>> every week passes, the expectation about how much the fed is going to cut rates is less. >> we have a fed that we have had sumwalt back of if march is on the table or not. the base case is the next steps are easing. >> we need to see more data. >> when you look at rates and where the fed is today, the fed has gotten to where we need it to be. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern.

>> live from new york city this morning, good morning. for our audience worldwide, this is bloomberg surveillance. alongside lisa abramowicz, i'm jonathan ferro. was the market open yesterday? the trading range was so tight. it closed on wednesday within five points of 5k and on thursday within three. >> it was pushed over there begrudgingly by a market that does not want to have any direction because why would you right now? people are worried about momentum given the fact that we have seen this incredible rally and yet, high valuations and questions about rate cuts and how many could happen and concerns about profitability and whether expectations are too high are plaguing the market. jonathan: look at the bond market. yields high up on the week. two year, 10 year.

we can talk about the auctions and the data, it was monday. it was a solid -- it was solid. 8:30 eastern time, we will be talking about inflation revisions. they were important last time around and are more important now. the quote is my hope is -- with good policies based on data. lisa: that was what i came in thinking. we are going to care about this? chris waller cares so we care. if it changes to the upside like it did last time around, does that change the view? i've read note after note saying this could be a big deal but it won't be. jonathan: it's so important the fed can't commit to easing until we get -- they get their hands around the trend. chairman powell was not comfortable enough yet to say

this was all said and done. maybe still concerned about factors bringing down inflation and worried about the prospect of inflation stabilizing. lisa: what i've heard from every investor that has come on is that nobody is pricing out rate cuts this year. they are still pricing in three, 4, 5 rate cuts later this year. here is the question, what will it take for the market to wake up to the view of the projection the fed is put out there, other than to say the fed is wrong and we are right. but what the market is doing despite the pushback. -- that's what the market is doing despite the pushback. jonathan: 30 year option, $25 billion yesterday. lisa: all of them going pretty well despite this concern about the budget. despite the fact the interest payments will outstrip some of the military spending in the united states this year. all of this is not playing into the bond market. why? person after person has said

bonds are back, we can get some income. we have a guest that will say there is something for everyone. pick your poison. people are trying to lock it in at a time where there is real concerns about long-term inflation and the deficit. jonathan: i can't believe we haven't talked about it. here we go. if you are running to be the president of do you want to be described as a well-meaning man with a pull memory? lisa: do you not want to be tried for something? take a step back. there are a lot of questions about this. president biden responded by saying i'm not a man who has problems with his memory. the mexican president -- that's a problem. on wall street, executive leadership is defined by creating people of succession where you can pass the business

down. the sense of who comes next. the executives in charge of this country have not done that. that, i think, is a real problem and a liability. on betting markets, people are starting to question whether biden will be the nominee. jonathan: the competitive contrast is amazing. waking up this morning, the front page, every one is about biden's memory. nobody is talking about the fact we had a supreme court hearing about whether the former president could even run in the election this year. if you thought it would be a bad day for the former president, think again. i would say yesterday was a phenomenal day for the former president. it was the sitting president getting the bad headlines. lisa: what i find interesting, the supreme court actually cross partisan lines. normally, they are contrast of conservative and more liberal justices. they said this is a federal

issue and he should be on the ballot. this is not something states can decide state-by-state. that was less politicized in terms of trying to create a democratic grounding. the fact we are not talking about that and we are talking about memory issues, well said. it's a problem for biden. jonathan: let's kick it off with the price action. equity futures on the s&p 500 are positive by .06%. the euro, just a touch weaker against the dollar. coming up this hour, jonathan stubbs, jeanette low and deborah aitken. i'm trying to work out, ms story or luxury sector story. it feels like the former. lisa: they are planning a

percent to 9% price hikes on their items, hermes, when you are seeing l'oreal and gucci struggle. it's the haves and the have-nots. who caters to be high-end luxury? you are doing great. jonathan: this is not the by now, pay later crowd. lisa: did you see the a firm? they came in lighter than expected. i wonder if some of those people are pulling back, exactly to your point. maybe this is in the entry level type of luxury. jonathan: deborah will speak to it in 25 minutes. we begin with our top story, the u.s. stock market. the s&p 500, hitting 5000. jonathan stubbs with a bit of warning. the broad u.s. tech group presents valuation headwinds, multiples have expanded. and the relative pe for u.s.

tech versus global equities gives a self signal. it gives a self signal. does that mean you want to sell? >> in markets, things are more complicated. we have valuation signals that we have to respect that tells us to sell u.s. tech at this point. that is clear. we have momentum signals which would tell you the opposite. investors are copper between the two schools. -- cost between the two schools and for the moment, -- caught between the two schools and for the moment, momentum is winning. we think it is the more sensible path to take. jonathan: we are all asking the same question, whether the earnings power of the magnificent seven, 6, 5, 4, can continue to power this rally stateside. >> if you break the 500 into the max seven and the spx 493, the

max seven has outperformed the 493 in earnings by around 90% since -- lisa: we have to be getting some technical issues. he's turned it off. he said i'm done. jonathan: we will try to reestablish that connection issue. jp lasky doing the same thing. the question i wanted to ask him in a moment was about european banks, how constructive is he? can you look to europe for what you are buying? when you are buying europe, what are you buying? skinning this? -- skinnyness? weight loss drugs? lisa: jp lasky can come on and talk about why that is a great trade. i do wonder if there is new

focus on efficiency and higher rates. again, people have been betting on that for so long. the fact that they are being forced into trades that they left out to dry shows you people are feeling a bit risk on. jonathan: equity futures on the s&p 500 are just about positive by 0.1%. a bit of a lift after closing short of 5k at the close yesterday. bond market yields are higher by a single basis point. 416.57 -- 4.1657. lots of push back to the old rate cut. nobody wants inflation to reemerge. the president early on in the week said we need a few more months of inflation data before easing. collins admitting rate cuts were likely this year. the governor indicated little urgency to reduce bonds. lisa: i think that was her first

public speech since she was confirmed in september. you are looking at a 20% chance of a march rate cut. why? is this belief we have more weakness out there? you have heard the fed tell us we are not going to cut rates in march and we are still getting a one in five chance of it. it speaks to people are expecting the fed to tilt to the dovish going forward. that's what i find interesting. jonathan: a bit more fed speak coming up before cpi next week. we may have quit trying to get that connection with jonathan stubbs. we will speak to you in a few weeks time. >> the supreme court appears ready to keep president trump on the presidential ballot. justices --

with liberal and conservative justice questioned whether the colorado state supreme court had the power to exclude president trump on the grounds of the 14th amendment. they are expected to retool. a ruling could come in the next few weeks. janet yellen is speaking at the capital and cautioned -- risks failing. nonbanks have become a major presence in the mortgage market and regulators have continued to warn that oversight has not kept pace with their growing footprint across finance. the panel that blew off a boeing jet during last month's alaska air flight shows signs it had moved prior to the accident. that's according to senator maria cantwell, who was briefed on the situation by ntsb. it had shifted prior to breaking loose on january 5. alaska airlines said there was no indication of issues with the door plug prior to that flight.

jonathan: let's get some earnings from pepsico. the stocks are down 1.8%. lisa: it looks like snacks, people are buying more frito-lay chips, mountain dew and gatorade. they are looking at an earnings share growth of at least 8%. revenue is up 4%. this is within range. within range is not good enough as people look at what you are seeing right now. consumer behaviors are largely reverting to pre-pandemic norms. key question, what about ozempic ? we will dive into that later. jonathan: a lot of people will dive into that later as well i would imagine. the stock is lower by 1.8%. up next on the program, president biden on the defensive. >> how good is your memory and can you continue as president? >> my memory is fine.

jonathan: that conversation is coming up next. live from new york city. this is bloomberg. ♪ that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

jonathan: welcome to the program. equity futures on the s&p 500 are just about positive i 0.1%. over the last three days, the s&p 500 has been grinding out day after day an ok day of gains. under surveillance this morning, president biden on the defensive. >> can you continue as president? >> my memory is so bad i let you speak. my memory is fine.

the president of mexico did not want to open up the gate. jonathan: that was awkward. here's the latest heated exchange with president biden angrily defending his memory after a special counsel report on his -- referring to egypt's president as the president of mexico. jeanette lowe joins us now. i know you want to focus on policy. we do too. but this is the focus. what are you telling clients about, particularly whether people are still asking whether this is going to be the nominee for this year? >> i think voters in particular have concerns about both of the current front runners for the nomination. aydin and former president trump. that is something that -- biden

and former president trump, that is something that continues to be a potential opportunity for one of those two to not be at the top of the ticket when we get to november later this year. that is something we have to keep an eye out for. there could be a change at the convention for either one of the parties. it's a very low probability it's not something we are going to discount. we have to keep in mind and have the opportunity out there that there could be someone else out there because of a health event or a criminal event. it is something we have to keep in mind as we move forward into the election. jonathan: even if they are the nominees, can you tell us whether, ultimately, you think this is going to be a traditional campaign? i traditional campaign, i mean debate, people on the road all the time talking, or whether or not they will have to pull it back once again? >> it's been an extra neri election because you have a president, former president

trump who is running who has a number of charges filed against him. you have a unique situation where you have the current president and a former president running against each other. you have a lot of concerns with biden, whether he would be on the campaign trail. i think this will be a unique campaign cycle that we are looking at. it might be very different. we expect there should be debates, ultimately. i think things might be different down the stretch as to how much campaigning is getting done. you see the biden administration trying to get on the road more. i think there will be some reliance on the vice president to do a lot of that for the president. i think it's going to be quite unique and we will have to take things a little bit differently than we normally would have, given the unique circumstances of this cycle. lisa: we've talked about how important it is to know who the president is going to be to understand what the policy is going to be, whether there are any trust issues, tax issues. having to do with sanctions with

china and other nations. how frustrated are some of your clients and how much are they paying attention to this try to get any information on that front versus just the noise that we seem to be getting every day? >> to some extent, what is actually helpful in this cycle is that we actually do know that trump and biden -- we do know trump and biden rather well in the sense of what their policies are. you are not having someone new come in where investors have to think about what could be on their agenda. we have at least some baseline on where these candidates are on various issues. the problem we spoke about is that there are so many other factors that might be coming into play this year. especially with criminal trials going on, classified documents cases, all of this adds to additional uncertainty that takes place that makes it a little bit harder to kind of frame out how the election may play out and then what issues are going to be on the topic of the agenda for whoever becomes

president in 2025. lisa: when you talk about we know the candidates quite well, do we? our next -- one of our next guests wrote this. biden is staying in the 2024 race to win the nomination and then pass the buck to another democrat. tbd, michelle obama? do you buy into this that there will be a quick switch at the end and we aren't going to necessarily have a clear sense of who the nominee is going to be? >> i think biden has been clear about this. he is in the race because trump is in the race. if trump were not in the race, there might be a move to change at the convention. that's a low probability. then you have to figure out who will be next in line. people with think it should go to vice president harris. -- will think it should go to vice president harris. if you would put someone else in there over her, there would be a civil war within the democratic party and that's not something you want ahead of the general election. i think it is quite unlikely.

i think he is clear that he is running because he is the candidate who can beat trump. and michelle obama is probably not interested in getting back into politics at this moment. jonathan: there are some bills potentially going through congress pre-let's talk about the bipartisan tax bill and how likely it is they will pass an eighth bill on border security. >> the senate is moving to this national security bill. it's a $95 billion bill. they will work through the weekend and maybe into next week to try to get this done. it has some hurdles even if it gets past the senate as to whether or not it will move forward in the house. we have a number of members of congress, they want to provide one more aid package to ukraine ahead of the presidential election. there is also this tax bill that you mention. it passed the house on a strong bipartisan basis. there are a lot of members in the senate who want to pass it

despite the call for changes. we think that is something that can get done. something that we are focused on is the fiscal impact that these pieces of legislation could have. we think it is not quite priced in that either of these bills could probably pass. if they do pass, as well as if they actually do get congress to pass a fiscal 2024 budget, that's a long -- along the lines of what we have as a debt ceiling, that could be seen as 300 billion dollars of fiscal stimulus coming into the economy this year. that is something we don't think is priced into markets and debt forecasts and priced into -- not priced into gdp forecasts either. >> how soon do you expect that to be? >> one of the things we are looking at is the presidents try to boost the fiscal stimulus ahead of the election. biden will be different in that guard. the tax thesis could be quite helpful. the tax bill, the headline is it

is a $78 billion bill. that's looking at the 10 year score for that bill. if you look at what's going to be coming out this year, we are looking at 135 billion dollars of tax credits that could be beneficial to companies. that can be helpful for those companies. in addition, you get some benefit from having an expanded tax credit that can be helpful to voters. also, if we get the budget passed, you have defense spending going up. that would be something that would be good for those stocks. the stimulus -- stimulative effect is at least enough to -- .5% of gdp. that can be healthy as you are trying to support the economy, making sure there is not a downturn. it could be helpful in the general election if that is something that biden is trying to do. jonathan: do you think we will be talking about fiscal austerity anytime soon? >> this is something we have

highlighted quite a bit. with the fed raising interest rates, we have seen u.s. net interest costs rising exceedingly high. we are over 16% of tax revenues. usually when we look back, once you hit 14% of tax revenues, the u.s. goes into fiscal austerity. we are in an election year so it's not likely we will see fiscal austerity this year. as we look ahead into the next couple of years, as congress needs to think about whether or not they will be extending 2017 tax cuts, as they are looking at what they will be doing with the new presidency, how much we are paying for interest costs is going to be quite important and we are going to have to think about how do we do fiscal austerity if we are not seeing strong economic growth to bounce it out -- balance it out. jonathan: if only you could have seen grandma's face. -- lisa's face. lisa: are we going to get fiscal

austerity sometime in the future? we are going to have to and then it never comes because it's always an election year and nobody wants to accept the cuts to certain programs. jonathan: bruce in politico moments ago, a day the biden world wishes it could forget, yesterday. lisa: it solidifies some of the impressions other people have had. we have how many more months of this? nine more months? stay tuned. [laughter] jonathan: i can't wait to see where you are at in nine months time. coming up, deborah aitken and we will recap with pepsi as well. this is bloomberg. ♪

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jonathan: three days of minor gains on the s&p 500. looking to make it day four. the nasdaq 500, up by .2%. heading toward five weeks of gains for the s&p 500. yields higher through the week. i will get to the bond market in just a moment let's talk about earnings. the big one is two wednesdays away, when we get numbers from nvidia. pepsico is down by more than 2%. lisa: it missed when it came to revenue.

what i find more interesting is pepsi raised its dividend by 7% and said it would buy back a billion dollars worth of shares. yesterday, i was reading data that so far in february, there has been the greatest amount of share buybacks announced by u.s. companies, ever. in history, for a february. it's been one of the best starts to a year after 2023, ever. this raises a question. is this because managements are comfortable, because they see a better opportunity forward? is it because they don't know what else to do with their cash? how much of this is behind -- jonathan: i want to talk about pricing power for some of these consumer facing companies. that stock is down 2.3%. i want to talk about this with michael from bank of america. a 30 second ad for super bowl one was $37,000.

nothing keeps pace with the super bowl inflation. but if they could, a sixpack of beer would be $340. a gallon of gasoline would be $61. the average u.s. house price would be $4.2 million. the s&p 500 would be at 16,374. lisa: you know what this tells me? michael, we feel your pain. it's been a market meandering with not a lot to talk about. congratulations on finding a great angle. jonathan: it was as if this market was not even open. we've had price action in the bond markets. two-year, 10 year and 30 year looks like this. 4.1579 for the 10 year yield. the 30 year yield, up by a single basis point. we heard from the governor who

had this to say. even if we end minus rates, the financial conditions will more than likely continue. lisa: this is the reason why it's been such a hard thing to trade. it's been completely predicated on what people have been talking about for so long. even though you got, a couple of weeks ago, the suggestion they were ready to start moving to a 0%, all the way up to a 0% rate, there is this pushback. we don't need to because we are not seeing the incredible inflation they were hoping for. jonathan: under surveillance, here are your top stories. number one is president biden failing to ease concerns of his memory and fitness for the job. president biden insisted his handling on classified documents was inaccurate. biden made another gaffe, referring to the president of egypt as the president of mexico prayed we all forget stuff and get things wrong.

-- mexico. we all forget stuff and get things wrong. lisa: what? jonathan: when you have to have a news conference that there is nothing wrong with your memory and then you make another gaffe, it doesn't help, does it? lisa: this is not great. the fact that we were talking with jeanette lowe and there was speculation that biden would hand off to another person and she said it's not going to happen. what's the in game for this? if he thinks he's the only person who can beat trump and then jim mckelvey said trump's going to lose to anyone but biden and biden would lose to anybody but trump, they are equally not loved candidates, why are we doing this again? jonathan: i wonder how this will work on this campaign. you go back to the previous campaign of 2020, we are in the pandemic. they joked he was in the basement but he wanted to make a referendum on the sitting president and was successful doing so. he did not have to campaign in quite the same way. this time, there is no pandemic.

he's expected to get out there. when he makes mistakes like this, the spotlight is on him big time. less forgiving. lisa: i'm glad you switched the conversation to policy. you are talking about the bill. he will be meeting with olaf scholz later today and how are you going to deal with not who he is but in terms of what kind of aid gets to ukraine and how we deal with some intense geopolitical things, that's where the focus should be. the fact it is not is a shame. jonathan: the focus on russia, vladimir putin saying he has not achieved his objectives in ukraine, yet. he would be open to negotiations if the u.s. would stop sending weapons to ukraine. evan believes an agreement could be reached to secure his release. we talked about this a little earlier this week. we said you can't cover this

particular interview without pointing out that many people have asked for an interview with vladimir putin and have not been given one. many people have tried to cover this war and have been locked up in russia for it. credit to him for taking on vladimir putin at the end of that conversation in quite the way he did to push for the release of this journalist. lisa: that i agree with. he then said sure, we need to have some sort of negotiation at some point in the future. again, theater. that's my take on this. he did push for the release of evan gershkovich. the question is what's the president of russia going to demand? jonathan: the fatigue israel. it's real in this country and it's real in other countries too. lisa: he said that. prudent said as soon the u.s. stops sending weapons to ukraine, we can negotiate something. what are the terms of negotiation? ruling over ukraine?

a lot of things need to be developed. the fact that people can't talk with a unified voice is becoming a problem, in terms of ukraine complaining they don't have enough missiles. jonathan: let's get to the latest on the earnings. i want to talk about hermes hitting an all-time high. l'oreal reporting disappointing results. also this week, kering is suffering from a slowdown in scales. gucci has been in a tough spot for a while, lisa. you look at earnings of 5%. you get the feeling that is a stock specific story and not an indication of what's happening with the broader luxury market at the moment. lisa: i take your point about by now, pay later. and i take your point about what else do we have to lose and let's go and buy something beautiful and go on a great experience because we can't afford to buy a house. this sort of idea is may be

losing steam as people face reality. maybe that's part of what's behind it. i've thought it was interesting the buy now pay later firm came out with the forecast for this year, seeing slowdown in that. jonathan: we can get to that in a moment. by now pay later, that explosion over the thanksgiving holiday. black friday into christmas shopping, you wonder how things are trending, my line of the morning comes from deborah aitken. she says they are in a high luxury league of their own. never joins us now. -- deborah joins us now. do you think this is a stock specific story rather than an industry story when you look at these numbers this morning? >> i do. in one way. it always has been the case for hermes. the 21% roast rate on the back of the euro growth rate that it achieved.

the way that it has built in its earnings numbers and the way it is focusing on that growth with new production facilities and staff. the biggest risk is it is diluted over the midterm. we see that continuing. there are companies, if we look from the beginning of the year, we have anywhere from 10% to 20% share price performance positive up to the tapestries, the owner of coach who did fairly well. it's the u.s. you look at what's happening, doing very well in the u.s. and that is counterbalancing what is happening at the moment in china. >> you talked about how polarized this luxury market is at the moment. can we talk about pricing power?

we could have price hikes of a percent to 9% on average in 2024. who else has that pricing power? >> he said that but he won't do that. we saw that over the last couple of years. the shockers out there were accepting it. there were many over the last couple of years that had that pricing power. we start out with average share prices across the board in many luxury categories and across many brands. when he percent to 25% -- 20% to 25% higher. that doesn't say that they don't pass pricing at 2% to 4% this year. that would be where i would expect pricing to go. lisa: is there any macro trend we can take from this? companies exposed to china?

is there anything at all or is this silk scarves and broken bags that people like -- burken bags that people like? >> it really is delivering every sector, every region and it is quite similar in terms of the growth rates and trends. if we look at other companies, i would say that the u.s. is particularly robust and it has been better than we thought going into this earnings season across beauty, high-end and the high-end luxury. we see that also, even with l'oreal today, where they have the u.s. up 12% despite a flat china market where l'oreal outperformed by 6%. europe as well, europe is resilient.

advancing, it's doing well too. there is a lot going on brand by brand that you mentioned at the beginning. there are some brands such as gucci where their only strategy overhaul is about getting perception into the mind of consumers being elevated from where it has struggled previously. jonathan: if i could jump in and get a response from you on that, it felt like that for a while, it was being used for the entry-level luxury items. maybe gucci. deborah, you've seen those trends change over the last 12 months. >> in the u.s. in particular, on the back of the system and others from the year prior, we saw the u.s. at the entry-level aspiration, particularly with fashion brands.

what we have seen through the second half of this year, against those easing comps into last year, what we have seen is we are coming out of that. the brands need to be really astute. they need to be in the face of the consumer. the consumer even at the entry needs to feel it is personal, personalized marketing grade you talked about marketing at the beginning of this too. advertising spent and how we use the cash flow. l'oreal is an amazing example of this. it has taken its marketing spend from $12 billion to $13 billion this year. what it talks about his text for the future. that is how, outside of asia, it is growing the business so profoundly well. probably 1.4 times the market rate. jonathan: interesting.

>> there are so many interesting messages out there. jonathan: pleased to get some clarity from you. hermes in a high luxury league of its own. morgan stanley, results very solid. let's get you an update on stories elsewhere. here's your bloomberg brief with dani burger. >> president biden has criticized the extent of israel's military campaign in gaza, saying there are lots of people who are starving. a lot of innocent people who are in trouble and dying and it's got to stop. the comments came after benjamin netanyahu previewed plans for ground forces to enter the city of rafah. ralph allies to the south of gaza. pepsi -- rafah lies to the south of gaza. pepsi saw profit growth for the year.

still, appetites are returning to pre-pandemic levels. pinterest reported weaker than expected fourth-quarter holiday sales. revenue came in at 890 $1 million. the estimate was $990 million. analysts are positive on pinterest thanks to a new partnership with google. jonathan: i missed a lot of things. number one would have been his review of pinterest. lisa: what do they do? i don't get it. i went on there for a hot second end it was terrible. jonathan: you say that and it sounds ok. when tk would say that, it skews female. lisa: it's true. jonathan: it's a wedding list and stuff like that. lisa: if you want to renovate your room or your kids bedroom, people go on this. i went on it and i haven't been

able to keep my interest because i'm not good at these things. the fact that pinterest is declining in ad revenue and meta-is crushing it, can you say targeted ads from google are going to change the dial pinterest? jonathan: up next on this program, the last mile to 2% inflation. >> to me, there is certainly a model that you take rates down quickly. that's not a model that's good for the economy. if i could get these kinds of numbers to stand, that's what i'm looking for. jonathan: that conversation continues up next. 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?

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♪ jonathan: live from new york city, stocks are positive on the s&p 500, up by 0.1%. the 10 year, for 16 -- 4.1637. >> it's a strong labor market still. gratifying to see inflation come down, hoping it continues to come down. there is certainly a model that could take rates down quickly. that's not a model that is good for the economy. if i could get these kinds of numbers to stand and even better, broaden, that's what i'm looking for. sustained and broadening. jonathan: the expectations for rate cuts until they are comforted, inflation is heading back to target. at 8:30 am, we will get revisions to last month's cpi data. a warning from henrietta, we are seeing slowing growth and we are fighting a tougher last

inflation innings. we have moved from a world of constrained demand to more vulnerable supply chains. let's begin if we can with the growth outlook. what we have seen so far is, stateside, upside her prize. what kind of slowdown are you into spreading? >> it should. it's true that the u.s. has defied gravity over the course of 2023 and, to be fair, it's true, the beginning of 2024, some of the numbers that were coming out, particularly for the labor market are stronger than expected. that being said, a lot has been thrown at the situation, in terms of rate hikes. that does take variable lags to come into the economy. it should slow. we will have to see if it does. the positive side is we are seeing inflation coming down. jonathan: there is a concern for central bankers. inflation stabilizes above

target. do you share those worries? >> i think it's a very fair question. as you mentioned, we are in the last innings. it's the hardest part. we are looking at the services. we are looking at some of the inflation that might be wage driven as well. it is a tougher part. it explains why the central banks are being cautious about going too soon in terms of rate cuts. lisa: you know this not being cautious? everyone in bond markets who are going into as much risk as possible and bidding up. you understand why. there is something for everyone. if you want spread or duration, you can find it because you are getting yield. how long will that look attractive if we still do see some of these economic prints coming on hotter than expected? >> well, at the moment, you are in a situation where there is a lot of cash. you showed some of the statistics earlier.

there is a lot of cash sitting on the sidelines. i think we will see more of that this year. it has been interesting to see the issuance. you mentioned the treasuries, there is pretty big issuance. that has been well absorbed over the course of this year. if you look at the european markets, you had some record inflows into the asset class. there is some appetite for the fixed income piece of the market. it's not just a growth story. it's also about inflation story. we've seen inflation coming down. that's what investors are looking at. another aspect investors are taking comfort from is we are talking about rate cuts. lisa: where is this cash coming from? we hear from people and they say there is 6 trillion dollars in money markets. we talked to somebody who runs money market funding and it's growing because it's an asset

class. where is it coming from? >> it's interesting. it's feeding on itself. you have a decent coupon on the cash side of things. i think that -- we had an interesting conversation with an investor the other day who said something that might be slowing the economy is to cut rates. that means you will get less income on the cash side. it's a question of investors being cautious and wondering what's going to be next from an equity perspective. maybe not quite being ready to fully go into the bond markets, either. i think that explains what we are seeing in the cash markets. lisa: i love what you said because it is so counterintuitive but something people flirt with in back rooms are not necessarily in public, what if high yields are stimulative and leading to more income that they can put back into markets and put back into

the economy? do you buy that? is it more true than people realize? >> i think there is something to -- it is something to bear in mind. keeping in mind the levels of yields you have across the u.s. and across europe in the cash markets, something you have not had in a while at this point. jonathan: great to catch up and get your thoughts, henrietta. let's talk about what we are seeing so far. let's wrap up the year so far. tons of issuance, corporate credit and not just investment grade. lots of supply has been taken down quite well. the demand has met the supply. this week, we had a lot of supply as well. we talked about the tenure slate , $42 billion of 10 year notes from the treasury. that went well. two days later, 30 year bond, $25 billion worth, also taken down quite well. that supply has been met with pretty solid demand. lisa: that's the unusual part of

this. you had a record supply and asset classes and you had the demand meet for it. there is cash on the sidelines. i wonder where it is coming from. if people are satisfied locking in yields of 4% on the 10 year treasury, yields will be lower than that over the long-term. if you start to get nervous that inflation gets stickier and the deficit will matter, you have a different equation. there is expectation they can keep rolling it over and be kept afloat by private credit until rates are going to go lower. it has not been fully assessed in markets that these are the new rate cuts. nobody believes it is. jonathan: 321 at the close yesterday. we are getting tighter and tighter. we talked about this over the last week. there seems to be a shift in central banking. they have been constrained by above target inflation for the last 18 months or so. there is a worry about their ability to respond to negative shocks. 12 months ago, big worry in the

market. we got through it. now, i think there is more comfort about the ability of the federal reserve and this chairman to respond to a negative shock if we get one. he told us that last week in the news conference. lisa: if the big threat is no longer inflation, they have the tools to cut rates more dramatically than they have for decades in order to respond to weakness. companies have greater resilience because of their pockets of cash, if you believe inflation is going to come down. that is the change. you've seen the reddit quality go up in a lot of these -- credit quality go up in a lot of these corporations. that's exactly why that is the big headwind. the potential for re-inflation in the economy. jonathan: when this conversation continues, jay pelosky.

a brilliant our, coming up next -- hour, coming up next. people get so upset when you call one person brilliant and not the other.

♪ >> what i'm focusing on is the productivity boom. that's what is driving this immaculate disinflation. >> i can't make the case for upside other than momentum, which is powerful. >> the data is telling me to be risk off. >> there's a lot of opportunity in the u.s.. >> we are seeing signs of re-acceleration in economic activity. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: this is "bloomberg surveillance." alongside lisa abramowicz, i'm jonathan ferro. the s&p 500, not doing much at all. not doing much all week. it's been calm, drama free. even with n.y.c. p down about a third. things are pretty calm. lisa: i would say it's calm on the surface but underneath, it's a battle. computer -- complete chaos. fomo versus fear. momentum or concerns about valuation. those things are locked in a steady battle under this relatively calm surface. jonathan: fear meets fomo. what are the things to fear? lisa: there's lots of things.

high valuations, narrow leadership. pricing in too many rate cuts and what happens if that doesn't happen? re-accelerating of inflation. geopolitical conflict disrupting shipments. people are -- jonathan: very on bread. -- on brand. i love that you have list ready to go. you start to see some fragmentation. i'm looking forward to catching up with jay pelosky about that. in two wednesdays time is the final mac seven stock. lisa: earnings performed better than expected, saying the ai trend is real. if that is an indication, there is a secular trend that could keep bolstering these stocks, which is why people have not been able to dismiss them. there is something real here. it's not all just fake offering. -- fluffery.

lisa: i'm thinking that is absolutely phenomenal. the big are getting bigger. snap, interest, you said it in the previous hour. jonathan: they are consolidating revenue and market share. don't you want to buy it? you could say this isn't good for small business, blah blah blah. they are delivering the earnings and the dividends. they are delivering share buybacks. at that point, that's what people are looking at and saying we can't discount that. jonathan: the united states is not the only game in town. ms is up by 5% in french trading at the moment. it's up 14% here today. they are having a decent year so far. there are some names beyond big u.s. tech. lisa: the granolas over in europe. this is what they are talking about. here is this question, can they really compete in some sort of

megatrend in the same way artificial intelligence can in the u.s.? jonathan: it's different. handbags versus ai, it's a different world. lisa: is it? jonathan: it is. you start the year, there is a worry we have priced in too much easing from the federal reserve. they have said you have priced in too much easing. their words are reinforced by the data. we have to readjust and equities are ok. it goes back to stuart kaiser's world. good news has been good news. equity markets are at all-time highs. even as we have reevaluated and recalibrated expectations around the federal reserve. lisa: you are baking in more than a one percentage point rate cut by the end of this year. at least four rate cuts. if you price in two like the fed is saying, you get a different

response in equities. what's the threshold? in this one of the reasons -- isn't this one of the reasons the russell 2000 has underperformed? until you get a sense of what certainty you have, can you get that broad thing out that people are hoping for? jonathan: four minutes into the hour and not a single mention of being old, frail or having a poor memory. lisa: someone just wrote in, fluffery was not -- is not a word. it's true. it should be a word. jonathan: the s&p 500 looks like this. we talked about it a few times in the last 60 minutes, it's as if the market was not open yesterday. a ridiculously tight trading rate. in the bond market, yields higher by a single basis point. 4.1657.

coming up, jay pelosky, greg valliere and jennifer of bloomberg intelligence on snack sales and the super bowl weekend. we begin with a big story. jay pelosky highlighting his concerns, writing the four for four line-up seen last fall, favorable seasonality, sentiment, positioning and technicals have reversed for the most part, leaving the u.s. cautious for the neil term -- near term and looking elsewhere for action. i want to talk about china and europe with you, and japan as well. let's focus on the u.s. what isn't there to like when there is -- the group of u.s. tech stocks keep delivering the earnings they are delivering? >> we had a big run. it's important to realize that

the factors that were attractive to us back in november, when we were constructive, unlike most, have now reversed. that's just reality. we want to live in reality. in terms of the u.s., i think the issue is a failure of imagination. a collective failure on wall street of imagination. i give you two examples. the first is the consensus for gdp growth this year is about 1.4 percent. even though we are basically with the atlanta fed now cast at 4%. second and more telling is the consensus for year end s&p is 2% below where we are today. i think it's time that we kind of expand our horizons and broadened our focused and think not just about a good 2024, but a multi-year period of a good

environment, of macro stability, of rising productivity and decent growth and good earnings growth. that's really the focus. what we try to do with that comment was tell people hey, the real fat pitch, i know it's football season but the real fat pitch was in november in the u.s. right now, it's ok. it deserves a rest. it will take a rest at some point and will pull back a little bit. the question is what do you do then? we are very constructive on ai and tech, completely disagree with the idea that we are approaching a 1999 moment. the companies today are cash making machines, unlike in 1999 when it was pets.com, which was nothing but pets.com. we are in a different environment on the tech side.

we are looking now for opportunities elsewhere, where the rest of the world is catching up. the u.s. has been the clear leader coming out of covid, the global growth leader, stock market leader, led by tech. lisa: hold on. you are talking about pulling everything else up. weight loss medication and luxury, is that pulling that up? i think people are trying to lean into lvmh, including herme s, do you buy that that is a similar type of trend as artificial intelligence? >> it's funny you say that because there is the make since seven in the u.s. we are looking right now at adding to what we are calling the magnificent six, us and a few others. it's not just europe.

it includes many of the companies you mentioned, lvmh, astrazeneca. it also includes asml, which is critical to the expansion of the semi conductor industry, and sap, the german software company. there is technology in europe and what's interesting is there is technology even in emerging markets. i was looking the other day and the number one sector in the broad index is technology at 20%. guess what? the broad emerging market index just broke out and above its 200 day resistance level. global equities is hitting an all-time high. it's a broad move. global equities are hitting new highs. emerging markets are breaking above their 200 day average. if you look at ems china, it

looks very much like the u.s. jonathan: we are being way too kind. you mentioned china. let's go there. the most unloved equity market on the planet. a continuation of the approach to equity market volatility, which includes administrative controls, financial crackdowns and is likely to provide more than a few weeks of reprieve. it creates a sense of malaise. i know you took a sip of the drink. you know it's coming, when is this going to change? when is it going to change? >> you know what? i think the environment that we saw back in november in the u.s. is now to be found in china. absolutely rock-bottom sentiment. seasonality typically quite good around the lunar new year. position is horrible.

technicals are very good. capitulation, if you want, some people are calling it capitulation. others are saying that technicals are extremely compelling for significant bounds. we own china. we were quite constructive last fall. it was wrong. it was the worst call we had last year. we resized it and shrunk our position and narrowed it down to the tech sector. the thing we are playing, the etf, is well above its lows of last year. even with all of the negativity, it's still above the lows of last fall -- i'm sorry. the follow-up -- fall of 2022.

all the things have shifted over to china. it worked well in the u.s. and everyone was skeptical and we were up 20% in three months. can china get up 20% in three months? absolutely. in the interim, it's not performing. it's a drag on portfolio. other things are working, which should give you a willingness to hold something that you think has upside, even if it's not working at the moment. i the way, it's completely uncorrelated with the u.s. u.s. is shooting up, china is shooting down. completely uncorrelated. at some point, the u.s. will take a rest and china will move. lisa: hold on a second. we have a little bit of time left. i love you can tell how much pushback you've gotten trying to justify why this is a call you are going to stick with. i'm wondering about the logical

leap here. that china could recover but that won't cause inflation to reignite in the rest of the world and that could be problematic to your thesis. how do you deal with that? >> you are right on it. i'm going to write about that today in our musings. i think that i am starting to develop the thought that china kind of being a laggard here is constructive. if china was firing on all cylinders and the u.s. was firing on all cylinders, you might get some commodity type inflation. maybe that we are having a stage and recovery globally, which i think we are very much in the early cycle camp, is constructive. i will leave you with one thought that is happening right now as we speak. dlt is breaking down its 200 day support levels.

gs g, global commodities, breaking above the 200 day resistance level. i think the next move will be a weaker dollar, which is going to give support to more of the non-us action as we see this play out a little bit. we are constructive on low inflation. but, we are watching this relationship. dlt breaking down, commodities breaking out. the dollar will be next. rest of the world has a chance to catch up a little bit to the u.s. while the u.s. takes arrest. jonathan: we have to go very we weren't expecting such a long monologue on china. super bowl sunday, pick a team. >> oh my gosh, going with the 49ers. jonathan: ok. good to hear from you. jay pelosky. jay is the only guy who would pick out his losing bet and turn around and say you are welcome. lisa: i'm going to tell you why you are going to miss out so big if you are not in this. jonathan: it's a good job china

did not deliver because of xyz p let's give you some top stories. here's your bloomberg brief. lisa: baker's -- >> baker's are facing a brutal slowdown season at barclays. executives are also planning to shrink the overall bonus pool. jr. bankers are allegedly going to be spares and top dealmakers may see an increase of up to 10%. arm surged as much as 40%. the ceo said the company is in the early stages of ai and is not in any way, shape or form -- they have their biggest daily gains since the ipo last december. l'oreal shares are down after reporting this appointing sales hurt by soft demand in china.

shares were trading at an all-time high prior to the results. that is your bloomberg brief. jonathan: up next, the president taking a defiant tone. >> my memory is fine. take a look at what i've done since i've become president. none of you thought i could pass any of the things i got past. how did that happen? i guess i forgot what was going on. jonathan: live from new york city, that conversation is coming up next. 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!

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under surveillance, the president taking a defiant tone. >> my memory is fine. take a look at what i've done since i've become president. none of you thought i could pass any of the things i got past. how did that happen? i guess i forgot what was going on. >> in december, you told me you believed there are many other democrats who could beat donald trump, why does it have to be you now? >> i want to finish the job i started. jonathan: president biden defending his mental fitness, pushing back on a special counsel report over his handling of classified documents which described him as a sympathetic, well-meaning elderly man with a poor memory. greg brown year writing this -- greg valliere writing this, democrats we have talked with are increasingly inclined to call a meeting with biden, diplomatically suggesting he should step down.

that would infuriate him, which would look at them looking at the 25th amendment which could lead to his ouster. the democrats you have spoken to, senior democrats, who have you spoken to? >> people on capitol hill who are increasingly worried about a loss of the house, senate and white house in the next election. they fear that biden could drag candidates down and that is a legitimate fear. lisa: is this because they are worried about his mental fitness or him -- the political ramifications around him continuing as the leader of the democratic party? >> i think it's both. just yesterday afternoon, when i was starting to feel they were picking on him and may be less fair, he got the president of mexico and the president of egypt mixed up. this has been an extraordinary week with one gaffe after another for biden. you have to ask the question, is there going to be more?

i think the answer is yes. lisa: people are worried about angering him. is there anybody around him having an honest conversation about how to build up leaders within the democratic party around him so that if something happens, he can do some sort of handoff? >> he's pretty isolated. his wife and kamala harris are people who can talk to him and his son can talk to him and say you've done a great job for almost four years, maybe it's time to retire. right now, i think that is a longshot. and that's why the democrats are increasingly worried about a tough election. jonathan: what will the election process look like if he was to go down that path? >> the fifth amendment of the constitution stipulates that a majority of cabinet members must certify that the president has become incapacitated. that is very subjective, obviously. if a majority of cabinet members said that, that could lead to his ouster.

don't think that's remotely imminent. jonathan: the former president was facing a supreme court hearing on whether he could even run in the election in 2024 and somehow, yesterday ended up being a win for the former president and a loss of the sitting president. how are we going to frame this going into to 2024? >> the former president was bombastic and aggressive and shows pretty good energy. i think the american voters are dismayed. i traveled a lot and talked to people who are saying this is our choice? biden and trump? you have to wonder is there anyone else. i don't think robert f kennedy is a serious threat. maybe if nikki haley catches fire or running as a third-party candidate, that would be intriguing. right now, we have biden against trump and for many americans, that's not an appealing scenario. >> is there any historical analogue to this moment?

>> i pointed out in my piece this morning, in 1919, when i was starting out in this business, woodrow wilson had a debilitating stroke. for the rest of his second term, edith wilson ran the government. i don't think we are in a situation like that now. but presidents get sick. ronald reagan was starting to falter at the end of his second term. the woodrow wilson one was a serious one. he did lose a lot of his mental acuity. lisa: a lot of people are looking to understand what the policy prescription is and how it relates to what gets passed or not down in washington. i wonder how some of this drama plays into ukraine and israel. >> with all of this about biden and the supreme court hearings, we have stuff to do. there are things that have to be done for you by early march, there are two deadlines to keep the government open and nobody

has talked about a budget cut. they are going to have to focus on the in the next couple of weeks. and aid to ukraine. i'm a little more optimistic ukraine will get something. i don't think they are going to get $50 billion. that price tag is too rich. jonathan: what number do you expect and what underpins that optimism? >> it could be 20 or so billion. hard to say. i feel that there is a growing anxiety that ukraine is beginning to falter. we saw a new general appointed yesterday by volodymyr zelenskyy. the idea of a faltering ukraine unnerves people in washington. it might be several months away but i think ukraine will get some eight. jonathan: appreciate it and your opinion. it's being taken very seriously, what's taken place in the last 24 hours. lisa: with respect to between for the moment, is that what you're talking about?

the idea that people are being required not just to have a hard conversation but to take action, that's pretty notable. jonathan: it's amazing. you and i have talked about it a few times. i think it's worth going over once more that we are not talking about the fact that the former president had a hearing about whether he could run for the election and somehow, yesterday was a big win for him and a loss for biden after last nights performance. lisa: the intrigue around trump has created more noise and been used as a campaign tool for him to raise money. jonathan: the news conference made the situation even worse than it already was. equity futures on the s&p, positive .1%. coming up next, snack sales ahead of super bowl weekend.

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jonathan: going into the weekend, a few hours from the opening bell, the equity market on the s&p 500 looks positive by .1 6%. the nasdaq up by .37 percent. the nasdaq 100 with a lift. the next big scheduled stop for the equity market will be nvidia earnings into wednesday's time. in the russell, the small caps positive by zero point 4%. in the bond market we have taken a ton of supply. 55 billion yesterday met with

really resilient demand. yields are higher on the week particularly after the data that we got on monday. this service is read is quite strong. up two basis points to 4.4757. one hour from now, cpi revisions front and center, particularly after what governor wallace said last month. my hope is that revisions confirm the progress that we've made. lisa: it shows how messy it has been post-pandemic. there have been more discrepancies in the gap between some of the reported numbers and revisions with seasonal adjustments made. i'm not saying that this is manufactured numbers and conspiracy theory that some people have put out there. it is not that so much as it's harder to get a read when you have fewer people responding to surveys i do have different types of trends muddying some of the picture. jonathan: let's look at what

they are doing. spending. bank of america, i shared this quote with you, with real income growth picking up two to a strong labor market and continue disinflation consumer spending is increasing to the upside. for the likes of b of a they were looking for a cut in march, they pushed it out to the middle of the year, barclays too. the data has been decent. lisa: it has been confirmed by a lot of people seeing revenues potentially coming in stronger than expected because credit card outstanding's have gone up. the american household is less leveraged than it has been traditionally endorsing real wages go up. you have to wonder, which is going to go to meet which? services go to manufacturing or manufacturing go to services? you see manufacturing excel and services pick up, and that is where we are. jonathan: after being terrible for two years, year-and-a-half, very close to getting into

expansion territory. 1.0 five. looking for the euro to drop to 1.05 from 1.07 67, primarily because of the conversation about better data in america and struggle in europe. lisa: it is a bold call, 1.05. basically showing that they will meander with the dollar slightly stronger, which seems to be a feeling for a lot of people. jonathan: the two things that you hate at the moment, the politics and the euro. lisa: just a two? jonathan: the top two. lisa: the euro isn't changing quickly. politics, the same thing. jonathan: -.1%. under surveillance this morning, president biden pushing back on concerns of his fitness for the job reporting on his handling of classified documents noting biden's diminished faculties and faulty memory. by then arranging a last-minute press conference to address the comments making it worse with a

new gaffe referring to the president of egypt as the president of mexico. really awkward. you want to clean this up and you hold a news conference coming and then you finish it like that? not great. lisa: it raises questions about who is advising him and how much pushback will he get from members of the party? there are senators and people around him who are seriously considering the 20 for the amendment. i wonder, is it a greater chance of him losing versus donald trump? i can't tell. jonathan: you can tell how americans feel about the issue of age for this particular president. it's a problem. former president donald trump is not that much younger. they don't have the same concerns in the same way. we have talked about this a few times and it's worth repeating. we know plenty of people around 80 who are still mentally very sharp and can hold a news conference, take questions, all of the above. it is not only about the age. it is about the performance.

it is about the performance under pressure in a news conference like yesterday. you make the same mistake that you've been making all week over the last two weeks. lisa: my frustration is that no one is having the real conversation about why are we not having real other leaders or younger coming to the fore? because of the identity crisis in both parties. who is going to represent the mainstream and parties that are increasingly polarized? you have people going for the standard bearers. this is raising a problem because a lot of people are feeling pretty alienated by a race that they don't want. how do you then cultivate a new consensus in each party and for the nation? i don't see how that is happening on either side. jonathan: they cannot win the primary. the republican party, nikki haley cannot win the primary. look at the head-to-head with joe biden. crushes biden on a head-to-head at the national level and cannot win the primary. lisa: have you heard anyone question the primary?

no, because this is entrenched. i don't want to get on my soapbox, so i will stop. no one really wants to hear it. let's move on. jonathan: russian vladimir putin said that the country has not achieved its goals in ukraine yet. in an interview with former fox news acre tucker carlson saying that we convey to the u.s. leadership that if they want to stop military action they need to stop supplying weapons. if they do the world will be over in a few weeks. president biden is expected to discuss aid with german chancellor olaf scholz. that will be one to watch tonight. lisa: there is the bill that is moving through the senate to provide $50 billion in aid, though we just heard from greg that he thinks the number will be closer to $20 billion.olaf scholz i'm sure is curious how that conversation goes with the money that they put up for this and what they're asking from biden

that he can provide given some of the disagreements in congress. jonathan: do you want to less politics? super bowl. some sport. counting down to super bowl sunday. food and beverage sales expected to rise 30% to 8.8 billion dollars. saying that is partly fueled by demand for snacks with the drinks expected to decline by 14%. the senior packaging and food retail and is striding that consumer spending has been david about higher inflation, but the super bowl should still spur demand as consumer see the game is a holiday occasion to indulge. jen, can we talk about the tv audience before we get into food and beverage sales? why are we watching? for the sport, the commercials? taylor swift? jennifer: we are expecting almost 69 million people will be tuning into the game, 7% higher than most of the estimates going into the game itself. we attribute a lot of that to taylor swift. you have a much broader audience that is being pulled in because of the personal romantic

dynamics as well as the halftime show. when people tune into the game, about 45% of people are there to watch the football game. 41% are there for the ads. 33% tune in for the halftime show. you have a nice diversity in terms of why people are watching the show and when they will be tuning in. lisa: can you give us the straight line from people interested in taylor swift to drinking pepsi? jennifer: so, when we are looking at this overall, you guys were talking about politics and war. this has become almost a holiday. people find the super bowl to be a reprieve. we are seeing a lot of excitement around the event itself this year. there is a lot of snacking and food occasion. everyone seems to be planning to tune in. lisa: i'm curious about how some of the food companies will be

advertising. i was struck by the statistic that more than 40% of commercials during lester's game features celebrities and this year is expected to be the same including lionel messi for michelob global threat, jason sudeikis, dan marino, and others. i have seen -- how much of that is a holy grail when the eyeballs have moved to instagram, twitter -- maybe not there, but other places as well? jennifer: advertising has become a new form of entertainment. a lot of companies put in a lot of effort into the ads this year. what we are seeing is that the advertisers are more diverse this year because they are expecting more female viewers. we are seeing ads for the first time from companies like l'oreal or cosmetic companies. so, it will be an interesting mix, but they are pulling the talent that they think is going to entertain people.that is the trend that we are seeing.

jonathan: do you think the food and beverage mix that they promote will change not only because of the increased female viewership off of the back of taylor swift but the push for ozempic going into the post ozempic world in america? is what they advertise going to change? jennifer: there could be changes in what they advertise. with regards to snack and food sales, when it comes to something like the super bowl, if you are on or off of a diet, goes out the window a little bit and most people look at it as an opportunity to splurge. when we are talking out snack sales, it is only for this week into the super bowl. there could be longer term trends, but we think that this will be a time when people indulge a little bit in the snacking occasions. jonathan: it is street weekend, apparently. appreciate the update -- it is treat weekend, apparently. appreciate the update. lisa: that is probably the worry of some of the executives based

on recent reporting. weren't there reports that there were anonymous calls -- jonathan: a couple of ceos from food companies have been calling me. they are scared about it, is the quote. lisa: the public says we have other things that people can have. in private, how bad is it going to be? jonathan: they wonder how quickly they can ramp up production of some of these drugs. you know that demand is through the roof. lisa: it is demand and insurance coverage. how cheap can you make the drugs? how fewer side effects? and then, how much does it change people's tastes in a way that they will eat less and they will crave maybe things that are not the snacks? jonathan: didn't they say that they would be all right because people would demand high-protein goods? lisa: we talked to coca-cola in davos and the ceo said it is not a big deal because we provide diet coke and people want that. jonathan: for breakfast,

apparently. lisa: are you going to troll our control room? he said that that was fine. he said that he welcomes it. jonathan: as the ceo of coca-cola, i have no doubt that he thinks that is fine. here is your bloomberg brief. dani: president biden has criticized the extent of israel's military campaign in gaza saying that there are a lot of innocent people who are starving, a lot of innocent people in trouble and dying and it has to stop. his comments came after benjamin netanyahu previewed plans for ground forces to enter the city of roth near the palestinian territory's border with egypt. the panel that blew off of a boeing jet showed signs that it made prior to the accident according to senator cantwell who was briefed on the situation by the ntsb. investigators found marks on the panel, indicating that it shifted prior to breaking loose. and a statement, alaska air said that there was "no indication of

issues with the door prior to that flight." leo messi's failure to take a page in last sunday's friendly football match in hong kong cost organizers more than $7 million. the world cup winner was sidelined by an injury to his abductor muscle. some had paid more than 600 u.s. dollars per ticket with organizers offering a 50% refund. messi was fit enough to play in japan a few days later adding insult to injury to fans in hong kong. jonathan: can you imagine paying $600 for a ticket without messi? lisa: i understand why people were upset. jonathan: furious. not upset. lisa: would you pay $600 to see one person play? jonathan: someone like that? sure. let's go back in time, like going back to the late 1990's and seeing michael jordan play with the bulls. lisa: fine, but it wasn't

abductor muscle, so you have to understand. -- it was an abductor muscle, so you have to understand. he -- jonathan: like japan was a more important market, somehow? interesting. next, concerns over the bond supply. >> i haven't had a single conversation over the last couple of quarters with a client that said get me out of bonds. everyone is saying how do i get it? where do i get in? jonathan: that conversation is up next. from new york, this is bloomberg. ♪

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jonathan: equities on the s&p 500 are posited by 0.2% going into the opening bell. equities are doing alright. getting closer to 420 on the 10-year, closer to 4.50 on the 10-year. under surveillance, concerns over bond supply continuing to ease. >> between the treasury supply and corporate supply, i am wary that there is not enough. i have not had a single conversation over the last couple of quarters with a client who said get me out of bonds. every single one is saying, how do i get in, when do i get in, where do i get in? jonathan: strong demand for bond auctions this weekend reduced concerns for oversupply. remaining constructive saying that we will extend duration and long positions on any rate selloff. we expect yields in 2024 to stay

within the yield range of 2023. davis i am pleased to say is with us. the supply has been taken down really well, not just from the sovereign side of things with treasury auctions this week, but over the last month with lots of credit and corporate supply coming to market too. what are the forces behind the durable robust demand? earl: i would not call it durable. there is one buyer and that is retail. sovereign wealth fund -- sovereign wealth funds, u.s. banks are not bank treasuries as much as they were previously. we have one buyer and that is retail. a very large buyer with a lot of money on the sidelines. the reason i wouldn't call it durable is retail is a fickle bunch. the reason that they are buying now is that we've had less volatility over three months in declining yields. everyone looked at their statements at the end of january and found they did not lose money in fixed income in 2023

which emboldened them further. we don't think that it's bad to buy bonds and durations now. we are plus one and plus three with regards to overweight, but you have to realize that retail is a fickle bunch. if we get a surprise cpi number next week to the high side and you see volatility in the market, do you know who is the first to retrench? retail. jonathan: if you question the durability of the year so far, what part of fixed income do you think is the most vulnerable? earl: two-year bonds without a doubt. part of what we were seeing last year, if you think we will stay within the range of this year, is that our favorite tactical trade, and it has been treating us extremely well, is short u.s. two-year treasuries. why? u.s. two-year treasuries are 4.50 with the overnight rate at 5.25. you sell those, you invest at the overnight rate, positive carry and significant positive carry. as well as we have heard people

talk about the resiliency of the u.s. economy. we believe in it. we have been talking about it the past year and the past few months and we think that that will continue to push out when the possible fed easing cycle starts. lisa: two questions. if this is a positioning tactical play or if you are capturing the difference, and arbitrage play, versus a true bet that we will get higher rates for much longer and the market is off signs with some of the rate cutting bets. which is? earl: the point that you put up for me, the high of 10 year bonds, for example. right now we are at 4.17. we are at plus one duration in case we get there are a lot of things going on geopolitically. we think that it provides a flight to quality protection. having said that, the underlying dynamics point to a higher yield. so, we would not be surprised to see a test of 4.50, and we go plus two long duration. the hive last year was 5%.

-- the high of last year was 5%. we go higher than 4.5 zero? it is a possibility. lisa: we saw three auctions this week that all common pretty successfully before the sales yet they were record levels. when do you think that they will demonstrate some sort of investor pushback, or do you expect this to be a new status quo? earl: i have been in this market for 30 years. the thing that you realize with auctions is that it brings in a selective-type of fire. someone who needs scale and size, hundreds of millions if not billions of bonds. those people come in. it is called a liquidity event because they can buy scale. the rates are higher in all auctions because those buyers won't come back until the next auction if they need more bonds.

the likelihood is they may or may not and the auction should do all right, but worries me is where does the market rate pricing between the auctions? that is why we are seeing even though we are steady a drift higher in yields. people are worried about the data, worried about the impact on the start of the easing cycle. there is a lot of different dynamics and understanding the nuances underneath the market is what makes active managers active managers. we are off to a fantastic start this year despite not having huge amounts of risks. it is especially placed risks because the dynamics of speaking about our persistent. jonathan: can we talk about the data coming out later this morning at eight: 30 eastern time? inflation revisions? can you frame how important that might be to you? earl: it is not that big to me. on tuesday we get cpi. the thing that i'm looking for in cpi is core. from our estimation core is going to be very sticky for the next four to five months because of where inflation was last year at this time. that is going to keep pressure

on the markets. the other thing that i'm looking for is what is sticking for services inflation. a leading indicator of services inflation is wage inflation. they feed upon themselves. that is what is worrying me from a risk perspective of something being different than what the market is anticipating. those are the dynamics of things i'm looking at closely. lisa: how long do you think we can see the idea that good news is good news? you are concerned about some of the wage gains. now, it seems to be that case. is there a threshold at which the concern about reigniting inflation trumps some of the ease of a robust economy with people spending? earl: great question. to enter the first question, how long is good news good news, i think all of 2024. the reason i feel that is the large fiscal deficits. people stopped talking about that. those are dollars that go from the public to the private,

people's pocket. keeps them employed. you are getting the financial wealth effect, too. i do think risk assets will be resilient, in-line line with the economy this year, driven by the deficits. when does inflation come back into the picture and start worrying people? i think that is a second half of this year story. we are starting to see real income really increase with the disinflation, at least temporary in my mind, that we've spoken about. what we are possibly going to see is the increased shipping costs in six months to nine months. these things have long legs. our team is looking at the first half of this year as a story of growth, resiliency, and surprise upside. the second is inflation reemerging. jonathan: in terms of performance the second half of the year against that backdrop?

earl: two aspects of corporate credit. we are pulling back from high-yield bonds in corporate credit. the reason is because the maturity wall that people are talking about is coming. this year, next year, and the following year. that means corporations have to reissue debt. that right now is 200 basis points higher than when they initially put on, which we think will impact defaults. we can see defaults increasing in high-yield.because of our view of the economy and its makes into the volatility is probably our highest conviction thing, we like credit but are selective. we are looking for episodes where things widen out to belong, similar to our duration strategy. we like financials very much. we think that the spreads are attractive. they are tighter now, but when they wide enough that is an area where we go overweight. that is our overall view on credit. you have to be selective on the credits that you take and moving away from high-yield now until

spreads widen. jonathan i would love to continue this conversation in a few weeks. a few calls to get into, two very different halfs for 2024. lisa: although good news being good news for all of 2024, but the inflation concern picking back up in the second half creating some headwinds. he likes financials. that was interesting. jonathan: somewhat contrarian given what is happening on the equity side. we have seen some of the damage in europe on the bond side of things. lisa: basically saying when it comes to high-quality you can capture some of the income. the tight spreads, going again to, people are getting concerned. maybe everyone has gotten over their skis with their bullishness? jonathan: tom kennedy of jp morgan, u.s. air force veteran david a., from new york city,

taking you towards the weekend, equity futures are positive. this is bloomberg. ♪

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>> every week that passes come the expectation about how much

the fed will cut rates gets less. >> it will take more time for cuts than people will like. >> we have had some walk back as march is on the table or not, but the base case is the next steps are easing. >> we are in the same camp as the federal reserve. we need to see more data. >> the fed has gotten us to where we needed to be. >> bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, let's get me to the weekend. from new york city this morning, good morning, good morning from our audience worldwide. alongside lisa abramowicz i'm jonathan ferro. one point 1% on the s&p 500 heading towards a fifth week of gains. lisa: the optimism is palpable in terms of the economy. maybe people raising worries. i get the feeling that people are sick of worrying, that people are sick of being wrong.

i am not sick of being concerned about things, but i have felt that from people. that the wall of worry has proven an inaccurate guide again and again so people are dismissing it and going with momentum. jonathan: i think that they are comfortable with the idea that the fed can respond to negative shocks. when you see a difference in a stock like n.y.c.b we re fence that. high-yield spreads are at 320, which is amazing. lisa: great point, but it only works with them with the ammunition to fight downturns, not an increasing the acceleration of the economy. even though we have better than expected economic data people have parked the idea that inflation will reignite and the fed will have to hike rates. that is the sea change. jonathan: you have nailed it, as always.

but will constrain their ability to respond to a negative shock? inflation without doubt. davis, if you missed it, go back over that interview. inflation concerns reigniting, that would change the game, but i'm not sure that that is the base case for a lot of people now. lisa: it is not because everyone believes in transitory again. that a lot of these are year-over-year supply chain normalizations that stem from the pandemic and it has to do with workers coming back into the forest. people pointed to immigration helping to bring down some of the wage pressures because people are able to come and fill the roles. all of these things, yes. the key question is, wage gains and wage increases are still well above pre-pandemic levels, so that's one thing that i'm watching. jonathan: the richmond fed was here yesterday for about 30 minutes, this slide, no one

wants inflation to reemerge. the experience of 40 years ago still weighs on them. i'm not saying that they are like voelker, they are not, this is a very different one, but they do not want history to repeat. they think that they have the time to wait. they will wait. lisa: if you look at consumer sentiment, there has been study after study showing that people tend to feel worse about paying higher rates in the grocery store even if they are getting higher wages. it does not register if you see that your bagel, egg, cheese costs eight dollars rather than four dollars. it makes a big difference for someone's sentiment when they go to work in the morning. jonathan: it is not my call. lisa: do people feel that it is important to pay attention to? the question of the different horse race between biden and the situation over the concerns over his age and mental acuity, and then trump and some of his

issues with respect to the court system? all of these things, do we want to get into this? we can ask our next guest how much he cares about this. jonathan: here's the lineup. thomas kennedy around the table on why investors should rotate out of cash and not what is happening politically in washington, d.c. a retired air force general on biden's increasing pressure on israel. and the data dependent fed and consumer confidence. it is starting to pick up. if you're going to get big layoffs in america, we get to the situation of corporate america, across-the-board, small and medium-sized businesses, they have to worry about margins, and start protecting margins by laying people off aggressively. how close are we to that moment? if consumer confidence and ceo confidence is building? lisa: and productivity is picking up so you can increase margins without having to shift some of the workforce.this

is the mystery. people are saying that we saw pepsi revenue coming in, profits coming and more, how? you have to think it's something with cost cutting and we see that company after company. at what point does it make the headline numbers? jonathan: positive by 0.16 percent on the s&p. our top story, awaiting revisions, thomas kennedy is expecting the results to have limited impact on the fed saying that fed rate cuts in march are unlikely and investors should consider rotating out of cash. too many investors are using the delayed cutting cycle as a reason to stay in cash. we disagree. our base case is a soft landing with the first fed rate cut coming in june 2020 four. let's build on that. where should they go? >> the easiest step is to lock in 5% short duration bond. my clients have the goal of compounding wealth over the long horizon.

stocks have to be the bigger piece of the puzzle. you did for my clients the most important transition happening in the last three months where the fed's balance within their mandate has shifted dramatically. the fed put, as you might say, was aggressively out of the money for two years and just put it back in the money. even the slightest hint of layoffs, the fed can cut aggressively. this should give credible support to earnings and now the market is trying to decide, when can i step to those low-quality stocks and get aggressive and get excited? in the meantime, stay high quality and the market is out, high-quality to low quality stocks is historic at this point. lisa: you said to stop making this an excuse to not put your cash to work that the fed may not cut rates in march? is anyone using that as an excuse? we make a record high? thomas: at jp morgan one of the

biggest pools of wealth in the world you still have investable assets and cash equivalents. that is down quite a bit but still elevated to prior experience pre-covid. i think there is wood to chop there. the cash trade was great. for two years it was the right place to be. going forward, it is unlikely to be there because of the fed pivoted and because of the disinflationary process and what we see in the labor market. you are seeing robust job growth but still getting good indicators that the rebalancing is happening, mostly from the supply side. the thing that people are not talking about is that real wages are inflecting higher but below pre-covid. that is a real job growth but not resurgence in inflation. lisa: a pivot from the federal reserve yet we hear from person after person talking about the potential for a reignited inflation risk later this year. how does that way on your call?

maybe not as much on stocks as on the duration call? thomas: i think that we have to respect the january report. this was a solid job print, however, january has been a head fake for the last four years so the seasonal adjustment is a struggle. the broader mosaic of the labor market is you are getting rebalancing mostly from the supply side. are we challenging that now with january? sure. but rates are below where they were, real wages are below trend. if you look inside of the inflation data, the demand from core services is still too high but not substantially high and it's coming down. i think with good balance the fed has all of the evidence that they would need to either cut or stay put. i don't see any evidence now that they should be considering hiking and i think that is why bond yields have come down. we have cut off the tail that we need to price in probability that they need to cut again. jonathan: there's is always something to worry about.

we talked about talking about banks that we've never talked about before. n.y.c.b is one of the banks. they have been hammered since the end of january when they had to increase provisions because of real estate loans souring. how is the market doing a discriminating between the banks that will have a problem, small, medium, whatever size, and the system that probably won't? thomas: the market is differentiating incredibly well. a simple cut is to take cre exposure in excess of capital and say that those are at risk next. you're talking about a 40% total return dispersion between those two cohorts since march of last year. new york community bank flew under the radar given its small size. i think that it is differentiating quite well. looking forward, this risk is here and will be here until rate cuts happen or everyone comes back to the office.

a recent survey from linkedin from one of my ex colleagues, 25% of all jobs in america last year were work from home. 25%. it marries to what we see in our subway data in new york city. this is a perpetual risk. the markets differentiate. jonathan: jamie is trying to get everyone back to work. of not sure how this is working out for everyone else. this could be a permanent feature to adjust to. do you see it as a single name problem, a sector problem that becomes a broader market problem because it is a economicn issue? they have to italian lending standards and the ability to finance the economy will be diminished? thomas: i think that we frame it as a natural credit cycle that many investors have not seen for 40 years. the fed has hiked rates, we have locked in interest rates and will have to deal with the higher interest rate environment . cohorts of the economy will not

be able to survive. how you'll spreads are tight, yeah, but triple c actually widened. it is an anomalous environment. what is the high-yield investment community saying? we feel good about this cohort but that cohort will have an issue. when we look at our private direct lending data, we see similar types of dispersion. i think that we will go through a credit cycle and that ash jonathan: but how unusual is that to go through a credit cycle nc credit spreads at 320 and equities at all-time highs? thomas: it is common to see spreads very tight. jonathan: to walk into it, i'm talking about coming out the other side. thomas: we don't know what that will look like. when you look back in history you can get credit cycles and still see the economy perform well. it is just that you've had a decade of low interest rates were people have been able to survive, or businesses, and maybe that will be a reckoning.

i can be invested in the stock market, favored cash-flowing high-quality businesses, and still find distressed opportunities in real estate or smaller businesses. jonathan: i can see the lisa worry playing out. have we paid the price to go from zero to 5.50 and was not a bad year for tech stocks in 2022? thomas: no, i agree with what you're saying and i'm trying to draw that out. i am reading your facial expression. i think what we have not felt all of that worry and all of that consequence yet. the point is that rates are 5.50 and it has come down to a place were refinance activity can happen. lisa: i'm struck that people have walked through all of the worry so much that they think that they understand then. to some extent maybe they have and there is a differentiation. that is the key.

have people internalized the worry, chewed over it, spent up hours at night, figured out how to price it, and it is fairly priced and markets now so people can discount it? that seems to be where people are and i find that interesting. thomas: from a final word perspective we have to acknowledge this cycle has been wildly different come the fed has pivoted and are now a support for growth and earnings going forward. i want my clients to take some of the cash that they have left and get invested in a world where they can compound. jonathan: high fees? thomas: not something that i would say. jonathan: appreciate it as always. let's get you an update on stories elsewhere. here is your bloomberg brief. dani: vladimir putin says that he hasn't yet achieved his objectives in ukraine. he told tucker carlson that he would be open to negotiations if the u.s. were to stop sending weapons to ukraine. the russian president discussed a jailed journalist saying that

an agreement could be secured for his release. both liberal and conservative justices questioned if the colorado state court had the power to exclude trump on the grounds of the 14th amendment. the court is set to reach a ruling on an expedited basis meaning that it could come in the next several weeks. the next several weeks. european central bank is warning lenders that they face higher capital requirements to cover real estate risks. the watchdog is placing greater emphasis on cre risk though individual requirements may only apply next year. commercial real estate fears have bubbled up in europe, japan, and new york community bank. jonathan: appreciate it. equities now are posited by point 15% on the s&p. next, president biden is lashing out. >> my memory is so bad that i

let you speak. my memory is fine. jonathan: that conversation continues next. live from new york, this is bloomberg. ♪

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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: later, shortly after 8:30, we should get revisions on cpi. going into that this course look like this on the s&p. yields are higher by single basis point on the 10-year. 4.1696. under surveillance, president biden lashing out. >> how good is your memory and can you continue as president? pres. biden: my memory is so bad that i let you speak. my memory is fine. the president of mexico did not

want to open up the gate to allow humanitarian material to get in. jonathan: the president is facing renewed questions over his memory lapses after a damming special counsel report and a new gaffe over the name of the exemption president as he is set to meet with the german chancellor this moment with a two ukraine and israel in the balance. a current member of the advisory board joins us now. it is wonderful to catch up with you because we have a lot to talk about and it is about real hard policy and the prospect of conflict in the middle east that engages u.s. forces even more than they already are engaged. lieutenant general, can you prevent a war by saying that you don't want one? >> well, the short answer is no. you cannot prevent war by saying that you don't want to. the fact of the matter is if you really want to deter conflict or

the line actions that we see unfolding in the middle east today, u.s. actions need to instill in the minds of both the iranian proxies and iranian leadership sufficient uncertainty of achieving their actions so that they do not continue their attacks because they are concerned about the potential consequences. that is what deterrence is about . until iran and its proxies understand that it is there critical interest at stake, attacks on u.s. forces and international shipping in the region won't stop. in order to do that i would suggest to you that a course correction is required in current u.s. strategy. i am happy to give you thoughts on that if you would like. jonathan: i would love that. what do you think that we should be doing that we are choosing not to do? david: first, as you alluded to in your opening remarks, the administration has got to stop

telling our enemies what the u.s. is not going to do. that gives them insight into how to continue their attacks. like you said, the way to deter conflict is not by saying that you don't want a war, or that we won't strike inside of iran, but by making sure that iran understands that if they and their proxies continue attacks on u.s. personnel and international shipping that they can expect disastrous consequences. the u.s. needs to be ready to follow up. to create those consequences. second, we need to shift the weight of our effort from shooting down the arrows shooting the archers. that means not only the launchers and the radars that the houthis are using but their leadership command and control and other critical houthi military infrastructure.

finally, direct actions against iran will be fundamental to halt the aggression by their clients. that action can take many forms. it does not have to be lethal. it can be nonlethal, it can be economic, or a combination of all of those. it is important to remember that the center of gravity of malign activity in the middle east today is iran. lisa: given the policies that you've seen in place, how long do you think that the current conflict will go on in the red sea? david: that is a great question. unless the united states and its allies change their strategy, as i mentioned, it could go on for a very long time. you know, it is always difficult to forecast because generally the only thing that one can be 100% certain about is that your

forecast will be wrong.when i say a long time, many months if not years. lisa: this is relevant to a lot of businesses. we have seen this in a lot of reports. saying that it could go on for a long time but expecting resolution later in the year. is there some kind of resolution to the war in gaza right now, would it bring about some resolution in the red sea? or do you think that people are too neatly drawing that line? david: again, a very interesting line of thought. the short answer to your question is, there might be some temporary pause. i doubt it because back to what i said earlier, iran's ultimate objective is to get the united states out of the middle east. they are taking advantage of the opportunities, from their perspective, to continue pressure on the united states. just because there would be a

resolution of some sort or a cessation of hostilities in gaza does not mean that iran would stop its malign activity and continuing to encourage countries like yemen or the houthis to continue their attacks to accomplish their ultimate objectives. jonathan: iran has changed over the last four years in the minds of a lot of people. their capabilities have developed. what is your read? how different is this iran from the iran of four years ago? david: it is a much more capable iran. the department of defense came out with a report yesterday from the defense intelligence agency listing all of the different types of missiles as well as

drones that iran is now exporting. they are not exporting them only to their client states or proxies, like hamas and hezbollah and the houthis, that they are now a principal provider of this kind of capability to the russians. that wasn't the case a couple of years ago. so, their technological capabilities are advancing. more worrisome is the production of those systems, which have been devastating in the hands of the russians against ukraine. you are well aware of how the houthis are using them to inhibit shipping in the red sea. jonathan: this has been a refreshing conversation away from the politics of the last 24 hours and we appreciate your input.

leaning on the expertise of people like david, let's talk about that. it has changed in the last four years and there is talk about how the former president would engage differently. we have to factor in the different capabilities of the iran that we are talking about today. lisa: especially given some of the refinery abilities that they have touted as accelerated during this process. how do you deal with a nation that seems to be emboldened? jonathan: here's what we are going to do. the data-dependent federal reserve as we await cpi revisions going into next week's cpi report. from new york, this is bloomberg. ♪ what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options.

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♪ jonathan: annmarie hordern choosing to skip coverage of the political drama. alongside lisa abramowicz, i'm jonathan ferro. s&p 500, posited by .15%. mastec up by a quarter of 1%. the stage is set for cpi revisions. yields are higher by a single basis point at 4.17. the two-year up two or three basis points, close to 50 at

4.482. >> i think anne-marie stayed home because this might be too boring. the cpi every year is seasonally adjusted. once a year, the bls changes to seasonal adjustments. last year, when they changed to seasonal adjustments, it changed the cpi significantly and raised inflation in the latter half of the year, which caught the governor's attention. he made a speech about it and now everybody is focused on this year's changes. we won't get an official release, which is why i'm not giving you the numbers right now. we get a spreadsheet from the bls and apply that to our spreadsheets and then we will have the numbers for you. hopefully we will have them soon. lisa: there is always a conspiracy theory saying the numbers are manufactured and that's the reason why the revisions are so important. can you put some clarity on why there has been such difficulty

understanding the seasonality is an historical reference points at a time when the data has been revised in meaningful ways again and again? >> the problem with seasonal adjustments is we have had weird seasons. when we went through 2020 and the economy shut down and reopened again, it made it very hard for the bls and the bea to go back and make the seasonal adjustments that are based on five years worth of previous data. they've been struggling ever since to come up accurate numbers. the key thing -- there are two key things. the fed has to deal with the numbers it has. whether or not they are accurate. two, the numbers that come in are going to be adjusted in the future as well. so, they have to, at this point, just kind of say what are we going to do here? the other important point is the

fed looks at pce and there are inputs from the cpi into the pce numbers. those are the nonseasonally adjusted inputs. this will make a real difference to the fed. lisa: next tuesday, we get cpi for january and a lot of people are saying this will be the main data point that could move markets. what are the whisperings that you hear? whether an upside surprise or downside surprise is more likely to trigger? michael: we are getting analyst calls that say before you read this, we might have to change it after the adjustments. what they are saying is we should see a reasonably large drop in the cpi. especially on the year-over-year basis. not only because energy has gone down but because base affects our falling out. big increases.

that will fall out of the data the sign. jonathan: wednesday last week, you talked about the news conference. there was a take away from some people after chairman powell spoke in that news conference that he was struggling to reflect on the consensus of the many and maybe it was breaking down a bit. based on the fed speak we have heard this week, it feels like they are on the same page. have you noticed any subtle differences? michael: nothing that would cause you to think there is any division at all. they basically all said we are not going to probably be ready. we have the data here. let me give you this first headline that is out. that is the revised fourth-quarter cpi is unchanged at 3.3% annualized increase. a lot of people thought that would be the case. revisions last year would be a one-off. that appears to have been the case. the cpi in december was revised down from 0.3% to 0.2%.

it is a slight, slight difference at this point. jonathan: i know it's a little clunky to get through. session highs on the s&p, up by point 4%. we are down two basis points on the two-year. on the 10 year, down to 4.13. we had 4.17 earlier. the euro is up. this takes pressure off the fed on the margins. lisa: you can take the numbers as they are that there is not some sort of fear looking under the hood that these are more disinflationary than we are seeing. my curiosity is how many different reads like this lead to some conviction that we are heading in the right direction, given some of the concerns about leader of the year? jonathan: do you think the

chairman could have more confidence after these numbers? michael: as he explained, they use pce. i don't think this will make a big difference to him. but, it removes something that was hanging out there over the markets, more than the fed, in the sense that the markets were focused on this. the fed uses pce so they will be less concerned about it. at this point, it seems to be a nothing burger. which is what a lot of people expected. lisa: what do you think of nothing burger? jonathan: i'm going to tell you that no news on this front is good news. the worry was that we were going in a different direction. michael: it's a dog that didn't bark in this case. we were watching it because one fed governor was watching it. it became a thing because there was no other data this week. jonathan: he said my hope is --

we can base it on data and not hope. fourth quarter core cpi up 3.3% -- up changed at 3.3%. that is good news, i guess. equities on the s&p 500 looks like this. equity futures up by .4%. yields are down at 4.43. the currency pair turning around in the last 10 minutes or so. this sets the stage for today and into next week as well. logan is going to speak later on this afternoon. lots of fed speak today. then you get data next week as well. u.s. cpi on tuesday. ppi next friday. bloomberg survey expecting core cpi to tick down to 3.7% from three point 9%. evidence of sustained disinflation is needed for comfort that a return to target

-- in that return to target and remaining there is possible. dana joins us now for more. can we go straight to the revisions or lack thereof? your response to them in the last couple of minutes. >> it's a nothing burger and that's good news. as mike mckee mentioned, the fed is focused on pce inflation and it's good to know we don't have lingering concerns on whether the cpi is breaking away from what we've seen in the pce. when we look at the pce deflator, it is swelling. it's above 2% and heading in the right direction. jonathan: the fed wants more confidence and more data. not better data, more of the same. i'm wondering from your perspective, the risk of stabilizing above target on inflation. is that a concern that you share? >> sorry, i lost audio. jonathan: can you hear us now or do we still have a problem? i think we have lost audio. we will come back to her. mike, we can go back to those

concerns. on wednesday, you heard in the news conference, the chairman is not quite comfortable here to say he has complete confidence this will be the trend for the rest of this year. what are the one-off factors that have led to this disinflationary trend that has emerged over the last 12 months? michael: the things they are worried about, they don't understand why house prices, the home price index part of all of this is not going down faster than it has. they are watching used cars because they have been volatile. airfares, hotel costs, those are the things that have been bouncing around a lot. they are waiting for them to steady out. the term that was used was are broad drop in the inflation data. one of the things they can't control is energy. they have to worry about what's going to happen with the middle east. but, they will look beyond that. they are looking to these other internal things to continue

going down. enough that they feel that it's not going to be something that will turn the whole thing over. lisa: there's concern about the atlanta fed wage. that is something i have seen in a list of notes. it has come down dramatically. what do they need to see their even that it is running about 5% or north of 5% still, above prepended norms? michael: in general, we are seeing wages rise in a faster pace than the fed is looking for. we saw wages going off half a percent with the pci. they think 3.5 percent is consistent with stable inflation. we have a ways to go with wages. they don't seem to think at this point that the fed has a problem , because ceos are telling them they are slowing the rate of pay increases down. lisa: dana peterson, i believe we have reestablished our audio.

we apologize for technical difficulties. your take on what you are looking for to understand whether the inflation genies have been slayed or the inflation dragon. how much are you seeing this as a done deal versus still concern about a couple of areas? >> i think much of the fed speak in terms of wanting to see sustained disinflation in terms of getting back to the 2% target is important. when we look at the details of inflation, home prices have eased and that is showing up in rents and the shelter costs. they have picked up and that poses some risk later this year and even into next year. more importantly, wages are still elevated. we are seeing them rise, especially in sectors like manufacturing construction where there is a lot of demand and you have to show up for work. i think wages will continue to be an upward pressure that the fed is going to have to watch. it's important to have more readings and getting into the

spring to feel confident so the fed can start cutting rates around june. lisa: can you give us a sense based on the increasing confidence that you track, given the fact among consumers, given the fact you are concerned about some of these areas that are elevated in terms of inflation, how many times you think the fed could cut rates this year, versus where the market is that? >> we think the fed could probably cut rates four or five times this year. that's roughly 125 basis points. that would be reasonable. -- especially given the fact that the economy is doing better-than-expected. we think there could be a lull. we have a number of risks to the upside and the downside. that 100 to five basis points this year is possible. lisa: is that based on the idea that the neutral is back to 2%? what's that based on if you do see these risks to the upside for inflation still present in the market?

>> i think that the neutral rate is probably higher now than it was before the pandemic. here's why. we have had a major structural change in terms of the labor market. we are losing workers. we are experiencing severe labor shortages and that is putting up pressure on wages. we have a number of outside factors, such as deglobalization and also the fact that you have a number of geopolitical risks that are disrupting supply chains that can continue to put upward pressure on inflation. those are all in the risk category. our base case is still that we are going to see inflation get back to 2% and remain there. the fed is going to have to keep rates higher than expected and not see as much in terms of cutting as the market is pricing in right now. jonathan: likewise for ceo, competence as well. how do you read the yeah -- read

that? do you read it as temporary? >> i think they are both positive trends. we have seen a few months of improvements. consumers are complaining a little less about inflation. they still think prices are high but they are not rising as quickly. they are looking forward to interest rates being lower. they think the stock market is going to continue to rise. they also feel they are going to continue to work. that is showing up in our ceo confidence measure where ceos are still worried about labor and they want to hold on to their workers. if you are a consumer, you are working and have a credit card and you can spend, you are probably going to feel better about life. jonathan: dana peterson at the conference board. following those revisions or lack thereof, according to the latest data, u.s. inflation about the same at the end of last year as initially reported. no news is good news on this front. let's put it that way. we will start with equities and

work our way through bond as well. we are up by one third of 1% on the s&p. yields were higher going into these numbers. they are lower now. we are down by almost a basis point on 10 year at 4.15. on the two-year, let's call it 4.45. there is your bloomberg brief with dani burger. >> treasury secretary janet yellen says regulators are watching for risk for non-bank mortgage lingers -- lenders. nonbanks have become a major presence in the mortgage market. regular does have continue to warn oversight. shares of arm hit an all-time high, surging 48% after they plus -- posted a blockbuster earnings report.

ai is in early stages and is not in any way, shape or form a hype cycle. the bullish outlook sent them to the single biggest rally since october. a surprise change at the ceo level, gordon will take over for peter kern as chief executive. they are expected to spend a record amount on marketing to compete with airbnb and booking.com. jonathan: thank you very much. up next on the program, super bowl ads flirting with record highs. >> it's great the san francisco 49ers are in the same sentence with talus with. it's good for the brand and we will lean into it as much as humanly possible. jonathan: that conversation is up next. ♪

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jonathan: live from new york city, no big changes after the cpi revisions which means equities are ok. positive by one third of 1%. yields unchanged. 4.1521. dollar is just a touch weaker. 1.0781. super bowl ads flirting with record highs. >> the nfl, as a culmination, we all benefit from taylor or the next storyline because it increases our media value and increases the general fan who might follow the game. the reality is we benefit because those people are tuning in. if they are a casual fan, they are tuning in around the storyline. these are good things for our brand and we will lean into them as humanly as possible.

jonathan: that's the wrong team. the 49ers. we aren't even talking about the chiefs. lisa: wasn't it someone's mother on the 49ers who said taylor swift is dead to us for the week and then she shall coming back -- come back into our lives. jonathan: everyone seems to be winning. big brands looking to spend big ad dollars. for the second consecutive year, the average cost of a 30 second ad spot hitting 7 million u.s. dollars. michael wrote this. a 30 second ad during super bowl one was $37,500. the price for super bowl lvii was $7 million. nothing keeps pace with super bowl inflation but if it did, chicken wings would be $43, a sixpack of beer would be 300 $40. a gallon of gasoline would be $61. the average house price would be $4.2 million.

the s&p 500 would be six being -- 16.374. lisa: talus with tickets can have that same kind of -- taylor swift tickets can have that same kind of inflation. jonathan: it's the sport, the ads, the halftime show and the people in the audience, the crowd as well. it's crazy. lisa: isn't it crazy, whether or not they are going to show her and what they are going to do. jonathan: of course they are going to show her. what are we tuning in for and how big is the audience going to be on sunday? >> when the chiefs played the eagles last year, the numbers came in at 113 million viewers. this year, the price at $7 million flat. the chiefs are back. we have the taylor swift thing. these guys, $7 million is a lot

but they might be getting a bargain if the value goes up which has been a trend rate it's been defying all of the pressures on tv, people tuning in for football. jonathan: you take the top 10, top 20 sporting events and tv events and the nfl dominates the list. when you look at football versus everything else, how is everything else performing? >> nothing is performing like the nfl. major league baseball had a decent year last year. the nba has been up and down but generally healthy. the nfl had really decent growth and audience across the regular-season into the playoffs. high single, double digit type of audience growth, even as the number of people subscribing to paid tv is pacing down and it's been doing that for a couple of years running. only half of americans have a page tv subscription.

113 million of us tuned in for the super bowl and probably more this year. lisa: how much of it is eyeballs we get eyeballs. and the fact that more celebrities are watching the game means other people are watching celebrity's watching the game. how much of this is a consolidation of eyeballs you can bank on to bring in bigger names that can do even better? >> this pop-culture fandom that has fueled social media is in. it's something that is very different from when you put up that previous quote about what a super bowl ad cost a generation or two ago. we didn't have the type of instagram, the type of tiktok, the type of social media engagement of someone like travis kelce that we have today. that i think is a big part of why the audience are bucking these trends. lisa: i'm listening to this and

wondering what this means in terms of going forward, in terms of the consolidation of ad revenue and what is going to happen. how much of this is the anomaly when it comes to cable television for you can get these kinds of ad revenues and how much are they shifting directly to instagram and tiktok and these platforms worse liberties live? >> the ad trends are clear. the super bowl ad pricing at $7 million and may be growing. certainly television advertising has been pressured. we are seeing this money is pulling out of tv and going into internet streaming. it's going into e-commerce driven and social media driven ads on things like meta and amazon. what i think you are going to see is generationally, you are going to look back and these big sporting events will move from

television to the internet and probably the tech giants, amazon does as they night football. apple has major league soccer. in 20 years, one of those guys will probably have the super bowl. jonathan: we wanted to talk about that. ted to talk about this new joint venture, the disney company, warner bros. discovery, pulling things together for sport. is that about the distribution exercise or is it being more competitive when it comes to sports runs? >> i think it's more incremental than revolutionary. this is a skinny ptb bundle that will be sports focus. they will have to charge a fair amount for that. it will probably cost $40 or so a month. not terrifically cheaper than the $73 a month you could pay right now for you to tv and get all of the news channels and get the entertainment. you will have a selection of 14 channels that have a lot of

sports and a few other things on the skinnier bundle. i think this speaks to desperate times require desperate measures. these companies would not have allowed other distributors to cherry pick their prime sports driven channels. they have forced onto the distributors the other channels. you have to get fox news if you're going to get fox broadcasting. you had to get the fx channel if you are going to get espn and abc with their sports coverage. they are breaking that kind of forced bundle for themselves. and i think for disney, it's decently sensible in that they are bundling a lot of different streaming services together and they are exercising the art of packaged selling that is uniquely available to them because they have to scale services.

the others, less so. jonathan: thank you. from new york city, counting down to the opening bell, 34 minutes away. equities are doing ok. ♪ that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy. 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.

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>> a very good morning. i am manus cranny. the cpi revisions set up a beautiful day of risk. come down to the open right now. -- countdown to the open 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, futures