and analysis live from bloomberg's washington headquarters. get the latest at the end of every trading day. >> the longer the financial conditions stay tied you will see that impact activity and see things slow down. >> we are expecting a slightly slow economy. >> you will probably get some capital appreciation if the economy slows, as we think it does toward the end of the year. >> we still think the trend is toward disinflation. the fed will probably be cutting in may or june. >> the uncertainty this year seems to be higher than it was last year. >> this is "bloomberg surveillance." lisa: we have a most made it.

it is friday. this is "bloomberg surveillance." alongside annmarie hordern and manus cranny, i'm lisa abramowicz. have to say, this week has been such a model. one thing i keep repeating to myself is this idea that the economy is not the stock market. the economy is looking like a muddle, but the stock market is looking good. manus: if you look at nike cutting jobs, cisco cutting jobs, you are right, the equity market continues to pile higher. that is what bank of america says this morning. over the past four weeks you are looking at some of the biggest inflows since 2022. but it is the breadth. the most since 2009. this tech mania, real rates have to get to 2.5% to 3%. that's not going to happen. lisa: that is what people are

taking off the table. the reason why people are so focused on the lack of breadth is because nvidia reports next week. retail spending, really soft. some people say seasonal, but a lot of other people say it was so broad-based it is hard to dismiss this. manus: it takes me back to the one line from paul donovan. it is that wonderful phrase about the hedonism of the u.s. consumer. at the end of the day it is about credit cards. the delinquency levels are not extreme. they are rising but not extreme on autos. they are not extreme on any of the leverage in the system here. the last thing the american public will do is stop spending on their credit card. and we have not reached the end of that track yet. lisa: it seems like europe is getting sick of it. i was reading ursula von der leyen in the financial times this morning, and we are hearing a lot of rhetoric ahead of the

munich security conference. annmarie: on one hand you have the vice president going there. she is going to talk about u.s. isolationism and how the u.s. should not be isolated. she is not going to mention trump by name, with those remarks have one individual in mind. and then ursula von der leyen talking about a rough world ahead. she wants to subsidize the european union's defense structure, kind of like what they did with covid, similar to what they did with natural gas when russia invaded ukraine. even though you have current administrative officials going to munich and they are going to say we stand side-by-side with our nato allies, the writing is on the wall that they need to do more. lisa: how much is it notable that, like harris is the one holding the helm for the united states? -- kamala harris is the one holding the helm for the united states? annmarie: given the fact that we are going toward a november election she is going to have to

be front and center on some of these important stages, because there are questions about president biden's age. lisa: i love this new york times quote. while no one in the white house will say this too openly, harris has demonstrated she is up for the job so that voters will not worry about electing an 81-year-old president. let's take a look at markets right now. you are seeing another left to end the week. the largest since february 2022 into equities, so solidly across that 5000 line .2% gain. you can see a bit more dollar strength today. this is a pair that is going nowhere as people try to parse through the ecb speak, the fed speak, the weakness in europe, and what this means. what you can see elsewhere is a little bit of a lift to yields. i'm focused on today's ppi data, because it does dovetail into

pce. how much do we see retracement of the cpi we saw earlier this week in terms of hot inflation? coming up, and weedy bogan as the s&p 500 -- anwiti bahuguna as the s&p 500 closes at record levels. and ian shepherdson of pantheon -- pantheon macroeconomics to round out the week. we begin with our top story, the s&p 500 hitting another all-time high. market selling off briefly after cpi tuesday, gaining background ahead of u.s. ppi, do this morning at 8:30 a.m.. and weedy bogan are -- anwiti bahuguna expecting a soft landing. or looking drivers of labor demand and supply suggest this slowdown is likely to come. anwiti, thank you so much for

being with us. congratulations on your new post. i'm curious if you see this data we got this week as indicative of the muddle that leads to that slowdown you are expecting? david: very happy to be here, lisa. -- anwiti: very happy to be here, lisa. we started with tuesday, inflation number, surprising to the upside, and everyone then completely forgot about that on thursday, right? we are back to new highs, and that is because this outlook we had of growth decelerating came into picture on thursday. january was so strong on all fronts that we spent a lot of time thinking, or we wrong here? do we think deceleration will happen or are we going into this no landing thing people talk about where growth continues to be superstrong?

3.5%, 4.5% growth is double the capacity of the u.s. economy. so that was our fear, that if that happens that is great for the u.s. consumer, but what does that mean for the fed? markets are driven more by what the fed is up to and less by, you know. lisa: if you really believe in have conviction in a slowdown that other people do not have conviction in, wouldn't you go full on into duration? anwiti: not really at this point, because of the inflation dynamics also, because you are watching ppi. pce comes in strong, that means rates are still under pressure, and that delays the fed hike and you don't really want that duration right now. because the economy is slowing but it is not recessionary. that is the major difference. if it is recessionary than you would want a lot of duration on your portfolio. manus: you look at the forward

drivers on employment, and this is something you specifically look at, and have concerns. we talk about those being a strong concern a slowdown is likely to come. you are not looking for hard landing. what are the cracks in the employment market i should be looking at? wages are strong. anwiti: the cracks are not on metrics, but -- because those are coincident at best. the forward-looking indicators are what is happening to the jones number. that is indicating demand is coming down. another thing we look at in there is the hiring rates. if you look deeper into the hiring rate and its correlation to wages, hiring rate and crate rate are down. that means wages are likely to come down. that means this component of cpi that the fed is focused on, that is not going to be as worrisome.

and that is what keeps me less worried about the hard landing. manus: why are you not sort of more enthusiastic about duration at the moment? or do you look more toward credit and that kind of the market rather than full on duration? excuse me. anwiti: he saw what happened with inflation this week was bad, right? we some massive backup in yield. i don't think the market has priced in that potentially get. that we get a harder pce number for a couple of months. that then leads to this worry. and if rates go up you see this correlated to what is happening with equities. rates go up, equities down. lisa: speaking of which, talking about the inflationary impulse, he wrote the er worried about a scenario where continued conflict in the middle east raises oil prices and makes it harder for the fed to act this year.

the concern about -- i don't want to call it stagflation, but stagflationary headwinds. are you going more into energy stocks? this seems like this is the key hedge for so many investors right now. anwiti: you can call it stagflationary fears. that is the word. that, to us, is a risk case. it is not a base case. because these dynamics are well known in the market. anyone who has needed to hedge this has hedged already. we do have exposure to national resources in our portfolios. and really just something as a risk scenario, not the base scenario. that feeds into inflation and the cycle again. manus: we talked about the stagnation nation in the u.k., a slippage in japan into recession, and likewise in europe. you talked about growth outside the united states. we see higher growth in china and an improvement in japan. i look at the velocity in japan,

6000 points rally in the past two months. to what extent are you preparing to take additional global risk? anwiti: that is an excellent question. i would like market breadth to improve. not just concentration in nvidia and all of the u.s. stocks. manus: all hail nvidia. anwiti: the small-cap stocks and value stocks in the u.s. and everything nobody has paid any attention to them a long time. market improvement would mean market breadth improving globally. that is very uneven also. only japan is sort of seeing a revival. but if you look at em index it is down for the year. if you look at other parts of europe and the u.k., they are showing some signs of life, but i would not call it that market breadth has come back. lisa: anwiti bahuguna, you are sticking with us.

he was your bloomberg brief. >> travel is picking up in china due to the lunar new year, offering signs of spending might also pick up. more than 61 million rail trips were made over the holiday. that is up 60% from the same period last year. china's economy has been struggling with growth concerns amid deflationary pressures and the ongoing property crisis. another major company slashing jobs. nike is cutting 2% of its global workforce as the sportswear giant cuts costs. it has nearly 84,000 employees worldwide. layoffs are planned in two phases. the first kicks off today with the second to be completed by the end of the fourth quarter. in december nike said it was looking to save as much is $2 billion. jeff bezos has sold more shares. he offloaded another 12 million shares valued at $2 billion. brings the total he sold in the

past week to more than $6 billion. bezos has not explained why he is planning to sell as much as 50 million shares, but the timing is likely linked to his move to florida, which has no capital gains tax. that is your bloomberg brief. lisa: thank you so much. we talked about this. it is a tax reason. let's put that aside for a second. $6 billion is nothing to sneeze at. what is he buying? he has islands, he has everything. he space ships. what more can he buy? annmarie: he is not saying what he is buying. i think it is obvious why he is doing it. he just moved from washington state to florida. 7% capital gains tax or 0% capital gains tax. he is saving millions of dollars, but i don't know what he is buying. manus: he is sending a strong message as well. i will not be corralled. i am the master of this company. lisa: we will be watching at $6

billion. if he is looking for places to park at, i have some recommendations. up next, the white house caution in gaza. >> we continue to believe, without a credible plan to account for the more than one million palestinians, a major operation in rafah would be a disaster. lisa: that is next. you are watching "bloomberg surveillance." ♪ ♪ meets bold new thinking. (laughter) at 88 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. old school grit. new world ideas. morgan stanley.

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. lisa: this is "bloomberg surveillance." welcome back. jon is off today. manus cranny joining us, which is a great thing. to parse through a muddled week, although of gains. this has been a key moment where we are seeing more layoffs, although people are getting hired, but -- but stocks

continue to rally. futures crossing that 5000 mark solidly, up another .2%. the euro-dollar is doing nothing, basically. and 10-year yield higher by about three basis points. the white house, urging caution in gaza. >> we continue to believe that under the current circumstances, without a credible plan to account for the more than one million palestinians in rafah, a major operation would be a disaster. we agree with that and we are continuing to talk to our israeli counterparts about what that might look like. lisa: international pressure mounting as israel prepares for are a major operation in rafah. profit is the final location of an unknown number of israeli hostages. joining us now for clarity, norman roule, former u.s. intelligence official, senior advisor to the csis transnational threats project.

always wonderful to get your thoughts. what do you make of recent reporting on some sort of walled in area in egypt on the border with raw file? -- rafah? what do you make of some of the reports overnight? norman: egypt has been adamant that it does not want to see an inflow of palestinian refugees. it has multiple reasons for this. refugees would not leave, they would be expensive to maintain. it would be militants among the refugees who could reignite the terrorism and insurgency israel faced -- i mean, egypt faced in the sinai. you also have the issue that this would depopulate palestine. many in egypt believe this is what is what israeli hardliners seek. however, there has been history where palestinians in gaza have knocked down or exploded the wall and poured into the sinai.

although the egyptian government has denied it is building a wall, there is some reason to believe they would build a fenced in area that would allow some number of egyptians to -- i mean, palestinians to flow into egypt, and be kept there until the situation stabilizes. annmarie: with a border wall in egypt, potentially would come egyptian army to come -- to make sure this is protected. what does this mean for egypt and israel's peace treaty? norman: egypt has reportedly moved some number of personnel and armor into that area recently, but not to fend off an israelite threat, but rather to bolster its security. so if palestinian refugees did flow across the board there would be able to contain the area. this happened in 2008, when hamas blew up the wall and about half of gaza's population poured into sinai for a few days.

the egyptians cannot have that happen now. that said, the 1979 treaty is a very sensitive issue in egypt. neither egypt nor israel would want to see this fall apart. but at the same time egypt and israel most cooperate on terrorism and the tunnels and the border. i think you are going to see cooperation. heady egyptian rhetoric against anything that might threaten palestinian refugees pouring into egypt. annmarie: the president and netanyahu spoke last night, and the readout says that the president reiterated his view that an operation should not proceed without a credible plan for ensuring the safety and support of civilians in rafah. how far apart is this gap between the biden administration and israelis when it comes to this potential down -- potential ground invasion? norman: the u.s. has been consistent in such statements. there is no evidence the israelis are going to pour in a conventional military force and

conduct an operation that would produce a claddagh class and -- a click -- a cataclysm. palestinians are gathered in about 70% of gaza's geography. you cannot attack that effectively without causing a humanitarian disaster. i think we are going to see israelis attempt to move about the population. and then to conduct surgical strikes against palestinian leadership. about one brigade of hamas remains active. they have gone into rafah, and they have got to work against the tunnel structure because there are hostages located there. hamas leadership, as well as fighting force. manus: we are also seeing rising tensions to the north of the country. those new salvos of missiles coming in from lebanon. about 13 kilometers into israel. how would you describe that flashpoint? because this comes at a very

tenuous moment in time. will the israeli pushback be significant, or how would you describe the tension on the border at that end of the country? norman: beginning february 14 violence at the lebanon-israel border reached a new high, because of hezbollah extending the distance of its strikes into israel. we are not yet at a point where either israel or lover -- or hezbollah would seek a lebanese war. the israelis continue to respond to such strikes, which killed an israeli female soldier, by conducting surgical strikes within southern lebanon against hezbollah and other militant positions. and this week they killed two hezbollah commanders, mid-level officials who have been involved in operations against israel. i think this is how this will continue to take place for coming days. lisa: i have to say all of this

seems like it would be escalation in a previous time and place. what counts now as escalation, when so many people are basically counting this as something simmering but that will get resolved? norman: you are correct. we need to keep in mind that there are 80,000 israelis that have been displaced from northern israel and lebanese from the southern lebanese border. we are looking at a state where hezbollah continues to believe it can fire into israel, and israel will respond to retaliate and destroy those firing positions. the biden administration is adamant that it believes that by reaching a cease fire of some sort, an agreement, it will suck the energy from proxy tax against israel. i'm not so sure, but it does have some logic. at the same time lebanon is in a terrible economic situation. it has no president. it has a tear -- it has a caretaker prime minister.

i think we are going to see lebanese hezbollah operate within that framework. there is a risk of an incident that produces a lot of casualties, and that sucks in retaliation on both sides. lisa: norman roule, thank you so much. anwiti bahuguna with us, and one thing we talk about is all of the cold war's that are turning into hot wars around the world. i do you work with this, given that there is so much uncertainty and he don't know the outcomes? do you just assign probabilities? do you invest in the military complex? anwiti: at northern trust we assign probabilities. probabilities also, we need someone like norman on our staff to know how to do that. there is not much you can do about it from the day-to-day market portfolio management point of view. annmarie: can you look at risk,

you talked about risk to oil prices because of the middle east. isn't it more of a risk to have demand in china pickup? anwiti: exactly. demand in china has been weak, and that would be a real sign of market breadth. and oil also. we haven't seen commodities really do much in this last year or two also. it would be at this point a positive sign of global demand picking up. lisa: anwiti bahuguna, thank you so much for being with us. congratulations on the new post. i do want to bring to you this headline just crossing that russian opposition leader alexei navalny has died in prison. this according to interfax. this is someone who has been watched as one of the main opposition speakers to vladimir putin. do we have any more details at all? annmarie: no, but what i do see from his press secretary yesterday is that he was sent to punitive isolation for the 27th time as he has been in this latest installment of

imprisonment. alexei navalny has been in the past been able to get individuals out on the street in russia. if this were to be true, you have to imagine there might be some sort of -- a little bit, at least, in the cosmopolitan areas of russia, unrest. this is something that is going to draw condemnation from capitals around the world. lisa: coming up, a look at where oil is trading amidst conflict in the middle east. with amrita sen of energy aspects. you are watching "bloomberg surveillance." ♪ ♪ well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

lisa: two hours until the other most important data point of the week, because they have all been pretty important and conflicting in terms of their message. we get ppi coming up. welcome back. this is "bloomberg surveillance." jonathan ferro is off today. you can see bond yields climbing just a touch. no drama to end the week as people parse through exactly what the fed will do and what this data means. you can see nasdaq futures outperforming this morning in a risk-off day. yields, twos, tens, and 30's lifting across the board,

although no drama. around some of the higher levels of the year, as people parse through when the fed can cut rates given the fact that you are seeing some strength. yesterday we heard from raphael bostic of the atlanta fed, traditionally a dovish voice. he didn't sound that dovish yesterday. manus: he was not convinced the trajectory, the train is not absolutely on target to reach its destination. and to that extent, you know, it is about the hesitancy. position by jupiter. jupiter have put on a massive treasury that -- treasury bet. they expect a hard landing. the debate is this. what is this rate cutting cycle going to be? what will it look like? traditionally you get 3.50 and 3.75 in cuts during a cycle.

there are a number of divorces in play. lisa: in the number of people that want to work as mediators in the meantime. in the euro-dollar you are seeing this stasis. we have been talking about this is the most boring pair in the world. sleepy, stasis, whatever you want to collect it, there is a question mark around the diversions in policies, the diversions in growth rates and what is going to try that. ecb governing council member francois warning that the ecb should not wait too long to cut rates. talking more in the dovish side, speaking to a french newspaper, saying the risk of moving too late exist as much as moving too soon. the comments coming with rising anticipation that the ecb may be the first bank to cut rates. this is what a lot of people were saying last year. that the ecb would move first and they have more reason to,

simply because growth is not there. manus: you talk about the number that nato gave germany, the slowdown in germany, which was a bulwark of european growth. if you look at what francois says, three successive degrees of freedom can be another argument not to be -- not to overly-delay the first cut. the question is, how poor is the economic scenario in the euro zone, and does it warrant faster and more aggressive cuts? that brings you to what european bonds are going to do relative to treasury. lisa: what this does to some of the perp mastication's we heard from ursula von der leyen, they want to spend more. is this something they have some willingness among ruling parties to do? annmarie: when you are looking at the european union you are looking at herding cats. but also christine lagarde spoke yesterday and said the last thing she would like to do is make a hasty decision.

so it feels like there is a little bit of this push-paul. do they go too soon or too late checkout they seem to be worried. lisa: in another episode of herding cats, house republicans saying they will not pass another stopgap measure to avoid a government shutdown. the house with saying that both chambers will continue to work on a framework, which may include spending bills. the house is in recess until february 28, because they are good at taking vacation. the senate is also a way next week and will have to deal with the impeachment of alejandro mayorkas. you put this all together, talking about the muddle in markets, the muddle in d.c., is he going to come together or are we going to have to talk about that again? annmarie: we are going to have to talk about that again.

they come back on february 28, and in the first tranche of potential spending that they did this two, parallel approach, they have three days to get spending bills done. to the point about alejandro mayorkas, once the senate deals with that and there is a trial, they cannot take up any other legislation. so they just don't have the time. but we have heard congress say before the we do not have -- before we do not have a continuing resolution and and they do it. lisa: on the one hand you want to say, who cares, ignore the noise and look elsewhere. but other people will say, that's what is behind a lot of the rather we have seen this year? it is the spending we have seen continue to play out. apple is racing to catch up to microsoft in the field of artificial intelligence. bloomberg reporting the company is on the verge of releasing new software tool which would help developers compete with microsoft's copilot. the new system will use ai to protect bok -- predict blocks of

code. it comes as microsoft and apple surge ahead with the development of chatgpt and gemini. there is a question of whether apple has underperformed because they haven't really been coming out with some sort of artificial intelligence in the sense that nvidia is still the outperformer and that seems to be the main theme. manus: it comes down to, how do you monetize ai if you are a phone and app company? to that extent what apple has put on the table is on the development side. not on the phone, not on the ipad, not the product sitting around this desk. if you look at what galaxy have done, samsung galaxy, they have gone to imbue ai into their phones. if it is interpretation and imaging. we spend our lives focused on the back of these phones. we spend our lives on instagram, on the photography, and so that is where some people -- some

people do. i am a tortured soul on social media. if you talk about what samsung are doing, they are making ai come alive for you, for you i'm a for me. lisa: what is the better pitch? to be on the development side? manus: i don't know where the monetization processes. lisa: right now it is nvidia, no? annmarie, that is what you are looking at with respect to the hardware, not the software. annmarie: that's where you want to make the money. people are still figuring out how ai, how they make money while incorporating into consumers' lives. then it becomes -- manus, you are talking about the iphone. for microsoft it is going to be about search. can they potentially go above google and make being -- bing a real thing? lisa: we can also talk about google and why it is falling this morning. meanwhile, oil prices holding steady.

brent crude trading below $83 a barrel. this is been one of the biggest surprises. after rising on thursday. wti trading close to its highest price since mid-november. amrita sen of energy aspects joining us now. this has been one of the most confounding stories out there. is this? is this an issue of demand falling off or an issue of supply that keeps coming and cuts that cannot be enacted in the way that opec-plus hope? amrita: well, like you said, prices are trading at their highs for the year, so i don't think that is suggesting fundamentals have weekend. the bigger challenge is that we just don't have traders who are convinced enough to go along on speculative positioning in the market. if you look at the physical market, physical crudes are on fire.

brent crude is far stronger than the futures benchmark. i think there is a big mismatch. i think the physical market is telling us that the market has tightened. we have not seen the bill that the start of the year most people were expecting. january has come in with a draw. the freeze ups in the u.s. has helped, supply will come back for q2 for sure. but the market is in a healthier condition than prices are reflecting right now. manus: good morning. i'm curious to get your take on the iaea. you have seen the global stock draw. that is going to go down not very well in riyadh, is it? in terms of surplus for the year? amrita: the report is the one that they -- that said they see 60 million draws in january. i do think the march numbers will get -- sorry, the q1

numbers will get revised down, and i think in reality q1 will end up flat or potentially a draw. we also have a build in q2 that is seasonal. q3 is a big draw, and a small build in q4. our crew balance shows a small draw. liquid's balance is building in part because there are a lot of ngl's. we have opec-plus production coming back gradually from q2. in reality that is unlikely to happen. believe opec-plus will extend its cuts in some form, if not all through q2. annmarie: i want to ask you about iran. china's imports have fallen. is this about china's demand story or potentially an iranian story?

amrita: it is that iran's floating storage has been run down. if you look at the data, the peak was pretty much around last year and the good before. we have seen about 140,000 barrels per day of oil from iran on an average basis going to china all of last year. now iran's floating storage is gone. you don't have additional barrels available for china to take. what you have seen instead is china taking more russian oil. india is taking less question -- less russian oil. that is missed because it is not actually supply. they have amassed all of this oil for years, and that was actually meeting a lot of china's demand. but now it won't be because we have run that down. annmarie: i only ask because there is talk of the administration trying to put or enforce more of these sanctions on iranian crude. if we could end on prices, even

what is going on in the middle east, if we did not have any of these hostilities how lowboy oil prices be right now? because some of that risk must be priced in. amrita: i actually don't think you have a lot of "geopolitical risk premium," because even with the red sea disruptions prices didn't really go up. we were still in the 70's for brent for the longest time because we are not losing supplies. what we are seeing is a disruption of trade flows, and it is very disruptive for refineries, which is why product prices are high. that will remain the case. the pull up we have seen in crude prices has been driven by a physical, fundamental story, that the market has ended up tighter than people expected. we might correct a couple of dollars, but i don't see much in the form of geopolitical risk premium right now. lisa: amrita sen, thank you so much for being with us. annmarie, i like that question of yours.

her answer was really telling. it's not priced in. annmarie: some people are not hedging for it, and they say it is -- and she says it is because supplies have not been hit. it is a long way to go around africa, but supply has been fined during wonder how much of an upside you would have if there would be an escalation of hostilities. lisa: let's get you an update on stories elsewhere this money. here is your bloomberg brief. yahaira: alexei navalny has died in a prison camp. the report cites the russian prison service as saying alexei navalny fell on well after walk, losing consciousness. lexington volley, one of vladimir putin's foremost critics, was facing charges including extremism. kkr is taking a private loan to help acquisition of safe fleets. iran's technologies makes

transportation safety equipment, like lighting and signals. it announced completion of the acquisition yesterday. kkr declined to comment. deutsche bank is tightening its work from home policy. antigen directors will have to go into the office four days a week, while all other staff are required to go in at least three days. for, some employees were able to work from home up to three days a week. the bank writing in a memo that its current real estate usage is "inefficient." the changes go into effect starting in june. that is your bloomberg brief. lisa: how many people more going to backtrack on some of the work from home kinds of policies? we have seen this again and again. annmarie: i'm rolling my eyes, because none of us worked from home, and the pandemic is over. go back in. support commercial real estate. [laughter] lisa: we will get into that later. up next, fed president raphael

bostic saying there is no rush. >> we will contemplate the appropriate time for monetary policy to become less restrictive. a strong macroeconomy offers the chance to execute these policy decisions without urgency. lisa: that is next. you are watching "bloomberg surveillance." ♪ ♪

how am i going to find a doctor when i'm hallucinating? what do you think, fever monster?

what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. lisa: in a debate about working from the office versus home here around the table, welcome back. this is "bloomberg surveillance." jonathan ferro will be back on tuesday. right now we are looking at a market that continues to get a lift from the sense that companies are immune to some of the pressures we see elsewhere. maybe just that nvidia keeps on nvidia-ing.

euro-dollar doing nothing, but it is sort of like a horse race that nobody wants to watch. 10-year yields up most four basis points. and crude lower after getting to some of the highest levels this year, down .8 percent. under surveillance this morning, fed president raphael bostic saying there is no rush. >> we will likely soon contemplate the appropriate time for monetary policy to become less restrictive. right now a strong labor market and macroeconomy offer the chance to execute these policy decisions without oppressive urgency. all things considered, the u.s. economy is in a good spot. even an enviable spot compared to other major economies. lisa: that was the dove on the bench. ppi, following hotter than expected cpi early this week and we could than expected retail sales. ian shepherdson writing, our

mapping of the retail sales data suggest that retail -- real consumption fell in january. it is too soon to say consumer spending is on course for a sharp slowdown in the first quarter. ian shepherdson joins us now. how do you parse the difference between a slow down and sharp deceleration? what is the difference and how does it matter? ian: it's got to be sustained. that is the first thing. especially when you are looking at data from the middle of the winter. because it is probable some of that weakness in january retail sales was weather-related. some of it will rebound in february. some of it will be lost permanently. at this point we don't know. i will remind everyone that retail sales get revised even when weather is fine. this is the first staff at those data. they will be revised. i think we should take a deep breath whenever we see something really surprising. in the cpi numbers as well this week. take a deep breath, see what happens the following month.

think about these potential special factors that might be a pork and don't dive into a premature conclusion. as you might find yourself having to reverse that position quickly within a few weeks. it is always a good idea to take a breath. manus: good to see you again. that is the issue for the fed, isn't it? there is words, language they are using. victory is not at hand, we want more clarity, we want more ammunition to give us the verification for cutting rates. they don't want and 1990's redux, which is what they went through cutting rates, only having to raise them again. what is it that will give them the confidence to pull the trigger? ian: well, they have clearly told us they are not going to pull the trigger in march. by the time june rolls around we will have a lot more data on everything. we will know if that drop in retail sales in january was a weather effect. we will also have a better idea

about payrolls. we had a big upside surprise in january. so, it looks as though the payroll numbers have strengthened, but if you look at the forward-looking stuff you can also make the case that by the time june rolls around they will have weakened again. given that uncertainty, plus the fact that this is a very cautious fed anyway after the whole transitory fiasco on inflation, they have told us they want to see a lot more data on everything. it is not just that they want to see the core pce printing at 2% annualized every quarter. it did that in q3 and q4 lasted. want to see it do it again in q1, and see some evidence that a long-awaited softening in the labor market, at least at the margin, is beginning to emerge. while as the latest data point in the opposite direction. what do you do as a policymaker that is nervous at this point? you tell everyone you are going to wait. that is what raphael bostic said yesterday.

manus: the europeans maybe have less time to wait than the americans. in this cutting cycle, when you look at some of the stories we have got this morning, jupiter fund boosting the treasury bets. they have also run the analytics in the cutting cycles, and that is why i'm curious to get your view. the typical cutting cycle is somewhere between 3.50 3.75 basis points. everything we look at so far does not suggest that is the kind of scale of cutting cycle that we are going to get. because we are in a fundamentally different economy to the 1990's. with that trajectory are we going to make anything like the hundred 50 basis point cuts without some dramatic incident to take us there? -- we hundred 50 basis point cuts without some dramatic incident to take us there? ian: they tend to be cunning in response to a shock or a major economic cyclical event which

drives up the unemployment rate and post on inflation aggressively. in the absence of those things we have a different position than the fed normally faces when they are starting to think about cutting rates. but we have instead is inflation rapidly heading back toward their target at a time when employment is low -- the unemployment rate is low. that would suggest they proceed cautiously and slowly and do not dive into the rate cuts in the way you might normally expect. but i don't think we should roulette the possibility that later on they have to go faster. because some of the leading indicators on things like layoff announcements and hiring intentions and capital spending plans really do look quite weak. certainly in the leading indicators. if that materializes over the spring and summer that would give the fed the green light to move faster and bring that sort of -- not necessarily hard landing, but a bit worse than the base case everywhere -- everything will be all right landing coming interview. this argues for the fed to

retain optionality. of timing and scale of the rate cuts. but as we have seen over the last few years, so many impossible things have happened. we all have to keep a very open mind about this cycle, because there is no real parallel for it in any previous historical episodes. i'm not saying there is no chance the fed cuts by 400 basis points, but i certainly think at the beginning they are going to be very careful not to send the signal that is what they expect. two years down the road, who knows? you'll have to be humble here. lisa: with respect to the layoffs, are we seeing the end of labor hoarding? ian: i'm sure there was a lot of labor hoarding in 2020 through, 2020 three. because businesses found it difficult to hire after the pandemic. participation, especially among younger people, are at record highs. that sort of intensity of, it was so difficult to get these people, i'm not going to let them go, i do think that is

beginning to fade at the margins. i think there is a good chance that as this year progresses and we see businesses and margins coming under pressure, as consumption softens a little bit and they have to fight to maintain market share, to maintain net earnings in that environment you need to think hard about your labor costs. i think there is a good chance, and we are seeing it in some of the indicators, that layoffs are picking up. that would be consistent with this whole story that businesses are finally realizing, if i let these people go and i need to hire them back, i will be able to do it. whereas two years ago they were terrified if i don't -- if i let this guy go, i will never get them back. it is starting to impinge on their behavior. lisa: ian shepherdson, thank you. it was notable to see all of these layoff announcements. we can say, why haven't they shown up in the numbers, but the fact that these companies feel the freedom to make these cuts is a shift from what we saw last year and the year before. manus: it really is. that is, presumably, going to

pass through into wages. it depends on whether it is technology rate cuts based on transferring into ai, or whether it is real job cuts. nike cutting 2% of the workforce, cisco cutting 5% of the workforce this week. you may say they are incremental. technology has dropped 32 thousand jobs, approximately. that has probably gone up this year. it is about an ability to be a little bit more punchy with the workforce. annmarie: it is important to note where these layoffs are coming from. like in ups, it was people not delivering packages, but in the offices. do your point, the data is so noisy and complicated, because why is it not showing up? lisa: that is a great question and also having to do with continuing claims rising to some higher levels. maybe they are not getting rehired as much. we are going to be speaking with sarah hunt, greg valliere, and

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

you can make money the hard way as a bullfighter t or a human cannonball... or save money the easy way, with xfinity mobile. existing customers can get a free line of our most popular unlimited plan for a year! not only will you save hundreds but you'll also be joining millions who have connected to america's most reliable 5g network. sure is a lot safer than becoming a stuntman for money.

get a free line of unlimited intro for a year when you buy one unlimited line. plus, get the new samsung galaxy s24 on us.

>> we will start to see some weakness in consumers. really, on the margins. >> there could be significant implications for margins this year if you do not see cpi continued to climb. >> we are in a this inflationary environment. >> consumer is more stressed than they were before. but as long as employment is strong there is resiliency that sits within all consumers. >> this is "bloomberg

surveillance." lisa: 90 minutes until a key economic data, ppi, coming out to round out the week of modeled -- muddled view on the u.s. economy. from new york city, welcome back. this is "bloomberg surveillance." annmarie hordern here, manus cranny. jonathan ferro is off for the remainder of the week, which is the rest of today. we take a look at what is going on in the economy this week i have to say, the economy is not the market, the market is not the economy. and what it looks like is the equity market is flying on the heels of nvidia, and the economy may is showing signs of cracks. manus: definitely those retail sales. each guest has said, the retail sales are more worrying than we presumed. the market passed off a hot cpi,

it passed off a week -- it passed off week retail sales. record high so far in 2024, and if he continues on this kind of velocity you are talking about a year like 1995, which was excellent, but then the fed spoiled the policy -- spoil the party. that is what raphael bostic is worried about. we haven't got victory in and, so these are going to be delayed rate cuts until there is a real sense of confidence. lisa: there is a question about how much that is going to matter for the nvidia-driven rally. there are flows into the equity market, that it is flows into the ai story. this is the reason why people are watching for next wednesday. nvidia reporting earnings. a key moment not just for big tech, but broader equity markets. manus: bank of america showed it was almost like a bible, isn't it? michael harden and the team say, the top five stocks account for 75% of this year's rally, and

breadth is the worst since march 2009. that should send a hot, red flag to every asset manager. what can you do? you do not want to be left off of that boat. i am even part of it. deploy! lisa: there is a question about how much that is going to support things. there is plenty of other risks, whether it is election risk, geopolitical risk. interfax is reporting that alexei navalny died in prison. it has great implications, given the fact that he was the loudest voice against vladimir putin. i know your phone is blowing up. what is the sense right now? annmarie: a spokesperson has said they have not been able to confirm. interfax is saying that according to russian media medical staff were unable to revive him. this going to be questions about whether he died of natural causes. only just a few years ago he barely made it out of this nerve

agent attack, which most western leaders blamed, this was at the hands of the kremlin. what happens next is going to be interesting. will people in russia come out and potentially protest what has happened to alexei navalny? this is an individual who has ran against boudin, he ran for mayor of moscow. there is going to be global condemnation, but what else can they do to russia? all of the sanctions and penalties have been laid. lisa: it is going to be curious how it is colored, given some of the intense debate in washington, d.c. right now in markets you can see more of the same. a little bit of a lift to equities. euro-dollar, again, it is the horserace that keeps around 1.0777 at the moment. yields pushing a little bit higher through the session. the interesting one is crude, off some of the highs of the year as people look to some of

the tensions may be resolving. i cannot keep up with what the narrative is that is driving oil on any given day, so i'm not going to be 10. coming up, sarah hunt, greg valliere as the house rules out another temporary spending bill, and kelsey berro of j.p. morgan asset management. we begin with our top story, the ai-fueled rally in stocks driving the s&p 500 toward six-straight weeks of gains. nvidia in the forefront. sarah hunt, saying all eyes are on its earnings report next week, adding, any faltering word, we believe, be a problem for equity markets, especially as investors start to push rate cuts further into 2024. sarah hunt, i am pleased to say, joins us now. can you give us a sense of why nvidia is driving the market? why maybe if nvidia misses others could not necessarily rise up and take over? sarah: i think the good news was

that microsoft came out with good numbers and showed that some of the ai was fueling some of their earnings. this is the big question. yes, this is great technology. can you monetize it? nvidia is the poster child for this. if they have any kind of wobble that anyone can say maybe this is not as quick as we thought it was going to be, i think the whole story comes into question. that whole story was, i think, instrumental in helping equity markets through the fall of last year. all of a sudden the market had something to hang its hat on. ai is coming, we have something to look forward to. equity markets want to look forward to something. if it looks like that story has weakness i think that is going to be a problem. lisa: we saw a capitalization rally for meta. what kind of downside are you potentially bracing for with nvidia's earnings? sarah: people keep making

parallels to 1999 and 2000 with the.com era. this time you have earnings to back it up. but if you don't see that earnings growth or the potential is this year is going to flatten out, people are expecting some huge numbers and growth. the question is going to be if you don't get it does the stock drop a lot? i don't know. it's really going to be, what am i looking forward to? if that looks like that is going to slow down i think everything in this space has room to come down, because everything has moved so quickly and so high. manus: there is almost a mania to the daily obsession, as you said, lisa, people wake up and check their nvidia price. on the floor show for bank of america, you actively look at markets everyday and deploy. what conversation do you have about concentration risk and breadth? do you deal with that? sarah: i think when you are constructing portfolios for clients you want to make sure it -- it is difficult when the market is this concentrated. no one is going to put a

portfolio together that looks like the top of the s&p. that is very unusual. you talk to people and explain to them, yes, you have some participation, but if you get a change in rotation or leadership when you finally see that market broaden out, or you get some sort of slip-up, like nvidia earnings, you don't want to be 100% technology, because then you are going to feel that downdraft. you want to make sure you have another -- enough other things in the portfolio looking at other parts of the economy. yes, you have to have some tech, but you cannot be as exposed as the s&p. manus: for others parts in their portfolio -- where are those other parts in that portfolio? where are those other portions in their portfolio you should be paying attention to? the consumer looks a little faltering at the moment. you have oil paying out big dividends. where are the alternatives?

sarah: you have places where you have good cash flow and growth. you have good industrials happening. i know energy has been a back-and-forth discussion. manus: there has been a lot of buybacks there. sarah: we look at cash flows. you look at some of the places in the industrial space, like hvac. companies that are looking forward to a long period of growth because you are changing out how everyone is looking at their hvac systems. everybody is for clean air. you have places where there is going to be growth that are not just stuck to technology, but have a technology component. lisa: all i can say is i am having hvac issues, so this is close to my heart. [laughter] i'm curious, just to go to the broader economy and how you frame it into an equity view. even that we were talking about some of the job cuts announced, how you view this given that it is not showing up in some of the numbers we are seeing in terms of unemployment? sarah: remind me of the job cuts

we started to see when facebook said, you know what, we have to cut our forces. we have to stop spending. a lot of those job cuts didn't show up because they were in the higher echelons. the question is, is that what is going on right now, or people taking second jobs? it is hard to parse out what is happening, but you can see there is some stress on the low end consumer. you are seeing delinquencies come up on credit cards. there is stress in the low end consumer, but the high end consumer is still consuming. that balance is not there yet, but there is a stress under the hood of the system, and that is where you have real tension going forward. annmarie: this is what a viewer wrote in. if you are on the higher end of the pay scale you cannot qualify for some of these unemployment benefits. in that sense is it those on the lower end of the socioeconomic scale dealing with inflation but still have their jobs and those

on the higher and potentially can deal with and withstand inflation, but are at risk of losing their job? sarah: there is a near-term series of issues of having your job and being able to do with inflation. i talked to people who are not in the higher end who are saying, it doesn't matter that inflation is not going high as fast, the price levels are higher and not coming down. you might still have your job, but that spending is going to be tricky as you start to move toward, we are fully out of covid savings, whatever raise a god does not cover the fact that i'm going to have to start substituting. people are going, i'm going to trade to cheaper ingredients. to the high-end, people are still spending, but if they are out of the job long enough. annmarie: do you buy into the administration's idea that there is corporate gouging and what companies are doing his shrink inflation and they should not be passing onto the consumer? sarah: i think shrinkflation

has been going on for years. it has been much more obvious now because ingredients have gotten so much more expensive. the people take advantage in small ways? absolutely. but is that the reason? i don't think that is the reason. the reason is the price levels are just not coming down. there are periods of time where people can prosper from that, but it doesn't last. manus: one of the ceos we have -- one of the things we have talking about this quarter is the ability to raise prices. lisa is immune to the price rises. [laughter] lisa: it's true. manus: but somebody like hermes is able to premium price, but the rest are not. you look at companies having trouble in terms of volume at the lower end. i caught up with heineken. it's going to be a very different environment in prices. the fetter going to like to hear that, but in terms of corporate

earnings, is that going to be -- i don't know what the right word is. sarah: it is a margin squeeze, right? in the end and margin squeeze is part of a problem for earnings. for a while you had this world where inflation is going higher, but labor contracts had not caught up yet, so you did have a larger ability -- an ability to get a larger margin. as labor costs go up, as the ability to price goes down, we are baking in a large earnings growth, and are we going to get a checkup the question is, i don't know. can technology save us? i don't know. i don't think we know and i think that is one of the biggest problems. lisa: sarah hunt, you're going to be sticking with us. right now let's get you an update on other stories this morning. here is the bloomberg brief. yahaira: russian opposition leader alexei navalny has died. interfax reports the russian prison service is it saying alexei navalny felt unwell after a walk, almost immediately

losing unk -- losing consciousness. alexei navalny was one of vladimir putin's most vocal critics and was serving a prison sentence for charges including extremism. choppers in the u.k. picked up spending. retail sales jumped by the most in almost three years. a boost to an economy that last year dipped into recession. sales jumped 3.4% in january. the latest figures, prompting traders to trim bets on how many rate cuts the boe will deliver this year. novartis says it is working on the next generation of obesity drugs after missing the first wave of weight loss treatments. the lucrative market has been dominated by competitors. the ceo telling david rubenstein what is on the horizon for the company. >> we are working on the next wave of medicines. i think these glp-1 medicines are very well serviced by

current companies. think there is opportunity to improve on them, and it is very early stage, but can we come up with drugs that better preserve muscle, are easier to take, and more infrequently taken? yahaira: the full interview will air on march 6. that is your bloomberg brief. lisa: up next, a looming government shutdown deadline. >> you are not going to get another continuing resolution out of our conference. when we come back the key is going to be, what are the packages put on the floor? lisa: we get to talk about that 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! thanks, bro! you've got more options than you know. book now. lisa: this is "bloomberg surveillance."

on a friday, which we are happy about. right now we are looking at markets that are not lifting after a week of record highs, albeit with one hiccup. right now you are seeing yields marginally higher. the euro-dollar not doing much, but crude markedly higher as people take a look at supply, may be risk they see as diminished. there are a lot of crosswinds there. under surveillance this morning we are talking about this. a looming government shutdown deadline. >> you are not going to get another continuing resolution out of our conference in congress. the last one was difficult. that was done because our speaker recognized there was not enough physical time to process all of the bills once the house and senate had agreed on the top line number. when we come back the key is going to be, what are the packages put on the floor? we should be there before the first deadline of march 1. lisa: and probably everyone heard blah, blah.

two weeks out from the deadline. house republicans ruling out the chance of another temporary spending bill. greg valliere saying everything is still on the table, writing very few gop lawmakers want a shutdown. the reputation of this congress is in tatters, so they are exploring all options, including another extension, perhaps for the rest of the deer -- the rest of the year or a deal that would require boats from democrats. valley area joins us now. you like talking about this? greg: it's my favorite thing to do, lisa. [laughter] how many years we going to fall for this, fall for the hype and not have it happen? lisa: that is the reason i asked. i wonder, we sort of hear noise, but other people say that fiscal stimulus has been behind a lot of the economic strength we continue to see. how much can that fiscal support continue to unleash into the

economy if you do have this joy of funding we get to talk about all the time? greg: it is a factor for the economy and government workers. i would argue the biggest angle here is the credit rating agency -- credit agencies, which already have downgraded u.s. debt and may do it again. they have stated it is not entirely because of our deficit, which is a mere $34 trillion. it is also because the whole process in congress is so dysfunctional. it is a negative story for the markets. annmarie: do you think they could get these appropriation bills done in the three days they come back from recess. greg: [laughter] i would say that is fairly unlikely, that they could do it in three days. there is an angle here. if they don't and it drags well into april than there are some issues that are going to get neglected. like, if they actually change the child tax credit.

it's going to be complicated if they do it after april 15, the tax filing deadline. i think this is going to drag on. i don't rule out getting a bill for the rest of the year, doing something through september 30. it is not totally out of the question. annmarie: when tom emmer says there is going to be no continuing resolution is this going to be they say that backtrack, or do you think there could potentially be a government shutdown? greg: i think a government shutdown is unlikely. it has been such a chaotic last few months with his house. do they want to be humiliated further? like johnson has lost his halo. i do not think he needs that kind of publicity. so, no. but, again, i do think that some kind of continuing resolution for the entire rest of the year is on the table. annmarie: i want to ask you about what is going on internationally. overnight cbs news poll said, if

nato countries are attacked should the u.s. defendant? it seems like the president is out of the step -- out of step with the american population when it comes to nato. then we just had this news that alexei navalny has died in prison. a much more vulnerable does it make republicans, to say they don't want to defend nato countries, especially at the helm of a russia with vladimir putin? greg: good point. the last thing the republicans need is a perception that they are soft on russia, that they are coddling russia. i personally think this is not a good week for trump. because of what he said about nato. sure, let's have russia invade a nato country. and we are not going to do a thing, just to punish them. that was absurd, and i think a lot of americans have heard enough of this and are disappointed. i would note, though, i took a

look this morning at all of the key staples -- the state polls. trump is ahead by 50, 60, 70 points against nikki haley. saying something like this about nato is not a plus for him. manus: in terms of how that plays out, i mean, at the election will americans really focus on international, multilateral organizations when it comes to making the decision about the president or their party? greg: i think two things will dominate. number one is abortion. i think especially in house races that often pivot on issues like this there is a strong feeling the republicans are too strident. and the other thing is immigration. i thought the other big political story this week came out of long island, where the winning democrat said, you know, we can't do nothing.

as the republicans are now suggesting. maybe inflation plays in. but i think immigration, and more than anything else, is going to be an issue, and abortion. lisa: greg valliere, thank you so much. now breaking down politics on long island is sarah hunt. just getting. i do want to talk about both the dysfunction people talk about in d.c., but also the fiscal stimulus you expect and how that is affecting where you are investing. how much can you get conviction in investing in the military complex, in industrials in anticipation of some of the fiscal money? sarah: we have talked about infrastructure and million times. do we ever get to fund some of that infrastructure? it is clear there has been more government spending and people anticipated even a year ago, which part of this liquidity and whether or not we have tight financial conditions comes into

play. because you have a lot more government spending consistently . that deficit is building up and no one is talking about what that means. you look at the auctions all the time. the auctions have been better now. what does that mean? does it mean globally we are the least bad place to put your money because we have that reserve currency and can keep going? that is part of the issue. lisa: next year there is a $16 billion option. i wonder how you use that to frame out the stock-bond correlation and whether bonds will continue to act as ballast financial -- dollars to potential risk? sarah: the bond market is tricky, because we know we are going to eventually get some easing. how much? we are not sure. you had 15, 20 years where you had zero interest rates. you have some room to put some balance in a portfolio, but you also have had prior to that zero interest rate a long period of time where people made money on

bonds, on the pricing of bonds. it is getting people back to understanding what you are getting is a coupon and guarantee of your money back. if things get volatile that is a good thing to have. lisa: sarah hunt, thank you so much for being with us. coming up, alexei navalny has died in a prison camp. we will have the latest next. this is bloomberg. ♪

lisa: about an hour until we get the latest in a slew of rather confusing economic data points. right now in markets, the data mattered for a hot second, and that it didn't anymore with hotter than cpi cratering. then, things reprised back to their gains and record highs. s&p futures back from some of the earlier highs, .1 percent. the nasdaq up about .5%. the russell 2000 down .2%. this correlates with the bond market with yields climbing higher.

the russell 2000 correlation has been lockstep. >> everyone has been saying maybe it is time to reach into value relative to growth. it is like being long yen. it was supposed to be the year for yen rallying. five stocks from bank of america have delivered 75% of the s&p 500's return. if nvidia does not deliver for the past two days, it will be a shock. that is what sarah said a moment ago. if nvidia doesn't deliver it will be a damaging moment for the equity market. lisa: which is perhaps why people aren't trading too much. close to the highs for the year, if you round up the two-year. if you push it through the fx market, you get confusion. dollar strength some days,

euro-strength others. today it is not moving too much, but my eyes are focused on european fiscal. i'm listening with a closer ear to understand if there is more emphasis by european leaders for the need to protect themselves and not rely on the united states? annmarie: we have seen a drumbeat since davos that they need to look in the mirror and do more to bolster the european union, the market, their economy, and their defense structure. we heard from ursula von der leyen giving an interview talking about rough times ahead and that they want to use the same kind of subsidies that they did during covid as one european market bidding for natural gas to build up their defense complex. this comes as a former president is saying if you do not hit your 2% target we won't be there for article five if russia were to invade. this looming large over

munich. lisa: under surveillance this morning, president biden urging benjamin netanyahu to hold off on an assault in the gaza city of rafah without a plan to protect civilians. egyptian authorities are preparing for potential flood of refugees from gaza, building an eight square mile walled enclosure near the border to house those fleeing the conflict. we hear stories about president biden urging netanyahu to do this, that, and the others, it is seems like it's falling on deaf ears. annmarie: it is for the moment as they are preparing for the ground invasion. you see bite and point out what the advice to netanyahu has been. that they need to not proceed unless there is a credible way to make sure that they can shelter these palestinians. at the same time, egypt isn't taking chances and they are concerned about what this could be for their border, which is why you have reports of this wall potentially going up.

lisa: a tragedy in terms of the humanitarian concerns. in economic space, the atlanta president bostic saying that the fed shouldn't be in a rush to raise rates. victory is not clearly in hand and leaves me not yet comfortable that inflation is index or a plea declining to our 2% objective. that may be true for some time. even if hotter than expected cpi is in operation the fed may need to have -- you talk about the reprise of some of that inflation how that looms large over these fed officials. manus: we had a conversation with pantheon economics, and the view was we don't know what the cycle will be. a typical cutting cycle is 3 50, 3 75 basis points. no one understood the impact of covid pain.

so, you have companies like jupiter building up massively long positions. 400 basis points cut in this cycle. that would be the norm. we are not the norm. we aren't seeing job cuts or unemployment or wages reaction function is more normal. job cuts are not the norm. lisa: nike right now is cutting 2% of its global workforce as it looks to counter weaker sales outlook and growing competition after the sportswear giant said in december it was looking for $2 billion in cost savings. saying that the savings put us in a position to right size our organization to get after our biggest growth opportunities as interest in sports, health, and wellness have never been stronger. the take away for me is that companies feel emboldened to make these cuts. we haven't seen this for years. manus: we've had a couple comments from our viewers saying

that, why is this not showing up? we've had this conversation with sarah, saying that higher end employees are not entitled to sign on for the benefits. i'm not completely familiar with the system. you lose your job here and the income levels preclude you from signing on for unemployment. you think some of the companies that have cut jobs, cisco, nike 2% of the workforce, instacart, morgan stanley. small numbers at morgan stanley, but this is, as you say, more emboldened management able to let people go because they can't hire. annmarie: it seems like there is an invisible unemployment market because these individuals can't sign up for jobless claims.it isn't just the tech world. nike is apparel. levis, 10% of their workforce. it is broadly around the scope of job forces. and until we see it in the

data, it's hard to understand how much this is impacting the real economy. lisa: a great point in terms of what were not seeing. it is why people talk about the lack of clarity and focus on things like continuing claims. vladimir putin's most outspoken critic has died in a russian prison camp. interfax reporting alexei navalny "felt unwell after a walk, almost immediately losing consciousness." for the latest, greg sullivan joins us now. what is the latest? in terms of clarity that we have around the situation? greg: the prison service in russia is saying that alexei navalny died apparently after a walk, losing consciousness. they didn't give a specific reason for his death. his spokesperson on the social media platform recently said that one of his lawyers is in transit to the village where the prison is. at the moment, they don't have direct confirmation.

still, condolences and statements from world leaders are rolling in response to this event. annmarie: will there be any response on the ground in russia? greg: it is hard to say. on the one hand, navalny built up a lot of support. he had the sympathy of people as he sought to campaign against corruption and try for public office. on the putin has been cracking down on dissent, the strictest we've seen for decades in russia. he has made sure that anyone opposed to the regime has either been imprisoned or forced to flee. even navalny's organization was branded a group of extremists and many had to leave the country. whether any kind of visible outcry over this could happen remains to be seen, but certainly there will probably be some people feeling reactions to this. manus: we have seen some lines come through from zelenskyy who

said putin must be held to account for navalny's death. that is a response you would expect. how does the international community act in response to this? they are already sanctioned within an inch of their life against russia and exerting forces. how can the international community react? words they have, actions perhaps less potent? greg: great question. we are seeing reactions from world leaders, especially in europe. by and large they are blaming the kremlin and vladimir putin for the death of navalny. it's unclear -- they have sanctioned russia pretty heavily, its financial sector. what tools they have to exert influence remains to be seen. lisa: i would love it if you could give us context for navalny's importance in an

society that has been rolled by an iron grip by vladimir putin. the role that he played as the lone voice of dissent in a country that has devolved into very much what people understand as a dictatorship? greg: navalny has been a figure who has been in the public eye for years at this point. he started as a local campaigner, activist, opposition politician. he campaigned against corruption. his organization frequently sought to expose corruption. he ran for public office, though he was barred from running for public office by the kremlin. in many ways he was the most visible opposition to the kremlin for years. in russia. he garnered some sympathy and clearly a lot of notoriety. there was the poisoning attempt on his life which also probably helped his status. he flew to germany for

treatment, but made the decision to come back to russia, where he was arrested the kremlin crackdown was severe. he was sentenced to 30 years in prison on various charges, most of which the u.s. said were politically motivated. annmarie: recently, an remote arctic prison. who fills this hole in russian society? i can't think of another name that will be as critical of the kremlin as he has been. greg: it's hard to think of how that could happen at this point. some of the crackdown on dissent that has come from the kremlin has partly come in response to navalny. at this point, it would be hard for anyone to emerge. the kremlin has taken any and all dissent seriously. as we saw with navalny, 30 years worth of prison sentences, it would be hard for someone to fill that stature. there could be critics in the future, but if they gain the same kind of stature or widespread exposure seems

doubtful at this point. manus: what do you think that putin's response would be? how do you think he will handle this? do you think he will be very aggressive about it? how do you think he will speak to the nation and the world? how he prevails here can give some indication perhaps of what we can expect for the rest of the year in regards to the russia-ukraine situation. greg: we have heard from the kremlin spokesperson that putin has been informed of navalny's death. and the kremlin in general has handled navalny is usually they don't name him. they refer to him condescendingly as the blogger, were very dismissively. they would not surprise me if putin did not address it publicly or in an offhanded way. he has at times been unproven theories about how he has potentially been poisoned.

i don't expect a very direct or sincere response on the part of putin. especially as we move forward with the presidential campaign. lisa: thank you for being with us. we are seeing this reported by cnn. the national security advisor jake sullivan says that the u.s. is seeking confirmation of navalny's death. let's get you an update on stories elsewhere. here is your bloomberg brief. >> travel is picking up in china during lunar new year offering some hope that spending might also pick up. it is up more than 60% from the same period last year. china's economy has been struggling with growth concerns amid deflationary pressures and the ongoing property crisis. apple is racing to ramp up its artificial intelligence capabilities with the company close to releasing a new tool for app developers.

it is understood the new system will use ai to create code more quickly and compete with microsoft's get have. apple has been working on a tool for the next year as part of the next major version of its flagship program, xcode. shares rallying in the premarket after the company posted a profit for the first time in two years. revenue jumped 50% in the fourth quarter to more than $950 million, that top analysts estimates. watching coinbase for signs that retail revenue at the biggest crypto platform will be cannibalized by the newly launched bitcoin etf's. lisa: treasury yields are hovering near 2024 highs. >> we are still in the camp that investors should gradually extend duration, even if the timing of the rate cut gets pushed back a little bit. we think investors should move out and lock in. lisa: that is coming up next.

♪

lisa: 45 minutes until the key ppi figure that adds to the model so far this week. if you're looking for clarity, good luck. markets found their clarity in a couple, but you are seeing a little pullback in nvidia. i want to bring that up as part of the market check. 5053 on euro futures. 10 year yields of almost four basis points and continuing to climb ahead of the key data. close to the highs of this year as we were talking about earlier. 4.27 rounded up on the 10-year. under surveillance this morning, treasury yields are hovering near the highs of this year. >> we are still in the camp that

investors should gradually extend duration, even if the timing of the rate cut gets pushed back. we think investors should still move out and lock in those yields, because we don't expect a re-acceleration in inflation or the 10 year to get back to the 5% level we saw then. lisa: taking higher after pulling back on weaker than expected retail sales. the expectations for a fed rate cut, even briefly, writing, there will inevitably be volatility. it's important to member the most likely path or monetary policy is that it will be easier at the end of the year than today. now is still an attractive time to lock in real yields in fixed income. before we get into the calls, what did you make of this week's model? kelsey: i agree it was a model. this exemplifies the phrase that

the risks are balanced. you hear people saying the fed might need to hold through the end of the year. you also hear people saying by the end of the year they may have cut four hundred basis points. i think this exemplifies why fixed income is such a good diversifier in your portfolio yield right now. if you get this an area where yields, the fed stays on hold through the end of the year, what do you do? you clip your coupon because it means the economy is still strong and you're getting returns probably equal to the yields on aggregate. that's 5% or 6%. in the event that the economy slows more and you get more substantial rate cuts, you can see significant capital appreciation in your high-quality fixed income portfolio.

lisa: there was one theory that was put out this week that we could be heading into a 1990's-type of scenario where the fed cuts rates and has to hike them shortly thereafter. maybe not in the same year, but 2025-2026 in response to resurgent inflation. why do you reject that as a concept reflected by higher cpi? kelsey: i don't think we should reject it. there is a variety of outcomes that can occur if we have to be humble that we don't know. we do know with the market is currently priced to expect. the market is priced for somewhat of a 1995 scenario. if you look at the trough in the fed funds rate it is for the fed funds rate to stabilize around 3.6%, 3.7%. that is about 150, 150 basis points of rate cuts and then they pause. that would be similar to the 1995 scenario. the market is telling you, maybe that's what we're going to get. in the event that things slow down, you have a lot more policy space then you have had in a very long time. don't forget during the pandemic the fed was only able to hike to 2.38.

manus: with that scenario, the market trading this bandwidth, it is trying to break out. transfer that over into the credit market, because you can get 5.5, five point eight, nearly 6% return in credit, and this current environment on a reasonably soft landing. what is your thinking on the credit scenario given the lack of clarity on whether we get 100 or 200 basis points of cuts? kelsey: when i talked to our credit analysts, they are unanimously very positive on the companies that they cover. when you look at the earnings that we have seen over the past few weeks, they have been saying to us, listen, revenues are coming in better than expected, but interestingly, earnings are outpacing revenues. margins are expanding. in general, it has been a

positive time for credit fundamentals. that is being backed up by flows into fixed income. we know that there are 6 trillion in money market funds, cash waiting on the sidelines. if you look at how the assets and money market funds develop over a cycle, they are not forward-looking. they tend to chase the fed once the fed started cutting. we want to encourage those in cash to not play musical chairs. if you play musical chairs, you will be the one without the chair when the music starts. lock in the yields now so you aren't left without a chair. manus: you feel there aren't healthy competition from the equity markets? the equity markets are roaring with 11 record highs so far this year. you put your cap down and you say transfer into fixed income? which is fair, but when it comes to that flow show, do you really think out of those money markets will be more high-grade credit

and into sovereign? kelsey: it is probably going to be across the spectrum. we are not saying that everything needs to be -- manus: everything for us? kelsey: yes, we are not that greedy. but we do think there is a place and that has been underestimated and under allocated for good reason. if you look back 10 years ago, we were talking about a situation where the fed was at the zero lower bound and you have multiple central banks at zero.there were 30% of the global ag with negative yields. it was a different environment and that is why people were under allocated to fixed incomes. structurally, we think we are in a different time. lisa: you give a playbook of what you do with the data when it comes in given that there are people who try to trade it and others who say it is more than musical chairs, you're just asking to get burned? kelsey: i know that both of us are very excited and interested to see the ppi data.

dynamically, there are opportunities to be tactically adjusting duration in your portfolio. this year we have seen a number of opportunities to do that and have taken advantage of them. there will likely be continuing opportunities to do that. you want to ultimately look through the noise. the reason that ppi is important for the benefit of the viewers, it is not the headline it is the subcomponents of ppi that feed into cpe, the fed's preferred measure. auto insurance, airfares, those are categories that directly feed into ppi -- into pce from ppi. it is a confusing story. i don't think that we should ignore the fact that the wedge between ppi and pce is over 100 basis points. on super court it is 200 basis points wide. there are differences in the way that inflation is measured.

there are different ways to do it. the fed told us they prefer the pce measure and that is why we are focused on it. lisa: there are distortions and things like auto insurance, which have gone through the roof. the trading, 430 and around there. is that a solid buy sign. kelsey: the hundred day moving average is around 433 and so far that has held. after the strong cpi print, we tested that overnight and i remember waking up that we had hit that level and bounced off that level. for now, that seems reasonable. we have to see what the data will hold. the fed is beholden to the inflation data. now, they have a year end forecast consistent with core pce. at two point4% even if we get a stronger than expected pce report at the end

of the month, .3 month over month, the three-month and six-month run rates are going to show that the fed is on track. i went to make sure that the people know not to overestimate one data point.we need to be sensitive to the trend. lisa: thank you for being with us. j.p. morgan asset management, kelsey berra, who is not playing musical chairs. i probably shouldn't either because i was always left holding the bag. you have to be aggressive and put people out of the way. you know what i'm talking about, annmarie? annmarie: i always had a chair. manus: there is no shock in that. lisa: of course, we also get nvidia earnings. the raid on the u.s. economy is ahead of ppi -- the read on the u.s. economy is ahead of ppi

with almost 34 minutes to go. this is bloomberg. ♪ hey, brent! if you had to choose, would you watch paint dry or compare benefits plans? compare benefits. gusto makes it easier to find the right plan for my team. i think i'm going to need new glasses. no problem. you're covered. choose benefits without the mess. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

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. ♪ ♪ you've got more options than ♪ ♪ know. ♪ ♪

>> the longer that financial condition stay tight end rates are restrictive, you will see the impact on activity and see

things slow down. >> we are expecting a slightly slower economy and that will open the door to rate cuts. >> we will probably get capital appreciation of the economy slows, as we think it does, towards the end of the year. >> the fed will probably be cutting in may or june. >> the uncertainty of this year seems to be higher than last year. >> this is bloomberg surveillance with jonathan ferro , lisa abramowicz, and annmarie hordern. lisa: 29 minutes until the latest read on inflation. this is bloomberg surveillance for our audience worldwide from new york city. annmarie hordern, manus cranny, jonathan ferro is off today. we are waiting for the ppi data to drop in terms of factory prices. when it does, we can look at that and say, why does this not look like everything else and how'd we put it in some picture that looks very cloudy right now? manus: the bond market just shredded itself on wednesday on the hot cpi and then got

reminded by goolsby that it doesn't need -- inflation doesn't need to hit 2% for us to cut rates. retail sales, it has been a whiplash of a week in reaction function by markets to data. lisa: which is why we bring our expert on musical chairs, annmarie hordern, to talk about what this means going forward. we have seen this with respect to geopolitics that there has been so much noise that markets have ignored. ultimately, a lot of people talk about how much money has been put into the system and we've seen people who are largely fully employed. how much is this the gift that allows washington to continue with its dysfunctionality? annmarie: the white house and democratic party will continually remind you that the unemployment rate has been below 4% for two years, but think about what we heard in the last hour. the individuals who get laid off but are at the higher end of the bracket cannot -- you do not

show up in the data. is there invisible unemployment? congress will talk about the fact, or at least the democratic party, about the fact that we were better than we are at the depths of the pandemic. lisa: looking at it as a way to be bullish on equities and risk. from your perspective, you are looking at all of the flows and noting how massive they have been. is it all driven by the ai craze? or are people starting to get further into other asset classes? that's been one of the big questions under planning the flows? manus: the concentration risks according to bank of america, this is one of the most concentrated markets. is the worst since 2009. there is a wave of money coming in. stocks posted the best inflows since 2020 two. you still see a real wave of money that's coming in, so there's no lack of velocity in terms of new money, to steal a

phrase from someone else who usually has sat here. it's a question of, what validates that flow? lisa: which is why people are looking at this rally and tepidly kicking in. what we are seeing is a continuation of that trend. equities up .2%. they have been hovering here all morning with not a lot of drama. solidly across the 5000 mark on the s&p 500. the euro-dollar is doing nothing. 10 year yields are up .4 basis points -- up four basis points. people will be parsing through to understand how this bleeds into the fed's key pce metric. crude is lower. this has been a story that people are wondering, when will it break out? you have been asking time and time again, when will people focus on the fact that there is this geopolitical risk? annmarie: they are ignoring it. because the risk isn't there to

the actual supply. no supply has been hit, but none of this will change until the demand comes back in china. lisa: which is why people are parsing through that economy and may be seeing some green shoots if you like to buy things that other people say it is uninvestable. coming up the s&p 500 hits a new record high. reacting to ppi. and jennifer of bloomberg intelligence is previewing big-box earnings that come out next week. we begin with our top story. is bad news good news? it is offering some relief, but investors look ahead to ppi in less than 30 minutes. kristin saying, softer economic data this week contrasts with stronger than anticipated cpi, a sustained rise in continuing jobless claims and relatively weak retail sales .2 the economy softening a bit. if it is softening, is that a time to buy equities or to sell?

kristen: the market is reacting so quickly on a daily basis to the data saying that this has fundamentally changed anything without thesis. you have to step back and say, what we know to be true going into this year? there are a couple of key points. one, the cash on the sidelines is extreme. when you actually look at the totality of cash balances it is a lot higher. you have cash on the sidelines. you have fed funds that have peaked.the idea of is the first cut pushed out, yes, it is, but does that matter for equity investors? inflation has peaked. there could be volatility in terms of the data, but you can see a trajectory to 2.5% by the end of this year. earnings have troughed. out of those four things it is pretty constructive. lisa: how much has the economy and markets gotten divorced from one another, or companies

preserving their margins by making cuts, and that will be necessarily negative for certain swaths of the economy, but that means they can keep delivering earnings? kristen: i don't think the economy and markets have completely disconnected. i think markets were ahead in a lot of ways in terms that the recession everyone was expecting was an earnings recession and we saw it last year. we saw it starting in q4 of 2022 with seven out of 11 sectors in a profits recession. to end 2023 is the highest percentage of stocks in the s&p 500 outside of recessionary conditions in earnings decline. you had the earnings recession that already happened. truth be told come the economic data is pretty strong. it is softening, but not weak. they key thing, why everyone is focused on ppi, is how it feeds into pce, the fed spurs -- fed's preferred measure, and that is what they need in terms

of their trajectory and making that first rate cut. manus: i see that you are a buyer of dips. are you secretly hoping that nvidia next week revises a beautiful opportunity for you to step in where you perhaps are lighter than you would like to be? kristen: i would say that this is the number one question we are getting from our investors. i'm not picking on nvidia, but the dislocation between the magnificent seven and the rest of the market. going back to what i just said, looking at the other 400 93 names, it's a very different earnings story and year-to-date in terms of their performance. i think within portfolios you look at these companies, and if they continue to deliver earnings growth in excess of 25% the market is going to react well. if you look at the size that they represent in the overall index, it is 20% of earnings contribution but 28% of market cap.

if investors are pouring into passive instruments and trackers they will benefit as well. there is more value in the broadening out story, but you have to be involved in these large companies as well. manus: when it comes to those large companies, this is the other thing from bank of america when they talk about concentration risk being the worst -- the breath of this market is the worst since 2009. when you look at 493 other stocks, where is the opportunity? kristen: there are a couple of key areas and this is based on the thesis that we have seen peak fed funds rate and peak inflation. there could be volatility, but once we get the first rate cut you will see the market react so fast. doing the equal weight s&p 500 versus the equalization rate to rot in that out, but from a sector perspective you can look at areas like health care and

biotech and longevity. manus: do you look at the ai influence? if you're not hearing a robust ai narrative -- if you're not hearing a robust ai narrative that is deliverable across the 493, does that discern where you want to be? kristen: you have an ai narrative but also a profitability narrative. the flows will go away from anything, any company, that doesn't have their balance sheet in order, any company not having sustainable profitability. even if we get rate cuts we are in a higher interest rate regime and it's hard to be profitable. you want that filter. ai, you hit on something important, a lot of the flows into gen ai have been in the pure producers of the technology. there is a whole part of the market that are beneficiaries from a productivity standpoint,

like cybersecurity which is one of our favorites. also health care, biotech, and longevity in terms of using that technology to bring drugs to the market in a faster fashion. we will hear more about those tangible productivity gains this year. manus: has the underperformance of the russell 2000 become a viable tip? kristen: when i look at the broadening out story with small caps and mid-caps, the russell 2000 is all-encompassing and it has such a market reaction function to interest rates, to the broader growth story. when you look at some of the indices, like the s&p 500 and 600 when it comes to small and mid-cap, when you're getting that quality filter, a profitability filter, there are ways to play in that space and get exposures to the sectors that can benefit but with stronger balance sheets than the whole small caps space. lisa: coming up, we are going to be talking more about the broader fiscal landscape as we

take a look at that cash on the sidelines. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. yahaira: jeff bezos is selling more amazon stock. the founder of the company offloaded another 12 million shares valued at $2 billion. it brings the total that he has sold in the past week to more than $6 billion. jeff bezos has not explained why he is planning to sell as many as 50 million shares, but the timing is likely linked to his move to florida, which has no capital gains tax. the justice department plans to scrutinize disney, and warner bros. discovery over the proposed sports streaming service. regulators are concerned the joint venture could harm consumers, media rivals, and sports leagues. earlier this month disney, fox, and warner announced they would team up on sports content in one app. sources say that the doj will review the terms' deal when it is finalized.

considering several concepts as temporary replacements for a skyscraper near madison square garden including u.s. open tennis courts, a tent for events like new york fashion week, and basketball courts. the space was cleared when hotel pennsylvania was demolished during the pandemic. a company spokesperson says that the renderings are for "conceptual purposes" and several interim options are being considered. lisa: i have to say, kristen, the death of the office, overplayed? kristen: what are some of the trends that we are seeing more broadly? i would say when you look at some of the earnings that we've seen this past quarter, and some of the companies and their ability to pivot in terms of, for example, malls. the death of them all. -- of the mall.

they are no longer about going to buy product but about the experience you are gaining. there are creative strategies to mitigate some of these. lisa: congress bracing for another shutdown deadline. >> it has been such a chaotic last few months for this house. do they want to be humiliated further? mike johnson has lost his halo. i think he doesn't need that kind of publicity. lisa: that is coming up next. you are watching bloomberg. ♪

lisa: 14 minutes to go and we are excited to parse through ppi. welcome back. this is bloomberg surveillance looking at markets climbing back

up towards new highs, up .2%. you can see a quiet day except for in the yields space. we are seeing session highs on the 10-year and two-year as people wait for the key inflation metric that feeds into the fed's favorite look at inflation, pce. 4.28 if you round up. under surveillance, congress is bracing for another shutdown deadline. >> it has been such a chaotic last few months for this house. do they want to be humiliated further? mike johnson has lost his halo. i think he does not need that kind of publicity. i do think that some kind of continuing resolution for the entire rest of the year is on the table. lisa: house republican saying that they won't pass's temporary stopgap to stop a

government shutdown. right after the house returns from recess on february 28. joining us is the senior political analyst at l for partners. we were talking earlier with greg b -- greg valliere who answered the likelihood of getting it done. he didn't sound optimistic. >> i think d.c. has been optimistic on the substance for a while. the house and senate are pretty close on topline numbers and the allocations. we have been pretty nonchalant about some shutdown prospects. the issue is process. how do you get a bill onto the house floor which a bipartisan majority would surely pass at this point? the appropriations writers, for which the house freedom caucus guys are rolling out, what is making us nervous is the train wreck we have seen in the house of representatives with disaster after disaster after disaster,

demonstrating that mike johnson cannot run the floor in these past two weeks. the substance looks good, but the process will be a nightmare. annmarie: they only have three days when they come back from recess. that increases the risk of the government shutdown? kristen: it does --james: it does, but the first deadline is only for the big four appropriations bill, including the defense bill. it is a possibility that ukraine and taiwan funding is loaded onto that. what we don't see is a big deal in washington is good enough for government work. most people are expecting some kind of a bumpy end to this process. i would agree that a long-term cr is something that is on the table, but the issue isn't the substance of what they are doing, it is the mechanics. how you can get this done on time given chaos in the house and the need to conduct an

impeachment trial in the senate. annmarie: there is news that alexei navalny has died. msnbc is saying antony blinken says russia is responsible for this. with this incident gives a impetus on congress to act on the foreign aid bill? james: i will tell you about the announcement by the republican chair the other day that the russians have a new space weapon about which members of congress were being briefed. that is clearly putin rattling their cages. it shows the level of concern about foreign policy. i wouldn't say that navalny is the one thing, but he is the latest important thing in a series of big developments. the biden administration has to worry at this point, because strategic failure in the middle east has been the graveyard of one presidency after another. they need to get through the

middle east at a point where russia is exploiting the crisis in the middle east to make its own gains in ukraine. lisa: let's talk about the middle east. we had the president on the phone with netanyahu trying to push for a way to make sure that if they will go into rafah that civilians are protected. where do you see the president in terms of the electorate in terms of his handling of gaza? are they continuing to give him poor remarks? james: the president is a vietnam generation senator. he has been dovish on every major foreign policy issue in the past 50 years. he is truly looking at horrifying election numbers right now, where he is upside down. net -55 points among younger people 18-34 on his handling of the war. among democrats in general he is down by about 40 points.

biden needs to put the brakes on netanyahu and show decisive action and achieve not only his humanitarian goals in israel, but hold together the democratic party, which is being torn apart on geographic, ethnic, and generational lines. some of the people who watch bloomberg news and some get their news from tiktok. manus: perhaps that is where they will put more of the president rather than open forum. it would appear, and i use the word loosely, that netanyahu is not listening to any global leader. he has made it very clear last night that he will not have anybody dictate to him. 28,000 people have already lost their lives. biden may have access but it seems like he doesn't have influence? james: netanyahu is not

listening to global leaders. he is listening to the major political parties in israel. as president biden is increasingly boxed in by his domestic constituencies here, netanyahu is facing the same problem in his country. it isn't like he is not listening, he has to make a choice whether to listen to biden or his allies who want him to take a harder line? lisa: still with us right now is kristen bitterly. we talk about how people don't want to price in the election, but there is policy differentials coming into play that are factoring very much into investments. how are you looking at some of the trade policy and tariffs in terms of where you want to allocate and where you are concerned? kristen: this is a major theme in the difference between 2023 and 2024.

last year everyone was about everyone being a part-time economist. this year, and we have been traveling around the globe with our outlook for 20, 24 the number one concern is geopolitics and elections. when you look at the data and say, even for the u.s. equities how does u.s. markets perform in an election year, it is quite positive. when you have an incumbent running you have volatile months leading up to it, but we could make the argument that this year is different. one area in the way we are exploring this within portfolios is through a theme called economic security more broadly, looking at these themes saying everything from near shoring, economic security has to do with access to chips. investing in the equipment makers and chipmakers. even something like cybersecurity and the increased demand and need for that. there are tangible secular trends that make sense from an investment standpoint, but we are not trading portfolios around elections.

annmarie: you mentioned that markets will stay positive and part of that is because this is an incumbent. this is different because there are two incumbents. you could almost set up your portfolio from what you saw from four years of trump and four years of biden? kristen: when you look at how our portfolios are allocated, they are very balanced across fixed income and equity. we have been taking advantage of the yields within fixed income to build. even with the volatility in rates, you have a lot of areas of the fixed income market at 15-year highs and you are buying that for the yield. there is an argument for total return, but you are buying that for the yield if you are buying individual bond positions. if they were volatility or shock, that would provide that benefit from a reaction function. lisa: thank you for being with us. citigroup global wealth management. coming up, we get the ppi data. we are about five minutes away.

breaking it down for us is steve ricchiuto. we are looking at markets treading water but i wonder if this will edify the cpi that we got or if it speaks to the weakness in retail sales? manus: i think whatever way it goes it will be another argument as to why we need to focus on the pce. that will be the narrative from the fed. that is the be all and end all we need to focus on. lisa: it highlights how much this revolving type of economic cycle has been unusual. economic markets continue to grind a touch higher. this is bloomberg. ♪

when i was your age, we never had anything like this.

what? wifi? wifi that works all over the house, even the basement. the basement. so i can finally throw that party... and invite shannon barnes. dream do come true. xfinity gives you reliable wifi with wall-to-wall coverage on all your devices, even when everyone is online. maybe we'll even get married one day. i wonder what i will be doing? probably still living here with mom and dad. fast reliable speeds right where you need them. that's wall-to-wall wifi on the xfinity 10g network.

lisa: just seconds away from the latest in a slew of inflation data. ppi, that nobody cares about until they do. but i'm particularly interested this month, considering the fact we got that higher-than-expected cpi. markets are quiet ahead of this. the expectation is for us light uptick. up .1% on the headline figure. with those numbers, let's head down to washington, d.c. mike mckee is there, hot off the plane from salt lake city. mike, what are you looking at? mike: right now we are looking at a hotter than expected ppi,

going along with the cpi. producer price index for final demand rose .3% on the month, after a -.2 percent drop in december. food and energy rises .5% after a down .1%. food, energy, and a trade up .6%. we see some strength in the final demand numbers on a headline basis. on a core basis, even worse. final demand for core was up .5% . on a year-over-year basis, final demand up .9%. that is a drop of .1% base effect there. the core, 2%. and x food energy antitrade, 2.6%. that one rose some. housing stocks are down some.

14.8 percent in january. of course, bad weather probably contribute into that. housing starts at a 1,331,000 annual rate. housing stocks up 1.5 percent, so it looks like builders pulled back, and that may be weather-related. we'll take a look at what is driving the ppi, why you take a look at how the market is reacting. lisa: in the market is reacting, mike. as you would expect, stocks higher, yields lower. the russell 2000 performing -- underperforming, down 1.2%. they were down with revisions to the month before. still, the average speaks to this inflationary impulse. s&p futures lower by .1% -- .01%. -- .1%. the 2-year yield kissing the highs.

right now 4.67%. 10-year yields up eight basis points. and 30 year yields up about five basis points. being a currencies, as you would expect, there was a reversal of some of the previous euro strength. euro weakness versus the dollar, 1.0749. mike, i'm curious about whether the revisions changed the picture at all or if this is a solidly inflationary picture, especially with the components that feed into pce? mike: you are putting your finger on one of the problems here. it is, it looks like, an increase. the kind of increase we should worry about a bit. 2.2 percent increase in the hospital outpatient care area, which does feed into pce.

one of the issues is, in january you tend to get these kinds of increases, these seasonal adjustment factors are supposed to take that into consideration. so, not clear exactly how this is going to end up affecting pce, but it should push it a little higher. the other thing people have been watching for is securities brokerage. they had been making more money raising prices as people, the market continued to go up. that was up .7% during the month, which is down from 2% rise the month before. so, not as much of an impact, but it did have an impact on this overall. index for goods, down in january, whereas the index for services was up .6%. that is the most since last july. manus: do you think this is going to be more troublesome for the fed and market to digester? it was easier to move through and look through the cpi on

wednesday because it did not have a material impact on pce. but here we are, we will have blow through from this. the estimate was for .1%. that is a significant mess. is this one going to be harder to push away from the bond market? mike: it depends on how the bond market is thinking about it. if they are worried about what the fed is going to do, of course we have been cautioning people not to pay a lot of attention right now because they are not going to move in march. so, we have a lot of data to come. but it may show a rebound in prices. january can be difficult, because of these seasonal adjustment factors. we will see what february turns out to be, but after a long string of declines in the producer price index, this is not particularly good news. lisa: mike, thank you so much for this. if you are just joining, we want to recap. hotter than expected ppi.

in particular, some components that feed into pce. final demand headline number, month over month, .3% versus the expectation of .1%. if you look year-over-year it is up .9% versus the expectation of .6%. it is pretty much as you would expect. 1.4% decline on the russell 2000. yields on the two-year reaching 2024 highs. now almost two or .70. -- now almost to 4.70. on the front end work -- is where you are seeing the most. steve ricky udo sitting alongside us. what is your reaction to these -- steve ricchiuto sitting alongside us. what is your reaction? steve: you need to say how much is reasonable to think about the federal reserve cutting interest rates. the market is going to have to

come into being bounded from below by three. in the question becomes, is it three or less than three? not whether it is going to be more than three. clearly the data we are seeing on the employment numbers, on claims, the confluence of data are telling you this economy has more resilience, and i would say a number that doesn't get much reporting on but should have is the import price numbers the other day which really sure -- it's really showed import prices having a bit of a kick up. as mike mentioned, the goods component is on the weaker side. lisa: i'm looking at x food and energy. that increased from the previous month, and now year-over-year is 2% versus the expectation of 1.6%. from your perspective, how important is this from a fed rate cutting cycle point of view versus a real threat of a resurgence of inflation that we have not yet seen? steve: the speed at which inflation came down was

incredible. almost unbelievable. to see some backup to a more realistic deceleration pace is not something we would be surprised to see. however, you have to keep in mind from the underlying perspective a tight labor market leads to wages. wages lead to service-producing inflation. and that really is the problem for the federal reserve. the goods component is a global deflationary force that is real. it is being reflected in terms of people's investments that want to come into the united states. all that is happening is holding the currency. but the domestic story is a service story. that is the battle. the global deflation versus the cyclical inflation. double deflation had been money. it is now time that the cyclical inflation story win for a while. manus: where we are right now is a market desperate to see inflation cascade -- the

disinflation story get back toward two percent. but the reality is the fetter talking about a higher for longer period. do we need to get used to the markets, higher rates of inflation, and higher rates on a new -- we are moving into a new era for rates and inflation? or just slightly harder than it was in the past 10 years? steve: that is an interesting question. the first part of it goes to real returns, and the second part goes to inflation expectations. there is clearly sentiment invoiced at the end of last year and the beginning of this year i the dovish members of the fomc that 2% is our objective, but not really our target. we will deal with where the target should be in 2025, and, you know, a be if it is 3% that is fine. that is one half of the equation, which the bond market has not been pricing. the bond market has been sent, we are pricing in the 2% risk premium.

raphael bostic was clear about this yesterday. they are scratching their heads and saying, the economy is not responding to interest rates. what is different now than was there before and terms of the response mechanism, the short-term interest rates? the answer is clear. we are less sensitive to short-term interest rates now because nobody is funding short. that is the key thing. corporate america does not issue short-term debt. household america is long-duration in their debt obligations. and most of their debt servicing costs are locked. when i hear people say look at what corporations are paying for new debt i'm like, yeah, when you look at their net interest expense of what they are buying, it is trivial. manus: if the funding side of our personal balance sheets have changed and corporate america has changed, talk to us about the employment market. we have debated this for the past three hours, which is perhaps lower socioeconomic groups having a tough time and losing less jobs at the moment

than the upper and -- upper end. what do you make of that, nike, 2% of the jobs gone. is that have any credence or are we in the infancy of that narrative and a changing job market? steve: i think we are in a changing job market. there is a lot of job availability. see it in the data and terms of the openings numbers. i think a lot of these people get jobs quickly. that is why when you look at the initial unemployment claims data and then look at the continuing claims data, there has been no real difference in them. they have not been rising, which you would normally expect. given how tight the labor market is in general you see companies rebalancing their workforce, and then you see somebody else willing to take them. therefore you are not getting the kind of response you want, because there are these job openings. that goes back to the fact that

there is a real worker shortage in this country. that i think people are forgetting. we are still well below the pre-cobra trend unemployment. manus: if we have a tight labor market with rising wages, no low socioeconomic employment -- unemployment, should the fed be cutting rates? steve: it is hard to say they should be cutting rates. manus: is that not politically palatable? steve: yes, you have hit the nail on the head. the reality of the situation is, look, they just want to maximize social welfare. which is a fair statement. if they want to maximize social welfare you want to keep a tight labor market. the inflation numbers coming down were giving them that ability. if the inflation numbers start going against them, given the asymmetric approach to monetary policy today, and the markets

after today are not pricing in inflation risk premium, the reality of the situation is they continue to do nothing. annmarie: you look at inflation, ppi running hotter, you talked about this exceptional period, where we were 9% to 3%. why isn't the american people feeling it? steve: so many americans had seen they real disposable income get crushed as a result of the upward adjustment. what we are saying is, inflation is slow, but the price has not gone down. so the reality is, when the average american goes to the grocery store they are still looking at the price of goods that are elevated from what they remember pre-covid, and that is where their budget is ss that. wages have not kept up with inflation. that is why the disposable income is back below trend. that is the reason the fed wants to keep the labor market happy. they want to try to correct that

to create the social welfare. they are really trying to get this balancing act right. again, the probabilities of them succeeding or not is highs people vanke, -- people think, but i can understand why they are running the experiment. lisa: steve ricchiuto, thank you for being with us. steve ricchiuto of mizuho securities. we did get hotter than expected ppi data, and particular having to do with specific key aspects that feed into the pce. 2-year yields now at the highest levels of this year. you can see a pretty sizable move throughout the yield curve. 10-year yields, kissing the highest, going back to november of last year. we will go through that coming up in more detail. right now let's get you an update on stories elsewhere. here with your bloomberg brief, hydrogen cats. >> alexi navalny has died in may

-- in a prison camp. navalny was one of vladimir putin's most vocal critics and was serving a lengthy prison service for charges including extremism. openai ceo sam altman is working to secure u.s. government approval for a multibillion-dollar venture to use global ai chip reduction. altman has been meeting with potential investors and partners in the united states, middle east, and asia, but says he cannot move forward without a green light from washington. the ambitious push to raise funds risks triggering a national security review of the foreign investments. apple is racing to ramp up its artificial intelligence capabilities, with the company close to finishing work on a new tool for app developers. it is understood the system will use ai to create code more quickly. the move places apple in direct competition with microsoft's get

hub copilot. apple has been working on the tool for the last year, as part of the next major version of its programming software. that is your bloomberg brief. lisa: thank you so much. next, big-box earnings in focus. consumers are taking a breather. >> the cat is out of the bag, inflation has come down. there is no more justification to raise prices. the issue for consumers is that companies have not dropped prices. lisa: we are also going to be talking to the latest response to hotter than expected ppi data. that is all up next. ♪ ♪

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. lisa: buckham back to "bloomberg surveillance." we are looking on the market on the move following a bigger than

expected ppi print. 2-year yields are at the highs of the year. you can see that also in 10-year yields and what that means for stocks is lower on the day. s&p futures now down .3%. still crossing that 5000 line. you can see in that 10-year yield is 4.32, rounded up. in the 2-year yield, 4.70 and climbing. big box earnings in focus as consumers take a breather. >> now we are at a point where the cat is out of the bag, inflation has come down. there is no more justification to raise prices. the issue for consumers is that companies have not dropped prices, so we are still -- so we are still at an elevated level. but if wages continue to rise that will eat into margins. so then they have to go back and say, if i want to preserve my margin i'm going to have to cut costs somewhere. lisa: here is the latest, walmart and home depot kicking off earnings next week as retail

sales show a post-holiday slump. before we get to what you expect from next week, i am curious about your response in terms of pricing power, considering we have had two hotter than expected inflation reads so far this week. are you seeing this in terms of companies expressing that they can jack up and people will keep on? >> it is definitely a topic of the day. when it comes to the package food companies, i think everyone acknowledges that the pricing power they have is -- is whining. they have raised prices a lot in the last couple of years, and it was justifiable because their own prices -- their own costs were higher. and as inflation is receding, especially with certain input costs, there is an expectation that they will not take as much price increase. that said, i don't know if it is realistic for people to assume that food prices will go back to pre-pandemic levels. the world is a little different

and it was four years ago. so, there needs to be a little bit of middle room there. lisa: there is this question about whether you are seeing pushback or not. it is conflicting when we look at the data. the fact that we got two hotter than expected inflation prints, the fact that coca-cola said they could increase their prices by 9% speaks to a different narrative. jennifer: and these companies say they can increase prices, they can, but that is at the expense of volume. you can raise your prices all you want, but the question is, will consumers buy it? that is where we think we are going to see an uptick in promotional activity issue. they are going to need to incite consumers into purchasing greater volumes. there is going to be a shift in the balance. the last few years it was about growing the top line. now we are looking at a very different kind of story for these companies. manus: we faced supply chain challenges, and what they have now of course is higher wage

bills. i'm interested to get your view on this. we will come back to the price rises in a moment. it is the higher end of the market where that seems to be resilient. talk me through wages and if all the supply disruptions are all gone. i'm talking to industrial companies and they say they still have supply challenges. jennifer: when you talk about wages -- again, thinking more about the consumer package companies, a lot of these companies, it is unionized. once labor, -- once labor contracts are negotiated they are only ever going to go up. coming out of the pandemic there were a lot of negotiations with regards to the working conditions and salaries and things like that. when it comes to the consumer, you know, wage growth has slowed a little relative to inflation. consumers are still in that spot where they are making selective decisions when they are

purchasing. even on everyday essentials. it is a unique situation where labor, depending on which side you are on, is an issue. jennifer bartashus you think companies, the ones that had to do all of these higher wages because of unions -- i think of ups, but then had to lay off people, are going to have to make up with wage gains, laying off other parts of their business? jennifer: at least in my industries that are covered they went through some large layoffs not long before the pandemic. so they are relatively lean at this point, but there will be a focus on cost cutting. most of the time that is going to be on internal things. for the next year or two to low hanging fruit is bringing costs out of the supply chain. during the pandemic because there was such an emphasis on getting goods to be available, that added cost into supply chains across the board. the low hanging fruit this year and maybe enter 2025 is, how do

you right-size your supply chain again and take the costs back out? that should eliminate the need to do any mass layoffs. lisa: jennifer bartashus. i'm sure we will be catching up next week with you when we get walmart and home depot earnings. if you are just joining us, just to recap what we saw, inflation data coming in yet it can -- yet again hotter than expected. this goes directly into the fed's core pce deflator. the response in markets has been the knee-jerk decline in bonds, the decline in stocks. not a lot of drama. we don't want to overstate it. the russell 2000, though, really taking a hit, as it has been the hardest-impacted by any potential increase in rates implied over the rest of this year. manus: it is the torture of the value to growth proposition. 10 basis points on 2-year note, i think that is the highest so far this year.

if you look at tens, again, trapped in the upper echelon of this bandwidth. the natural question is, do you look at this as an opportunity to step in for duration, or do you run the risk that this is going to be a very stumbling, difficult road back to a more normal -- the norm of inflation that the fed want to see? lisa: inflation is highly political. i'm sure we will hear discussions about how the inflation genie has not gotten fully into the bottle, and concerns from the political sphere. i do you message something as noisy as disinflation? annmarie: it is very challenging for this administration. you'd hear them -- you hear them say, look where we were at the depths of the pandemic. they are not going to want to focus on any specific report, but when the economic data is noisy and the american people are not feeling and it is hard to message that. you have seen the administration go after corporations. but today the michigan survey,

they have really been harping on this. the past two, the survey has been much better and they are hoping that the american people are starting to feel some of the good data. manus: that is positive, isn't it? that whole sentiment? lisa: that is tied to gasoline prices that have been the bright spot. here are the numbers. ppi, if you strip out food and energy, which have been the disinflation area types of trends recently, you ca a 2% increase year-over-year -- you see a 2% increase year-over-year. on tuesday we will continue to take into this. steve sharon of federated hermes, sam stovall, amanda lynam, and joe feldman. manus, think you for being with us, and we will continue to parse through these inflationary figures. this is bloomberg.

♪ you bring a lot back

to civilian life. leadership skills. technical ability. and a drive to serve in new ways. syracuse university's d'aniello institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. from professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world.

>> from new york city, i'm dani burger in for jonathan ferro. your last trading day, another disruptive piece of data. yields backing up to their highest levels of the year, but stocks lower. the countdown to the close starts now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg "the open ," with jonathan ferro. dani: coming up, the