>> i think the equity market is really nicely set up from here. >> there is lots of opportunity in this market. >> even at rich valuations, it is going to be earnings growth that is going to drive the market. >> we are starting with the magnificent seven, but over time we see the gains and positivity spreading. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning.

to our audience worldwide, this is bloomberg surveillance. coming off the back of the biggest one-day gain of the year so far. the stack lineup, bramo is out. peter is with us, we will talk about nvidia. let's go through the numbers. 276 $.65 billion in market cap in a single day. let me go through the list of companies with the market cap smaller than the big one-day gain on nvidia. salesforce, netflix, bank of america, coca-cola, pepsi, mcdonald's, the list goes on and on. yesterday we added a pepsi to the market cap of nvidia. peter: it has been almost insane. we saw on february 2 meta-did almost the same thing. it seemed like a huge number at the time. what did wall street get so wrong that it was off by that much. i think that wall street didn't

get that much wrong. it got a little overdone. even if you go back until later in the morning it was back to levels it was traded at last tuesday. as exciting as it is it also dropped. jonathan: amory was talking about it yesterday. we are talking about a bead on the forecast of 2 billion u.s. dollars. that beat or $2 billion seem to release a rally not just in one name, one country, but across the planet. can you make sense of that? peter: no, to be honest. i think the nasdaq 100 was just below 18,002 weeks ago. it is at an all-time high but verily. everyone is forgetting that we sold off pretty hard on tuesday and wednesday coming into the earnings. we bounced into the close. then we rallied hard yesterday. to me, it is almost the last gasp. everyone was cut short and un-invested is pulling in.

we really like ai. we believe ai is going to change things. the problem is, did it get too expensive? is the data ready for ai? if it's going to work the rest of the market has to be successful. it has to translate overall into the rise for everyone. jonathan: this is what peter has to say for the next 60 minutes. unloading to bear mode. we can find it with that means in the next couple of minutes. equity futures on the s&p 500 are looking a little something like this. equity futures on the s&p are pulling back in touch, negative by 0.0 3%. the bond market, yields are climbing again of two basis points on the 10 year, four point 34. the foreign exchange is an exchange on the euro, 1.0823. coming up, all spring with u.s. stocks pushing all-time highs. nvidia smashes records for a single day. and darby field advisors as nikki haley vows to stay in the race against donald trump.

our top story is nvidia smashing records adding 277 billion dollars to its market cap in one session. joining an exclusive to trillion dollar value club. all spring writing, nvidia's results not only relieved uncertainty about nvidia and ai growth, but resolved investor concerns about the health of the technology sector and economic growth overall. let's go with pete's line. i am reloading to the full bear mode. are you? >> no, i think this shows that the economy is at least strong enough to have a pretty good result for the whole year. i think a lot of people are waiting on the sidelines. this affirmation i think will open the floodgates for a lot of the money sitting on the sidelines that it's ok to come into the market. peter: do you think that much money is coming into the market? i am concerned everyone has already filed in and this was a

sigh of relief that everyone bet on this and was hoping for this. margie: i think that people were actually expecting a disappointment and a big market correction to go through the whole market. that didn't happen. so, we saw a quick reversal. mentally, people are still thinking that we are locked into some kind of economic cycle precipitated by the fed. the market hasn't been very sensitive to what the fed has done. the market is looking at the numbers, revenues, and margins, which have held up. the sectors in the tech sector are very strong. that looks like that will continue. i don't see any reason why we should get a meaningful correction. peter: will this translate into a broader market rally like we had in november after nvidia earnings then? that seem to parse -- seemed to precipitate the rally as a whole. will it still be may be a tech-led rally? margie: i wouldn't say

exclusively tech. i think it's going to be a narrow market to those companies with above average growth. that would be tech, because they have shown that. a number of industrial companies were very strong and i think our position to be on the secular increase. that is a sector that's rather undervalued. the health care sector, parts that looked like they hit bottom and are ready to do a little better. broadening out but only to companies with good jonathan: growth. jonathan:the front end of the yield curve has repriced 50 basis points since the last day the fed met. at the end of the close i think that we were a full 20 that day, through full 70 in the last. why do you think this market is willing to deemphasize the importance of what is happening at the front end of the yield curve? margie: i think when you look at a market of interest rates roughly 4% to 4.5% for treasury rates, that shouldn't be an impediment for economic growth or good returns on equities.

i think the market is disregarding it. they aren't sensitive to the tweaks that the fed is doing. i think that the fed would like to be more relative, but they really aren't when you look at margins. there is no sector that you would say is so vulnerable to fed increases that that could cast a recession. things are looking good in the fed is on the sidelines trying to be an important player. jonathan: they are apparently not in a rush. we will talk about that later. peter chen seems to be confused about this. if you think about how this rally started at the end of october, this was engineered by the idea that the federal reserve was about to pivot, seven rate cuts in 2024. we are pushing that out and reducing the amount. the equity market has carried on rallying. what explains that? peter: yields have been going higher for the right reasons. the economy seems to be holding together. the market is doing well if we are marketing for those reasons rather than when yields go

higher because we're worried about deficits. that is going to be a problem that hits the market in the coming weeks and months through the election campaign. yields are going higher because the economy seems to be doing well, equity market rallying on the back of that. to me it is too narrow. most of the stocks are up 1.5% to 2%. i want to see the full-scale rally where the russell 2000 outperforms everything. jonathan: you want to jump in? margie: i don't think that we can look for a classical recovery like previous cycles. previous cycles have been driven by the fed so we mentally think that we should see this rotation in the markets and sectors. it isn't happening. economic growth has been at least moderately strong. it certainly is invading that much. maybe slightly below the 3% level, but that's good enough to produce double-digit equity returns over the year. i'm not worried about interest rates.

for percent should never be an impediment to economic growth or good returns on stocks. jonathan: you can make the argument that the u.s. economy is strong but europe has been dreadful. the gdp in germany, negative, japan negative. the equity markets, all-time highs in europe in the last 24 hours. germany, france, and even japan record highs there. numbers we haven't talked about since 1989. how do you explain that one? margie: number one, the competition from interest rates is so low that people look at equities. there are signs of i wouldn't say vibrant growth, but a little growth. even in those countries, japan, england, germany, they've had a little negative growth, it may have modestly pickup. and modest pickup is all we need to take socks higher. peter: most of these companies are very global. u.s. companies, 50% 60% come from the u.s. and most are

foreign. i think it is really hard to say that u.k. companies and the u.k. index -- jonathan: i agree, but the struggle is global growth. whose growth? peter: people have been shoving money into equities because is the only game in town. what i find interesting as i have been getting long on china, it's starting to rally, and my theme is everyone says don't fight the fed. it is ok to fight the chinese communist party? if they want the stocks to rally i think we will see a massive short squeeze in china. i don't think it is investable long-term but for a trade that is my favorite foreign market right now. jonathan: the longest a winning streak going back to 2018. a note dropped in my inbox, socgen, is it time to turn more positive on china? margie, what is your call on what is going on in china? they are restricting

selling within the first 30 minutes of the open and the last 30 minutes going into the close. is that sufficient to say that this is a trade, they don't want people to be short? margie: i think when you look at the chinese economy, clearly there are strong trends that are continuing to decelerate, and i think that that is the long-term picture of china. slower and slower growth, less and less competitive compared to other economies. they can tweak it here or there and put on restrictions, but it seems fundamentally there are better places to invest your money for long-term. china i think is in a slow-motion downward for a slow motion downward for number of years. jonathan: fantastic to hear from you on a record-breaking week in the equity markets. the s&p 500 just about unchanged. the closing is for an all-time high on the s&p and nasdaq 100. an update on stories elsewhere with your bloomberg brief. sonali: the huge rally in nvidia

has catapulted the ceo to new heights on the verge of becoming one of the 20 richest people in the world. jumped 9.6 billion dollars yesterday to $69 billion and it's a game that leapfrogged him ahead of charles koch to 21st place on the bloomberg billionaires index. at&t said that a widespread outage that took hours to resolve on thursday was caused by an incorrect process. the software issue interrupted service for hundreds of thousands of subscribers and prompted the fbi and u.s. department of homeland security to investigate the outage. at&t said that all wireless service was restored thursday afternoon. for the first time since 1972, the u.s. is back on the moon. intuitive machines landed a robotic spacecraft nicknamed odysseus on the surface yesterday afternoon, the first private flight firm to successfully place a vehicle

there. nasa's administrator said in a webcast, today is a day that shows the power and promise of nasa's commercial partnerships. jonathan: thank you. very cool. the at&t story, we were down for about nine hours yesterday. are we rolling out a cyberattack? annmarie: that is what homeland security and the fcc will look into. was it a cyberattack given the outage for hours that happened in the middle of the night extending through people's morning. the u.s. administration wants to look at everything. they have been dealing with cyberattacks and have been talking about them across u.s. industries.whether it is pipelines, cloud computing, at&t, this is a concern for the u.s. government. jonathan: the deputy treasury secretary is joining us later this morning and we will talk about sanctions about russia but try to squeeze about that as well at 8:45 eastern time, two hours and 30 minutes. the s&p is totally unchanged.

the last two republican candidates going head-to-head. >> she is here, down by 30, 35 points, everyone knows her. you aren't supposed to lose >> your home state. south carolina will vote on saturday, but on sunday i will still be running for president. jonathan: that conversation is just around the corner. good morning. ♪ 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.

♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪) jonathan: what a week. it has been exhausting for many of you. a week and a single day yesterday with the s&p 500 up to all-time highs. this morning, a bit of calm. unchanged on the s&p. on surveillance this morning,

the last two republican candidates going head-to-head. mr. trump: she is down by 30, 35 points and everyone knows her. you aren't supposed to lose your home state. she is doing poorly. she lost in record numbers in iowa and new hampshire. mrs. haley: many of the politicians who publicly embrace trump privately dragged him. they know what a disaster he has been. south carolina will vote on saturday but on sunday i will still be running for president. i am not going anywhere. jonathan: here's the latest, voters in south carolina will go to the polls for the gop primary with nikki haley trailing donald trump by 30 points in her home state according to the latest polling. hailey is vowing to stay in the race no matter the results. matt, let's get straight into this question that nikki haley herself is struggling to answer. what state can she win if any at all? matthew: that is the right

question and there is no right answer. it has been a wild ride on wall street, but it is still a rocky road on the campaign trail. tomorrow, i think that that clip encapsulated this entire race. lash back a week ago, you, lisa, anne-marie did an amazing interview with nikki haley on critical issues, domestic, foreign policy. then you saw donald trump who continues to be something of a political pundit from the sidelines. oh, also, the front runner for the republican nomination. a very weird cycle. nikki haley in her home state, it looks like it will be another loss, another defeat. i think from her speech from yesterday, it looks like she is pivoting from the presidential campaign to more of a messaging campaign, where she is going to continue to point out either donald trump's personality flaws or unorthodox policies.

annmarie: home sweet home isn't so sweet when it comes to south carolina, but you didn't answer jon's question. is there a state that she can win? matthew: the old canadian band said it, the night they drove old dixie down. there is not a place she can win.people will say she she is running for second place in case first place goes to jail. she has said that she knows that her political future with the republican party is dead right now. she is going to go out on her own terms. she is going out swinging. she is probably not going to win tomorrow or anywhere else, but she's going to go out on her own two legs. she has a group of donors who appreciate her message come appreciate what she is doing, and she will continue on. in politics it is always a fine line between a fool and a hero,

between bravery and stupidity. i think what she is doing now we won't have a clear indication as to what it is until maybe what happens in november. peter: this is what a lot of republican lawmakers are saying. she sticking around in case of former president cannot run. a lot of people say you don't back out because you don't have the will to do it, it is because you don't have the resources. is her game to build up a war chest for what she decides to do politically in the future? matthew: unclear. yes, she has donors. you are so right. campaigns do not end because people don't have a say and because they don't have money. she has something to say about donald trump and joe biden, to be clear, that she is becoming the republican for democrats. she is becoming the republican for independent and moderate voters. that is absolutely damming when

it comes to the gop nomination. the base, the maga republicans don't want that. it is about a feeling she is adopting, whether it is left-wing talking points about donald trump -- it looks as if she knows. she is doing it deliberately. she is going to go out the way she wants to. peter: from a markets perspective, i have been advising clients that this election cycle will be very different.normally we go through the primaries, you get to the convention, and then the real election campaign starts. i think everything will be pulled forward because it seems like it is decided now. is that right or wrong to give to clients? matthew: you are right. we have never, ever seen a sign area -- ever seen a scenario, i dynamic like this with two elderly presidents, one being current and one being former. this is a very weird time where you are going to have,

undoubtedly, a lame-duck presidency coming up.in terms of advising clients come in terms of what will happen, probably a divided government, no matter who wins it will be negligible is what most people think. beyond that, what you pointed out, we are going into a rematch that most americans do not want. there will be a lot of these here . it is going to be a vin dick fuld, vicious, possibly vile campaign that will ultimately lead to victory for someone that will be pretty bloodied up even after a win. peter: my next question, is there any way that this doesn't get very divisive and angry within the country?it sounds like it will head in that direction. matthew: i think it already has. you have both parties absolutely dug in. both parties cannot fathom a person voting for the other side, which is an incredible

dynamic. forget two parties, it feels like you have two different species in this town and across the country. it is polarizing and divisive. that's remember that most americans don't want either. that is why i think nikki is continuing to pound away down there. jonathan: before you run, what kind of spread are you looking at? how big will the gap be when we get the results from south carolina? 30 points, may be more? matthew: 30 points and i'm still taking the over. jonathan: describing nikki haley as the republican candidate for democrats, which is certainly not how you will win a primary for the republican party. pete, we have had a conversation the last couple of days that lisa is really, really focused on. the policy and policy gap between these two individuals that we are focused on. how business friendly is this republican party going to be if they take back the white house?

peter: i think it will try to be business friendly, but i am increasingly concerned as people digest the campaigning we really realize the deficit will balloon and it doesn't matter which party. republicans will say we will cut taxes and do various things and that will keep the budget in line. that won't work. the democrat side is coming at a spending angle saying the spending will help the economy so we don't have to worry about the deficit. i think the deficit will become a huge issue like it was in september and october as people realize the party cares about the deficit. annmarie: because they all want to spend and they all add to the deficit. peter: it is going to grow and that is what i think people will realize. that is when you have another wave higher in bond yields. that is the wave higher that would be difficult for equity markets to digest. jonathan: you think we can retest the highs of last year on the long end? peter: this reminds me of 2006, 2 thousand 7, 2008 in the mortgage market where things cracked and came back. early fall was the first time that the treasury market cracks. it was for sale every day.

it didn't matter what economic news came out, treasury markets went higher and bonds lower. that was the first crack. i think we will see cracks like that appear again. annmarie: the first 20 year option is odd, but does it hint that treasuries issue with issuing longer-term debt? peter: there's a lot of chatter. do they need to do something with quantitative tightening, some operation twist to reshape their yield curve? i think people are going to start saying it is never going to get better. we are going to issue more debt and maybe go through times win this quarter was great with tax revenues. it's getting higher, yields are creeping up, and people forget how long it takes for the average coupon to go higher for someone who is in debt for so long. jonathan: what happened to the wall of yield hungry buyers that was going to step in when the 10-year goes to 4.50? do they go quiet? peter: they do go quiet. the treasury at four, if they get to 4.25 they will buy.

we are starting to get in the range of real risk of going to five rather than back to four. jonathan: in the next hour we will check in with bmo and looking at high yields. record highs in the equity market, not only stateside but in europe too. in germany and paris, france, and a big winning streak in china. nine days of gains. jay polonsky has been waiting for that victory lap moment on china. he will catch up with us at 8:00 a.m. eastern time. coming up, more on nvidia's record-breaking day. live from new york city, you are watching bloomberg tv. ♪ we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

jonathan: this is a snooze compared to yesterday. s&p 500 going nowhere following the biggest one-day gain on the s&p 500 going back to january of last year. nasdaq down by 0.1 2%. the nasdaq 100 inching a little lower heading towards the s&p for a solid week of gains. the bond markets, have we repriced. yields up for a fourth consecutive week. 4.7 327 on the two-year. if you go back to the end of

january, the federal reserve meeting, the close on wednesday, we were looking at 4.2 zero, repriced by more than 50 basis points in the equity market has carried on rallying which has been phenomenal to see. finishing off for an exchange, the euro side, the index out of germany isn't bad but not great. it is a low bar in europe as you've seen with the data all week. i touch stronger on the currency pair, the euro firmer by 0.6%. under surveillance, the magnificent one's stellar week continues with nvidia shares surging to the biggest single session gain ever. jumping 16% adding 277 billion dollars in market cap bringing the chipmakers total market value 10 year $2 trillion. nvidia passing the 197 billion dollar single gain made by meta. you have a refreshing call? full bear.

for the people tuning in, can you give us a snapshot while you are turning in the other direction? peter: i haven't liked the price action since early february when we saw the crazy move in meta. something moves a billion dollars in one day, i shudder to think what would happen if nvidia missed. down 3% basically coming into that, it rebounded, and it felt awful out there. you are seeing a lot of expiration auctions pushing. yes, we are at all-time highs, but the nasdaq 100 and 18,000, was 17,009 hundred 70 week ago. let's not get carried away. this saved the day. at the feeling in the next day or so, it will be, what excess higher? i think the money on the sidelines, the money has been added to the markets, it has been dip buyers, i think that we are fully invested and susceptible to a pullback. jonathan: how do you get a read on that? this was described as one of the

most crowded if not the most crowded trades on the planet. peter: part of that was last week it was 694 or something like that, so they had a pullback. the other problem, and this is where we have trouble dealing with a company like nvidia, where it is waiting in the index much greater than most money managers can get comfortable. a lot of money managers can only be invested 5% in a particular equity. even the nvidia roles are probably underweight their index benchmarks. that causes a weird dynamic where people have to chase it even if they are already long. again, yesterday would have been more concerning to me, and i made bullish, if you saw other names of 3%, 4%. across the board, a lot of the other big drivers were up 1%, 2% . it wasn't a widespread rally. this was people getting squeezed into the markets and it was lackluster. it kept going up during the day. look at meta after their big gain. they were lower until yesterday.

jonathan: talking again about at&t, so let's do that. widespread outage that talk hours to resolve yesterday caused by a "incorrect process." the software issue interrupted service for hundreds of thousands of customers and prompted an investigation by the fbi and the u.s. department of homeland security. at&t said that all wireless service was restored nine hours after it first went down. we were thinking about this, i think that people are talking about this. have we pushed aside this was a cyberattack? annmarie: at&t is trying to push it aside. processing feels to me like turn it off, turn it on, some engineering failure. with the federal government is looking into this, whether or not it was a cyberattack. the department of homeland security, the fbi, the fcc. they aren't going to put that aside. what is so concerning is the l.a. ports authority, china

infiltrating infrastructure. jonathan: you have generals on the team, what did they say to you yesterday? peter: we have three or four that are cyber specific peer they're asking what's going on. we can say everyone is clearly questioning, was this or was this not a cyberattack? so far there is no indication. it's a good reminder and we live in a world where we view cyber as digital, but the risk of it going from digital to physical is real.we saw it with the columbia pipeline. this is going to be real and we have to figure out, how do we deter properly instead of name and shame. we have to figure out a policy at a national level that is, what do we do if we are hacked? annmarie: when you talked about china and cyber it was a hotel company that was worried their data would be stripped of all of these guests who arrived. when colonial pipeline happened you saw this massive infrastructure stop. it hit real prices and real

people every day. this is where you have the u.s. administration concerned. jonathan: at&t up by zero .1%. international security, the biden administration is set to announce new sanctions against russia. the latest package will target 500 people and entities linked to the country's war effort. president biden testing after the death of alexei navalny. we have tons of questions for the deputy treasury secretary, who we will catch up with that 8:45 eastern. the first question for you, what is it? annmarie: can you give us more details about the sanctions? 500 people and entities now, why didn't you do them over the last two years? we saw the aluminum market move. we'll metals market be on the table when it comes to sanctions? is it high time to get rid of this price cap and sanction

russian energy? because putin continues to sell. india has replaced europe for them in terms of export flows and they are still making money. maybe not as much, but still making money and that is how he is funding the war. peter: i think sanctions really don't work very well. it worked a little in russia on high-tech and the military side, and you're seeing ways around that. north korea is getting involved. it doesn't work. one weakness as a nation has been our fear of energy inflation. iran is selling 3.5 million barrels of oil per day, well above their sanction, and we are turning a blind eye.we have to focus on a domestic energy policy that gets us back to true independence and not only on production but on refining. then we can tell everyone, do what you want, we are good. annmarie: we are the biggest producers in the world, more than 13 million barrels a day. the record of any country under

this administration. they don't want to discuss it. jonathan: the deputy treasury secretary will discuss it later this morning at 8:45 eastern. nvidia, the company is nearing a $2 trillion market cap thanks to historic gains. nvidia and a new price target of 925. the obvious question i've asked, is 925, i'm looking at the number we are still climbing. are you bullish enough? >> i am very bullish because, as you do, i see the ai revolution playing out today and i can't dismiss where we see the deployment of the ai clusters in 2024, 20 5, 26, 27. this is a credible scenario. you have 200 million users of generative ai today, what if we have one billion in four years.

that is the speed the internet grew in the late 90's and early 2000's. what if people who use generative ai for three minutes a day today use it 50 minutes a day in four years. nvidia as a stock can still trickle over the next four years. now, the visibility that we have on that case is a very good, because we don't know what's next in generative ai. the only thing we know is that every time we grow the size by 10x it pushes the veil of ignorance and we find new functionalities. at some point generative ai cools off. that is what i reflect. over a one-year horizon we know that the current momentum will gain and appreciate by at least

20%. jonathan: just to jump in, nvidia yesterday, it was amazing to see the numbers and the reaction to it. sometimes you can learn more about a stock by how the stock reacts to the information and not the information itself. if i was to say to you two days ago that when they come out with a new outlook it would be $2 billion north of what the street is looking for, would you have guessed we would've had the parabolic move we had got off the back of that? pierre: definitively no. two things. one, a lot of people start thinking nvidia, as we are getting into numbers they get worried and pulled back significantly. that creates a bit of a squeeze. on the value numbers are coming through. that is number one. number two, two nights ago

management didn't only share very good numbers, they made extremely bullish comments on the conference call for this year in the next products generation. we are supply constraint. demand is higher than our supply. what we know is how the supply chain is. we know nvidia is supply constraint for the next generation, the nice rally that you see today, the ability to gain, that is where anyone who has questions is ready to give up. peter: i think that we can all see that ai is improving, and in five years ai will be way better than it is today. my concern is, is the data good enough to support the current level of spending on ai? is the data needed to drive ai there, or is that going to be the snag?

pierre: the training data? peter: the data that people can leverage ai into. pierre: as ai gets better, ai generates data. in the medium-term outlook for ai, as you have one model generating movies and another being trained on that. the generation of data is going to be growing as fast as the models are growing. that is one of the key technological bets that we are making in the next three to four years. annmarie: does it not concern you, and bank of america talked about the biggest risks in the market this year, that the concentration of the tech firms at the top of the market are the most exposed to geopolitical risks? pierre: yes, of course it is a concern. one of the names we like a lot is tsmc based in japan -- sorry,

in taiwan. made in china. every time we try to run a scenario in the geopolitical context it's difficult to find a business that will not be heavily exposed. that is a systemic risk for the whole group, yes, in light of supply chain for sure. jonathan: can i finish on tesla and ev's? we've had so much bad news in that sector of the past few weeks or so. how are you framing it for clients? is it a problem for everybody else or tesla too? pierre: i've been telling you the same thing for quite a while. thinking about the car market as ev's as a single market, the car market. some of these cars are ev's and some are not, but in partly some cars are good cars and some are

bad cars. gas cars are doing terrible ev's and they are not very good. and then you have a handful of people, as you can guess tesla is one who have great ev's. these are doing much better. they are not growing 50% per year with prices going up as they were two years ago, so that explosive initial growth for tesla is going behind us, but they are still gaining share and doing well in that market. i think what we are realizing today is not that many people can do great ev's and sell in the long run in the markets. traditional makers are making more progress towards ev's and the market is going to remain very -- jonathan: a busy couple of days for you.

on nvidia and ev's. how investable is the auto sector now given some of the news we've had over the past few weeks? peter: the auto sector slowing down, we had the demand pull forward. i'm increasingly worried about what will happen to the chinese ev makers. i think that they have a lot of technology. how they got it, they developed very quickly. they have a lot of the wrong resources with the batteries being made there and i think that they are treating ev's differently. they don't treat it as a vehicle. they treat it as an appliance. the features that go along with that are very different. i am concerned that will be an area where china does this made by china and their brand starts selling globally against ours. annmarie: you basically cannot make an ev without touching china, they have the raw materials and processing. at what time do you think china will say we will no longer sell you the battery, you have to buy the car? peter: that is a real risk, or

they start upping the price because we have done such a poor job and we have seated so much of the refining of these raw materials, the processing, the making of the components. long-term that will be great for the u.s. i think we will see the foundries and the chips that we were talking about earlier. that's awesome that we are building domestic boundaries. in the meantime i think it's very inflationary and problematic. jonathan: down 9% on tesla in early trading. an update on stories elsewhere. sonali: good morning. the u.s. is expected to announce sanctions on more than 500 people and entities linked to russia's war machine. the announcement comes a week after the death of russian opposition alexei navalny. as the war with ukraine approaches the two-year mark. the u.s. and its european allies have imposed significant sanctions up affecting large swaths of the russian economy and officials. standard chartered beating expectations unveiling a $1

billion buyback plan with the bank saying that its new fit for growth program will save about $1.5 billion in expenses over three years, but it is to spend about that much as it makes organizational changes. winters has been looking to boost changes for investors and boost the stock which has fallen over 50% in the past year. reddit files for an initial public offering revealing the social media platform shrinking losses. the san francisco-based company filed with the fcc two years after submitting its plan to file confidentially and expected to be one of the biggest ipo's of the year. it would trade under ticker rdgt. jonathan: the fed in no rush to cut rates. >> it is appropriate to be patient, careful, methodical, deliberative. pick your favorite synonym. whatever word you pick they all translate to one idea. what is the rush? jonathan: what is the rush? that question is next.

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jonathan: equities on the s&p 500 are unchanged after a big lift in yesterday's session with yields higher again lifting up by single basis point, 4.4347. the that is in no rush to cut rates. >> do you believe that we may be in a position to see rates decrease this year? i would caution anyone from looking for it right now and right away. >> we have to be careful, and we have to try to assess the different shocks that could hit the economy. >> i would like to have greater confidence that inflation is converging to 2% before beginning to cut the policy rate. >> it is appropriate to be patient, careful, methodical, deliberative, pick your favorite synonym, for whatever you pick

they all translate to one idea. what's the rush? jonathan: fed officials reiterating the central bank is in no rush. this as nvidia pushed stocks to all-time highs. writing, the fed is unlikely to set policy based on nvidia earnings, but the ai trend is part of u.s. growth outperformance. this outperformance has proved more persistent than many expected. the signal is the bullish trend is alive and well. i love this note.let's go to that quote . should they said policy based on what happens with a single name driving a monster move in this market? >> the answer is, i have never seen a company where i have to watch the earnings release for literally what macro markets are going to do. we have been doing this for three or four quarters. we look at the line earnings, the data center revenue item,

and that is a proxy for what ai investment is doing in the united states in particular. if you're going to scale it with the other investments that companies have related to ai, it's not just compute. you're probably around 1% of gdp growing from 0% to 1% in a relatively short time. this is a meaningful contribution to gdp growth in the united states. whether you look at how the u.s. economy has been doing over the past three to four quarters, it surprised a lot of people. especially relative to the rest of the world. china is in serious trouble. europe has weak growth. it's a very impressive performance. this is something you cannot ignore. it is not just nvidia trade, it's everybody. you can see what's happening in global markets. have interest rates rising and equity market is still ok because there is this growth support. it is an important part of the story. jonathan: let's talk about the risk of cutting too soon versus holding too long.which is the

greater risk ? jens: two things. we went through the ai dimension which is clearly adding to u.s. growth in a meaningful way. the other thing that we have learned this year is that we had very good inflation numbers in the second half of 2023. going into this year, we have this annual reset process that we have seen around the world where the first couple of months of the year is really impacted by a lot of companies resetting prices on an annual basis. certain categories don't move around very often, but they move around early in the year. that is causing some uncertainty for the fed. that means the trend that you had in the second half of last year is not nearly as clear now. that means they have to be more cautious. we are not seeing a lot of evidence that financial conditions are tightening dramatically. that was in october of last year

and right financial conditions look to be on an esing t -- easing trend. there is no particular rush. people who want to cut rates are the more academic types that look at a taylor rule and say, given where inflation is, we don't need to have 5.5 percent interest rates anymore because that would tailor to win inflation is very high. but it's an academic argument. i think given what's going on in the data it will be the more pragmatic fraction within the f1 see that will win the debate now and say let's chill out and get more data before we make to rush to the decision. peter: you're ai point is great because it is really contributing to the u.s. europe has such strict laws around data usage they will struggle with ai . virginia is announcing ai policies. i think that you will see states compete for ai like they competed for manufacturing. i think it will be part of long-term growth and will change industry here. i think you're spot on. you think that the fed does something with the dot plots?

how did they get the messaging more severe? everyone seems to be listening to the messaging but not following through? what do they do to hammer your idea or home? -- your idea home? jens: the interest rates had a massive move from october to december. we got well ahead of the dot plot that the fed communicated, right. the dot plot that they announced is kind of still broadly consistent with the current market. the market has come back to the dot plot message. i don't think they necessarily need to tweak the short-term dots that much, but the debate is the long-term dot. is there something going on in the economy more structurally that means we can have higher for longer? the fed has been reluctant to go in that direction, but as we get more data, and as the ai boost proves to be more persistent, there will be more debate about whether they need to raise what

they think is the long-term level, long-term equilibrium, and that will impact the trajectory of rate cuts, not just when the cuts will start. jonathan: a brilliant note and fascinating read. thank you for joining us, sir. thank you. final thought on that, the long dot. what is sufficiently restrictive in this quickly evolving world? peter: i don't know, but maybe it's higher than they thought. 4%, 5%, and the economy is still moving along. as an investor looking at retirement planning, it's hard to plan when you are getting 0.0% on your savings. it would be encouraging if they do this. i want to see a steeper yield curve. i think we go back to flat to slightly positive. jonathan: peter tchir, fantastic to catch up. next we catch up with mohamed

el-erian of queens college and amy wu silverman. ♪

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>> there does seem to be more hesitancy than we thought at the fed to start rate cuts. >> i think the fed will be pushing back on the timing and magnitude of the rate cuts. >> i think markets are broadly in line. >> we have been consistently calling for the fed to be cutting in june. our base case is that remains. >> the best for the fed is to

proceed gradually. the last thing we need is confusion and financial markets. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning. this is bloomberg surveillance. the s&p 500 is slightly positive on the s&p. what a run we have seen over the last few days. we begin this hour with a record-breaking week. nvidia, one name making up a little more than 4% of the index and enthusiasm to buy stocks in the last 24 hours p that single name adding 276 point six 5 billion dollars in market cap in a single day. a single day. that is a new record. the old record belonged to meta and that was three weeks old. the move wasn't only isolated to one stock, one sector, or one country. it was enough to push equity markets worldwide to record highs. stateside the s&p is an all-time high, the nasdaq 100 all-time

high, and in europe to stoxx 600 all-time high, germany's dax, all-time high, and even into japan, reclaimed a milestone going back to 1989 at all-time highs. this is happening with negative gdp in the u.k., negative gdp in germany, negative gdp in japan, and interest rates in america and multi-decade highs. the stock rocket is -- the stock market is not the economy. some are confused. some say we find current market developments, others are nothing but jubilant. this is a game changing moment for the tech bowls and puts jet fuel inditex market thesis as derivatives of ai play out of the coming 12 to 18 months. to discuss a week of records we are joined by good friend of the program, mohamed el-erian. i want your initial reaction to

the price action yesterday off of the back of earnings on one single name. mohamed: i think is totally understandable. i think there's a revolution that's going on in ai that's fed by four things that will only grow in importance. that is, computing power, data, talent, and financing. there is a long runway on the supply-side and demand-side for this sector. on the supply-side, we will see capabilities improving and expanding. on the demand-side, it is not only about ai add-ons as companies are talking about today and trying to do. it is about developing things that are ai native. when i look at this, i understand the excitement about the sector and i understand how that sector can suck investment into many other things. it doesn't surprise me. this is a secular story now.

will there be successes in the market, course, but there is something real going on that can enhance product video and have a huge impact secularly. jonathan: you called it a secular story. can we talk about the sick killer impact? -- the circular impact? how the federal reserve may have to reconsider how high rates may have to be in years to come? are you making that connection yet? mohamed:mohamed: in years to come, yes, but this has not been betting policy on years to come. this is a fed that has been basing policies on past data. it has been overly data dependent. he is right in the sense that when working out productivity and growth potential you have to factor that in. it is a transformational -- and it's not the only one. you have been hearing me say that there are three of them. what is happening with generative ai, with

life-sciences, and what is happening to green energy. you have talked to my colleague on these issues, and you know how strongly he feels. jonathan: spence was fantastic. the conversation that we've had, governor walter, what is the rush. do you share that opinion? mohamed: do you remember when he repeated what i said a few months ago when you asked me what will happen and i said let me tell you what should happen and what will happen? i said at that time three cuts starting in june. that was at a time when the market was seeing six to seven cuts starting in march. we are now in a really good spot. we are now at a point where the market has finally converged to what the fed has signaled. it is really important to try to maintain that alignment because there's so much else going on. i think it's right to say patience, but that shouldn't

go too far. what will be hard is to stick to the three cuts, both by the market and by the fed, at a time when the inflation data is going to get more bumpy. jonathan: i will tell you what didn't surprise me, the spread had to close.something else that didn't surprise me is how the spread closed. the market coming towards the federal reserve. it is what didn't happen as the spread closed that shocked me. we priced out all of the cuts we priced in since the end of october and pushed out the timing and reduced the magnitude of interest rate cuts this year. still, the equity market carried on rallying. the two year yield is up 50 basis points in two weeks and change. the equity market carried on rallying. if you asked me what my views were back then, if we were to close the gap in that fashion into your yields were the price higher, i would say stocks down hard. stocks are up.

how do you explain that? how important is monetary policy given the dynamics in nvidia, ai, and big tech? mohamed: simply put, it is one of three factors. interest-rate risk has been a significant headwind. you have two very strong tailwinds. one that we talked about which is a secular journey that we have embarked on, led by these incredible innovations. the second significant tailwind is the strength of the economy. we were also surprised by 3.3% growth rate in the fourth quarter.we were surprised by almost 5% growth rate in the third quarter. the u.s. locomotive has been strong enough to offset the numbers that you showed in terms of recessions in germany, the u.k., and japan.

jonathan: do you think that that should lift all boats abroad? you mentioned recessions in germany, u.k., and japan but we have all-time highs in germany and japan. can you explain that by the u.s. alone? mohamed: people looking at valuations differentials and seeing that other markets look incredibly cheap relative to the u.s. and wanting to go fishing there as well. a lot of people have been saying if i will invest in the u.s. at these levels, look at how much cheaper other markets are. so, you are getting massive spillovers, because people are looking at relativities. jonathan: do you think those easy financial conditions should be of concern to central banks grappling and lacking confidence of getting inflation back down towards target? mohamed: you're taking to me the question -- i don't like discussing what is the appropriate target. we live in a world that given everything going on on the supply side, talking about geopolitics, talking about

companies rewiring their supply chains, what is happening in the labor market, that when we look at this, if i was a central banker, i would be aiming long journey back to 2%. i would not rush to get back to 2%. in the back of my mind i would believe, as i believe now, that if i were to set an inflation target today it would be higher than 2%, closer to 3%. of course, i can't change that because i missed my target for so long. in the back of my mind be in a rush to force it back to 2%. that's important. my mindset, i can live with these financial conditions. if my mindset is i need to get to percent quickly and that is the right inflation target, i would be concerned about financial conditions. jonathan: we have to acknowledge why you said that that time ago. you believed initially that in

order to get back to 2% in over 18 months to two years we needed to crush the economy to do that. the lesson of last year was maybe we don't, perhaps.what is the question you would be asking in regards to that? do you think we can achieve that inflation target without crushing the service side of the economy given the trends that have emerged over the previous six months? mohamed: i think it is about 55% probability that we can. that we can get towards a stable inflation rate that is low enough and stable enough that it anchors inflation expectations without crushing the economy. i get that 55%. 30% probability that either because of an external shock, and there is a lot going on in the world right now, or a domestic political change, or a policy mistake from the fed of staying too tight for too long,

15% that will slip into mi ld recession. 15% is productivity gains that will occur over a number of years happen much more quickly. we find out that we get to what some people say growth remains robust but inflation behaves. annmarie: they want to see a couple of months of inflation data to make sure they are prepared for cuts. you are looking at june. what needs to happen in terms of goods disinflation between now and june for you to be comfortable? mohamed: i am comfortable now, because i look way beyond. i think that data dependency doesn't mean data obsession. it is very, very, very problematic if you get obsessed by data, because you need to look forward. your measures act with a lag, as you know.

if you're totally basing policies over the past three month of data, you will get it wrong. that's why we've had such a reactive fed. that is why communication has been such a problem. i don't need to see two more months of data to feel comfortable cutting three times starting in june because of what i see ahead. if this fed remains obsessed with being data dependent, and seemingly solely data dependent, then they want to see goods inflation staying will tamed while -- well-tamed while service inflation comes down. that's what they need to say. jonathan: what evidence is there that they are sufficiently restrictive looking across the economic data that we've had, not over the last month, but over the last 12? mohamed: borrowing costs have gone up. credit risk has been supported

by economic growth. inflation has come down. it's not just the supply side issue. we have seen major adjustments in interest-rate-sensitive sectors. so, there's evidence that they have had an impact through higher wage. my concern is the market and the fed surprised by the fact that the inflation numbers are getting more bumpy will end up being too tight for too long. jonathan: let's go there again. you think that the biggest risk here is that they hold for too long and not cut too soon? mohamed: correct. if they don't cut in june you will hear me say, oh no. we are making the opposite polymer steak than what we made in 2021. -- opposite policy mistake then we made in 2021. jonathan: let's get you an update on stories elsewhere this morning. your bloomberg brief with sonali basak. sonali: the ecb executive board

member suggesting that the eurozone may have weathered the greatest impact of an interest rate hike. saying, "our models tend to suggest that pea impact of monetary tightening may be behind us." ecb officials will hold their next meeting march 7. u.s. crude oil exports hit a record level highlighting the pressure on opec-plus nations to avoid a global surplus ahead of its meetings next month. february exports hit 4.81 barrels per day, about one million more than a month ago. opec-plus members are set to decide that month whether to extend voluntary output cuts, 1.9 million barrels a day. the new sports streaming merger between disney, fox, and warner bros. could attract 38 million subscribers by 2032 representing half of the u.s. households who like sports.

the service is expected to cost between $35 and $40 per month. jonathan: next, a fresh round of sanctions against russia. >> the sanctions that we will be announcing on friday will be in connection both to the two-year anniversary of the full-scale invasion of ukraine and to navalny's death. jonathan: we catch up with the deputy secretary of the treasury at eight: 45 eastern. that conversation is next. from new york, this is bloomberg. ♪ 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.

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under surveillance this morning as a fresh round of sanctions against russia. >> the sanctions that we will be announcing on friday will be in connection to the two-year anniversary of the full-scale invasion of ukraine and to navalny's death. it will be a robust sanctions package. we are always looking at additional ways that we can choke off the russian war machine. jonathan: the u.s. is set to announce sanctions against more than 500 people and entities linked to russia's war effort nearly two years after the invasion of ukraine began. it will be the largest single package of economic penalties against vladimir putin's regime so far. i guess the first question is, what is left to sanction in russia after the last two years? michael: great question. there isn't that much. over the past two years, and i've remembers our teams were covering this in the immediate aftermath of putin's invasion of ukraine, how big they went.

they froze the central bank assets of russians held overseas and they booted several russian banks from the interconnected network that helps move financial transactions around the world. those were considered seismic events when it comes to penalizing another country for its geopolitical conduct. even with those measures we haven't seen much of a slowdown in putin's war machine. annmarie: there is one place they could go after that for the most part has been saved, things like nickel and aluminum. do you think this administration will take that next step? michael: we may or may not see that next step today. that remains to be seen. they have to calibrate carefully what the ripple effect will be not only in markets for russia but more so elsewhere in the world. any upset in the supply of precious metals, especially aluminum, could have unforeseen consequences when it comes to

the domestic economies of the countries imposing the sanctions. that is also a politically sensitive question at home. the u.s. is just starting to see inflation break and abate, and biden is trying to make sure that it doesn't flare back up because of some outside event with sanctions in such a sensitive area like aluminum. annmarie: you have schumer going to ukraine today but showing up empty-handed for president zelenskyy. what is the meaning of the trip? michael: good point. the issue for schumer and members of congress who are allies want to provide reassurances. they just want to show that we believe this can still get through. we know it's been tough. please hang in there. when you think about the calendar, the amount of time that has passed since joe biden asked for the $60 billion package in october, and that time the tide of the war has

turned against ukraine in vladimir putin's favor. this is something the president biden and a statement that he put out early this morning talking about the sanctions and the two-year anniversary of the war and the death of russian opposition leader alexei navalny, this is something that he alluded to. he talked about it is not through sanctions alone we will be able to change the course of events in ukraine. we need the house of representatives to actually pass this $60 billion package of aid for kyiv. jonathan: the latest effort to try to constrain russia and the war machine. the elephant in the room is the $300 billion in russian central bank reserves that were effectively frozen in 2022. what are we going to do with them? annmarie: some people are saying these reserves if there is going to be an opening to have a peace negotiation does the

u.s. use this as a carrot and stick approach? jonathan: mohamed el-erian is still with us. broadly, the world becoming a more fragmented place. we have been talking about near shoring and deglobalization. when you look at those themes, does that contribute to your idea that this will be a post-pandemic regime with more volatility than before the pandemic? mohamed: absolutely, because you have two distinct factors. first, you have the noncommercial determination of supply chains for geopolitical reasons. then you have a second factor coming in as well that tends to aggravate that, which is the continued weaponization of economic and investment tools for the purposes of national security. which is totally understandable, but both of these tend to be inflationary.

i think the biggest surprise, including for me, is that the russian economy didn't suffer as much as most of us expected. didn't suffer in terms of contraction. there were projections of 10% to 15% when russian sanctions were put on. the imf in its latest projections increased growth for russia this year for over 2%. that tells you two things. one, with hindsight the west should have been harder on the sanctions with fewer exceptions and taken the risk of collateral damage that you heard michael talk about. the second issue is that it signals to the rest of the world that maybe you can live outside of the western system. that it is not as much of a threat as most of us thought that it was. annmarie: we were talking earlier with peter tchir that russia created new markets in

india and china where they share their energy where europe was one of their biggest partners. have sanctions actually worked? mohamed: not only have they created new markets, annmarie, they have created new payment systems that bypass the dollar completely. that i think is what has surprised many, including me. the russian technocrats have come up with a clunky system that nevertheless allows for international payments without going through the core of the system. this image of little pipes being built around the core. the worry is that you are going to encourage more people to build these little pipes. that is the fragmentation of the economy. look, that was a decision to be made early on about how hard are you on energy? should you threaten secondary sanctions or not? for the reasons michael

mentioned the decision was not to go that far, and therefore -- sanctions are as effective as the sanctions you deploy and there were two major loopholes in round one. jonathan: let's explore the elephant in the room. if they confiscate the russian central bank reserves that were frozen two years ago, how concerned would you be that other countries would ditch western currencies? mohamed: i think other countries would look at that very carefully. in economics there is a notion that says to make sure you have enough tools to meet the number of objectives you have. we are pursuing sanctions for three objectives. one is to punish russia. two is to not excessively harm the global economy. three is to not excessively harm the role of the dollar in the global system. you cannot get these three

objectives with a single tool of sanctions. that is why you hear that sanctions are not enough. the risk is that you in the all three with a single sanctions and not satisfying any of the three. jonathan: a good friend of the program and of mine, mohamed el-erian weighing in on the federal reserve and the sanctions regime of the united states trying to clamp down on russia. at 8:45 the deputy treasury secretary facing some of those questions on this program. next, we look ahead to key inflation data next week that could influence the fed. ♪

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jonathan: live from new york city, mike mckee around the table to get you up to speed on fed speak. equity futures on the s&p 500 positive by 0.606%. biggest daily gain on the s&p 500 going back to january 2023. all-time highs on the s&p, nasdaq 100. let's see if we close at those all-time highs coming up this weekend. two-year, 4.7133.

the day of the fed's last meeting at the close we were looking at 4.20. we have repriced higher by more than 50 basis points. coming up, we will catch up with the men who predicted this, while he has close dot plot trade, and why he is still looking for high yields at the long and. 4.3248 is where we are on the 10-year. in europe, this is confident not as bad as some expected. slightly stronger by 0.1%. euro-dollar, 1.0835. fed officials reiterating their stance that rate cuts are coming this year, just not anytime soon. the data we have received on inflation means it is appropriate to be patient, careful, methodical, deliberative -- whatever word you want to pick, i'll translate to one idea, what is the rush? goldman sachs cutting for a --

calling for a cut in june. they are pushing it back. mike: it is almost as if it was coordinated. one idea that drives fed officials crazy is that they coordinate their communications because they don't, but in this case everyone has the same song to sing, we are not in a hurry, we want to make sure that we get this right. with the job strong the way they are, inflation still coming down, what is the rush? jonathan: credit to fed officials so far this year. the incoming information has surprised but has led markets, economists to readjust their expectations. fed officials can say that the dot plot is still intact from december. mike: the fed changes its forecast every three months. the market changes its forecast every five minutes based on new incoming information, and then the market changes back because something else happens. the fed can sit there and say

that while we look at a longer period of time before we start switching what we are doing. annmarie: waller talking about he wants to see a change in the data. mohamed el-erian saying they are becoming data obsessed. mike: i think he is a little bit overboard there. i don't think they are data obsessed, it is how they judge the economy. he was talking about where he thinks they will be, and that is what they should be looking at. that is what they are doing, as well. that is why they are sing a couple more months. we will get to the point where inflation is low enough, but they are watching on a day-to-day basis. if you go back and look, jay powell has been saying the inflation progress will be bumpy for months and months. the fed is not surprised by this. as you noted, they have not changed their forecast. they are still looking at a couple more months, still

looking at three cuts, because they anticipated it would be this kind of a process. jonathan: mahatma had something to say on the balance of risk. i wonder what you feel about that. the biggest risk is holding too long, not cutting too soon. how well shared is that view on the fomc at the moment? mike: if it has basically come to the conclusion they can hold as long as they need to, not worried about recession at this point, but they also realize they don't want to wait too long which is why they are still looking at three. the thing i was thinking about when mohammed was offering his opinion, and he brilliantly supports his view, he is one guy. that is the situation with the fed. there are 19 of them. some may have that view. mickey bowman has been very hawkish. some may have that view, others don't.

they have to come together as a committee and make a decision. jonathan: i cannot get a sense of how split that committee is right now. lisa said at the time it was struggling to herd cats on the fomc, struggling to come up with consensus to communicate to the audience. then i listen to the fed officials. i don't see a massive difference between the officials. mickey bowman aside, she is pretty hawkish, but everyone else feels like a difference in degree, not in-kind. mike: two things at work here. they don't have to make a decision here so why lean strongly in one direction or the other especially if you know how markets will react to that. two, they generally are not sure at this point and i don't have a reason to make themselves sure right now. they will wait and see what happens with the economy. before the june meeting, three or more inflation numbers. we will see if inflation

continues as progress. jonathan: i want to get you up to speed on the latest in israel. prime minister benjamin netanyahu agreeing to send negotiators for talks to paris on a new hostage deal. president biden has been vocal about a new peace deal between israel and hamas that would include a six-week pause in fighting. how big of a change is this from netanyahu? annmarie: i struggle with the story because i feel like it is netanyahu placating to the americans, wanting a hostage deal. this is what he said in a brief phone interview this week. i ordered a plan, we will present in their future. not a plan for hostages. determined to push ahead into rafah. we are very close to a november election. michigan is where you have a lot of the diaspora of palestinian americans living there.

you look at people who voted for biden in 2020. they are now "abandoned biden," a slogan for some of these people in michigan. they are not saying that they will vote for trump, but they will not vote. hillary clinton lost michigan by 10,000 votes. when you are looking at such slim demographics, this is where there will be challenges. that is why you see biden putting that pressure on yahoo!. jonathan: i want to turn to the story as well. for those of you that leave the house early, 3:00 a.m., you realize that you don't have signal. you were not alone. at&t had problems yesterday. the fbi and federal communications commission is investigating outages on at&t and other networks that left thousands without the ability to send texts or calls yesterday. service has been restored since

with john kirby telling reporters they are in contact with at&t and don't believe the disruption came from a cybersecurity incident. people asking the question quite a few times yesterday. annmarie: i know you have at&t, so i don't know if this is personal for you, but they say this is a processing error. officially, they are not ruling out a potential cyber hack from china. you have the fbi, homeland security fcc looking into it. when you think about cyber hacks, you think of digital, wiping customer data from a company. no. the issue when it becomes a big problem for any government is what it hits infrastructure. think about colonial pipeline, concerns about china operating 80% of the cranes at u.s. ports. now we have an outage at at&t. mike: maybe in a way good news because it gets people to focus on this even more.

i would point everybody to the great up at yesterday on bloomberg. everyone is talking about russia and a new clear weapon in space. china or russia or some other country cutting undersea cables would be even worse because more traffic goes across the. we think about it in terms of jon cannot call an uber, but the financial markets depend on the stuff. if they cut one of those cables, we would have a global crash. this is really important to be focused on. not saying the appropriate people are not focused but always a good reminder. jonathan: far more important than my uber. good to see you, mike mckee. we have seen some really big moves in the bond market. some people have a really good read on things. one of them is earl davis, calling for a further selloff in the 10-year yield to 4.75, and

he believes that it may be a buying opportunity. earl, you have been fantastic. congratulations to a wonderful start on the year. if we start with the front end and then move out to a longer and, the front and you talk about a repricing. we have had one about 50 basis points. i understand you have closed out that short. before we talk about yields going higher, why the change at the front end? earl: it's been a fantastic move. the reason is we are about the meat, not the fat. not to say that it cannot go to higher yields, but that would be the fat. i have been in the market 30 years and we know what happens with too much fat in the body. we are good where we are. jonathan: let's go further out on the curve. why are you looking at 4.70 five from the 4.30 we are at right now?

earl: when the two year yield moved 50 boys higher, the 10 year 15. people are focusing on the repricing of the cuts and when that begins but also a lot of people had curved trades on, when you call a bull steepener, longer two-year bonds, short the 10 year bonds. that is typically what happens when you get rate cuts. because they had the bull steepener, they had to reverse that trait, take their losses, which meant they accelerated the two-year bond selloff, and they bought 10 year bonds, so they muted that selloff. now we feel covering is largely done. we got three data points at the markets will focus on. pc next week, unemployment, but march 12 we have the next 10 and 30-year bond auction. that will come back into focus over the next couple weeks. we think that will push yields out to 4.75, so we are setting

up in that area in regard to under weighting duration. jonathan: let's talk about duration. is it the size of them or does fear start to kick in and then you start to focus on the size of the auction again? earl: i would like to say it is the sizesqaured. it is the size of the individual auction but these are key military. this is the second one this year. that is taking out the marginal buyers, p2 had that people who had to get long. they may be done if they are a pension plan or insurance company. now we will see who wants to buy the second auction. it is the cumulative effect that is pushing yields higher. jonathan: that point on where the buyers are is so important. we've had people come on the program and decide this wall of yield hungry money that is coming into the 10-year at 4.50 and by a lot of it. are you pushing back against this idea? earl: we are going to be buyers

4.50 to 4.75. when i was on your show last year, we said our expectation for 2024 is that we would test the high yields of 2023, moving toward that 5%, and the low yield, the move toward your 3.25. we still believe that. we still believe we will have lower yields by the end of the year. because of the selloff, this mixer great buying opportunity from a valuation perspective compared to 2023. the thing i like to say is valuations are not a timing tool which is why we are tactically short heading into the auctions. jonathan: your note was a great read, acknowledged the number one risk factor to your big call which is ultimately the labor market. any reason to believe we would get any kind of deterioration in the labor market given where jobless claims came in earlier this week? earl: that is one thing but we

do not see any deterioration coming. the number one reason why is fiscal deficits. still a lot of money hitting the economy. that money is going to private sector. each time you get a very strong, resilient number, it adds confidence to small and medium-sized employees that maybe this will be persistent. we feel it will be stable, strong for the first half of the year, and then we feel inflation will come back second have, and that is when you get the pullback in employment. jonathan: you talked about auction squared, can we talk about that, and the deficit. this is not going away anytime soon. when you listen to the political analyst -- analysis, ultimately it doesn't matter who takes control of the white house, that deficit will be large and persistent. when that accumulate through next year as well, doesn't that push back on the theory that yields will ultimately drop back

to where they were a few years ago? earl: for us, we believe that, but the market takes time to adjust to it. the market has i would say both short-termism and extreme short-term ism. a look at yields over the past 15 years and say this is great yields, and the market rallied like it did in the fourth quarter. but that it pulls back and test the highs for the exact reason you said. this will be. asecular trend toward high yields if you look at the average of 10 year yield from 2000 to 2008, it was 4.75. the long-term average is 4.75. we have a long-term range of 6% to 3%. the dynamic we have right now is a slow grind higher up toward that 6% over time. not a 2024 story. maybe 2025 but we don't feel that. it is a 2027-2028 story.

jonathan: congratulation to you and your team. earl davis of bmo global asset management. we are down a basis point on the two-year. 4.70. bear in mind, 50 basis move higher on the front end. the 10-year now at 4.31. they are looking at a move to 4.50, 4.70. two-year notes, $63 billion worth of next week. seven-your notes, $42 billion worth. and they will keep coming. let's get you an update on stores elsewhere this morning. here is your bloomberg brief with sonali basak. >> warner bros. discovery missed for the fourth quarter and earnings posted this morning. the company says last year's writer and actor strike weighed on television, posting a 20% decline in content revenue. however, they did see a beat on total subscribers with nearly 98

million customers. the ceo added the streaming service max will be rolled out to new international markets. for the first time since 1972, the u.s. is back on the move. intuitive machines landed a robotic spacecraft nicknamed odysseus on the surface thursday afternoon. it is the first private firm to successfully place a vehicle there. nasa administrator said today is a day that shows the power and promise of nasa's commercial partnerships. and a huge rally in nvidia shares has catapulted the ceo to new heights. he is becoming one of the 20 richest people in the world. it is a gain that leapfrogged him ahead of charles koch on the 20th place on the bloomberg billionaires index. jonathan: unbelievable. up next on the program, the ai

rally goes global. >> this is like the lastgasp. everyone who was short, underinvested is pulling in. jonathan: they have been piling in over the last 24 hours. that conversation is next. this is bloomberg. ♪

the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com jonathan: equities just about positive on the s&p 500. little bit of a lift after a big lift yesterday on the s&p. changes to some yield forecasts. 10-year was 3.65, now 3.80. two-year is 4.70 something. under surveillance this morning, the ai rally goes global.

>> this is almost the lastgasp. everyone who was short, underinvested is pulling in. we really like ai. we believe ai will change things. the problem is, didn't get too expensive, is the data ready for ai? if it is really going to work, the rest of the market has to be successful. jonathan: equities around the world hitting all-time highs as nvidia is out with $277 billion to its market cap in a single day. rbc capital markets writing it has been tough to be a very these days. history would suggest that positive momentum will beget more momentum. amy wu silverman joins us in new york. can we explain what on earth yesterday was? i said to him, if i said that the revenue forecast would be $200 billion above the street, when you guess the equity market would have rallied as much as it

did yesterday? what on earth was that? amy: when we look at the derivatives market, one thing we were telling clients prior to the earnings is at the call exuberance, the demand for call options relative to put options or at historic levels. the last time we saw this positioning was made in 2023. it is typical to blame options when you don't have any other good reasons but i think it provided a tailwind. there are other technical dynamics that follow options like a dealer positioning that happens, the gamma cycle that happens. we have seen this over and over again post-covid where options plays a very large role in exacerbating momentum. jonathan: you talked about positive momentum it gets positive momentum. is that what you are expecting to develop? amy: when we look back at financial history, one thing we will say is post-covid is almost its own regime. a lot of the options relationship we are use to have broken down.

now we see spot up, volatility up, and this started during the meme craze, where people put one to into the pool and said i'm ready to jump in. it's a way of expressing fomo but on an institutional scale. it is not just institutional investors, it is folks who feel like they must participate. no one really knows what ai could mean in the future. jonathan: back then, we had a ton of fiscal stimulus, rates were zero, and qe. are we deemphasizing the importance of monetary policy? amy: it's a great question. the longer tenors, yes, but the shorter durations, no. it has come down to the fact that these tactical positioning's and options matter much more. that is what we see in these exacerbated moves. following this exuberance now still matters a lot, still telling us that there is more positive momentum to go.

jonathan: what is the correlation between rates and stock markets right now? amy: when you look to the rest of the markets, ex-mag seven it matters a lot. one thing that we have talked about is historically, tlt, spy, this inversely correlated bond correlation we could count on. that has also broken down. mag has almost taken its place. i know it sounds crazy but it has taken almost the same inverse correlation. when you have a flight to safety, you go to mag seven. that is what is interesting when you think about the context of rates. jonathan: do you think others are picking up on that? amy: i think they are treating it and that is why you have this market where it looks great, all the headlines talk about nvidia, but the reality is a large percentage of the market didn't rally yesterday. that is the problem. the breath of the market is overwhelming what is on the surface.

jonathan: can we talk about what is on the horizon? what is the big risk event on the horizon given this rally? amy: anytime we have any sort of set speed, that has importance. . march 18 is the next time nvidia will have an ai conference. i actually think that's an important inflection point in the market. when you have this momentum cycle, you need a clearing event either to make it continue or to make and break down. that is when i'm watching for around options expiration as well where i think it will be important to see where lamenting goes. annmarie: anyone buying protection on a government shutdown or no one cares? amy: sadly, no. i've been digging around in my financial history, and you go back to 2011, debt ceiling crisis, vix did spike to 35 and remained there through the end of the year. other things going on economically but there is not

lack of precedent for government shutdowns, debt ceiling's, election events to be important to volatility. i will tell you it is not on the markets mind right now. jonathan: i always quote lori, see note of rbc talking to clients about the election this year, staring at the sun. that is what it feels like for a lot of people. annmarie: your note was, i guess we have to talk about it. that is the sentiment from clients. because we pretty much already know the front runners, they have to start thinking about it. amy: it is the longest general election. four a lot of investors, what i have gotten feedback on -- this is interesting. there has optionally been very little policy talk. all the policy talk has been essentially one in the same, hard for people to focus on sectors that way. jonathan: things were being with us, amy wu silverman of rbc capital markets. coming up, jay pelosky of tpw

investment management, andrew simmon, and wally at a young. the third hour of "bloomberg surveillance."

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>> i think of the equity markets are nicely set up from here. >> lots of opportunity within

this market. >> overall tech market. >> even at richer valuations, it will be earnings growth that will drive the market. >> we are starting with the magnificent seven but over time we see the gains and positivity spreading. >> this is bloomberg surveillance jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning. for our audience, what a week we have had. this is "bloomberg surveillance." the s&p 500 slightly firmer. bramo is out. jay pelosky of tpw with us this morning, doing victory laps. let's talk about it briefly. all-time highs in europe, japan, france, germany. you were looking for these moves. you were looking for a move in china. jay: thank you for mentioning

that. i was going to mention it. [laughter] jonathan: you are feeling good, what is behind it? jay: importantly, we have made a handoff from depending on rate cuts to earnings growth. that is the big story behind all the new all-time highs. the other point we want to make as we have removed the inconsistency we had in the markets, where the markets were expecting both seven rate cuts and 10% earnings growth. those two things don't go together. we been able to squeeze that seven rate cuts down to three or four in line with the fed without any pullback. that plus the fact that we are having global all-time highs means this bull has some legs. jonathan: impressive to see this repricing on the front end on the two-year and the two-year and equity market keeps on going. equity futures more broadly on the s&p going absolute we know where. the 10-year, yields look like this. 4.3130. earl davis with us earlier

looking for 4.50 to 4.75 in the next few months. the euro a little bit stronger. 1.0832. coming up, we will catch up with morgan stanley's andrew simmon on why he expects market to take a breather. i single tasking on why house speaker mike johnson could be losing his job. and wally adeyemo discussing fresh sanctions on russia. record highs from nvidia's. blowout report andrew simmon expects a call down. that doesn't mean 2024 won't be a decent year for equities, just a lot more gut check's. however, i don't expect more of a correction until later in the year. earnings are coming into strong. andrew joins us right now. nvidia, blowout report.

is it everybody or just one name driving that earnings story? andrew: i think that story is kind of sucking the air out of the room because the fact is 78% of companies have beaten. you look at the consensus earnings for this year and next year, they have gone up. not even including nvidia yesterday. i think there is a lot of opportunity in the market that is beyond just nvidia and the whole ai story. jonathan: can we talk about the market cap change? three weeks ago we were talking about meta adding 200 billion. three weeks later, nvidia adds 375 billion in a single day. i was going through the list of companies that are smaller than the market cap that we added yesterday. salesforce, netflix, bank of america, coca-cola. we added a disney, netflix. how is that possible? andrew: i think it's possible

because if you look at earnings growth for the company the last two years, it is actually higher than the stock return means the pe has come down since the end of 2022. that is pretty incredible to me. it's a story about a story about earnings growth and earnings from visions. that is what drives stocks. i understand there is another issue which is interest rates, what is the right valuation, but right now we have just come off of a strong earnings season for a lot of companies and the market is focused on that. that is why we start of the year very strong. jay: i think your points are well taken. what is interesting to me when you talk about revisions is that if you look into the third and fourth quarter, the non magnificent seven, the other 493, have expected to have higher earnings growth and the magnificent seven. kind of supports the view that

we have at tpw, which is we are in the early stages of a cyclical recovery. we are not only involved with tech also transports, homebuilders, industrials. i wonder if you share that point of view? andrew: one of the mistakes i think people make is they talk about what is the return if i enter the market now, what is my return for the year i.e. on december 31 when the dust settles? remember, on december 31, the market will be priced off of 12 months earnings which is not 2024 earnings, it will be 2025 earnings. 2025 earnings right now are 275. it has gone up the last couple of days because of strong earnings. does that support a market above theisen --5000? you bet. that will determine where the market ends this year.

you are seeing it across the board in a lot of industries. it is not just tech. one of the areas we like a lot is the industrials because of the infrastructure play. we hear from the retailers, the consumers are actually making bigger ticket purchases lately. i think there are a lot of areas beyond just this ai story. jay: absolutely right. i noted yesterday there were more new highs in the industrial sector than the tech sector, same with financials. that is one of the things people are missing because there is so much focus on the magnificent seven. this is a broad market move. if you look at equal weighted s&p, if you look at equal weighted nasdaq, those are also breaking out. you have numerous sectors other than technology breaking out. that earnings point you make about looking out into 2025, i share that exactly. we are looking forward to to

three years of solid earnings growth, what we call a blue sky outlook, as we go into a global economic recovery. jonathan: andrew, are you looking for the same thing? andrew: having said that, as you began the segment pointing out, the vix, a lot of people were bearish last year but if you are bullish, pretty easy to make money in stocks. the market went straight up. we barely had a pullback in early fall. i've been around this business for a long time to know it is never easy to years in a row. somewhere along the way we are going to get a bump. what is kind of tragic is that the first year of a bear market low, retail sells. they get out. they get in 2020, 2009, 20 23, there was not selling. this is why the market is

surging right now. retail flips and said, i made a mistake, should not have been selling, and they start to come back into the market. what happens is they capture that more volatile year. the analogy, as much as the political, economic situation is very different than after the great financial crisis in 2009, the market took off, retail were sellers. 2010, the market was up 12% but we had a 16% pullback in the summer of 2010. i suspect it will be similar this time again but more got wrenching more volatility because the vix, no one talks about it anymore. jonathan: one thing i have learned, it is never easy. i remember last spring when banks were failing, it didn't feel easy then. you were bullish throughout much of the year. clearly, you think we should lighten up a little bit here. where would you do it?

andrew: i think some of these names have had big moves, the ai story. one of the things that i see that is beneficial this year is the mag seven, the returns are dispersing. not all of them are doing well so that creates some opportunity to choose. they are doing well, good revisions versus some that are not. i would focus on the companies that have reported good numbers. i have learned in this business there is rarely one good quarter and there is rarely one bad quarter. i stick with companies that are surprising on the upside and forcing wall street to revise higher. again, maybe the tech area is overbought right now but i sell a lot of financial stocks that report frequent numbers. the capital markets are reopening. that will be good for the big banks.

as money moves out of money markets into higher fee-paying products, bond funds, equities, that will be good for the asset, wealth management business. there are opportunities to focus on as the market has seemingly exceeded just on semiconductors and ai as of late. jonathan: andrew slimmon, great to go through your thoughts. jay, you were nodding along. do we need rate cuts to unleash that or just more gains in the stock market to attract it? jay: probably a little bit of both. when we put out our macro outlook, we talked about return to stability. we pair that with this idea of a trillion dollar reward. that is basically the trillion that went into money market funds last year is going to start to come out. when things were ugly, as they did in the spring and the pol

last year, 5% on cash, i like that. but when the market is up 15 or 20%, and there are names going up 20% or more, it is not as appealing. we think as we go through this period and it becomes increasingly clear we are in a multi-your economic recovery that can stretch, then cash will come out of that money market. that is why think the pullback will happen but it will not be as deep because there will be buyers coming in. jonathan: two perceived disconnects that we need to work with you. one is the disconnected between equity markets. the other disconnect is the one that you have already addressed. the fact that we could price out these interest rate cuts, push out the timing, reduce the magnitude, and equity markets have carried on rallying, even though people justify the move into the back end of the year, more rate cuts coming in 2024, can you walk us through why that

has happened? jay: we write every friday, will be on we get off the set today. our title last week was handoff. we went through exactly this. we have handed off the underlying vitality of the market from expecting rate cuts, dependency on the fed -- which we don't want to be, we want to be free. versus earnings growth, where we are see to see that earnings growth. 2024, 2025, we see double-digit earnings growth in the s&p. the rest of the world has good earnings growth, too. the market has been able to make that switch confidently. you see the rewards with nvidia. earnings were up 760% year on year. 760%. it is just crazy. what it does is reveals two things. one, wall street's failure of imagination, another title of

mine a couple weeks ago. and two, the fact that this earnings story israel. if you don't buy it, you are going to be left behind. think of the people who are active managers. jonathan: i called it career risk yesterday. jay: think of the people who are running money professionally and are not fully exposed to technology. you are by definition underperforming, and it is not even the end of february. you are coming out of the gate -- you underperformed last year, worst year for active managers ever relative to benchmark. you underperformed last year. now you are underperforming this year. i just don't see any big pullbacks because i think there are people who will need to participate. again, it is not just tech. transports breaking out, homebuilders, industrials breaking out. there are pieces that have not participated. we expect they will. and that is where we are paying attention. jonathan: you have been bullish

and you are right to be. equity futures on the s&p, no drama. posited by 0.1%. here is your bloomberg brief with sonali basak. >> shares of carvana are surging. a beat four quarter expectation for profit and said it expect better earnings this quarter. performance comes after a year of cuts and debt reduction. company admits the macro economic environment is still uncertain but still expects to increase sales on a year-over-year basis. reddit's long-awaited listing file for a public offering, revealed that they have shrieking losses. company followed with the sec more than two years after first summoning its plan confidentially. it's expected to be one of the biggest ipo's of the year. it would trade under the ticker rddt. anna newest reaming sports merger between disney, fox, and warner bros. could attract 38 million subscribers by 2032.

that would represent about half of the u.s. households that like sports, with the bulk of those subscribers coming from cable tv customers cutting the cord for a cheaper alternative. the service is expected to cost between $35 and $45 a month. jonathan: thank you. another government shutdown deadline looming. >> the question is more about army going to get another short-term continuing resolution? the two possibilities are -- i would not be surprised to see a short-term shutdown. jonathan: that conversation is next. this is bloomberg. ♪

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constant contact. helping the small stand tall. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com jonathan: one hour, 12 minutes

away from the opening bell on wall street. s&p positive by .1%. yields lower by a single basis point on a 10-year note. another government shutdown deadline looming. >> the question is more about army going to get another short-term continuing resolution? the two possibilities are that we get a cr, and i wouldn't be surprised to see a short-term shutdown. speaker johnson has shown he doesn't want to shut down. he promised he would never do another short-term cr in advance of the last deadline and he ended up doing so. jonathan: congress is set to return from recess next wednesday leaving just two days to avoid a partial government shutdown on friday, march 1. isaac bulk penske lays out three options that he sees for mike johnson. punting the deadline once more, passing a stopgap, or compromising with democrats and risking his job.

your call out of those three, punt or compromise isaac: good morning. i think we will have a short-term shutdown and we need to have that pain in d.c. for folks to move on and do the inevitable which is likely pushing acr through the end of the fiscal year. i think that is what we will see. first and foremost, i think we will see a shutdown. that is where the politics are. i think we need that pain in town to force folks from their rigid negotiating positions. i would also say, i have been taken aback here, speaker johnson has a really tough job. it is an impossible job some might say to govern the ungovernable. he has been very underwhelming in this role so far in terms of marshaling his caucus and actually setting expectations that are realistic. my base case is we have a shutdown. annmarie: how short of a

shutdown, just from march 1 two the eighth, to get to the second tranche or longer duration? isaac: this is the one thing i keep on pounding home to clients, i don't know how long but i think just a few days. i am begging everyone, you should not care as an investor. and he missed economic activity will be made upon the others. this is nothing but political theater. we have seen it a thousand times. it doesn't impact the things that really matter for an investor like the debt ceiling. annmarie: the south carolina primary, trump is leading nikki haley north up 28 points. what does she do after this? isaac: she has given every signaled that she is staying in the race. i think she stays in the race in case we see a massive stumble from the former president. that is the lane she will maintain. but the number one question i get from clients usually an exasperated, tired tone,

goodness gracious, will this really be biden versus trump again? the answer is yes. i think trump will win in south carolina, he will march to the nomination through super tuesday in a couple weeks. we need to start embracing the reality that this is going to be biden v. trump again. jay: great set up for my question. i expect trump to lose by a landslide. am i crazy? isaac: my cautionary point in all of this, if you go back to the last election, that election was decided by 40,000 voters in three states. we can go in with our base cases for all this, but we will take some lessons from the fed chair and have some humility around this. who knows what will be talking about in a few months. five months ago, there was not more in the middle east, speaker mccarthy had the gavel in the house.

that is my cautionary point in all of this. jonathan: what underpins this call? jay: trump has to be so extreme to maintain his base, he is turning off virtually everyone else. on the democratic side, you have abortion, a lot of energy to come to the table and vote. you see the money, biden has more money than any other democratic nominee has had. trump is failing to raise money, spending most of that money for his legal bills. he has all the challenges ahead. there is just going to be an outpouring that suggests, notwithstanding battleground states and limited numbers of people, i think the overwhelming turnout of the democrats will lead to that. annmarie: the money is a real problem. trump is facing a cash crunch this summer, but when you look at the issues that people care about, it's the economy and immigration. trump continues to lead biden on those issues. i'm not sure at this point,

similar to isaac's point, what happens with the border? where are we the summer with the economy and inflation numbers to decide who wins? these are issues the american consumer cares about. jonathan: you are seeing the polling, immigration, economy, the president doesn't do too well. why is that misleading to the overall outcome in november? jay: that is one of the things you want to mention, the economy. the economy is clearly turning and consumer confidence is turning, and how people vote ties in nicely with the consumer confidence data. that is clearly turning and trending up. exactly to the point, we are going to have the election in nine months. by that time, it will be clear the economy is doing much better. immigration, i think it's clear, if you are paying attention, the republicans are not allowing it to be solved, so therefore the former president can run on that all day. isaac: i think past elections

have been determined in large part by economic realities on the ground. we can always say it's the economy, stupid. this election i think will be different. this election will be driven by anger and fear and different drivers than just how is your wallet doing? i think we have to think about more broadly than just consumer confidence, which is absolutely one of the inputs, but we have to be aware of crime and the border. this election, each side will be pushing anger and fear in different ways. that is a different motivator than we have seen in different election cycles. jonathan: i appreciate it. we have to do this soon. what did you make of that final point, that this is more nuanced that we give it credit for? jay: i guess we are sitting here in the media. [laughter] jonathan: easy to forecast the weather and markets, to be fair. annmarie: when you look at surveys, they are so political.

ask a republican about how they feel about the economy, they say it's terrible. a democrat says it is fantastic. jonathan: if you ask a republican in a red state, they feel pretty good about the state that they are in now. but they will not give biden any credit at all. jay: the issue is, trump has a small base that really believes in him deeply. beyond that, people are open to discussion and negotiation. jonathan: a lot more to talk about. coming up next on the program, citi global economist rob sockin. jay is constructive on global growth and global equity markets. that conversation is next.

jonathan: 60 minutes out from the opening bell. equity futures on the s&p 500 doing ok. posited by .1 percent. likewise on the nasdaq. all-time highs and seeking out another solid week of gains on both the nasdaq and s&p 500. two-year, 10-year, 30-year, repriced big time. 4.7111 on the two-year. andrew hallman horse of city

just publishing, what is the rush. solid activity data this year would keep the fed from cutting rates before june, raising the probability that the economy is entering recession once cuts are delivered. foreign exchange, the euro shaping up as follows. stronger against the dollar. 1.0831, posited by almost .1%. under surveillance this morning, nvidia shares surging to an all-time high yesterday, the biggest single session gain in market value ever. shares jumping 16%, adding about $270 billion in market cap, bringing the total market value to about $2 trillion. jay, do we have to stop talking about these numbers so that we don't get distracted by the underlying profits that this company is generating? when you hear things like

we just added a netflix, pepsi, salesforce, it is difficult to process why we should be able to do that in a single day. jay: it reflexively bit of wall street's failure of imagination. 60% move in a single day reflects that no one has wrapped their head around what this could actually look like, what this market looks like. ai is global, moving at speed, and we are struggling to deal with the speed of change as investors. our models don't really incorporate this. going forward, it will only continue to accelerate. jonathan: can we talk about this from over 20 years ago, and amazon analyst being interviewed with a smug journalist who wanted to understand -- i did learn the lesson from this, don't worry. i wanted to understand how amazon could be worth more than sears. really sat there with conviction

thinking, how could amazon be worth more than sears? how could a bookseller -- because that is how people saw them at the time -- become this? are we repeating that now? jay: we are in a place of rapid change and innovation. we are at the beginning. for me as an investor, i'm trying to pay attention to the people who are the best minds in that space. the guys and the women at the front of the train. nvidia's ceo is at the front of the train. what he lays out what he is seeing, corroborated by others -- this is global. every country. this is a big theme of hours at tpw. climate, conflict, covid. these are big things. every government needs to have an ai strategy. every ai strategy has to incorporate nvidia chips. total addressable market is global. everyone has a play, and they

have a monopoly. we talked about the magnificent six in europe. there are european companies. in asia, south korea and japan, tying up to develop semiconductor production outside of china. everybody wants a fab plant, electric vehicle battery plant. this is bullish for company earnings. this is bullish for the next couple years. jonathan: let's talk about government policy. the biden administration cracking down on russia with a new set of sanctions expected to target 500 people and entities related to the country's war effort. president biden teasing these sanctions after the death of alexi navalny last week. this week also marks two years since they began the invasion of ukraine. will be catching up with wally adeyemo. what is the outstanding issue for you? annmarie: you need to know the

names and entities but i largely view this as symbolic. what you'll hear from the administration is they will punt to the fact that they need to get aid to ukraine, using this as pressure on republicans, but sanctions have not fully worked. at least not what the president said he wanted to do, crush the ruble and their economy. the imf is upgrading their growth. they have just found new markets when you look at what they are exporting, and how they are bringing things in. they are stripping things like refrigerators to find the technology they need to work on their war machine. jonathan: the elephant in the room right now is the frozen assets. $300 billion worth. if western governments confiscate those assets, primarily talking belgium and france, do you see emerging market governments dumping western currencies because we have set a pretty tricky precedent? jay: people in that position, who have committed crimes, worry

about immunity. it is the same type of thing. if you have invaded another country, you may look to have your assets confiscated. i think the issue for us is the fact that defense spending is actually leading to deeper european integration. you look at nato enlargement, what is happening in europe, this is bringing europe together, not just because of the conflict with russia, but also because they haven't been able to depend on the united states to the amount that they expected previously. in our view, that is bullish for european integration. jonathan: i want to finish on the federal reserve, latest call from goldman sachs. economists pushing back a rate cut to june. now anticipating four reduction this year. the shift coming after this week's fed minutes and comments from three top that officials. all sing the central bank is on track to cut this year, just not

anytime soon. robert sock and expecting the first cut in june, 120 five basis points of using for the year. a recession which we expect to occur around the mid part of the year gives the fed a reason to cut. rob joins us around the table. recession, later rate cuts, lie the recession? we have had decent data to start the year, why do you still have that recession call? >> this is the key question. especially last year you were seeing particularly soft landing data. resilient growth, moderating inflation. we are still seeing some cracks within the system that argue a recession may occur. credit conditions continue to tighten, stresses in lower income consumers persist. the fiscal impulse that was there last year will not be there this year. when you add these up, it's a lot of risk.

basically it comes down to, the longer these policy rates stay elevated, the more they will bite into the economy. also that services momentum from the consumer that powered growth last year is not going to be there as much this year. as those things fade and interest rates bite, we think those stresses will grow and the economy will eventually fall into recession. jonathan: you have a different view to jay. can i set up the global economy? if you strip out the united states, what is the engine for growth right now? rob: that is the key question. if you look at our forecasts, we have emerging markets holding up relatively well. those economies that did well last year like brazil and mexico, slow down a bit, but still pretty solid within the forecast. em's are still a decent engine for growth. it is on the dm side that the u.s. is really caring the ship. in europe, i don't see a lot of

upside risk. you are talking about slightly negative, zero or slightly positive growth for the year. it is the u.s. where there is still that risk of a soft landing and could be an engine for the global economy just like it was last year. jay: interesting point of view. we take a different side of it. when we wrote our 2024 outlook, we talked about an early cycle recovery. when we look at things like the semi cycle, homebuilders, ism raking back above 50, we see things that suggest that we are early cycle. when we look more broadly and extend a year or two, we are looking at a rate cutting cycle globally, global liquidity, global earnings all pretty positive. china growing at 5%. europe, full employment. the production side is weak in europe but the consumption side is ok. when you look at japan, same type of thing. they just had a new all-time

high. 35 years. how often do you get a 30 five-year all-time high? i just wonder if that up cycle papers over some of the cracks that you point out, which i agreed to exist. rob: that's a great point. those stresses i highlighted, lower income consumer strains, credit conditions tightening, there are certainly yellow warning signs, not red, and you could get an environment where central banks ready to ease this year. the question is, are they able to do that in a way that upsets it soon enough? i agree there are some green shoots, as you highlighted. manufacturing pmi just touched near 50 for the first time since third quarter of 2022. it's a difficult time to assess the confluence of data. risk of a softer landing is pretty high but i think those

factors i mentioned, that services momentum feeding, those interest rates which are rising on a real basis because inflation has fallen so much, i think are going to bite more. fiscal is a story underneath the surface that doesn't get a lot of attention. globally, almost all economies around the world are having a negative fiscal impulse this year. jonathan: i am pleased you brought it up, the second perceived this connect. rates and the equity market continuing to rally. i want to finish on gdp worldwide. germany is negative. china is clearly struggling. yet we see markets in countries at all-time highs. you explain how rates can be priced higher and equity markets in the states can carry on running. how have you managed to do this abroad? jay: same thing. the lessons we always have to remember, markets are forward-looking. forward-looking, europe will recover.

japan is going to recover. china is growing at 4% to 5%. another thing i didn't mention, but if you look at exports coming out of japan, south korea, coming out of taiwan, they are picking up meaningfully. to me it's a case of the market knows best and the market is telling us with these new highs that earnings are going to be fine. it is really earnings, not gdp. if you thought gdp was what to focus on, look at china. fastest growing economy in the world for a decade, one of the worst stock markets. earnings is what counts. the market is saying to us, the global economy is in the beginning of a multi-year up cycle led by those factors i mentioned, rate cuts, liquidity, re-shoring of supply chains. we think the analog is the second half of the 1990's. that is what we are looking at,

a global productivity boom where ai supports low inflation, decent wage growth, continued consumption, an economy that will grow for the next two or three years. rob: do your point, you said markets are forward-looking. one thing we've been highlighting even though our outlook for the global economy is more bearish than most, the saving grace is these recessions are all relatively short-lived, relatively mild. even at the end of last year for japan, u.k., relatively small contractions. after that, central banks could start to cut rates, inflation moderates, and growth bounces back pretty quickly. if you are forward-looking, these are relatively short blips in terms of downturns. jonathan: that is the hope if you are bullish european equity markets. always great to see you, rob sockin. jay pelosky will stay with us. here is your bloomberg brief with sonali basak. sonali: warner bros. recovery

missed on the fourth quarter and earnings posted this morning. they said last year's writer and actor strike weighed on tv, posting a 20% decline in content revenue. however, they did see a beat on total subscribers with nearly 98 million customers. the ceo added streaming service max will be rolled out to new international markets. the huge rally in nvidia shares has catapulted the ceo to new heights. he's on the verge of becoming one of the 20th richest people in the world. his wealth that leapfrogged him ahead of charles koch on the list of bloomberg's billionaires index. house speaker mike johnson is rejecting newborn or policy restrictions considered by the biden administration, colin bennett election your gimmicks. president biden is wearing -- weighing an executive order.

the speaker has sought one-on-one talks with biden on border policy in exchange for international aid. speaker johnson has refused to allow members to vote on the standalone aid package which passed in the senate earlier this month. that is your bloomberg brief. jonathan: next on the program, the biden administration cracking down on russia. >> in terms of new measures and additional sanctions, stay tuned. they will be forthcoming. jonathan: the deputy secretary of the secretary, wally adeyemo, when the program next.

jonathan: counting you down to the opening bell about 43 minutes away. equity futures positive by .1%. under surveillance this morning, the biden administration cracking down on russia. >> is actually a quite useful

reminder to russia about what virtually the entire world thinks about this aggression, and the strong desire to see it end. in terms of new measures and additional sanctions, stay tuned. they will be forthcoming. jonathan: here is the latest. president biden slapping russia with a set of 500 sanctions after the death of alexei navalny. the white house saying that some of those sanctions will target those responsible for his debt. the sanctions landing as the russia-ukraine more hits the two-year mark. joining us to discuss is deputy of the secretary of the treasury wally adeyemo. there is not much we have not sanctioned over the last two years. what is different about this, what is the objective? molly: our objective remains the same, going after russia's industrial complex and making

money to fight the war they want. what we are doing today is furthering those action by going after companies in russia that are helping to build military equipment. today, russia is running a wartime economy. factories that used to produce goods for russian civilians are now producing military equipment. we are sanctioning those companies but also going after the company that supplied them in third countries in order to make clear to countries that you have a choice. you can do business with russia and their military-industrial complex or you can do business with united states and our allies and partners. jonathan: what is india's answer to that right now? wally: what we have seen from companies around the world, when they have a choice of being able to sell things to 50% of the global economy versus selling things to russia's military-industrial complex, the answer is pretty key for them. today, we are sanctioning company that you have never heard of that russia has set up to try and buy things from other

companies. we put them on the radar of companies and countries around the world and they know they can no longer do business with them. annmarie: when you look at the russian economy, the imf has upgraded their growth forecast. sanctions has not worked in the sense that the ruble has not been brought to rubble as the president promised. have sanctions work or have they created new markets? wally: it's important to remember our objectives with sanctions. sand in the gears of the military-industrial complex. selling of oil is down 40% because of the sanctions that we put in place. we have promised to do more. russia's expenses for the military are up 70%. any company where the expenses are up 70%, revenues down 40% is not an investable economy. the russian gdp is right because they are spending more, but so is inflation and interest rates. over time that leads to a

country getting smaller and weaker, not stronger. annmarie: the price cap has not worked all the time. russia is using shadow fleets, peer he hard to track this. there are times when they are just selling how much they want to india and china. india has pretty much replaced europe. they have found a way to go around u.s. sanctions to continue funding their war. putin funds his war by oil and gas exports. wally: you are right that russia is looking for ways to circumvent our sanctions, but the rally that you mentioned, the russians have two choices. sell under the price cap of six dollars or build up their own shadow fleet. in order to build up that shadow fleet, they have to invest in tankers. every dollar they spend buying a new tanker, building up their own ecosystem is a dollar they cannot spend on this war of choice in ukraine. we will continue to force them to make those kinds of hard choices. jonathan: $300 billion on russian reserves. the bulk of that is in belgium and france.

how close are we to a decision on confiscating those repairs? wally: important to remember that our leaders talked about what we can do to make sure russia doesn't choose what it will pay ukraine for the damages it has done. over the course of the last several weeks, we sat down with experts in the g7. we are looking for ways to unlock the economic value of those reserves or the ukrainian people. we are already seeing europe take a step, the windfall profits tax, which they are using to take from some of the companies there to move to ukraine. over time we will continue working to unlock that. jonathan: help me understand how that happens, when belgium and france, who are in direct conflict with russia, how do they go about doing that? wally: what russia has done is international -- violated international law. our leaders have made clear that russia is not getting back these assets until they pay for reconstruction in ukraine. ultimately, russia needs to end the war. our goal is to make sure we can

use the assets that russia has around the world to fundamentally -- jonathan: are you concerned about undermining the rules-based order that we all sit around and claim to support? there may be other economies, western economies looking at what is happening and saying i don't want an exposure to the currency anymore. are you worried about that? wally: ultimately one of the strengths of the coalition that we built that represents the world's largest reserve currencies, and what we are committed to doing if we take action is taking it across the g7. fundamentally we think russia has a legal obligation to compensate ukraine for the damage they have done. we have to remember that russia is the one that violated that order by invading ukraine. ultimately every action we take will be in keeping with international law, in keeping with make sure ukraine is able to be a functioning democracy. our goal is to you sanctions and are economic tools to slow down russia. but also in order to speed up

ukraine they need money. that is why the president is focused on getting congress to act. that is why we are thinking about ways that we can use russian assets, the economic value of russian assets to support ukrainian people. alternately what we have to do is ensure that russia learned an important lesson that you cannot violate the rules-based order and get away with it. annmarie: there is one space in the russian economy that has been a little bit safe, the metals market. why are you not going after nickel and aluminum? wally: i would wait a few minutes and you'll see that we are going after a number of revenue sources. i want to make clear to russia, as long as the invasion continues, we will go after their revenue sources and after the military industrialize complex. jonathan: you cannot tease that without telling us. going after nickel and aluminum? wally: i will not. the actual sanctions that we are doing. annmarie: the market thinks you are. wally: what i will say is we are going after the sectors of the economy that helps russia earn

revenue, that includes commodities. we know that includes oil. what we have done we have done in a targeted way, it has accomplished two goals. one is making it harder for russia to earn revenue while also taking steps to ensure we protect the rest of the global economy on the repercussions of their actions. you mentioned the price cap where russia today is earning less revenue. the russian deputy prime ministers just a few weeks ago complained about the impact that russian price cap is having on them. ultimately our goal is to make that impact greater over time by taking these actions while also stabilizing markets, making sure global prices do not rise. annmarie: alexander novak also talking about they are getting entrance into india. they are still making a ton of money. my point is, until the u.s. is willing to take on the repercussions on what it would mean for their economies, should we just expect this war to continue? wally: you have got to look at what the ukrainian's have been able to do.

two years ago when we were sitting here, russia thought they would take the country in weeks. ukraine has demonstrated to us that they have the ability to defeat the russians but they need two things. one is what we're doing with sanctions to slow down the russians, but they also need the money to make sure they have the weapons to defend themselves. that is why it is critical that congress asked to give them the weapons they need moving forward. we have seen in history, we know how to defeat tyrants, but it requires us to take action. we are doing that with sanctions but also providing the financial resources. jonathan: good to see you in new york. i would love to catch up on nippon steel and the industry. wally: thank you for having me. jonathan: special thanks to jay pelosky at tpw. very bullish on this global economy and global equity market. have a wonderful weekend. we will catch up with you on monday.

live from new york city this morning, good morning. this was "bloomberg surveillance." ♪

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>> it's the hangover after the nvidia party with futures higher. the countdown to the open starts now. >> 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 equity rally takes a breather