>> this market is extremely profitable to the upside. >> what we will see here is a broadening out in quality growth. >> what happening -- what happens here is a broadening to areas that aren't as risky as we think. >> we think there is an opportunity for small-cap to catch up. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> live from new york city, good morning for audience worldwide. this is bloomberg surveillance, i'm jonathan ferro. your equity market on the s&p 500 totally unchanged.

on the bond market some big moves. 27 basis points higher on the two-year. deutsche bank out yesterday dropping its recession call prayed they've held out since april of 2022 going back to something like two years. lisa: it seems like a base case talking about how the fed cannot cut rates as many times as they previously thought. there is a narrative shift underway that the economy is not slowing down enough for it to become goldilocks. right now fed rates are not as restrictive as so many people expected. jonathan: when i came in this morning, goldilocks is on life support. the kind of morning we will be having. let's go through some of the calls for you. considering upside risk for rates. hsbc we see rate pricing being more prone to upside than the

downside for now. contrary to the consensus narrative the economy has not yet made a soft landing at it likely will not. lisa: this also speaks to why matt at deutsche bank has a base case for a neutral rate of 3.5 percent and possibly as high as 4%. it speaks to what neel kashkari was saying yesterday we are looking at a higher neutral rate. how restrictive is the fed funds rate when you have an economy that if it's not slowing down it could even be accelerated. jonathan: just phenomenal. lisa: given the fact headline figures were greater than expected but prices paid search the most going back to august of 2012. it's the red sea disruptions, the fact things are getting more expensive. >> it all sounds pretty bleak so forgive us. goldilocks on life support.

a bill in d.c. that's apparently dead on arrival. annmarie: it potentially is on life support as well. bill republican james lankford who authored part of this bill says he's not willing to hold its funeral just yet. what we know from behind closed doors, a punch bowl had a great report saying what mitch mcconnell has said who continues to back this bill is saying the political mood has changed. so if this drags on for much longer, potentially we could see them come around. a lot of carrying of grievances out loud in washington dc. lisa: i am so deeply frustrated by this story. it feels like a game of political checkers and it's not the real issues that have to get dealt with witches international involvement of the united states and what can happen with border patrol. these are the issues we need to have conversation with. this is who puts us in a better position. >> this is why people hate

washington dc and politicians. the difference between good politics and policy. annmarie: i wouldn't say. going back to what terry haines said yesterday a 60% chance it gets done. we potentially weeks and months go by there could be something to go around. this is how washington works, no deal until there is a deal. >> let's turn to the price action on the s&p 500 totally unchanged. what a move we've seen in the previous two days. the two-year at 446. the 10-year at 4.16. lisa: what i find fascinating is it's not just the two and fed expectations it's a long-term rate for the 10 year. the biggest increase in yields for the tenure going back to 2022. that i think is really

compelling for asset classes. jonathan: 1.0730 is where the euro is spread wall street pulling back calls, john lever of eurasia group. the senate on the verge of collapse and jeannie coronado as the fed continues to push back its first rate cut. we begin with our top story, a series of upside surprises on wall street. larry adam of raymond james expects the market to continue. saying we are 1.3 years into this bond market versus the average bull market of 5.5. we still see upside longer-term. larry joins us now for more. let's get straight into the data. jobs data blowout report on friday. asset services looking tremendous. how much weight are you putting on that data? >> it's important data we continue to get. we are still skeptical about some of those jobs numbers.

it doesn't comply with what america just corporate america is talking about. you're seeing a lot of layoffs taking place. i would say with those strong numbers if they continue to come it does narrow that path of us thinking we will go into a recession because historically to get a recession you need to lose about one million jobs. if you see that strong growth you probably won't see that loss in jobs this year and you could get that soft landing we've been looking for. lisa: there's been this feeling the economy is strong, when do you start reconsidering what restrictive means. what the neutral rate is. how does that factor into your thesis? larry: good news is always good news. we've base case for the equity market will go. if the fed were to avert a recession, there's a lot of upside risk to the forecast. good news is good news.

if we were hit a recession that probably takes the earnings forecast higher and takes the price of the equity market higher. that's always a good thing when you see this good news longer-term. >> a lot of analysts parsing through why the analyst -- why this is different from other regions. our people pointing to stimulus and the fact that it's still coming. how much is that tied to u.s. industrial policy and the fact that will be a boatload more of money flooding into the sector. larry: we believe in that industrial renaissance that's taken place. if you look at the money set aside whether it's the chips act, the american recovery act, there still tens of billions of dollars sitting on the sidelines to bring that manufacturing to the u.s. and that's the reason why we believe industrials would do well for the foreseeable future. >> what if this leads to a persistent repricing and interest rates and repricing interest rates higher.

can you explore that scenario with us. if that happens what areas right now are most vulnerable? larry: if interest rates move higher that will waive on the equity markets. our forecast interest rates go lower because we see a soft batch in the middle of the part of the year. one area where a lot of people think higher interest rates are going as far as the mega tech -- make cap tech stocks. we've been talking about that from the beginning that these for the most part have been insulated from the higher interest rates. that tends to be better growth and credit growth drives those sectors of the market. where i'm worried interest rates go higher is interest-rate sensitive sectors. your consumer staples, those will be more negatively impacted if you see those higher rates. >> when it comes to financials, the banks. >> i think they're in good shape. it's always interesting when you

see these headlines about the possibility of a bank going under. keep in mind regional banks are 1% of the s&p 500. it's a very small portion of it. if you look at within the s&p 500 it will be a big cap bank stocks. it will be insurance companies. for the most part they continue to do well as we've come through earnings season. they are talking about an uptick in capital market activity this year. if you look at what happened yesterday in the survey they are talking about more banks getting lending out there looking for more demand. i think there's an ability in earnings for the big banks going forward is still pretty solid. >> we were talking about how the senior loan officer, i was reading it and thinking this isn't interesting at all. this is giving us no information. it speaks to exactly what larry is talking about. you said you're expecting a soft

patch prayed i'm not seeing that. does that make you more bullish or bearish. >> it makes us more optimistic because what that will do is increase earnings and obviously lift our target on the s&p 500. historically when these recessions come about they come about quickly. you look at the last 12 recessions, the corner before this recession occurs gdp growth is around 2.6%. the next quarter when you get a recession, growth falls very quickly. it can happen very quickly. >> this is really something people used to say a lot is higher rates will make stocks reprice lower. what is the rate at which you get uncomfortable with stock valuations. is there a yield that gives you a little thanks. >> i think it's two things. i think it's the level and the time. , we were on the show once before and we did 5% with the

10-year treasury yield. at that level that really starts to slow down the economy quite a bit and we were seeing that because not only was it impacting the housing market but you are seeing a lot of companies not go into the market to get additional funding. as that's fallen pretty quickly you see a resurgence in corporate activity which is going to help support this economy. i think if you get up to that 5% level i think that that does start to crimp the economy. jonathan: i remember last spring the only thing that mattered were payrolls, not cpi. the senior loan officer opinion survey, we haven't talked about it at all. i can give you the lead paragraph in case you missed it. u.s. banks reported stricter credit standings in the fourth quarter although the proportion of those standards shrank. it's getting tighter, just not

as tight as before. >> they are kind of slowing the pace of how they and basically it's not that bad. people are starting to extend that credit. if you are looking for this it's not it. >> it didn't lead to this lending standards that would tip over. we go back to the deutsche bank call. this was their outlook. rates of rise between 5% and 6% on fed funds. great call. significant recession by late 2023. that was ultimately the view we see a little bit of pain in the labor market getting inflation down towards target. spring of last year the banking stressed lending standards. here we are against our 2024. they will cut interest rates in march prayed grade data to kick off the year. to your point you can just feel the conversation slightly turning. i think you need another month or two months of the same data so far to really change people's

thoughts on this. you can see the direction it's going in. lisa: people are still saying it's early but there is this possibility we reverse this and get a repeat where the economy is better than expected. and everyone chugs along with inventory. jonathan: no lending last year in february. lisa: we are in february so no landing. hovering. jonathan: everything seems to repeat in this market. what you call it, narrative roulette? lisa: that was very well said. jonathan: narrative table tennis. let's get you an update on stories this morning. dani: southern california experiences heavy rain and flooding thanks to a powerful pacific storm reid the national weather service says rain is expected to taper off today all the flooding and mudslides remain a risk as the storm moves east. the so-called atmospheric rain dumping 10 inches of rain

causing $11 billion of damage. shares of palantir are soaring after the company gained a higher-than-expected profit outlook driven by ai demand. the ceo told bloomberg they are rebuilding to match the search. they also marked the first year ever being profitable with net income at $210 million. users of apple's vision pro are discovering the pain of losing their passcode. the company telling users they will have to bring the device back into the store or mail it if the device is disabled after entering passcode incorrectly too many times. it is apple's major hardware category in a must a decade. jonathan: have you seen a vision pro in the wild? dani: i went to the apple store and said can i demo this thing

and they said the waitlist is three days long. annmarie: three days to try a $3500 product? when you add in potentially more storage space, the kit to carry around, that's what most average americans make it a month. jonathan: i've seen the video of people walking around in the city. that's not the future i want prayed -- i want. lisa: it's the future my oldest son was talking about last night. saying you do not need an ipad cora dust, you can superimpose -- you do not need an ipad. you can superimpose your eyes. jonathan: now kids want a $3500 vision pro. up next on the program, president biden making a play to congress. >> pay attention to what the

senate is doing. it gives us control and still meets the needs of the people legally coming across. jonathan: you are watching bloomberg surveillance. ♪ fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics.

fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. 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! you've got more options than you know. book now.

jonathan: beginning the week by pulling back from all-time highs on the s&p 500. yields unchanged, anything but unchanged over the previous next sessions. right now this morning the 10 year 4.1559. president biden making a plea to congress. >> pay attention to what the senate is doing.

you got a bipartisan deals and we see that this week. the bipartisan bill gives us control and still meets the needs of the people who illegally come across. shutting down the ones not coming through the points of entry. jonathan: gop support souring on a deal to impose new u.s. border restrictions and the locke ukraine aid. the planned vote is too soon with top gop negotiator james lankford singh the legislation is a work in progress. director for the united states eurasia group and former policy advisor to mitch mcconnell joins us now. how narrow is the path to get this bill through congress? >> right now i don't think there is one. this bill has been rejected outright by the house of representatives and that's the key question. a lot of senators would be willing to vote for the deal if they thought it could become

law. but the house is telling them there's no chance this becomes law because they simply aren't ready to legislate around the border. that's a really narrow path even if the senate did manage to pass something this week which is looking less and less likely. instead arrival in the house which means there's no path forward. >> senator james lankford said he's not prepared to hold a funeral yet. we've seen in washington take -- things take a really long time. do you think it's some point they would have to coalesce around to deal. there is still ukraine aid that needs to get done. >> there's a lot of interesting ukraine aid among republicans and democrats in the house and senate and if you put a plane ukraine bill on the floor it would certainly pass, but the issue is how do you get that bill to the floor. there are still other vehicles out there. you have to fund the government by march 8, of this border trade

for ukraine deal was originally president biden's idea that was embraced per publican leadership but the border deal was just a bad trade-off because republicans aren't interested in doing the border. ukraine has other paths, it's not quite dead yet. the border continues to be a bridge too far for u.s. politicians prayed annmarie: biden link them because of pressure from republicans. at some point our voters going to blame republicans if this deal does not get done. >> unfortunately for biden the incumbent tends to get blamed for things happening in the world and the situation on the border is something biden is carrying now. in many ways republicans rejecting this bill which actually looks like a reasonable compromise that's to the right of where democrats would have been five years ago helps biden pin the blame on him, it's a little bit of inside baseball for biden to make. he's the incumbent president and

takes responsible for what's going on. lisa: i'm getting increasingly frustrated about this negotiation because it feels like political checkers and we are not talking about the actual issues and what needs to get done and it doesn't seem like there's an honest meeting of the minds. you've worked for many different members of congress, how different is it today then say even five or 10 years ago? >> the difference may 15 years ago is there were bad faith actors trying to compromise 15 years ago, there just weren't that many of them and they did not have the megaphone today. now those bad faith actors have grown up to just attack anything that moves and that's their only instinct is to say no and they benefit by taking on the establishment as they call it an they can fund raise off of it, they can be on social media off of it and they rejected this bill even before they knew what was in it.

it's a difficult to get anything done. it's frustrating to watch because it means we will have this continued crises on the southern border. just finger pointing to the other side. lisa: a question of ukraine aid passing. 35% chance of the tax bill passing alongside it. can you extrapolate out if you are currently senior economic advisor to mitch mcconnell what would you say is the potential consequence of not having action ? >> this tax bill is a moscow -- model stimulus for next year, it's a sizable tax cut for corporations. ironically the tax cut for corporations is one that is a tax increase republicans put in place to fund the reduction of a corporate tax rate in 2017 so they are trying to undo piece of their own bill. that bill probably could go away and there would be some unhappy corporate lobbyists but the ukraine aid is a big deal and

ukraine is fighting a fight against an aggressive neighbor that looks like they are poised to make some gains this year if they can get this money. if washington can continue to get support for its allies this is a signal people like china, north korea, iran and russia will take and interpret as washington's weakness. it will show how the dysfunction is undermining america's global leadership goal. i'm sure those memos of congers agree with me, it's just this morass they are stuck in where they can get anything done. jonathan: i'm pleased to join us because i know you can answer this question. in this bill some conservators are pointing to one specific passage which seems to imply according to them you would allow 5000 border crossings every single day before shutting down the border. i know it's not that straightforward. can you tell us what actually says and means? >> it's a pretty convoluted

provision. if senator mcconnell or langford were drafting the bill on their own this is not what it would look like. once illegal crossings pass 5000 a day they can shut down the border which means no more asylum-seekers or barely any asylum-seekers and empowers them to ratchet up enforcement on the southern border. this is not letting in 5000 people a day it is making enforcement much stricter ace on the current conditions on the border and shutting down the asylum paths which are one major way that people are crossing into the united states right now. i would send a signal to other migrants trying to get to the u.s. border that they better stop coming. i agree with president biden it gives them some power and also empowers a future president trump if he wins office. this is clearly a win for people horse -- concerned about the border. jonathan: i can sense the

frustration across the desk on this issue. lisa: the issue is you can debate the insides of this bill, whether it is valor not, whether it is effective or not, would love to have that debate. don't have a debate of who helps and what it means in terms of popularity contests that's good happen at some point. jonathan: policy versus politics. in an election year. the outlook for european banks as ubs looks to move beyond its takeover of credit suisse. equity futures just a touch negative on the s&p. from new york city, this is bloomberg. ♪

jonathan: is good news truly good news? we will try to figure this out on the equity market the s&p 500 slightly negative on futures. positive on the nasdaq by .16%. yesterday the services read look tremendous. delivering the biggest gain in about a year. future demand rising to a three-month high looking decent as well. prices paid but climbed. two-year, 10 year, 10 year yields higher. two-year yields higher. now a little bit lower by a single basis point or two. lisa: people thinking how much can the fed cut rates at a time

when you are seeing signs there's a real acceleration of the economy. key question keeps being when does higher yields higher for longer bite the economy. jonathan: are we sufficiently restrictive based on the data yesterday. lisa: other people are saying maybe we have to reassess. jonathan: dollar index yesterday climbing to the strongest levels since mid-november. the euro breaking down here. 1.0733. let's begin with our top stories. a senate deal to impose u.s. border restrictions and aid for ukraine is on the brink of collapse. republican senator say wednesday vote would be too soon. it would crackdown on illegal border crossings and speed up deportations of migrants. gop presidential front-runner donald trump rejecting the bill

and leadership in the house calling it dead on arrival. for those of you at home who think maybe financial journalists, take a listen to politico this morning. the subject of the morning note, everything is debt apparently. annmarie: the republican author of the bill said he's not running to hold -- just yet. this is the politics of this builder got tricky to sign up for a motion of cloture on it tomorrow. president trump says this bill is a great bill to the democrat and a death wish to their publican party. immigration has become a bigger issue heading into november. the economy is better according to our polling. people are ranking immigration is more of a priority. when it comes to a trust deficit when voters ask about trump or biden they see trump doing better when it comes to immigration at the southern border. jonathan: the first couple lines of that coming up in conversations down in washington

d c. the number 5000. this bill only gives shutdown authority after 5000 encounters a day. can you build that out a little bit. annmarie: senator kyrsten sinema is very frustrated, she's an independent who worked on the bill. she said the border automatically closes when migrant encounters reach 5000, it does not mean 5000 migrants are permitted to enter every day. it's not legalizing that it's making it an automatic mark. the consensus in washington is no, i would say there is a chance down the road there is a yes. jonathan: let's turn to washing -- to china. the equity market has been all over the place. the chinese government will -- president xi jinping expected to meet with regulators as soon as today with $7 trillion being wiped out in equities since

2021. the news lifting china's benchmarking index to this best day since 2022. foreign inflows surging today, the most this year. we've seen plenty of reports saying president xi jinping is about to do something. with little detail of what he will do. lisa: xi jinping is getting advice from advisors. we've heard this many times before, they can buy stock out -- stocks outright. ultimately they are just basically putting band-aids unless they come up with a cohesive plan for how they will counter the lack of enthusiasm on spending, the lack of enthusiasm and credit demand and frankly just policy of consistency. annmarie: whose briefing who? is xi jinping briefing regulators or are they briefing him? jonathan: i think he does the briefing. this is what we need to do.

do your point on the new year i think this is important. they do not want citizens going home being with families talking about how bad this equity market is. they want to fix it before the weekend. lisa: what does he instruct them? haul them into court if they search or sell things? jonathan: is that not called the national team? lisa: it's got to be something good. the key is it just is not stock. you continue see the losses. how much do people keep buying the story if it does not have lasting power? jonathan: a bit of clarity on what happened last week. growing pressure from a top u.s. regulator. for the new york community bank to slash its dividend and hoard cash. this senior executives held behind-the-scenes conversations with the office of the comptroller of the currency ahead of last week's drastic's move. the decision to build reserves

was part of an expected transition to tougher requirements after taking on assets from signature bank just last year. lisa: they crossed the threshold which made them susceptible. jay powell talked about how their working on a number of things. i wonder what other conversations are being had behind-the-scenes. people point to these because they're inching up towards that $100 billion threshold. how many are there? that's a key question of the time people were speaking about this. jonathan: the ultimate criticism wasn't about the regulation it was about oversight, the enforcement of physics thing -- of existing. is this different from what we experienced a year ago? lisa: you have to wonder given the nod to this how much more is going on. is it sufficient to remove what's concerned about a credit

constraint in the market. jonathan: let's turn to europe. ubs shares falling after missing third quarter estimates. and resume share buybacks it with what the ceo is calling a pivotal year. >> i think one thing is to be willing and the next couple of years to sacrifice a leading bit of topline growth in order to improve our financial resources. jonathan: joining us to discuss, let's get straight into it. what are the goals for 2024 and beyond? >> i guess the biggest goal that stood out to me is they are aiming for an 18% return on equity which is very bold for a european bank even for ubs. investing efforts in the very important core unit of wealth

management. these are two goals that are very ambitious. i would say they are not out of the ordinary. they give us a clear path of what they will be thinking at this moment and how they want to go with this new entity. the other big goal was on cost saving the bump this up again. showing us as well they are on track with the merger and trying to lift those synergies at the core of the whole idea to do it and to make that whole merger work. i would say these results are pretty good. there are probably a few things that are worried about. today was very reassuring result. jonathan: there was some concern some monsters were hiding on the balance sheet at credit suisse. jp: we don't know yet. ubs tells us they are very sure everything they've outsourced speaking to the non-core legacy unit that they are not expecting

big credit. today's results there was not much to be worried about. could there be some trapdoors down the road? that's always possible. if you look at what was said during the call they have 6000 different boxes to make the merger work. i'm pretty sure one of those is credit quality and asset quality. they still have to go through a lot of stuff and consideration of what the market is going to do. overall and pretty sure if there's anything major but would be a concern to the market they would've told us by now. lisa: the mundane concerns of how many wealth management clients want to diversify between two firms and might move away from ubs who previously were with credit suisse because they want the diversification. do we have any sense of what's going on with that? jp: that is a big issue. if you look at the numbers you can take the target of 5

trillion invested assets and if you go to credit you can calculate the growth rate they are assuming for this is basically interest and dividends from those invested assets. really calculating a lot of organic growth so to speak. the bank said we still have to consider we have people leaving the bank because they don't want to bank with ubs alone or for advisory reasons or we don't want to is a client anymore because they've been vocal about optimizing the business and not taking every client on board. look at the holistic line relationship and want to have a full idea of not just a loan for example or just doing brokerage for the client. there is still the potential they are losing some of those outflows. some people can argue may those targets are a little bit vague

so to speak and is not clear the path to the target. i guess ubs is doing the best they cannot this point. there's a lot of moving parts but to me very important that was actually the failure, ubs is very good at this point in what is said connecting the dots. they are giving us the dots telling us the story how we want to achieve what they're putting out his targets. that's more important to investors out there at least long-term investors because they want to understand how management thinks, what is at the core and what is not. i think they are doing a good job at this. lisa: zooming out there is the question whether ubs is the model for what's to come for major european banks or is it just benefiting from the boom we are seeing with others that are actually delivering results

impressing some investors. jonathan: gaetz -- jp: it's hard to use that as a blueprint. they've been very similar in terms of the business and focus with the wealth management at the core so that makes stuff easier. they don't have a big impact to cross-border merger. that makes it very hard to say this is going to work for all the banks. it is reassuring for the sector as a whole that you can make a big merger work but there still a problem of big fragmentation in europe, different standards when it comes to capital and how you can move capital between equities and entities across borders. that's an issue that needs to be solved before you can talk cross-border mergers. that is still very far down the road. jonathan: don't get people excited jp. this is the latest this morning

from the wall street journal. here it is, jp morgan planning to build 500 more branches in the next three years. executives according to the wall street journal are targeting 20% share of u.s. deposits. a 20% share of u.s. deposits. lisa: in fairness, where else do they have to go? if they want to grow they just have to dominate that much more. it's jp morgan's game everyone else is just playing it. jonathan: the share of deposit for 13% which is already pretty staggering number. and only going higher. but schedule an update this morning. dani: the u.s. secretary of state is on his fifth visit to the middle east since hamas's attack on israel. negotiators in egypt and qatar

are proposing a deal with hamas to pause fighting and allow for the release of the meaning israeli hostages. israel intern will release palestinian prisoners. they are to make stops in the west bank. nikki haley has requested secret service protection after receiving threats against her. she confirmed the threats and interview with nbc but did not disclose further detail. haley's qualification will be determined by the secretary of homeland security after consultation with the congressional committee. king charles is receiving treatment for an unspecified form of cancer. buckingham palace is ruled out prostate cancer but is not specifying further detail. the palace adds king charles will continue state business and official paperwork, remaining positive about his treatment and looks forward to returning to full public duty as soon as possible. jonathan: appreciate the update. the data-dependent fed.

>> if we just keep getting more data like we have gotten we are well beyond the path to normalization. >> that's coming up next life from new york city, this is bloomberg. ♪

the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com 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! you've got more options than you know. book now. jonathan: live from new york city, equities look like this on the s&p 500. equity futures negative by 0.1%. yields going absolutely nowhere. some stability after the chaos. the last couple of days. lisa: why old. jonathan: double-digit -- wild. jonathan: payrolls blowout report friday to end of the week.

pretty tremendous. lisa: there was a very clear shift in mood. it wasn't this uncertain what's going on, this was all of a sudden trying to reassess the path of inflation coming down slowly and if the fed cannot cut rates quite as much is possible it's a reset. people are saying how much further does this have to go. jonathan: 34 billion dollars of three-year notes. 42 billion of 10-year note's tomorrow. later in the week we will get $25 billion of 30 year bonds. lisa: i think it's a -- it is important. basically we are talking about supply issues and the -- they don't care when we go back to something familiar into this low-inflation narrative. it's a real good narrative test, not necessarily sharing the agenda for deficits, it sets the

tone. jonathan: you get the list, it is bramo's favorite on the terminal. >> it feels like the economy has been quite strong on the growth front you have big jobs numbers, gdp numbers better than expected. but at the same time we that inflation better than expected. if we just keep getting more data like we've gotten, we are well beyond the path to normalization. jonathan: the chicago fed president sitting down with michael mckee echoing comments from chairman powell. looking for more data. all set to speak later on today. lisa: there is a subtle shift, austin tends to go on more the supply side.

saying it's possible during the post-pandemic recovery period, basically we are looking at something that substantially above neutral. jonathan: where does that leave emerging markets. as if it's not a struggle already for emerging markets. getting tremendous data in america. >> we have to keep talking about china, it is un-investable. president xi jinping visited the pboc. in chinese equities. alibaba has lost 75% of their market value since 2020. jonathan: that's amazing. >> probably the cheapest stock you will find in chinese -- not investable certainly but tradable potentially. lisa: which might leave people

scratching their heads, are you saying it doesn't matter what xi jinping does with respect to truly providing this market, just the meeting is a tradable event. damian: what you're asking is what the cross protection clauses being triggered by finance vehicles. lisa: 100%. damian: which is a pretty big deal. they have never defaulted on their public debt -- you're asking about the collateral they have to additionally provide bondholders to keep them comfortable to fund everything that's going on locally. i think seriously what i'm looking at this week in addition to china inflation data is the export data in latin america. juergen is see it first in the exporters. i'll be watching exports out of brazil just to have a sense of

what this is like. we won't get a sense of the chinese domestic market until mid-march. we might get some economic data but we are not to have any color as to what mark -- emerging markets will do. annmarie: we were asking who was briefing who. how important is new -- lunar new year weighing on officials? damian: they need to get sentiment fixed through the next week or two in order for people to spend and retail sales to pick up. i think it is critical the messaging right now. what is present xi jinping discussing. will it be more regulations on the short side braided will or be real stimulus in the right places. they haven't been successful yet. it's sort of a precursor it took them a long time to right the ship and even when equities did peak in 2020 it was far from the

peak of 2015. i'm terribly not optimistic but -- jonathan: can you tell us why they've been reluctant to do that. very different approach through the pandemic, why have they been so reluctant? damian: the greatest 15 year build in leverage and debt in world history preceded what we've just witnessed. prison xi jinping is trying to do the right thing but it's become so very big. you can just think you will put on the brakes and things are knocking a break. it's the same thing with the pandemic. we never really saw that. if you look at energy demand, oil demand. china is going to be a third of new oil demand this year. they are redoing their refining industry, margins are improving. there's a lot of reasons to be bold about what's going on in

china and how it spills out. as it relates to china. jonathan: if this was the bear's dream, the balance sheet recession call made years and years ago on china do you see elements of that materializing? damian: it never did materialize to the extent we thought it would now look, the vigilantes are now back so people are looking at the fiscal deficit and reserves to gdp in the u.s.. there will be a heightened focus on value as opposed to carrie, awaits compressed globally. it means is not to be as much money, people will look for value and that's where the fundamentals kick in. lisa: i think about how they deal with the china question. and there's data coming out tomorrow that's expected to show the u.s. trade deficit with

china hit its lowest level in at least 13 years led by a drop in imports. if you look as a share of gdp those are levels last seen since the early 2000's. how much of this is a taste of what's to come. damian: is that indicative of demand from the u.s. or is that supply out of china or maybe logistics. lisa: you're supposed to answer the question. damian: i don't have the answer. jonathan: as you know we look at places like mexico, vietnam, of those chinese exports are making one stop there, can you really get a clean read on the relationship based on that? damian: was the most illiquid way to pay china? . if you look at on a carrie and value basis, it's one of the lowest yields among market royalties. i think it's rallied a bit. if you look at it on a value

basis, it's pretty expensive still. those are two strikes against the china yuan as an investment case, currency speculator or risk manager. from that perspective it will be a tough slog for china investors. jonathan: asking his own questions and answering them. coming up in the next hour on bloomberg tv. chief market strategist bnp paribas, a global liquidity market cio. and george ferguson of bloomberg intelligence on boeing. the second hour of bloomberg surveillance is just around the corner. negative by 0.1 percent. live from new york, this is bloomberg. ♪

j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app.

>> i feel like the fed is locked and loaded the cut rates if needed. >> the fed has signaled that they are done raising interest rates, maybe at some point lowering interest rates. >> the data is not going to turn in a meaningful way before the june meeting. >> is difficult to get consensus on starting cuts soon when you haven't seen the full scale of data yet. >> this is a fed that does not want to make another mistake. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. >> good morning, good morning. this is bloomberg surveillance. i'm jonathan ferro. the s&p 500 negative by 0.1%. bramo, a series of upside surprises upending calls on wall street. lisa: she said if she was with the nonfarm payrolls report that are hairy and raise questions about the validity, but you have been wrong if you discounted numbers that looked too strong because they didn't feel right. that has been a consistent theme over the past 12 to 18 months. frankly, it is being confirmed through the ism services data. jonathan: the headline number jumped in january delivering the biggest gain in a year. a proxy for a future demand rose to a three-month high. we had manufacturing last week

inching closer to expansion. that has been in a slump or something like two years. prices paid for materials jumped the most since 2012. higher shipping costs, increasing commodities prices. across the board everything is picking up again. lisa: where is the slow down happening? it isn't happening in manufacturing. we are seeing things turn up a little bit. do we get a landing? it raises the question, with our goldilocks is goldilocks having issues? jonathan: the landing story, is it too early? you said goldilocks is on life support. lisa: it means they will probably have to hold rates, if it's true, for hire for longer and they will have to hold back. suddenly we start talking about the potential for it to make sense for the fed to not cut rates until after the election later this year. jonathan: the economic data comes into start the year looking great. a captive audience on sunday evening may be 120 million

americans in front of television screens. you get the offer of doing a pre-super bowl interview and you can talk about this good stuff. and then you say no and your comps director says, we don't know who will be paying attention. they might be getting the chili ready and putting the beer in the box. that is the words of the biden campaign. lisa: it feels like this administration is not taking advantage of the 150 million eyeballs to tell a good story of the moment, two years of unemployment under 4%. we see the president talking about the economy to specific groups. he was in nevada ahead of the democratic primary. you are going to love this. when he talked about inflation coming down he talked about the best economy in the world and more work to do. he said that high prices were partly the work of "a little bit of corporate greed."

it is at some of the issues you're talking about when it comes to shipping costs. the administration is going to hammer that they think it is corporation's problem. jonathan: you have to you communicate that the economy is as good as you think it is when a lot of the polling doesn't agree with you. and two is immigration. there is a bill working through congress and a lot of people think that it's dead on arrival. we have an opportunity to try to communicate the substance of the bill and why you think that it will help you do a job in a way that you can't right now. at the moment it feels like republicans and the conservative message has hijacked the bill and spun in a way that makes it you like is not going to address the underlying problems at the southern border. annmarie: which is why you see the administration having to come out and talk about light will work. i then says it would give them the authority to shut down the border. there is one issue around the 5000 migrants coming across the border that many conservatives are saying that that almost makes it legal for 5000 migrants to come across the border. kyrsten sinema has had a lot of issues with this. she says it is being manipulated. she says if there are 5000

encounters automatically a border is shut giving the president some authority similar to title 42 during the pandemic. lisa: the last hour expressed a lot of frustration about this and i won't rehash that, but despite some of the inaction and paralysis we talk about in washington they did pass a lot of stimulus. you start to wonder how much that is underpinning a lot of this narrative that we are getting back. to bring it full circle, because this is what people talk about when i speak with them, that there is so much money that is been pumped into the economy. annmarie: heart of the structure. the inflation reduction act. and then chips. $166 billion already for chips with the chips and science act and a lot of that isn't even in the field yet. so, there is a lot of pent-up demand from the money that will potentially be coming out of washington. it isn't all out yet, but potentially we will see some of it. jonathan: i can sense the frustration even when you're trying to hold it back. lisa: i'm trying to be good.

i thought that i was really diplomatic. annmarie: trying to get those and then something bipartisan when it comes to immigration, something that has been debated in washington for decades. jonathan: here is the broader price action on the s&p 500 with equity future slightly negative by 0.06% in the bond market yields are unchanged, 4.15 20. foreign-exchange, that currency negative by 0.7%. coming up, bnp paribas on resetting market expectations. the front-end of the yield curve. and george ferguson on boeing's latest challenges. we begin with our top story, recession calls in reverse as the u.s. economy drives forward. markets are finally waking up to the inflation risk after ignoring it for months. it is clear that the goldilocks narrative of accelerating growth and decelerating inflation was a

fairytale. dan morrison joins us for more. let's get into why the goldilocks narrative was a fairytale. what are you seeing? what is it about the economic mix of the moment? daniel: the goldilocks tory made sense prior to the pandemic but the distinction that we try to make between goldilocks and south landing is that we have decelerating growth. at the same time we have decelerating inflation. that's not such a great environment. it is obviously better than a recession but it is still slowing growth. at the beginning of the year we had the idea that you could have three plus percent gdp growth at the same time that you have falling inflation. the idea that you can have stable or improving economic growth about inflation continuing to decelerate. we thought that that was never credible and after the payroll data on friday and sense i think that it is that idea. lisa: this is a compelling idea to me and i was joking that

goldilocks is on life-support and you pointed out that it was fictional to begin with. what has to give? is it the soft landing or the inflation aspect of that it keeps coming down in tandem with ongoing strength from the economy? daniel: it ultimately seems that growth is going to have to slow even if the economy really refuses to do so. given that we believe that interest rates are at a restrictive level, and we can debate all day if you would like to, but they will eventually slow economic growth. we appreciate the reason that that hasn't happened yet is because of the fiscal stimulus that has been put into the economy. it is the battle between monetary policy on one hand and fiscal policy on the other. but rates high enough for long enough and u.s. growth rates will slow. it isn't just that u.s. growth needs to slow, it needs to slow to below trend growth rate meaning that you need to be somewhere below 1.75% in order to get inflation back to target. we are a long way from that. lisa: walk us through how this

informs your investment. you are not exactly bearish. your notes sound like you're still constructive, but maybe not as constructive or you think that things will slow later. how do you see this changing your view? daniel: i think it is the timing that we are worried about. we appreciate that monetary policy works with a lag and clearly the fed won't be cutting rates anytime soon. the previous hikes and current levels of interest rates will continue to slow the economy. are we going to see a sudden deceleration at some point later in the year? we think that that is ultimately what will be reflected in market prices. so far what you see in equities is a very sustained relatively high level of growth. we don't think that that will last. when you see that deceleration you will have to see some weakness in equity prices. jonathan: if you strip out the major tech players, is that really what we see in equities? daniel: i think so.

if you try to take the russell 1000 value index as a proxy for the nontext parts of the s&p it still had a decent year last year and you're still looking for a percent to 9% earnings growth this year. -- 8% to 9% earnings growth this year. even their there is justified optimism, is just a question of if the optimism at this level is supported. jonathan: talking about the repricing of interest rates higher and the parts of the equity market that might be vulnerable. let's talk about the financials. is that pressure on the financials all over again? i wonder if the events of last week were truly a one-off or if you expect to see more of that in the weeks ahead? daniel: in general, if we look at the trade-off with the relative performance of growth versus value, you are right. on the one hand, if interest rates go up we know the sensitivity evaluations for growth stocks. you are right, it will certainly affect what we see in terms of financials and energy, which is

another key part of the value index. it will be that dynamic on one hand driving economic growth, but on the other hand discount rates. the interest rates will assert whether or not real growth versus dynamic continues into this year. lisa: what is the threshold for benchmark rates at which point it really challenges a host of valuations in the s&p and the russell 1000 and 2000? daniel: if you really thought that policy rates needed to go higher, you would be worried about if there will be a tipping point in terms of equity markets. for us, it isn't that rates need to go higher, it is that you won't get 150 basis points in cuts out of the fed this year the way that the market thought at one point. powell seemed insistent that 75 seemed like a reasonable number. if you are worried about the outlook later in the year come you don't want to paint to bearish of the picture. last year to the end of this

year should be in positive territory, but it is now trying to calibrate what that move should be. jonathan: daniel morris at bnp paribas asset management. let's go back a month or so. it was talked about already this year and i think it's worth going over. last year, constructive on risk. sticking with it through the banking stress of last spring and even as the federal reserve continues to increase interest rates. 2024, he changes course and he writes, the biggest risk is not from a sudden deterioration in earnings activity but a repricing of rates. i know it is not even the last couple of days, but we have had a repricing of interest rates higher off of the bank of january data. how much weight do you put on the january economic data? we have been talking about the spread between services and manufacturing. how with the spread close? would services come down to manufacturing or manufacturing come up to services? this is starting to happen.

manufacturing is coming up to services. lisa: even before some of the fiscal which will fuel more growth in certain areas. it raises the question of whether rates are truly restrictive -- we are not talking about higher in terms of policy rates. this is different. we are talking about rates truly higher than longer taking jay powell at his word to curtail some of the momentum. to your point of do we take this data on face value? that is why people are looking at crp revisions on friday. how much will we get a gut check given some of the anecdotal data doesn't confirm what the headline numbers say? jonathan: it is worth repeating this is an observation where we are not a judgment of where we are going. you ultimately get another month that a february data looks like january you get a shift in terms of the probability around a range of outcomes and we move away from the soft landing and go back to what we were talking about 12 months ago. what landing?

lisa: no landing will lead to a hard landing, because that is what we hear from everyone. the deceleration will be sudden and you will have to turn up the screws on the economy as inflation comes down to keep it lower. we will do a repeat of last year. jonathan: an interesting start to 2024. the s&p 500 negative by almost 0.1%. da here'sn your bloomberg brief. ispotify is higher in the premarket trade after first quarter since -- first quarter subscriber growth beat estimates. overall, sales were spotify reached 3.6 billion euros, just short of estimates. spotify laid off 70% of its staff in december and raised monthly subscription prices by one dollar and the u.s. shares of ubs are falling this morning after the bank's fourth quarter earnings missed estimates. a buyback up to $1 billion in shares this year and an increase in the cost savings target.

2024 is a pivotal year. >> i think that one thing that we need to do is be willing and the next couple of years to sacrifice a little bit of topline growth in order to improve the returns of our financial resources on the balance sheet. >> red bull is investigating christian horner come the ceo of its formula one team, over accusations of inappropriate behavior. he has denied the accusations. i spoke with the team principal at williams racing who said that it's important to have an accepting culture. >> these allegations are allegations. i am afraid i don't have any understanding of what's behind them and the significance of what has happened. all i can say is should this happen our guard will be entirely supportive in terms of fixing it and making sure that we have a culture that is accepting of everyone. dani: that is your bloomberg brief.

jonathan: appreciate the update. next, pursuing the fed's objective. >> we pursue 2% over time. the plans for labor or more aligned. wage growth across the bay spectrum is settling back into more normal patterns. jonathan: that is coming up next on the program. this is bloomberg tv. ♪

jonathan: two hours and about 13 minutes from the opening bell. getting bullied around the desk. lisa: oh, come on. jonathan: yields are unchanged. the 10 year, 4.1578. this morning, pursuing the fed's objective. >> the price ability objective

is clear. we pursue 2% inflation over time. the supply demand for labor is more aligned and wage growth across the pay spectrum is settling back into more normal patterns. it is dangerous to proclaim with certainty that any pandemic era phenomenon will shape future labor markets, but these are potentially significant developments that could be particularly important drivers of labor market dynamics in the future. jonathan: the atlanta fed president raphael bostic saying that the central banks inflation target remains at 2% and wage growth in labor supply are normalizing. he opted not to talk about the timing or path of interest rates in his prepared remarks and speculation grows as to when we might see the first interest rate cut. julie coronado suggesting that the time is now writing, the question is very much what are we doing it 5.5 percent? it's time to start adjusting the nominal funds rate. julia coronado joins us now. let's talk about that. the chairman of the federal reserve said that we need to see

more data, more good data, not better data. just more data. >> not even as good. just good, he said. jonathan: any reason we won't see that in the next three months? >> no real reason. you will need the data to ratify that and data can always surprise us, but if inflation continues to behave as it has been, they are rapidly approaching 2%. i think what we are hearing from the fed is that the committee is struggling to catch up to how quickly the data have moved. and what to make of that. it certainly defies all of our macro models for inflation to come down so rapidly with the labor market so healthy. so, there are still some skeptics. i think that chair powell might be having a challenge corralling everyone on the committee. i think that he wants to make the first move based upon a

strong consensus. i think that he is having a little bit of committee management challenges, which is why he, in a very data un -dependent way, took march off the table. jonathan: lisa said immediately after the fed meeting during the news conference to us around the table, it is like herding cats. you said the same thing. what is it about the statement and news conference that stood out to you that gave you the impression that maybe things are divided on the committee at the moment? julia: for me, the moment that was the most telling was when he took march off of the table. he said it in a halting way that he doesn't think that this committee will have the confidence by march. he thinks that it is unlikely, i think was the turn. it was not a reference to his view but to the collective

confidence, which suggests that there were some people just digging in their heels who were deeply skeptical of what they've seen or the likelihood of continuing. i think that that was the moment where it was like, that is not data dependent and it was not referencing his own views. we know that chair powell has been more encouraged and optimistic about the data flow. more willing, perhaps because he is not an economist, to accept it for what it is and buy into its staying power. data will have to ratify it, but should they ratify it there is no reason not to move in march. there is tension now between the fed saying that they are going to start the cutting process well before we get to 2% and taking march off of the table, right? because we are getting close to 2%. with a couple more months we could be quite close.

i think it is just the herding cats challenge. lisa: you said it's clear the fed has policy in a restrictive place. talk about herding cats, it is the market too with people questioning how restrictive that is. if you're seeing job growth like we saw on friday, ism services like we did last month as well. julia: that is a fair question. i think that one of the things that has been the huge macro surprise of 2023 was the productivity boom. we had been bullish productivity, that it would be strong in 2023 and would help bring down inflation and make the fed trade-off easier than they expected, but it was much stronger than we expected. the second half of the year was a productivity boom for the year. it is close to 3%.

that is quite a performance after a very bad performance in 2022 when supply chains were dragging us down. it is masking, i think, some of the restriction in monetary policy, which could mean that the neutral rate, at least for now, is higher. the big uncertainty -- and jay powell touched on this in his press conference -- we don't know if we will get productivity gains like we saw in 2023 or anywhere close. if we do, if we are not just in a productivity post-pandemic dividend but a stronger trend, then the neutral rate could be higher. on the other hand, if this is a one time productivity dividend we could see a sudden stop in the economy as that slows down. the restriction would come through and they would have to cut faster. i think that those are the uncertainties we are facing.

lisa: we have about 60 seconds left. do you believe in goldilocks or do you think that it is inaccurate at this point? julia: i do believe in goldilocks. i have been bullish productivity and i think that the trend is better. that could mean a higher neutral rate, but what is higher? it is not 5.5%. it might be 3%, maybe 3.5%. i do think that productivity is higher and the trade-offs will continue to be, you know, the fed's dream come true for now. jonathan: somewhere in this country there is a child waking up that put on business news on accident instead of the cartoons and hear you asking, do you believe in goldilocks? this child is now fixated on two adults discussing if goldilocks is one real or not. lisa: welcome. we can talk about fed policy another time. jonathan: away from his goldilocks is real or not,

herding cats. lisa: it seemed like there was some sort of gap, a disparity between his view and what he had to read and stick to for the statement. he seemed to have more conviction in the 60 minutes interview where he laid out exactly what it is. it's interesting. i wonder how heated those conversations are. jonathan: 60 minutes is more comfortable speaking from your own opinions. reflecting the consensus of the committee in the news conference is tremendously difficult to do and i think we saw that last week. the s&p 500 negative by 0.1%. from new york city, this is bloomberg. ♪

♪ ♪

♪ ♪ ♪ ♪ hi, i'm tali and i lost 85 pounds on golo. (upbeat music) i started golo because i was unhealthy due to my weight. the minute i started taking the golo release, i knew it was working. i was not hungry, and i did not have any cravings. since losing weight with golo, i'm healthier now than i've ever been, and my doctor is thrilled. golo is so much more than weight loss, it's gonna give you your life back.

jonathan: equities are little softer on the s&p and the nasdaq and small-cap and wrestled down across the board. -.01% on the s&p and nasdaq 100. in the bond market a big readjustment the last two days. the two-year is 4.47 after two days of double-digit gains on a two year yield. lisa: people are almost entirely pricing out the idea of a march rate cut. are they going to back load them and wait for weakness and cut by 50 basis points? how any people have you been talking to who say it means they will cut that much more aggressively later in the year? are we heading back to know landing? the idea that this is

sustainable, this growth and expansion? that raises the question of how much they can cut at all. jonathan: they are looking for a resilient dollar. the euro is again negative by .1%. this has been a grind lower on the euro over the last week. lisa: they are not alone. standard chartered said that you could see even more dollar strength just because you have the ecb moving and perhaps the opposite direction with the data that justifies it. in the u.s. we are talking about surprising resilience with more fiscal stimulus coming down the pike. jonathan: the dollar index the strongest of the year so far. going back to the middle of november, that is the dollar, the fx market. your top stories, the u.s. border and ukraine a deal nearing a collapse with republican senators saying on vote tomorrow on the 118 billion dollar bill would be too soon. it would unlock significant aid for ukraine and impose new u.s.

border restrictions. donald trump leading the push back on the bill, calling it "a death wish for the republican party." annmarie: this is something that for sure is on life support. what you hear from republican senators, especially many who wanted to link these two items together, we won't give for nate until we fix our southern border. mitch mcconnell says that the problem is not the bill, it is the politics around that. when you have the former president who is now your front runner to become the gop candidate into november and potentially the next president is saying that this is a death to democrats -- a gift to democrats, i want to run on this issue, don't give this to by then. jonathan: the editorial board put out that if republicans reject this bill they will hand democrats an argument. the gop wants border chaos that they can exploit as a campaign issue. at the moment it is clear in the polls that the blame is going to

the white house and not to the conservatives. the poll on that issue will be the one to watch if this bill doesn't pass. annmarie: senator langford says i won't have a funeral for this bill yet and that is why i say that it's on life support. the electorate will not just blame joe biden because he is an office -- in office but they will look to the republicans and say that it's a split government and this is a bipartisan deal. why are you not signing up for it. lisa: no one wants to hear my rant about politics versus policy but it raises the question on turnout. if you see this going on again and again how any people will turn out to elections if they feel disenchanted with politics versus policy? jonathan: doesn't this get people to go to the polls because they are so fed up with who's in congress now? lisa: and then who do they vote in? jonathan: more of the same? politicians are self-interested people who only want to get reelected, really?

lisa: we don't need to go here, but there is frustration and people are watching this because it determines a lot of the funding and for markets how you jonathan: i'm shocked those people exist. let's get to deutsche bank, the drop in the call for u.s. recession. the chief u.s. economist saying that the economy performed as well as it could have last year and, we now think that the economy will land on this narrow path and a recession will be averted with limited cost in the labor market. though inflation could firm some in the near term, we ultimately believe that it is sustainably falling towards the fed's target. we have to reframe this. what a change of this is for deutsche bank, who going back to april of 2022 said late 2023 recession that we have the fed call right and interest rates would go between 5% and 6%. nailed that. pretty much like everyone else got the consequence of that move totally wrong. they thought that we would have to see pain in the labor market and unemployment below 4% for

two years. that we would have to see that in inflation back down to 2%. there is a hope that we can receive these without a recession. lisa: making that their base case saying unemployment will rise to 4.1% versus the expectation for more material increase in unemployment. this is what you feel under the hood and it raises the question what does it do for policy rates? they say that it means that the fed can cut by 100 basis points. i believe it was 105 before this . longer-term, this is key, what does this mean about where the rate can be to keep the economy chugging along? it used to be 3%. now 3.5 percent maybe 4% over longer term. to me, this is one of the key questions as people reassess refinancing on how sustainable some of the rates are. jonathan: a game changer for the stock market, too. there is a hope that we are going back to the old world pre-2020 and can get going in the equity market. that's a big challenge. a challenge to what is a

question i keep asking. a challenge to big tech which are blowing it out of the water when it comes to earnings, or to financials which really struggled last year? lisa: a great question. i don't know the answer. if i did i probably wouldn't be here, but it will be interesting if the russell 2000 is a tea leaf of what is to come. some of the businesses haven't had to fully refinance or face the music or divert cash away from their equity holders and put it towards their debtholders as they reassess a new platform. is that what the devaluation is something out? jonathan: matt, thank you for sending over that call, a fascinating read. boeing come executives dealing with an ongoing safety fallout could have a fallout. the largest union set to demand a 40% pay increase over the three or four years. hoping to capitalize on a resurgent u.s. labor movement and a short supply of aerospace workers and pressure on boeing to stabilize work at its

factories. the union's warning of potential strikes in order to get their wish. more bad news for this company, potentially. annmarie: how can they deal with this on top of everything else? the union is saying we do not take striking lightly but are willing to do it. it seems that they have a lot of leverage because boeing is dealing with a plethora of issues. jonathan: after uaw we ask the question, is this a sign of the times? a new era? a regime of labor power? or the dying embers of the story out of the pandemic? which is it? lisa: a lot of people are saying it is probably dying embers. i would point to ups earnings and that they cut, significant cuts, after their labor negotiations. jonathan: we can compare data with anecdotes. some of the examples that you are seeing from corporate america, cuts from estee lauder yesterday and the blowout jobs report on friday. it has been example after example of companies not hiring

but firing. jonathan: you see this in the tech space as well. i was reading about this yesterday talking about under the labor market how much is seasonal and how much is reallocating to other areas. erases the question about the headline numbers. jonathan: yields are basically unchanged after recording their biggest to -- biggest two day in months. trains are no more in line with our view of 75 basis points of cuts this year. more value along the curve then when fed futures called for upwards of six rate cuts. i'm pleased to say we are joined for more. deborah, the march meeting. a lot of people are pouring cold water over it, but this could be interesting. i know you are interested there will be a big conversation about the balance sheet and may be winding down qt? >> i think that there will be

more details on how the qt process goes forward for the rest of 2024 into 2020 five. i think that will be the focus of the meeting. the resilience of the economy, the jobs number that we just saw, we get another labor report, obviously, before the march meeting. so, additional information. what happens from an inflation perspective going into the march meeting, i think that those will be top of mind. having said that, i don't see much change in the current path that we are seeing, which is continued wage inflation and continued strength from an employment perspective. maybe some stickiness from an inflation perspective given where we are from a wage inflation and rents perspective. we were talking about from union and the uaw settlement earlier

this year, or last year, what is going on with boeing now, it seems like the stage is set for the fed to have a slow decline in rates. nothing precipitous. nothing that is -- meeting after meeting starting in the spring of this year we are of the opinion it is the second half of that. lisa: you are the key person that i wanted to speak to because if rates are not going to go down so quickly, is there so much cash on the sidelines or is it happily parked in money market accounts and short-term debt? deborah: i think it is happily parked. if you look at the money market industry last year, $1 trillion. deposits lost $1 trillion. that is not a coincidence. there's something to be said

about what came out of deposits and with into money market funds.i'm not saying that there is no cash on the sidelines. there certainly is those who are using the liquidity markets and money markets as a safe haven in the context of no longer in the equity market, longer-term fixed income market. the resilience in the market from a cash longevity standpoint is there. lisa: how much of the $6 trillion in money markets will flow into risk assets later this year? that has been one of the bull cases for a lot of stockmarket prognosticators. how much do you view this as something that hinges on federico it's -- fed rate cuts versus a fallacious statement?

deborah:deborah: the flow came from retail and came out of deposits. what happens when the fed plateaus from a rate standpoint and it goes down the other side? institutional cash comes into the marketplace. it comes out of direct securities because derek securities are now lower -- direct securities are now lower. ultimately, there may be some amount, let's call it a couple hundred billion, that flows out because of the re-entrance into the riskier asset markets. having said that, i think that the assets in these products continue to increase in 2024 given what our expectations for rate cuts of 75 basis points to maybe 100. you're talking about rates at the end of the year of 4% to 4.5%. jonathan: in the meantime, no rate cuts until may be the middle of the year based on how the consensus is shifting?

deborah: that is our outlook at this point. jonathan: let's finish on the banking system. given the bank lending process implemented by the federal reserve last year set to expire last month, how much stress is accumulating in the regional banks at the market based on your read over the last few months? deborah: jonathan, it seems like the larger regional banks are quite fulsome at this point and don't have the same geographic risks and concentration that something like more of the community regional banks have. the system, the bank term funding program, was designed for the larger regional banks and right now they seem to have much less stress. their stress came last year because of the rapidly rising rate environment and that is behind us at this point. their portfolio should be back

to the traditional stresses, the loan portfolio. for the most point they are well diversified. jonathan: thank you for joining us early this morning. i say early because deborah has such a more active social life than i do. overnight at a concert, what time did you go to sleep last night? lisa: i don't want to talk about it. jonathan: good for them. equities on the s&p negative by almost .1%. an update on stories, here's your bloomberg brief. dani: bloomberg is reporting that behind the scenes talks between the new york community bank and u.s. watchdog led to the surprise decision to hoard cash and slash the dividend. the drastic moves last week were part of an expected transition to tougher capital requirements. n.y.c. be took on riskier loans and commercial real estate. toyota's market value has

climbed to a new high topping ¥50 trillion for the first time in its history. just under $40 billion. it jumped in reaction between upward revision in the profit guidance. shares are up all over the year on the back of strong sales and a weaker yen. the new guidance exceeded analyst estimates. aston market is shaking up their c-suite again. the company is searching for its fourth ceo in four years. according to bloomberg sources, current heads of other luxury automakers have been contacted to secede the current ceo. he has been the ceo of aston martin since 2022. that is your bloomberg brief. jonathan: four ceos in four years. at this point, do you get a new recruiter? lisa: at a certain point you have to come up with a new thesis as to what you are looking for. jonathan: up next on this program, more headwinds for boeing. >> we caused the problem.

we instituted additional quality controls and inspections at boeing and our supplier. jonathan: live from new york city, 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! you've got more options than you know. book now. jonathan: equities on the s&p 500 futures are touch negative down by 0.04%. if you want a mover, check out shares of hertz, down by 7%. lisa: reportinglisa: bigger than expected losses because of liquor vehicles. offloading about one third of its fleet and talking about how expensive it was to repair them. residual values were declining. the ceo said we continue to face

headwinds related to our electric vehicle fleet and other costs throughout the quarter after previously having been the one to lead the charge this way. it shows the hiccups and growing pains in the transition. jonathan: the push to ev for hertz was one part seeing the future and one part marketing gimmick. you get tom brady on board, let's get an electric vehicle. what you said i think is the critical element, that we did not discuss enough, the cost of keeping these vehicles are the loss of value over time. that was behind this decision, not just that consumer demand was not there in the way that they anticipated. it was those issues too. lisa: when i was thinking of buying a car there was the question if you are going to have ev's that will be more developed and cheaper later on, why are you going to hold onto it now if you're not going to get the same kind of value later? this has been a real concern that you can see a practice that hertz.

annmarie: they bought 100,000 want to get to be a massive push into the market but the demand isn't there. you have a number of dealers writing to the biden administration saying that you need to slow down on this ambitious plan or the electric vehicle grid of the united states because the demand is not there. there is a lot of range anxiety and the cost is an issue. we are seeing the fallout of potentially moving too fast on the transition. jonathan: did we say that the range anxiety was a consequence of the misinformation campaign? lisa: range anxiety sounds like something that happens to a dog. jonathan: the dealerships right to marry barrow saying that we want the hybrids. mary barra, what did you talk about? lisa: hybrids. there is a reality check. is it a bump in the road or does it change the course in the road? a lot of people say it is a bump in the road. jonathan: hertz is down by 6.9%.

more headwinds for boeing. >> we caused the problem and we understand that. we instituted additional quality controls and inspections at boeing and our supplier. we issued to strengthen the performance. jonathan: the latest this morning, the company finding more mis-drilled holes in the fuselages of the 747 at boeing is facing a potential labor battle with union leaders asking for a 40% pay boost for workers over the next three to four years. the faa administrator mike whitaker is set to testify on capitol hill today. prepared remarks he said the faa will consider the full extent of our enforcement authority to ensure that boeing is held accountable for any noncompliance. george ferguson senior, aerospace and defense analyst of bloomberg intelligence, joins us for more. can you frame how much of a nightmare this might be for boeing later today?

george: no ceo would want this to be happening, but i don't think there is much choice. the faa, their reputation has been hurt by boeing. i think as the regulator they need to get in there and make sure that the manufacturing process is stable and that boeing is building safe airplanes. if we had a problem, god forbid, part of it would be on the faa's hands. no ceo would want this to be going on, but i think it is necessary at this point. i think a lot of it will be about increased oversight at boeing, at the manufacturing facilities, and there will also be questions for the faa. if they have the personnel in place and the resources to go out and properly oversee. lisa: is it the job of the faa or boeing to make sure that planes are safe? george: at the end of the day it is boeing's job to build an airplane according to what they

have had certified by the faa. it is boeing's job to build a safe airplane and build it correctly, but it is the faa's responsibility to oversee that process. so, there needs to be appropriate controls in place and inspections in place so that they can feel satisfied that the work is being done according to their authorizations. lisa: we were talking with some of the labor issues and the potential for a strike and i wonder how much this is yet another problem and how much this is central to the problems. how much is boeing's issue a workforce problem with respect to more row, retention, and full staffing? george: a lot of it is workforce. everyone that i talked to in the industry talks about the turnover that we had during the pandemic and the difficulty getting workers even now. the unions are going to have plenty of leverage. the workforce still seems -- or

at least the u.s. workforce seems like there are shortages in some areas. i would expect them to get a nice pay package. the primary challenge here is the turnovers really depleted the amount of experience on the line and they need to be able to retain that experience so that they can build airplanes will. aircracked many factoring is different than other types of manufacturing where you can do higher volumes and more templating. you buy more capital tools that will help make up for any deficiencies in the workforce. there is a lot of manual labor that is not capital tools accompanied in this business. so you need smart, well-trained people on the line focused on detail. it's hard to do. they will probably get a nice package. jonathan: what are we missing now that we used to have before the pandemic? george: a lot of grey-haired

experienced folks on the line. prior to the pandemic we saw a lot of seasoned professionals on the lines. during the pandemic they left. i guess they decided they would move to jacksonville or something. i'm just saying that they went to sunnier shores in the northwest. they were in an industry that saw the crashes, the max was grounded, the next thing you know you get into a pandemic, air travel goes to almost zero, people just throw up their hands and said that's it. i'm 62, boeing is going to offer me a package because they are trying to cut longer-term costs. i will take the package, move out, do something else. they had to turn over that staff and bring in new people, train them, and that has been a serious challenge.

jonathan: it is good to catch up. george ferguson of bloomberg intelligence on the challenges for boeing and also spirit aerosystems. spirit suspending guidance. no surprise. we saw the same thing from boeing. lisa: how can they provide guidance? they don't even know the parameters of the regulatory regime and they don't know what the blame is. i wonder why this hasn't been a more talked about area? it has been all boeing and not some of their subcontractors. this assumption is they will stay subcontractors and figured out. jonathan: the books that will be written about the pandemic and the people who were tired and are almost irreplaceable. lisa: it is such a human story. we talk about these numbers but this is a human issue because it is a detailed craft focused-type of practice. jonathan: the beaches of florida. lisa: not just anywhere, jacksonville. jonathan: next, the third hour of bloomberg surveillance.

♪ hey! sarah! if you had to choose would you listen to elevator music all day or deal with payroll compliance? payroll compliance, for sure. gusto automatically calculates and files my taxes for me. hold up, compliance? easier? choose payroll compliance without the ups and downs.

♪ ♪ that's work♪ ♪ with gusto. ♪ ♪

>> this market is extremely powerful to the upside. >> what we will see is a broadening out in quality. >> what happens is a broadening

to other areas of the market which are not as risky as we think. >> when we think about broadening out we think there is an opportunity for small-cap to catch up. >> the market is ready and wants to rotate. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: there is a group of that -- of investors that want it to rotate. this is bloomberg surveillance along with lisa abramowicz and annmarie hordern. the equity market almost unchanged. all of that talk about rotation, going away from big tech and going elsewhere. year to date equal weight is down on the year. the max seven is up by 8% or 9%. annmarie: the rotation is away from the seven. jonathan: who is it, meta, microsoft? lisa: nvidia and amazon. jonathan: how much is that

distorting what is happening elsewhere. when we talk about good news being good news, has it been for the stock market? lisa: not for a lot of the small caps or other small stocks. we have not seen that rotation and that is the bottom line. it feels like deja vu all over again. it feels like we get some sort of weakness. but it put 2023 on repeat. jonathan: we were talking about no landing and on the back of ism services and payrolls and blowout jobs reports. talking about the prospect of moving away from goldilocks. lisa: and getting a no landing. are we just in 2023 press repeat or is it something different that maybe something comes to the middle of the year? jonathan: the politics are fascinating and what is it starting to shape and equity markets. yesterday we heard mcdonald's complaining about what was happening in the middle east and it was hurting their bottom

line. we saw it from starbucks. we have had mcdonald's and starbucks. which are the poster child for international business flying the international flag. annmarie: you had boycott mcdonald's and starbucks because customers did not like what they were saying about what was going on between israel and gaza and also coca-cola. we spoke to the ceo about the fact that they are having issues in turkiye. turkish airlines wanted to get rid of coca-cola. how much are these going to become bigger problems going into this year it not only with the israel born to gaza but with a u.s. election that is very tenuous and emotional and what does this mean for corporate america? lisa: mcdonald's says that it will continue as long as the conflict is going on but did not say that their store saw impacts. starbucks side of 5% and said that it had to do with this. jonathan: this goes back to what we talked about, how much will

it be a challenge for multinational. this is just a politics, never mind the economics. europe is dreadful, china is a challenge. apple spoke to all of these things at the same time. lisa: this is why they want things to go back to the small u.s. companies. this is a roundabout reason for exactly why people are calling for broadening out. really what it is is confusion for all of the stocks except for the mag 4 and 2, or let us see how far it takes for us to have a mag 1. and that is the kind of thing that consistently works. jonathan: the whole market is standing on the shoulders of nvidia 2024. equity is totally unchanged. adjustment in the bond market and we will discuss that in a moment. moving over 20 basis points in almost 30 basis points higher. on a 10 year further out, the 10 year almost unchanged at 4.1481.

the dollar is just a touch stronger. 1.0 737. coming up wells fargo delivering a reality check for markets. lara reim on her surgical rate cut call and hobby air blas -- javier blas. stocks inching back from all-time highs as wall street rethinks beds. recent data only confirms the belief that the first rate cut would come in june or labor -- or later. the market is overly optimistic on the number of cuts and when they start. our view is three rate cuts starting in the second half. darrell i am pleased to say is around the table. let us talk about the rate cut calls. we are starting to see an adjustment in two years -- two year yields pushing higher. how much morbid -- how much more of an adjustment will we be seeing? darrell: for the stock market to

become attractive i think you have to see somewhere in the neighborhood of 5% to 8% down from today. that is not unusual to get that two to 3% deductions. it is entirely possible. remember, let me just been you back. this time last year the consensus was 85% said we were heading to a recession, and the fed funds future curves has three interest rates priced into the back half of 2023. we know those never happened. here we said that the consensus is this, soft landing and four to five rate cuts. 10 to 12% earnings growth. we have slayed the inflation beast. my bet is that when we spin forward and look backwards that consensus is wrong. jonathan: a repeat of last year? darrell: a repeat in the sense that the fed cannot give you that the markets wants the fed to give. if you describe this year year

to date, it has been boring. the equity markets drifted higher. the vix is still low and gold has not been an issue and oil prices have not been an issue. we are repricing rates to back out some of those cuts. i think you have to see for us in 2024, three things happen. if inflation was all the rage in 2023, this year is the labor market, and earnings which we need to talk about because they are not as good as what people think they are. and it is what the fed does. those three things will determine the path of 2024? lisa: what about nvidia? darrell: it is 30 to 35 times sales. you are correct and exactly right that it is narrowing. i pulled the numbers. we had six of the seven report. nvidia is the only one left on february 21. if you look at sales and earnings growth, the whole s&p

is running about 4.5% sales growth and 2% earnings growth. the mag seven, 14% sales growth and their margins have expanded year-over-year on this corner. if i look at the other 493 stocks i am getting 2% sales growth and margins have contracted by 110 to 120 basis points. under the surface, the durability of demand, maybe the idea that it is not widening out and people are not binding the value. lisa: can you walk us through how you see the calendar evolving. if you think consensus is wrong and we are talking about soft landing and a fed that will be cutting rates and inflation coming down, where does everyone have it wrong? inflation cutting -- coming down, the rates or the weakness that will hit suddenly? darrell: if i were to stack rate

that, the fed, inflation and the weakness in that order. i think the consensus has moved so hard to just we have won a war and battle. and if you look at the yield curve remaining deeply inverted. if i take the six months to 10 year it is 100 basis points averted. if we have the economic indicators with 18 months in a row in negative territory, that does not happen. it has not happened since 1951. if you look at ism manufacturing which is two points to the upside that is still 15 months into contraction territory, again, it is not bearish or negative, it is to balance the conversation. it has tipped too far to the euphoria and everything is good and we have won all the wars. jonathan: can we talk about margins? i got another headline. doc you sign, -- odcusign work

cuts. lisa was talking about ups, 14% of about 85,000 management jobs are getting caught. are we in that period where we are starting to protect margins and attack costs? darrell: you see it in the corporate earnings reports. and what people miss is that it is right on time. it is exactly on time from a historical standpoint. you have to calibrate based on how much we are greasing the engine. if you go back to the 1950's and take every period of economic slowdown, it weakens after the first 23 months after the first fed hike. 23 -- 23 months of 2020 through -- from february 2022 hits february. let us acknowledge payout. i would be looking at the months

coming forward because you will see the unemployment rate drift up and some of the corporate layoffs that are companies defending their margin line because they do not have the pricing power anymore. and so they have to make an earnings number, which we think 10 to 12% growth is too high. jonathan: do we want to play the recovery to the downturn. is it too early to be excited about things like small caps? darrell: we were looking closely at our investment strategy committee about small caps. so, every year people want to declare this is the year of small caps. it has happen for the last five or six years and every year it has been wrong. we started to see that turn in december. all of a sudden, small caps are underperforming large caps by six or 700 basis points. what is compelling is that the narrowness of where the s&p

earnings multiples are at versus small-cap are as narrow as they have been in decades, meaning that small caps are cheap relative to large caps. is that a function of large-cap being too expensive? maybe. small caps have not had that same multiple expansion as large caps enjoying in 2023 or 2022. there could be a compelling valuation case. they will have to deal with that highly leveraged business model with rates being higher and that will chew into earnings growth. jonathan: it reminds me what we said about european stocks. compelling valuation which was not working. darrell: which has been wrong. jonathan: apart from the last 12 months. it has been good to see you. brilliantly explained just looking at the earnings and what it means for corporate america from the stock market basis as well as beneath the surface. equity futures turning positive. we are up by 0.05%. let us get you an update on

stories elsewhere. here is your bloomberg brief. dani: antony blinken is on his fifth trip to the middle east since the october 7 attack on israel. he will meet with egypt's president before traveling to delhi. leaders are proposing a deal with hamas to pause fighting and allow for the release of the remaining israeli hostages. israel would release palestinian prisoners. he is expected to make stops in israel and the west bank in the coming days. bps urging off their -- after beating on earnings. they will repurchase $1.57 billion worth of stock in the first two quarters of this year. exxon, chevron, and shall have be expectations. hurts is slight -- hertz is sliding, posting higher-than-expected losses. this follows the decision to cut 20,000 teslas or one third of its ev lead.

it lost money renting them out and it is a larger trend of eb demand sliding and tesla cutting prices on popular models. that is your bloomberg brief. jonathan: a reality check on ev's. is it any different in europe? dani: it is the charging infrastructure. i have rented a tesla from a rental car company and i can drive up and down the u.k. and have no problem finding one of those hyperspeed charging stations. it is about prices and also the infrastructure is not here. jonathan: so true. this conversation we are having in america at american auto manufacturers is different from the european experience. annmarie: also different culturally. europeans are willing to get onto trains and they have better trained infrastructure. they have a smaller geographical distance to cover. the united states is a driving community and that is what the u.s. does. here u.s. officials talk and they are concerned about trucks and driving because to even get

the groceries at his farm to truck to table and everything involves a car. jonathan: down 8% in early trading. a border deal near a collapse. >> the only way to get things done is to work in a bipartisan way. the american people are smart and they will know exactly who to blame if this bill does not even get a hearing in the united states house of representatives. jonathan: we will get into that next. live from new york, 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! you've got more options than you know. book now. get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside - and the other goals along the way. wealth plan can help get you there. ♪ j.p. morgan wealth management.

jonathan: life of new york city. equity is just about positive. turning positive by 0.1%. one hour 30 minutes away from the opening bell. a border deal nearing collapse.

>> the ability of congress to pass any kind of border security or immigration reform has been a point of frustration. it has been very self-defeating. the only way to get things done is to work in a bipartisan way. that is what this bill represents. the american people are smart and will know exactly who to blame if this bill does not get a hearing in the united states house of representatives. jonathan: gop support crumbling for a deal to impose new border restrictions and unlock ukraine aid. donald trump opposing the deal saying "it is a great gift to the democrats and a death wish for the republican party." michael shepler -- michael shepard joins us for more. the opinion of "the wall street journal" if the republicans reject this bill they will hand them an argument that the republicans want border chaos. if this goes through who wins the blame game? michael: it is hard to see.

voters will decide that. it will be so interesting to see how this plays out because are so element -- so many elements tied to it. aid for israel and recurring and the really chaotic situation that we are seeing on board -- on the border. for president joe biden and democrats trying to preserve and make some gains in congress and inroads in the house. one level you can point to that. they are republicans that republicans have failed to follow through on what they have actually wanted. they want a deal and negotiation like this that would allow them to solve the border and now they are backing away. on the other hand the headlines in the polls do not favor biden and democrats. in the consult pole, it was president joe biden's who drew the most lame. annmarie: if this drags on and

it looks like it is going to. you mentioned aid to israel and ukraine. last night the white house said the president would veto a standalone israel bill. at some point will he have to come around to that? michael: that is a good question and one that our teams have been asking? what about ukraine and israel? at what point will they have to break off these two elements of the big border package which totals $118 billion. a big chunk of that those two -- what go to ukraine. -- would go to ukraine. for the president the clock is taking on ukraine and the border as well. he has to measure if he has any kind of political leverage. one question we have been asking is whether the president will meet with mike johnson to reach some sort of break in this growing impasse. remember biden put in this

request back in october. this is not something that showed up in january. this has been months of negotiations without an end game or progress. annmarie: who is responsible for linking them together. a lot of people say it is the president who linked it together. wasn't it because he was goaded by republicans who refuse to give foreign aid money when there was no money for the southern border? michael: republicans early on wanted to link them so they could be able to argue that we will not take care of security abroad without handling security at home, at least at the same time if not worse. the argument has been let us try to pair them together as one large security package internally for the u.s., but externally for the allies such as ukraine and israel. jonathan: nikki haley has a problem. we are not talking about her, but we are talking about biden

and trump. how does she get a hearing ahead of the big boats to come? michael: she might need to do more than the one saturday night live appearance that we saw over the weekend. it is hard for her to break through, even in her home state of south carolina. trump is pulling well ahead of her consistency -- consistently. it is not that she is rejected as somebody from the palmetto state, it is just that voters there, it is an evangelical christian stronghold and very conservative. those people like trump as their president so many years ago and they want more of that. they are kind of rejecting nikki haley for their role. -- that role. it will be hard for a breakthrough. they are advertising heavily in the seven major markets that compose south carolina. we have spoken and reporters have been in touch about plans

for advertising and fundraising. she has been raising funds from business interests and people on wall street from people who want to see her as the alternative. lisa: wall street wants to see her but republicans in congress do not. 19 senators and 98 house members will be showing up to a trump fundraiser next month. does she have any support from her party in washington? michael: it is very narrow and does not come anywhere close to the enthusiasm and support that trump gets. if we opened our conversation talking about the border deal, his role cannot be overstated. he has pushing and driving the agenda and conversation already. he has picked up a lot of the endorsements a lot earlier than he did in 2016. jonathan: thank you for the update. michael sheppard from bloomberg in washington.

we are not talking about nikki haley and she has not getting a hearing at all. we are talking about the sitting president, the former president orchestrating what is happening in congress. nikki haley does not feature. do we know what her thoughts are on this bill? i do not. lisa: that is a good point. i saw the story asking for secret service protection. and you just wonder how much animosity that there is for anyone that is not donald trump and that character she is having to play at a time where she is not definitely going to win, she seems to be trying to stay in the race. annmarie: over the weekend she spoke to the fact that she did think wet -- that trump was doing breathing down the republicans, a lot of them support him and they will be showing up to his fundraiser. she says that this is very political and she called him out for being too political, similar rhetoric from the white house.

jonathan: who gets the blame, let us go back to that editorial. who gets the blame? is this really about substance or maintaining and preserving an issue to campaign on? if republicans "reject this bill they will hand democrats and argument that the gop wants border chaos that they can exploit as a campaign issue." do they see through it or not? the electorate claims the sitting president not the republicans. will that change? lisa: not to think out loud but does it plan that the democrats come up with a cohesive message where they celebrate a victory or on the flipside we need something done and the republican stymied it. you have people pushing against the democrats and the fishers -- fissues within their own potty -- own party. annmarie: they can work better if trump wins, and my kratz will

demand more if republicans do not show up now and they might get a watered-down bill and the substance might become more complicated. jonathan: coming up next, laura rheim on her call for surgical rate cuts. equity futures on the s&p positive by 0.1%. yields look like this, a little bit lower, 4.14 on a two year down two basis points. 4.45. one hour one minutes away from the opening bell. this is bloomberg. ♪

at ameriprise financial our advice is personalized based on your goals, whatever they may be. all that planning has paid off. looks like you can make this work. we can make this work. and the feeling of confidence that comes from our advice... i can make this work. that seems to be universal. i can make this work. i can make this work. no wonder more than 9 out of 10 clients are likely to recommend us. because advice worth listening to is advice worth talking about. ameriprise financial. (jennifer) the reason why golo customers have such long term success is because we focus onng about. real foods in the right balance so you get the results you want.

when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try? you can make money the hard way as a bullfighter or a human cannonball... or save money the easy way, with xfinity mobile.

existing customers can get a free line of our most popular unlimited plan for a year! not only will you save hundreds but you'll also be joining millions who have connected to america's most reliable 5g network. sure is a lot safer than becoming a stuntman for money. get a free line of unlimited intro for a year when you buy one unlimited line. plus, get the new samsung galaxy s24 on us.

jonathan: lisa and the commercial break, an official review of cody locks the fairytale. goldilocks is a brand. lisa: i thought we would keep this in the break. jonathan: we need to know how entertaining you are in the commercial break. people at your -- people adore you already and people would love you so much more if we had a live camera. lisa: i think that goldilocks is kind of a brat. let us move on. jonathan: is this criticism of a fairytale or people who are looking for their goldilocks inflation? lisa: i was talking about the fairytale but some the else can do that, not me. jonathan: equities on the s&p,

posited by 0.1% and up .2% on the nasdaq 200. about 60 minutes away. a reassessment of yields, repricing them higher and this morning a little bit lower, down two basis points. on the 10 year down a single basis point. to finish off on foreign exchange the euro negative 5.1%. you mentioned why this dollar strength is persisting on the same page. annmarie: the bar is pretty high for there to be some sort of shift on the federal reserve. if they will prolong the rate cutting cycle it speaks to that divergence that people were talking about with the ecb meeting. jonathan: you need offsetting data to accumulate. right now the data is accumulating in the other direction. where are we on the surprise

index, a series of positive surprises relative to where expectations were. lisa: it is the most positive going back to november and that is going the wrong direction which is part of the problem. they expected a deceleration and they have been wrong. and they have upgraded which brings us back to the same story. jonathan: 12 months ago and it is amazing. on repeat. here are the top stories. the chinese government will backstop the stock row. president gigi paying expects to meet with regulators today with options of nearly $7 trillion being wiped out since 2021. this lifted the benchmark index to its best day since 2022. foreign inflows adding $1.7 million, the most this year. we have had plenty of talk and it is time to see action. lisa: is it? it is the un-investable but tradable market. and how to get out before the

reality sets in. there would have to be a package . but essentially people are like we can buy the news. jonathan: he said something like an investment is a trade go wrong -- gone wrong? an investment is a trade gone wrong. let us move stories, the u.s. striking two houthi see drones as the red sea attacks continued. they determine the explosive devices to an imminent threat. they say that the houthi rebels claimed responsibility for two more attacks. annmarie: they do continue and the shipping industry is warning about being careful. so what this does show is that even if the u.s. has retaliated

it has not stopped. jonathan: what is different about the strikes that took place? you notice immediately after the market closed, it was different and what was different about what we have seen over the last month? alberto: there -- annmarie: they are trying to degrade the missiles. the strike was in response to the three servicemembers killed. and that was to the facilities that back proxies used to syria's -- to syria and the administration said it will be sustained. lisa: i am focused on the imminent credit -- internet traffic. and then the houthis put out on their channel a map and pictures of the internet cables and they account for 70% of the global internet traffic i am trying to do a deep dive. jonathan: they have the willingness and ability.

do they have the ability? annmarie: it is a good question but the u.s. is concerned about those cables under egypt egypt gets paid a lot of money for. jonathan: here is the latest in california. a powerful storm has caused $11 billion in damage and economic losses. accuweather making the calculation after 10 inches of rainfall fell of -- fell over the mountains and weston -- in los angeles. it has killed two people and left people in the region at risk of landslides. lisa: honestly it is a tragedy to watch people's homes get blown out. it raises questions about insuring areas prone to mudslides. for quite some time. we will just have to keep track and hope that they stay safe. annmarie: third wettest day since 1877. almost one million customers do not have electricity. this is going to be a big problem and it is scary. jonathan: any more information

we will share it with you. we are 55 minutes away from the opening bell. equity futures posited by close to 0.1% and yields pulling back from the 22 any for highs. down two basis points at 4.45. austan goolsbee telling michael mckee that he is not willing to rule out a rate cut. we will hear from kashkari, collins, and harker. lara rhame saying "it is incredible how long it has taken for the market to let go of hopes for a cut. my expectation is that we get two or three rate cuts in the second half of the year." she is calling them surgical rate cuts. she joins us for more. let us talk about what is happening. we have had a reassessment of what is happening with the federal reserve and yields have climbed over the last two second -- sessions by double digits. are you surprised by how little

we have moved and you expect us to use more? -- move more? lara: it has been a reassessment given we have been at 5% as far as october, there is room to have more of a reassessment. this idea that we are pushing rate cuts out month by month by month, that is the question of how we are stepping back and reevaluating as investors the impact of a higher yield war -- higher yield world. you add up the sheer supply of treasury coming online. we will be able to get those options done, that is higher yield. the inflation genie is not fitting back into the bottle. that is a high-yield story. and then the growth at the end of the day, i am actually surprised that yields are higher than they are. jonathan: why do you think it is better to express stronger data in the bond market at the longer end of the curve and not the

front end? lara: i think the inversion and the fact that short-term yields are higher than long-term is really still a signal that the bond market is nervous about some coming slow down, or muscle memory from the fact that when we do have problems the fed slams rates down to zero. the fed is in a place, may a good place, that it has not been in a long time. if the economy slows more than a goldilocks landing and i agree with lee said that the phrase is overused. the fed has grown to -- is known to cut rates a low bit more. but these forecast to me, it needs to come with some more significant economic slowdown which would not be great for equities. lisa: you were talking about higher yields ahead, how much higher could you for cfa daimler a lot of people think we are range bound for the future? lara: you look at the long

tracks of history where nominal gdp aligned closely with long-term yields. i do not want to make some insane forecast of yields above 6%. but if you look at where we are growing today and settle around 5% nominal gdp growth. i do not think it is out of the question that we would hit 5% on the 10 year at some point this year and i do not think that markets are prepared. the complacency that we are seeing is coming from two places, expectations that growth will be very optimistic and inflation will come down. it is also coming from complacency that yields will stay low, long-term yields will stay low, and we need to prepare ourselves for a lot of yield volatility. we saw that last year and i think it carries forward. lisa: one of the big things people have been struggling with is what is the neutral rate? if rates go higher you could see things chug along. if you -- do you have's a sense

of the 5% or 4% yields being restrictive? lara: this is something i've debated heavily because to a large degree we cannot measure the neutral rate. if you look back at history we have never actually sat at a neutral rate for any length of time. the fed is always in very restrictive territory or accommodative territory. we do not tend to hang out around 2.5 to 3.5 percent fund rate. every fed cycle starts because we have had a shock, either you know a very strong growth shock or a very weak shock. today we are sitting carrying the momentum from a strong shock. i think it could be another six quarters before we get a sense of where we are. in the meantime wage and inflation pressure is creeping higher. jonathan: last year i remember

our conversation, inflation may not make the last mile. that is what you said. you still seem to believe that is the case. we had chairman powell and the news conference and he was not comfortable to say on behalf of the whole committee that they have greater confidence that we were headed back towards to percent and they want to see more data, more of the same, not that are but good data. -- not better, but good data. he is concerned that the improvement could be one-off factors. it is clear to me that you might actually think it is down to one-off factors. what is it about the next six months that is not repeatable? lara: getting from 6% to 3% has been a lot easier. i have been using the analogy of a long road trip with a bunch of kids in the back of the car. if a couple of them start acting up it makes the whole trip really difficult.

i think we are starting to see them act up again. i think we have had a period, a short period where we were seeing the energy, the goods prices and progress on services moving together. but services are starting to creep higher. i think goods deflation might have run its course and i think that energy is open to geopolitical risk. there are growing influences that are going to cause a couple of the kids to throw tantrums in the next six months. jonathan: name the kids in the back of the car, fed officials? or is this market participants? lara: i think the kids are what is driving inflation higher, the shipping costs, services, and rate -- and wages creeping higher. it is coming from the fact that food prices are still too high for consumer comfort.

it is coming from a lot of places. jonathan: thank you. that was brilliant. lisa: the set as the mcdonald's that you stop at to try to feed the kids to deal with the issue that is making everyone angst a. but it is not going to work because the underlying issue is there. jonathan: chairman mick -- chairman powell is ronald mcdonald. is this going into the newsletter? lisa: it is a good analogy. jonathan: i will go back over this interview. let us give you an update. here is the bloomberg brief. dani: treasury secretary janet yellen is set to testify this week. she will speak before the house financial services committee today and the senate banking thursday. lawmakers are expected to grill her on the state of the economy and the fight against inflation. she will discuss the potential for tougher regulations for asset managers and hedge funds. docusign, the latest tech firm to announced layoffs and they

will reduce 6% with the majority coming from's sales and marketing. 32 thousand tech workers have lost their jobs. cuts have come from the likes of snap, amazon, salesforce and meta. users of vision pro are discovering the pain of losing their passcode. they will have to bring their devices back into the store or mail it to customer support if the device is disabled after entering the passcode incorrectly to many times. this is the first major new hardware category in almost a decade. that is the bloomberg brief. jonathan: up next, big oil delivering upbeat earnings. >> it was a year of records for us. record oil and gas production of 3.1 million barrels a day. really strong performance and that allowed us to return a record $26 billion to shareholders, almost 10% of our market cap. jonathan: good morning, cutting

it -- counting it down to the opening bell with equity futures on the s&p 500 positive by 0.1%. a beautiful new york city. you are watching bloomberg tv. ♪ 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! you've got more options than you know. book now.

j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app.

jonathan: live from new york city, good morning, counting you down to the opening bell. we are 43 minutes away. equities doing ok. they are getting pushed around in the last 24 hours by the bond market. the yields are up aggressively as they were on friday but equities are down off of the back of that. make some sense of that if you can. meta and amazon to thank because they were not as present on monday. 4.1578 on the 10-year yield. big oil delivering upbeat

earnings. >> it was a year of records for us. record global oil and gas production of 3.1 million barrels of oil. in the fourth quarter we had record permian production of 870,000 barrels per day. a really strong performance a lot -- across the board allowed us to return $26 million to shareholders. jonathan: just amazing. oil's biggest players delivering what they promised investors, growth and returns. bp joining chevron and exxon beating estimates and announcing a buyback plan. bp, exxon and all of the above, your title and headline, the boring colder -- quarter golden for investors, can you frame how big these capital returns have been? javier: last year chevron, exxon

and bp give an extraordinary amount of money and what is good in the last couple of quarters these three companies, bp has also joined becoming more regular, nothing flashing on them, good delivery and a lot of cash, exactly what investors need to re-collect and give the cash that they need. lisa: that is how they reconnect, how much do they need with higher oil prices given that that is one of the surprises that oil has not rallied in the face of potential pressures. javier: that was a big question last year because a lot of investors said that these companies are doing well but it is the background, the invasion of ukraine and situation in the middle east. we do not have any of that. oil has been trading below $100 for many months and that is why gas prices are at record highs. markets have come down to the ground and they are still elevated by historical standards

but they are not at record highs of last year. big oil is performing. one of the things that his got is that companies are review operational expenditures. they are making it stronger and they can perform in environments of oil prices that are still elevated, 75 or $80 a barrel but nothing like that $100 plus. lisa: fascinating. that raises the question how much can the shares rallied to catch up with valuations elsewhere on the basis of dividends and financial acumen regardless of the price? javier: that is an important in terms of evaluation we have seen as good as it gets. big oil will not go back to the 90's and 2000s where investors really loved it. it will be a sector that many investors will not touch no matter how much money they are returning therefore the evaluations will be under

challenge. it has recovered and they are at least a sector that if you are investor and you like the return in yield that you are offering it is a sector that they need to work -- they need to reconsider. annmarie: i felt like i was in the upside down when you have exxon and chevron talking about ramping up in the permian and saudi arabia ditching plans to expand spare capacity. do you see the u.s. becoming a bright spot becoming even brighter? javier: i think it will remain brighter. i see more production coming from the united states. i expect that the pace of growth in u.s. oil production will slow down from last year. i also said that last year and got it wrong. the pace barely slowed down. even more interestingly, we will have more production growth coming from canada at the same time we have more production coming from brazil. it is the whole of the american

continent, a big bright spot for oil production and the saudi's have the challenge. annmarie: hostilities once again in the red sea, but oil fails to break out. how much loyal -- how much loyal -- lower prices be if we strip out all of volatility? javier: i do not think the middle east is a big factor on the valuation of oil prices. the market is at the moment completely ignoring the geopolitical race. and i do not think there is much of a geopolitical reason to apply to oil. if everything is messed up in the middle east i do not see nate -- i do not see a downside. can we go two or three dollars lower? yes, but it is driven by supply and demand. the demand looks relatively good. yes, china is challenging. but i will consider oil demand growth in 2024, one million barrels a day is a good resolve

for what is happening in the world. jonathan: it begs the question why crude is not higher so we can finish. where does this conflict come from and why are we able to ignore what has been developing in the middle east in the last three to four months. you remember 2019 where houthi militants were taking out a chunk of saudi production. we are not seeing that play out. why are we so comfortable in terms of what has been playing out in terms of crude christ -- prices? javier: houthis were able to lock down saudi capacity for a few days and then the production came quick to the market. the market is effectively reassured. we can lose a lot of middle east production, it has never happened and so the market just gets complacent. there is a lot of spare capacity in the united eric m. sand saudi arabia. at the same time there is a lot of production coming from the united states and canada and the

markets see that coming. and non-opec production will probably be more than enough to meet all of the demand. jonathan: brent crude 78.53. great to catch up. we should do this more often. having a blast. out of london today. crude is posited by 0.7%. wti up point we percent -- .75%. lessons of the morning, takeaway, goldilocks is on life support? lisa: i am sure that i will get hate for people who love goldilocks. there is a question if we are talking about a landing again and what it looks like. what it looks like for a potential they hard landing and a higher neutral rate going forward. these are some of the debates that are the most heated. jonathan: coming back to that you said goldilocks is just a fairytale. lara rhame suggesting that

rates need to go higher further out along the curb which folds into what we heard from deutsche bank that says that maybe the neutral bank is closer to four than three. lisa: are we restrictive? we are seeing strong growth if it continues and we are not restrictive, it means it is sustainable to have a 5% rate and still see growth. maybe it is a 4% rate and it is a far cry from 0%. jonathan: if goldilocks is on life support is the bill going room congress dead on arrival? everyone wants to say it is. politico, what is the title? annmarie: everything is dead. jonathan: is it? annmarie: the bipartisan hard infrastructure took months to get through. biden talked about that when he came into office. it got through 2021. the problem is the election is in november. the closer we get to the election how hard will it be for republicans to sign up?

this morning the editorial board, if the republicans do not do anything the electorate will say it is not just donald trump that wants to make it an election issue and they will start to blame the republicans for this. jonathan: is it convenient for both parties to drag it out and just fight over it for the next couple weeks? annmarie: it is not convenient for the democrats. biden is the incumbent president and integration -- immigration is becoming the big thing for polling. the economy and immigration are top issues. jonathan: quickly becoming the top story. tomorrow a stacked lineup for you. block cofounder jim mckelvey and michael nathanson of moffitt nathanson. from new york city, good morning with already four minutes away until the opening bell.

this was bloomberg surveillance. ♪ xfinity rewards presents: '1st and 10gs.' xfinity is giving away ten grand to a new lucky winner

for every first and ten during the big game. enter daily through february 9th for a chance to win 10gs. with the ultimate speed, power, and reliability the xfinity 10g network is made for streaming live sports. because it's only live once. join xfinity rewards on the xfinity app or go to hi, i'm jason and i've lost 202 pounds on golo. xfinity1stand10gs.com for your chance to win. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized.

golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

guy: -- manus: good morning. there is a sheer defiance of the equity markets despite a 27 bacon -- basis point ratchet higher in the bond markets. equities undefined. countdown to the open begins right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg the open" with jonathan ferro. manus: coming up, investors brace for the next wave of said speak.