average hourly earnings of .6 and pushes the year-over-year to 4.5 from 4.1 with average weekly hours falling in labor force participation at 62.5. the headline numbers are all really good and i'm going to have to say, anne-marie, the white house is going to love this. they will skip over the inflationary part. jonathan: a monster upside surprise, equities are just about positive by .25 and in the bond market, there is selling off on the front end with yields

higher in the dollar is stronger, euro weaker. 1.08. there is a big upside surprise on payrolls, wage growth coming in much stronger than anticipated. lisa: this goes against the idea that you are seeing disinflation or normalization, there is no sign at that. you have 4.5 in is a bit concerning because it doesn't get you back down to 2%. it will probably be off the table unless something happens but it is not factoring into expectation for rate cuts. why does this upside surprise not factor into a full rate cut

forecasts? jonathan: we have mohamed el-erian on standby. what do you think of this? mohamed: what an amazing job report. it's an exceptional labor market that feeds into the exceptionalism of the american economy. i think it's a headache because of the wage growth numbers and lots of people have been warning about wage growth and service inflation and that finally, for the markets. march is off the table. which also means you are more likely to get through because that the fed has signaled rather

than the higher number that the markets have been saying. lisa: are we seeing wage pressures going in the wrong direction for the fed? mohamed: what i think should happen and what i think is likely to happen. annmarie: what does it mean in terms of the u.s. election? what is the window that they have? mohamed: if the fed is influenced by politics? i tend to believe they are apolitical and will do what they think is right. it is a two-sided sword because it's good for them that the economy is doing so well and on the other hand, there is concern that as you get closer to the

election you get weakening that results from buffers. it is good news for them right now but i think they have to keep an eye to what will happen closer to november. lisa: the revisions are as stunning as well, everything be revised to the upside. what do you make of that, that people are getting it wrong? they are getting it wrong with the incredible strength under the hood? mohamed: that has been the consistent story for the last 18 months. i keep reminding people that going into 2023 the consensus was we ended up with a 3.3% growth rate in the third and

fourth quarter. impending corrections from michael mckee, it looks like a progrowth stretch. this is not something that you can easily assume away. this economy is still strong. jonathan: stay close, if you just joining us the number looks like this 353 with the estimate of 185. we were looking for unemployment declined but it stays at 3.7%. a big surprise and wage growth coming in at 0.6 month over month and that takes us year-over-year to 4.5, with the estimate at 4.1. the s&p is positive .13% and nasdaq up .44%.

off the back of stellar earnings in the russell is negative by 1%. the bond market is look at the two year, up 16 basis points at 4.3679. the 10 year at 3.9724. the euro holding onto 1.08. mike: there are big revisions in terms of jobs and payroll. most of the last year revised up by 27,000 a month. the economy was adding jobs at a faster pace during the latter half of 2003 which goes to show, we have not slowed down in the

recession call is not working. looking at the jobs break down in terms of where jobs were. construction 11,000, service providing jobs 289,000 and of those professional business services went up, it had gone down in the prior month and that is usually a harbinger of what is going to be happening in the economy. here's something i haven't been able to say in quite some time, eating and drinking places lost jobs in december. it's hard to figure out why that food and drinking places lost 2400 jobs. jonathan: you know it a former would do, a rose garden address. he would have balloons and talk

about how strong the job market was. mike: is a bad day for joe biden to do that, he is going to dover to welcome back the bodies and is hard to take a victory about. i would imagine they are very happy. jonathan: let's turn to you and get your thoughts on the federal reserve. you mentioned that maybe june would be the date in march was too soon. what guided that thought? mohamed: three things, one was the data that the economy was not going to weaken as fast as people thought. two was risk management, it was really important to realize that this fed does not want to make another mistake. the list of mistakes is already

long and miscommunication mishaps and this is a fed that recognizes it is getting back on slidable not messed that up. in the dynamic of inflation itself. this is been a disinflation led by the good sector and there is a limit, these places can keep it going. we simply have not seen enough. lisa: you are starting to see the acceleration a manufacturing. it's fast clip since 2020 and manufacturing jobs, 22,000 jobs added in the payrolls report versus 3000 expected. do you see signs the manufacturing sector is catching up to the services sector?

mohamed: that is the worry. we don't want to sacrifice growth too much. if it happens in crisis, that is a concern people have. you know my view we are living in a growing macroeconomy with insufficiently flexible supply. the one number that is a disappointment his labor force participation. we want the supply side to enable this disinflation and we didn't get hired labor force participation. lisa: was it a policy error to remove rate hikes from the table? mohamed: no, i don't.

i think the mistake is how they communicate. you were talking about the communication the december and i feel what happened on wednesday is ami's communication -- is a miscommunication. the sudden press conference that march was off the table was unhelpful and unnecessary. if you have a statement that gives you optionality you stick to that statement. he should have hugged that statement. who do you believe? who are they speaking on behalf of? did something happen in the committee?

you don't need all of this noise when the fed should be signaling that it will ultimately weaken the feds signals and that's detrimental to policymaking. jonathan: but speak to jeff rosenberg from blackrock. it's great to catch up. following the date of this friday morning, your response to this one, a blowout jobs report. >> it is at first blush. the first reaction is not the last reaction. a couple of things to consider, in terms of headline payrolls there is a lot of seasonality in this number. if you look at the spread of expectations it's a wide expectation spread and this was mentioned before, consecutive january upside surprises.

you have a lot of seasonality. i think you have to be careful about reading too much into this , a couple of things going on there. you all -- already have a mixture of jobs. the lower and paying jobs were not as large of a contributor as the higher end and the reduction in work week with eci validating the disinflation in terms of wages. not to take anything away from the initial reaction. this is a very strong report and strong labor market.

there is a pace for normalization, it's not as quick as the bond market was expecting and not as soon. jonathan: the take away from the report on wednesday, is there anything about the story the changes that? jeffrey: it reinforces it and thinking about what the market reaction would have been upside this, downside this. we are right along those expectations. strong economic data, that's good news. where it pivots is that the fed does not have to normalize policy as quick. what does the rush? similar to what mohammed said, there is not a rush if there is not an economic slowing. if you look at the economy pivot

moving away from inflation, there is still a debate as to where that settles but much more of how strong is this economy and what that tells about what the fed continues to believe in say, but if the economy stays above potential you have to question where the restriction really is and that calls into question the longer path to expectations. lisa: i'm interested in the selloff in 10 year. does this make you not like a bonds as much? jeffrey: in this cycle we have a preference for the front end of the curve. it reinforces the skepticism we

have in terms of long-term duration. a flight to quality used to mean to buy the front end. it used to be you wanted to own the back in and now you want to own the front end because that is where the interest rate declines will occur in the back and is vulnerable to an increase in term premium and that's what you're seeing here. lisa: do you think that the fed is embracing that in a subtle way and you will see that increasing? mohamed: i hope at some point it will understand that. traditional reliance on longer

duration bonds is less effective. that is a consequential statement because it raises the question of what else can play that role. it tells you how complex portfolio management has become as we normalize in the world that has interest in the supply side. lisa: is it relevant to you that the fed is going to cut rates in may or june how far ahead of an election cycle or a of economic data do we need to get? jeffrey: they want to get out in front of inflation. powell said we don't want to wait until we are already at 2%. they want to see that in the next so many months which is

what they spoke about on wednesday. they want to be validated in terms of not making the mistake on inflation and those are maintenance cuts. inflation has come down, if you don't want real interest rates to go up see maintain the policy rate. the bond market has gotten ahead of itself, they think policy is to type in the fed has to start to cut. where do you see that in the data, especially with policy that's not as restrictive so you don't need the five cuts they are pricing in. that's problematic with the valuation side because they like lower interest rate so they have to calibrate that. jonathan: let's talk about what's happening with markets right now.

meta in the premarket at 17%. what is going on with valuations? the credit spread is still pretty tight and equity markets are at all-time highs. what's going on with financial conditions? jeffrey: they are using. you have to be careful when looking at the stock market and looking at the magnificent seven. they are in a different stratosphere. they are operating off the numerator rather than denominator. earnings growth is so powerful they are perceived as secular growers entreated as defensive because of the persistence of growth and i think that is the meta-story. you have to look away from those stocks and see what's going on. you mention the russell 2000

which is a much better barometer for growth in interest rate sensitivity. you separate those two things out and for the rest of the stocks there is a denominator of fact because the numerator side and a slowing environment is empowering the stocks and valuations. it's much more about what's happening underneath. jonathan: what is your reaction? mohamed: my reaction to meta-, you don't expect a 17% pop on a company that large. that tells you about having a sensitive marketplace. financial conditions of lucinda big deal -- a great deal.

i think they will take some of this back in the next few months. lisa: how much of that is tied for interest rates higher for longer. do you think that is going to be called into question? mohamed: on a flow basis you will be very constructive on the economy and on the market but what we bring into 2024. the resilience is lower and second you have a small but consequential set of asset classes that have not adjusted sufficiently to the new interest rate reality. every once in a while we will

have a concern about commercial real estate and over and over again the question will be will you have contagion, contamination? we have to get over this issue. lisa: what is your take on that? jeffrey: he brings up important points when you look at community bank issues in is about this underlying commercial real estate uncertainty in the adjustment to higher interest rates. there is a lot of resilience when you look at commercial, consumer, the benefit of having years of zero interest rates and the action players took to secure their balance sheets and extend maturity they mitigated interest rate sensitivity but

that does not mean we have eliminated it. there is the slogging notion of where is the risk out there? when investors get all in an overbought and you have vulnerability you can have pulled back and that's what were seeing. jonathan: is june still the month for you for the federal reserve to cut? mohamed: i'm going to say yes. jonathan: we appreciate your time. and jeff rosenberg of blackrock. 353 against the estimated of 185. lisa: an average of 27,000 jobs added with hourly earnings coming in higher. a 4.5 percent gain this is not a weakening labor market.

annmarie: two straight years of unemployment 4% or lower. this is something they can win at but when you look at the pulse americans are feeling better about the economy but are still worried about price pressures and they don't trust b iden on the economy. jonathan: consumer confidence starting to turn around. 353 when 185 was the estimate. year over year at 4.5. coming up on monday we will be talking about the jobs report, ed yardeni from yardeni

research. have a wonderful weekend. catch the open. ♪

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from new york city i am and for jonathan ferro. we have been blown away by the jobs report. capped out to the open starts right now. everything you need to get started in u.s. trading. this is bloomberg's the open with jonathan ferro. manus: