♪ >> welcome to "bloomberg markets ." we are looking at the major indices all near session lows on the day. we are seeing big tech is being dragged down in the market away from its all-time highs. with a quick check in the markets, the s&p 500 now down about 1% 0.9 percent. the nasdaq 100 down at 1.5%,

a little more than that. stocks semiconductor index this is where you are seeing the brunt of the pain. and the kbw bank index not near session lows come actually need a session highs on the day, down 0.3%. a lot of losers here but a few flipping into the green and we will talk about that in a second because the midday movers on the equity side include the discover and capital one deal we are seeing here. discover shares up more than 14% on the capital one deal to buy the rival firm. capital one flipping green on the day, up 0.7%. initial reaction was down on the dave and buster's starting to see the synergies seeping -- down on the day, but there's starting to see the synergies -- but the investors starting to see the synergies seeping in.

visa and capital one and mastercard working together when it comes to the credit card network to that issuer. perhaps some of that also part in the future. we are looking at another richard neal as walmart agrees to buy vizio for $2.3 billion and it topped wall street earnings expectations for the fourth quarter. we are looking at roku now down more than 6.8% on the day. investors weighing the invocations of the vizio sale to walmart. yell is up 14.8% on the day. the pile -- vizio is up four -- vizio is up 14.8% on the day. we need to talk by the cash flow that shows no sign of slowing. the total assets brought to over $6 trillion. now for more, we are joined by a guest to talk about why so much

money is moving in. when we are seeing the fed start to not meet investor expectations on how fast they were anticipated to cut, what is the expectation and the word on the ground from what you are hearing from executives and investors on how much more cash they expect to hold? >> thank you for having me. i think the picture has changed quite a bit. just going back two months ago, the fed was excited to cut rates by march and people were wondering what is going to happen to the cash sitting in money market funds? now the fed is moving to cut rates later, and we see people thinking of another hike before rates move lower. then that means of course corporates and investors will hold money market funds for longer and we don't necessarily see that immediate rushing or the sucking sound out of when you work at funds as some people anticipated. we have seen increases here, and that is probably also not going to change anytime soon.

it depends of course on when the fed moves to cut rates and by how much. barclays for example is thinking that cash is relative to other assets, still unattractive thing to hold -- an attractive thing to hold. we have seen jp morgan expecting $5 billion out of the $6 trillion susceptible to flight risk so basically we are still expecting a fair amount of money being held in funds. and some even out there in the market. expecting this amount to increase to $7 trillion so another $1 trillion to be added today. i am not necessarily sure entirely where it will go but from corporates we are hearing very much they are not moving to move their funds out of money market funds anytime soon given that they want liquidity, they want the cash available, which that also means they don't necessarily want to take a lot of risk on it. sonali: investors or even corporations give a sense of how

fast and far rates have to go down before cash becomes unattractive. nina: my sense from corporates talking to cfos is very much that even if rates were to be cut significantly, still it would hold a significant portion of their cash in cash or similar instruments just because they want to be in position to use the cash for a mandate -- for m &a and other things. we saw corporates hold onto cash. from a cfo or treasurer perspective, right now is not a bad time given that we see money market fund yields with a loss of 5%, which is much more than they used to get. sonali: we thank you so much for your time and analysis. that is an author on one of the most read stories of the day. larry summers is one of those voices saying there is a chance the fed's next move could actually be a hike. larry: i think that may his odd

zapotec this point and probably should be odds off and, gosh, i think we have to recognize what no one is talking about. there is a meaningful chance, maybe it is 15%, that the next move is going to be upwards in rates, not downwards in rates. sonali: joining us now is constance hunter, senior advisor at macro policy perspectives. this idea of another hike, how do you play that into your expectations for the year? and what type of data would you be looking for for that kind of outcome, which obviously very few are prepared for? >> well, ok, i think it is wonderful that you showed that larry summers clip. we were going to have unsustainable record inflation

as a result of fiscal policy. we did have some inflation due to fiscal policy, also due to supply chain issues. so you have to really adhere to the theory larry has been apparently unwilling to capitulate on in order to believe that rate hikes are in our future. what the fed has said is we will leave rates higher for longer, and they seem to be about to deliver on that because the data has given them the space to do that. however, what we really need to think about is, where do real fed funds need to be? in other words, how restrictive this monetary policy need to be as we are on this path to percent? -- 2%? we can say, is that a slower path? we need to wait for months of data before we can say this, but

the prevailing wisdom is you want to have fed funds already on a lowering path before you reach 2%, right? so that's a we went from our current level of 5.5% down to 4.5%, we drop 100 basis points. 4.5% is still a restrictive fed funds rate right? so that is what we need to keep in mind. sonali: it is good to talk to you for a few reasons. first come as we look to more detail about what the fed has been thinking inside the debate within the fed about where inflation is versus rates as well as a whole host of federal reserve speakers this week. there is a chance for some volatility in terms of the expectations here. remember just how far we have come about the expectations for rate cuts moving out further into the year. what will you be watching for? constance: first of all, i think this is the year of volatility. that is the theme that i think everybody can more or less count

on, and that is because at times of economic inflection points, data becomes very noisy. so let's pick for example if you were to only look for example at the employment report and the cpi and ppi data. we have a strong labor market, inflation heating up, and that is true if you look at it on his face. if you look under the you will see the hours worked is beginning to fall and falling so meaningfully that you had average weekly earnings and hourly earnings, weekly earnings decline come and we are seeing three straight months of declines. they are not hoarding hours so they don't need all those people working that many hours. we look at retail sales. again, just one data point, but it shows the pace we saw in december which was nice and calm is probably not sustainable.

we will see southward consumption in 2024. we are seeing a lot of noise in the data. and looking through that and seeing what the signal is is really important. we also at macro policy perspectives do our own scribblings of the earnings report and look at the context with which firms are hiring and mentioning hiring and layoff plans. when we take those two things together and create a diffusion index out of it come up what it suggests is we might be having a negative payroll print by the summer. if the data -- we only have part of the earnings reports in but as we continue to look at that data, map out what is with the data -- what is happening with the data so they are comparable, that is a signal that perhaps under the hood things are weaker than they appear on the surface. sonali: and as we are speaking, we are seeing another set of session lows on the major indices, particularly the s&p 500. you think about the negative

sentiment starting to seep into consumer sentiment, retail sales, and even inflation. what are the chances that if what you are saying is true, that we start to see negative prints come the summer when it comes to jobs and we still see inflation, do you think we could potentially see a two-pronged economy this summer where you are facing higher inflation as well as the weakening of jobs? constance: the old stagflation situation. look, even if we start to get flat or slightly negative prints on jobs for aperiod of time, it will be -- pray per -- for a period i'm, it will be a while before we reach 4% -- -- period of time, it will be a while before we reach 4%. cutting in may, cutting in june, june is now our baseline, but for a long time, made was our forecast for good reason -- may

was our forecast for good reason. we are looking at sort of the crosscurrents of what is happening with the data. and so beginning to cut and even signaling you might be cutting in may or june is going to help do things like reverse some of the conversion in the curve. it is going to have a knock on effect and might prevent that jobs -- prevent that negative jobs. sonali: thank you for your time. it is a complicated economy out there with a lot of fed speak ahead. coming up, the biggest merger this year, the stock of the hour next. a lot of complications to think through. stick with us. this is bloomberg. ♪

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sonali: this is "bloomberg markets" and i am sonali basak, and it is time now for the stock of the hour. capital when agreed to by discovered others all stock deal to create the largest -- discover in a $35 billion deal. the reality of the situation is you have two massive companies with slightly different consumer bases. one major question out there in the market is if capital one has been so leaning towards customers that are not always prime, sometimes subprime, sometimes under the 660 fica score, and they are going upscale, they have been more and more, do they start to leave some of these consumers behind? >> it is a bit of a bar build is to be should become to the

high-end ash bar bell, low end to the high end -- bar bell, low end to the high end. think it folds nicely into their portfolio -- i think it folds nicely into their portfolio. it is nice to have structural improvement in delinquency and recoveries, which are two competitive advantages capital one has. sonali: one other question about competitive advantage, traditionally cover itself has been a smaller network. you still have visa and mastercard. these networks have worked with capital one in the past. what is the impact for visa and mastercard for a deal like this to be approved? ben: yeah, so they will be a bit of tension going forward because capital one will continue to issue visa and mastercard branded credit cards, but discover is really small, about $550 billion in annual volume

versus mastercard and visa together, which are about $10 trillion in the u.s.. i don't think the competitive concerns are too grave for visa and mastercard but this is definitely a shot across the bow for these two companies going forward. sonali: what does it mean for regulators? a shot across the bow is interesting because capital when it's up had not been the one or two credit card company by credit card volume. they were number three and discover was number three in network volume so does this propose a threat that regulators would be upset about? ben: obviously, the environment out there is tough right now for regulatory approval. but this is again -- discover is a distant number four network. capital one will have a long way to go to make it bigger, but it will integration is a bit of a dirty word and that is what will be happening in this transaction. the card issuer will be acquiring the network.

traditionally, those two parties negotiate fees. so when the two parties are together, it gives capital when a bit more control over the fees it charges merchants. but on the other, it will give merchants another viable alternative to visa and mastercard and american express in determining what kind of fees they pay to issuing banks. sonali: you have covered this a while. when you look at a massive deal like this come through the water like last night, you're thinking in terms of the biggest ramifications to the industry? ben: this is potentially one of the biggest transformations the industry has seen in quite some time, but it will also be a slow-moving one. this is a huge bet that capital one is taking, betting their legacy but that discover's network is the path forward for them. in the short-term, the consumers will not see a lot of difference. capital one will have to do a lot of marketing, invest a lot in the tech to leverage discover into a network that can compete

with the likes of visa and mastercard. sonali: thank you so much for your time and instant analysis over the last 24 hours. coming up next, we will talk about bill ackman, shooting of the list of top page hedge funds managers -- hedge fund managers. we will see why he has ascended so far, so fast. stick with us. this is bloomberg. ♪

sonali: this is "bloomberg markets." i want to check on the markets for a moment here because we are watching declines on the s&p 500, nasdaq 100, and the semiconductor index. the nasdaq down near session lows, down 1.4% on the day. the s&p 500 down 0.8%. the two year yield taking a five basis point hit lower here. and little bit of a hit in the

bond market. the 10 year yield also down about two basis points on the day, still firmly about 4.25 -- above 4.25. we see the selloff continue on here. it is time for the wall street beat. we will look at what is buzzing on wall street and the world of banking and finance, looking at the top aide hedge funds managers -- top aid hedge funds managers -- top paid hedge funds managers. that is bill ackman. when you look at ackman's gains, is it surprising he has been able to jump so far on the list? >> he has done well. he parted $600 million last year. it is the highest he has been on the list since we did this analysis, and what is interesting is he did not do that much to his portfolio. he addressed of the exposures to the stocks which is really only in 10 companies basically on the margins.

some of the portfolio did not see any big way down but it was still up 20% last year contribute into his gain. sonali: also offer ackman, roughly a third of the haul last year included pershing square funds. that is a model a lot of people have been following. explain the difference between ackman and what was happening with ken griffin. we know they have been doing extraordinarily well. what interests me about the bloomberg list is they have done better in terms of comp than ken griffin last year. hema: if we compare these two groups, ackman's fund performed better, but the founders were high on the list making a lot more money so you see what we talked about before, which is the multi-strategy model and what that means for income. and you see they both made about $1 billion from performance fees

alone, nearly or about $1 billion come and both of their funds, even though they did not do quite as well, they both have a sizable personal stake in the funds. so when they gained, it helped them a lot. sonali: it is interesting because you are talking about the countries -- the concentrated bets bill ackman was making. tci, were they doing the same here, bedding big? hema: they invested in about 10 u.s. stocks. they may do a few others internationally too, but the theme of concentrated big positions, they were up 33% last year, one of the best performers of the group we looked at. yeah, you don't see a lot of the big funds doing as well given their concentrated positions, but what they are doing is working well for them and certainly for chris. sonali: just about a minute left here. for some of the miniatures that have bet big on stocks, they have fallen off the list.

what happened there and why do they have a different fate from ackman? hema: a lot of the tiger cubs are still digging themselves out of the high watermark it making -- watermark, so they have not made our list. a lot are still trying to come back. they had been on our list previously. sonali: we thank you for your time and reporting. it is one of the most read stories on the terminal right now, about bill ackman and the hedge fund paid list. we are looking at the s&p 500 still down 0.8%. the nasdaq 100 down 1.3% so far on the day. the sox semiconductor index falling more than that. of the biggest love stocks if you will of the industry -- some of the biggest love stocks if you will of the industry, nvidia leading here. a general sense of negative sentiment.

this is the second day of declines coming back from a holiday weekend. keeping our eye on the bond market because of a slew of fed speak this week. yield traded lower. -- yields are trading lower. keep your eye on the close. this is bloomberg. ♪

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