>> if we see inflation move higher, -- >> it would not take much to push back the timing of the first potential recut. >> they are trying to say the risks of those cuts are balanced. >> this is a fed chair that wants to cut rates and is willing to look through some of the hot inflation data. >> i think we will end up with two cuts this year. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city, good morning. this is bloomberg surveillance,

kicking off the year, two year, 10 year, 30 year. close to 4.45 on the 10 year. the two-year, approaching 4.8. lisa: what i'm looking at right now is how much does it matter and how much does this speak to concerns about inflation or a real yield narrative. i know it is nuanced but this is something else. this is the fed fighting inflation in the short-term and winning over the long-term, which gives fuel to risk assets. jonathan: there was a dominant phrase in all of the southside research, not inflation regrowth. how much of that story can we embrace? lisa: we will find out on wednesday with cpi and on thursday with ppi. we will find a as we hear about the geopolitical backdrop in terms of tariffs -- out as we

hear about the geopolitical backdrop in terms of tariffs. is there justification for any rate cuts this year? if there are no rate cuts, will there be fewer rate cuts over 2025 and 2026? or does that mean there will be more in 2025 and 2026? jonathan: you mentioned geopolitics. let's take the temperature of that. let's bring up brent and wti. uti on a six-day winning streak. -- wti on a six-day winning streak. still 90 on brent crude. lisa: a little bit of cooling off on the oil market. israel has taken troops out of gaza. they are waiting potentially for the strike from iran. goldman sachs is talking about the fact the rally could go, should we still have the geopolitical impact continue. that remains to be seen.

then you have a lot of supply constraints around the world. lisa: what i find fascinating is over the weekend, the notes i read had more to do with the saudi arabia and breakeven rate. where they have their positive returns on some of their funds. it was $85 a barrel. this is talking about a structurally higher rate of crude going forward, regardless of what happens. jonathan: how long will the saudi's withhold barrels? for how long will the white house sit there and do nothing? we know they don't want to fill the spr, will they look to drain it again? lisa: how much capacity do they have to drain this and what that means for gasoline prices? also, saudi arabia, do they have some sort of bone to pick in terms of who they want to win the election and how they want to put their thumb on the scale? annmarie: they will do the best -- their best to talk about this

having to do with supply and demand. if we see four dollars a gallon of gasoline and five dollars a gallon of gasoline, you better believe the spr potential tap is on deck, as well as a lot of pressure on riyadh. jonathan: let's get into the market action. starting with equities on the s&p 500, equities are down about 0.1%. coming off the biggest week since the start of the year. yields higher this morning by four basis points. lisa: i know we always say this but this is a massive week. we have the trifecta. on one hand, you have key u.s. inflation data with cpi on wednesday and ppi on thursday. we get fed commentary and an ecb rate decision. how much do we get them kicking off a potential rate cutting cycle? is june still very much ago? and then earnings season kicks off. friday, this is possibly the

most interesting bifurcation. matters more? central banks or the earnings group? we are getting delta earnings on tuesday but i will put that aside. how much will that be the front driving seat versus the inflation rhetoric and questions around fed policy? jonathan: i think we are done with the fed speak. we can move on. lisa: you want to say that? somebody will come out and say something and all we will talk about is the fed speak. jonathan: government has talked about interest rate hikes next year. what would you need to say to make conversation more interesting -- make the conversation more interesting? lisa: the neutral rate is 4%. in 2025 and 2026, recoding expectations were greater than they were at the beginning of the year. this is a long-term structural play where people have complete faith in the fed. what if the fed does not have complete faith in themselves? jonathan: if you want more of

that, you will get plenty of fed speak. geoff yu, ellie ackerman and enda curran are coming up. looking ahead to the latest cpi print and earnings season, jeff wrote this. while flows may remain heavily focused in the u.s., cross asset price action last week suggests that not all will be rosy for risk appetite rate markets are vulnerable to outcomes in policy and data amid positioning volatility and shifting correlations. how much of a challenge are these yields to this equity market? >> yield levels are a challenge. but also, the pace of the moves will be a greater challenge. putting my ethics hat on, sometimes it's not about levels but the speed at which you get to certain levels.

it is somewhat slower compared to last year. if this accelerates, that tightens financial conditions more plea than markets are ready for, then you get the volatility. if earnings do not meet lofty expectations, that generates volatility as well. finally, we have the geopolitics. it's not all rosy out there. jonathan: you have to learn something from the data and how the market responds to it. we learned the good news is actually good news based on what happened friday. >> we had this discussion internally today and no longer are we saying it is absolutely a slamdunk i good news will be good news. at what point do we trigger it so that good news turns into bad news? looking up headlines from this morning and last week and the last seven days, i count 50

billion dollars in investment by direct or subsidies by asian ship manufacturers in the u.s. how do you offset that? this could be used on the corporate front. if that translates to high yields and financial conditions -- lisa: just to put some numbers on this, i'm looking at real yields and inflation and justin yields -- adjusted yields, which triggers concern in the inflation environment. that is the highest level going back to the end of last year. why do you think this is happening? is this the fed will hold rates higher for a longer period of time? or, is this idiosyncratic selling from a particular cohort that don't believe the 10 year is any longer the haven type of asset? >> i would say it's a combination of factors. if you are anticipating stronger productivity gains in the u.s., real wages should be higher and

consequentially, the real interest rates should be able to reflect that. at the end of the day, what level of real yield you want to reflect? people are looking at productivity gains. that is benefiting earnings accordingly. again, how long can this be maintained? one sector might be doing well and continue to generate quality gains but that will come at the expense of other sectors as well. it will be a delicate balancing act. lisa: when you say it's good news, good news, i wonder for what? is good news becoming bad news for bonds, with still pretty good dues for stocks that might also face-off with a pretty positive q1 earnings season? is that basically your view? >> i think right now, you need to be in the u.s. market. there are no alternatives. i think this week is a live meeting.

june is when i feel they will come first. there is no good use coming out of asia according to our data our clients. every single currency is short. you are almost forced into u.s. markets, be a bonds or cash or equities. in that sense, as long as the u.s. keeps unsurprising or meeting expectations, it is good news. then the bar gets set higher and higher and the moment that you see expectations on the earning site, that's when expectations begin to crack. jonathan: i heard about 1% of what you said and i was thinking about just that. ignore the other 99. what does that mean? >> going back to my parity call in terms of euro-dollar, it is not far from where we are right now. you will get voices. now is the time to act if i look at wage growth and whether pmi's -- we need to distinguish in europe at least. less bad from a very bad

environment. it doesn't mean things are getting better. if we do get energy prices going, with supply constraints, that is going to be negative. they can argue are inflation expectations going up? that totally different reading of where the economy is between the dovish camps and the hawkish camps will come out more into the open. the decision is probably going to be on hold like all the other central banks do to decide this week. i think you will see much more two way dialogue. jonathan: are you sticking with the parity call of the euro-dollar? >> absolutely. jonathan: how much pushback are you getting from clients regarding that? >> there is sympathy with the view and the broader consensus is euro lower. sympathy with the direction,

pushback perhaps against the target. jonathan: wonderful to catch up with you. geoff yu. jamie dimon, 2023 letter to shareholders. lisa: he talks about the macro call. these markets could be pricing in a 70-80% chance of a soft landing. he talks about artificial intelligence and about how, over time, it could be potentially revolutionary, akin to the internet, it has the potential to augment every job. he talks just generally about the government deficit and renting a lot of money and how basically what we have seen is an economy fueled by -- ok, let's hear what you have to say. jonathan: inflation may be stickier, rates may be higher

than expected. i think you've touched on the important topic. is this a man making a call on the economy? is this a man who is leaning toward treasury in washington, d.c. over the next five years? what is it? >> it's the house of jamie dimon, led by jamie dimon in the front seat, trying to give off is larger-than-life message that he does every year. you can speculate on his tax trade or whatever else you want to do. he has talked about this before and others have talked about similar things. annmarie: there is a lot of questions swirling in washington after he made those comments in davos. he had lunch with vp kamala harris. someone in the white house quipped to me that the days of davos are long forgotten. one thing that stands out, the staggering inability of the government causes deep damage to our growth. we have heard a lot about this on our program. jonathan: and yet, here we are

talking about an economy that remains resilient. best economy relative to europe and what's taking place there? lisa: michael put out a piece talking about how the deficit will grow for the republicans or the democrats. it won't matter because people can still chug along. this is the bottom line. how long before it matters? people can scream about it all they want and care, it doesn't mean anybody else will care. jonathan: you will hear more from jamie dimon on friday. equity futures look like this. down by zero .1% on the s&p 500 with stories elsewhere. back with us is dani burger. >> d mc will receive 6.6 -- tsmc will receive $6.6 million in grants. it is a pre-lim agreement and they will build a new factory in phoenix, adding to the facilities they have in the state. production is expected to begin in 2025 and 2028.

the newest building will be building next gin nanometer chips. david ellison is closing in on paramount. the movie producer and tech air needs to sell paramount's gourd on the merger with its production company, sky dance media. ellison would serve as the ceo of the combined company. his father, larry, a big co-founder is one of several names being footed for the role of chair. for a few fleeting moments today, americans will turn their gaze toward the sun as the path of a total eclipse tracks across cities from towns in texas to maine. the event will last for several hours but the main spectacle where the day turns to night is expected to last for about four minutes. get outside and get your glasses.

areas along the path are fully booked. buffalo called it there super bowl. -- that is roughly the output of 30 nuclear reactors. that is your bloomberg brief. jonathan: amazing. guess who came in this morning prepared with glasses? guess who? >> and i bought one for each of you. >> thank you. i'm very excited. >> these are so cool. >> you aren't going to watch? jonathan: no. that's naptime, 2:00 p.m. >> don't look at the sun if you don't have the glasses. i've lectured my kids, time and time again. jonathan: is this a lecture for the kids this morning? lisa: if you are watching, kids, please. jonathan: don't do that. up next on this program, israel

is preparing for rafah. >> we have been increasingly frustrated. if they have to do more, they have to make changes. jonathan: that conversation is up next, live from new york city this morning. good morning. ♪ llucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

jonathan: just for the record, amh thought she brought -- bought the solar eclipse glasses, they are movie 3d glasses. [laughter] annmarie: they are not. get real. jonathan: equities right now, the s&p 500 are -0.1%. your 10 year, 4.4399. under surveillance this morning, israel preparing for rafah. >> we have been increasingly

frustrated. that was a core message that the president told prime minister benjamin netanyahu. they have to make changes. the prime minister assured the president he would do that. we have seen some announcements in those early hours. we have to see more. we have to see it over time. jonathan: israel, putting troops out of southern gaza, preparing for operations despite growing pressure. the president is one step closer to victory but reiterating there will be no cease-fire until hostages are released. elliott ackerman joins us for more. are you unclear on u.s.-israel policy after the events of last week? >> know, i am certainly not 100% clear. i think the u.s. is running the risk of sounding pretty hypocritical in its warnings to israel about civilian casualties, given the number of civilian casualties the u.s. has

inflicted over the past decade. even if you go back to the history of the united states and what we've been willing to do in terms of attacking civilian targets in wars existential to our survival. lisa: we heard from -- annmarie: we heard from admiral kirby and he says this has to do with indirect consequences of their conversations. you hear senator kunz saying he think that is tactical. israel wants to have a reset or potentially move troops to the north if they will have an issue with lebanese has villa. what do you make of this specific move israel made over the weekend? >> what we are seeing is israel's 98th division is moving in the south. the question is why is it moving out? the israelis announced an operation in rafah for some time. they have been telegraphing that

move. it would seem this is tactical, you have to withdraw troops. the 98th division has been in combat for about four months. they probably do need to rest and refit. all of being said, the tactical troop movements can be used to service strategic cover. at some point, israel may decide they won't go after roth and make that type of concession. we will have to see what this means. annmarie: if israel is going into rafah, the united states is talking about potential consequences. we had hostage negotiations over the weekend. are they now just for show and public optics? i think -- >> i think it's not inconsistent to have two parallel tracks of action going on at the same time. the u.s. can have hostage negotiations at the same time israel is posturing for an offensive that may or may not take place based on the outcome of those negotiations. right now, we are at a point of

uncertainty in the war. and a lot of multidimensional aspects of the war, from negotiations to negotiations around a cease fire to tactical operations. lisa: what message do you take from the fact we have not seen an iranian retaliation yet from the killing of their senior military officials? >> these things take time. i think we will see that retaliation, because just like the united states or any other nation, the iranians have a domestic constituency and they have to retaliate to show strength to that constituency. what shape that retaliation takes and how effective it is is yet to be seen. i'm sure they will claim at some point that they have retaliated. lisa: the fact that we have not yet seen a retaliation from iran, there is a softening in

the potential escalation to a broad reach no conflict. do you think that is an accurate way of reading the events over the weekend? >> i think it potentially is. whenever you are in a conflict like this, there are always these off ramps. you know, both sides can choose whether or not they take the offerings. at this moment, iranian retaliation, it could be something very minor and that creates an offramp. i would point out that iranian retaliation is extreme and it makes it difficult for israel to come to the negotiation table. we will have to watch and see how this plays out. jonathan: that conversation is the epicenter of the crude market this morning. we are down about 0.8%. elliott ackerman, the former -- white house fellow and co-author of 2054.

lisa: the fact we saw the increase in crude prices and people are pointing to the potential for iranian escalation, we heard about jammed gps signals as people hunkered down. iran targeting the u.s. as well. the fact that nothing has happened and troops are being removed from certain areas of gaza, seems to have taken some of the temperature down. whether that lasts remains to be seen. you can't gain the sow, which is why it is difficult. annmarie: iran will go to the security council and weigh the options of what they want to do. is this going to be something potentiallyike he red sea and the indios -- indian ocean? we have seen this before. reports, georgia, india, thailand, in the past that iran has used to try to target israeli officials. i think we need to wait and see, like the gps that israel was talking about that was getting spun out of control, because they wanted to make sure no drones can attack. we need to look up at the u.s.

and israel say, what place is to avoid. potentially that is what they are concerned about. jonathan: debbie ti is down about 0.8%. brent crude, $9.40. coming up, in the current -- in the koran -- enda curran. starting the week with new highs for the year on 10 year, to year and 30 year bond yields. yields are higher by about four basis points. this is bloomberg. ♪

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jonathan: live from new york city, welcome to the program. equity futures on the s&p 500 are negative by 0.0 6%. totally unchanged on the nasdaq 100. still, only the fifth week of losses since the end of october. we can talk about this, worst week since the start of the year. lisa: completely tied to the bond markets. yields went higher with the expectation that the fed would not have justification to cut. i want to point out how rare it has been to see any kind of decline. the s&p 500 has not had a down 2% day since february of 2023.

this is the 12th longest streak since 1928. jonathan: that's how strong this rally has been since the end of october. the reasons for the rally have shifted quite a bit. in the bond market, yields look like this. two-year, 10 year, 30 year. we finished north of 440 -- 4.4 last week. a 10 year yield of 4.4359, yields up by a couple of basis points and getting closer to 480 on the two year yield. -- 4.8 on the two year yield. 4.7739. lisa: people look at this as the moment where we find out if the bump idea is transitory like it was a couple of years ago. is it the threshold of saying at least inflation did not surprise to the upside? that seems to be the big fear that has been baked into the rates market the past couple of sessions? jonathan: can i say yes a few

times? the consensus view is not inflation with growth. most people look at payrolls, a strong payrolls growth. then you look at everything else. people have taken a little bit of confidence. if you get inflation data coming in line, they can embrace the supply-side story. lisa: is it a good enough reason to buy the long end? the long end has been a mystery to me. that has been the most volatile area. one that is most of a mystery to me. what is the reaction function if you think the fed is going to hold rates higher for longer? is that positive for the long end? does that mean you could see that kind of priced in longer-term benchmark rate? jonathan: we've had a big move higher in crude, something like

4.5% last week. highs we have not seen since october off brent crude and wti. what happens here will be critical to the conversation around inflation going forward. and the fed's tolerance of it. that's how i think things develop. lisa: it's not just crude, it is broader commodities, whether it is gold or chocolate. this is the reason they have to take into effect a little bit more. especially with the driving season and the fact that it is a political hot potato and all of that jazz. i don't know if they have the ability to. we have such a low level. i've heard so many people say we are up against the edge here. annmarie: we are well below the peak we had under the obama administration. yes, they can drain it. it's not going to be the same levels we saw previously under the biden administration.

a lot of that would be job running as well. jonathan: under surveillance, a busy week ahead. u.s. inflation data on wednesday. the ecb with a decision on thursday. let's set the scene for you. apollo versus morgan stanley. the data point to another inflationary expansion of the labor market. the economy is re-accelerating. we are sticking to our fear that the fed will not -- feel that the fed will not cut interest rates this year. lisa: i keep saying what will be more important, the fed and the macro or earnings? there is bigger risk in bonds and there is less risk in stocks, especially if the earnings come in better than expected. that all flips on its head if we get this weakness. it shows there is no consensus whatsoever on wall street about how to read some of this data and what it means for the

trajectory going forward? annmarie: it almost is a different economy in a sense. jay powell talked about this. it's a bigger economy, not a tighter one. how much is immigration playing into the jobs market and is that helping keep a lid on wage growth? everyone will be looking toward cpi. now that we have jobs out of the way, this is the next data point that could point to what the fed is going to do in june or july. jonathan: getting a flavor or a preview of what jamie dimon thinks about the world, devoting a large portion to ai, saying it may be the biggest issue the company deals with. these markets seem to be pricing gear at a 70% to 80% chance of a soft landing. i believe the odds are a lot lower than that. >> house he handling his business? we will find out about that hopefully -- how is he handling his business, we will find out about that on friday. there is this issue of how much

ai is going to transform his staffing levels. where they are hiring, where they are cutting back and who they are putting their money into. those are some things i would like to hear from him. these big proclamations, he has talked about 7% for the 10 year rates. it looks less far-fetched than a year ago. these are some of the things he has come out with in the mornings he has made in the past. jonathan: each additional dollar of revenue with these banks, every single year from here, will become less and less labor-intensive. it's not that you may see, i don't know, 10,000, 20 thousand, 30,000, 40,000, 50,000 people laid off, companies will get bigger and deal with fewer people relative to that expansion in revenue. that will be of some concern to younger age groups coming out of college, looking for jobs. the grad schemes -- grant schemes at these banks, which a lot of people are depending on, coming out of colleges, working

hard on their degrees, sacrificing time because this is the career they want, it won't be the same. that's a big change we will see. lisa: the grunt work that people come in and they have to be the assistant to a banker and you learn through that grunt work, it will be done by a computer. at what point does that you limit the opportunities to learn? the silver lining might be fewer people but they are paid a lot more. jonathan: the golden ticket. annmarie: it's interesting he almost led the letter with it. it feels like this is what his bank is grappling with as one of the top issues. jonathan: far more interesting than the numbers -- interest in the numbers on friday than ai in the next 5-10 years. >> i'm very focused on it. jonathan: janet yellen wrapping up her latest visit to china. saying excess production and subsidies will lead to significant risk to workers and

businesses in the united states and the rest of the world. weighing in on this is enda curran. it's almost like the staff discovery tour of janet yellen. how is this prevalent to policy shifts for the u.s. administration anytime soon? >> -- it seems to be of criticism and cordiality as well. on the critical side, miss yellen ruled out some of the familiar complaints we know about, which is china is manufacturing too much stuff and exporting to the rest of the world at cheap prices. she said that is not just a threat to u.s. workers would mentioned global workers as well. maybe trying to build up a global line as she beats the drum on the overcapacity story. she raised complaints about china's support for russia, of course. she made the point that china

needs to drum up its own demise to command and buy more of its own stuff rather than sending it overseas. the old miss yellen, the kind of miss yellen that china would like in the past was also there. there was an exchange of gifts between miss yellen and chinese officials. it was one hand delivering a hawkish message and on the old hand, being the old miss yellen. annmarie: many are equating that to what we see in the ev space and she says the president and i will not accept this. they have gone out of their way to showcase that tariffs are set to come. do we have any timeline on when we would see these tariffs? enda: i don't think we have an explicit timeline but you are absolutely right. miss yellen was certainly delivering a message to china that they are not happy with their economic growth strategy and all indications are the u.s. will respond. and that she will respond from

beijing, even though there was a cordial tone around the meetings. they had back and said miss yellen has delivered a preemptive warning that more tariffs or some kind of export controls are coming down the lines. china is bracing for it. china also seems to be playing nice during this visit. typically, even the amount of criticism miss yellen level, you would have expected a more robust response. that does not seem to be there in the media reports we have incurred so far. maybe china expect something coming down the pipes but they are willing to play the waiting game. there is going to be the election and this may well be miss yellen's final trip to china as treasury secretary. lisa: i wonder if there is a lot to withstand some of these tariffs without retaliation on the part of china. is that what you're saying? that they are willing to wait, grit their teeth and bear it if there are additional tariffs? enda: there is one interpretation out there that china's economy, as we know, is

not as strong as it could be and continues to be humbled by the sector. export real estate is hitting at a time where the u.s. economy continues to beat expectations. china wants to put out the welcome mat for fbi. remover the meetings you should ping had with the u.s. ceos a few weeks ago. they are trying to dial down the rhetoric. but on the tariffs and pedicure, china knows -- particular, china knows there could be a change in the administration that could lead to a sharper change of approach in policy. a lot of us watching us feel like there is a bit of a timeout in this. china is more than happy to run down the clock and wait and see what comes out of the november vote. jonathan: appreciate the update. i think a lot of people on wall street have august and september

circled as the next move potentially for this administration. why do it now when you can wait until right before the campaign picks up? annmarie: they don't want to turn this into infrastructure we create every week becomes tariff week when reporters are asking them is it done, is it done? you have an election in november, you are going to hold your biggest arsenal until september, october, maybe even august. jonathan: what's in the arsenal right now? go forward with ecvs? annmarie: they are looking into connective vehicles, this has to do with chinese ev's as well. potentially more export controls on some of those technologies. to lisa's point, it's not at the level that it was when biden came into office. but they could still drain a few millions and potentially help the market. they will need to if they are

seeing for dollar and five dollar gallons of gasoline. every american consumer, even if you walk, you pass a gas station. that's a reminder of higher costs and inflation has docked this administration. jonathan: you talk about china waiting it out. waiting it out for what? waiting it out for who? lisa: that's what i was thinking, given the fact that this is a campaign tool and given the temperature with the general population and what you can excite from the ministration. jonathan: equity futures for s&p, negative by about 0.1%. let's get an update from stories elsewhere. here is your bloomberg brief with dani burger. >> european stocks are likely to outperform the u.s. over the next year says goldman sachs. the ecb, cutting rates in june. financial energy and consumer discretion will be the best performers, they wrote. shares of boeing and southwest airlines lower. the faa is investigating another in-flight incident. this time, it was an engine

cover that fell off and struck the wing of a boeing 737 taking off from the denver airport. the plane was towed to the gate. boeing is dealing with regulatory scrutiny after a door blowout on an alaska airlines flight earlier this year. the south carolina gamecocks are national champions, beating iowa, 87-70 five. this is their third national title in seven seasons. they are the 10th team in history to complete an undefeated season. caitlin clark ended her career with 3951 points and leaves as the all-time leading scorer in men's and women's college pascual. jonathan: what a phenomenal athlete, what she has done for sports, women's sports, has been absolutely incredible over the last few weeks. lisa: all the jokes about going

to a bar to watch women's nba and this question of whether college brass mobile get anything, all went out the window. >> i'm not watching the boys, they suck. this was him in a podcast. jonathan: i can't name a single male athlete from college basketball. what do i know? that's been the story over the last month. lisa: she's a star. jonathan: that should come with ratings and money as well and it's well deserved. up next, inflation, testing the fed's patients. >> what we are getting from the fed is patients and impatiens. they can only be patient for so long. jonathan: love that line from priya. that conversation, coming up next. ♪

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jonathan: equities on the s&p 500, negative by 0.05%. yields a bit higher, four basis. 4.44 on the u.s. 10 year. crude back just a touch, -0.7%. under surveillance this morning, inflation. testing the fed's patients. >> what we hear is patience on inflation. they can only be patient for that long. prorated bump is the new transitory. this is not suggesting that inflation is not moderating but how many months can they be patient? if service disinflation does not continue to slow down, i think that is where the spread patient narrative will run thin. jonathan: efforts investments

chief economist lara rhames said markets on edge -- service prices are just too high. does the fed need to cut rates? no. there is no urgency for rate cuts. my forecast for surgical rate cards starts possibly in qfii or -- q3 or q4. there might be a bump in the road, is the new transitory, does that translate with you? >> it is starting to feel like deja vu. month by month, we are pointing at one or two small one offs of indices giving an upside surprise and giving us a 0.3% monthly gain instead of 0.2. if you get 12 months of those, it adds up to 3.2 percent inflation. not 2% inflation. that whack-a-mole since has come

back in, just like it did. it's not a massive re-acceleration story but it is not pushing inflation back into that convenient 2% lane that we occupied for so long before the pandemic. jonathan: let's take a little deeper into that. the consensus on wall street is you can surprise or rather you can embrace the supply-side story. that growth is not inflationary at the moment. i think chairman powell shares that. what's the biggest challenge to that view right now? >> the challenge is it's not just cpi. we are starting to see -- it's been 1.5 months of inflation, upside surprises from producer prices and commodity prices moving higher. the ism manufacturing price index hit the highest into 2.5 years. it's not just consumer prices. it is really seeping and bubbling up from a lot of different places. services prices are sticky. i think that's the issue.

again, it's not just rent. you are seeing a nuanced story around inflation. unlike the growth side of the economy, there is more consensus around the fact that we are in good shape on the inflation. there is a wide range of consensus and what is surprising is powell's interest in dismissing the latest data. there is no urgency to cut rates. the fact that he still seems so intent on that path i think is causing a bunch of us to wonder what the conviction behind the rate cut is at this juncture. lisa: maybe this is a reason you said not higher for longer. the 10 year retests 5% sometime this year. what do you think is the trigger for that, given everything we have seen so far, we are quite a bit away from that? >> we are still a ways from it but i think we are on that trajectory.

it's the higher inflationary numbers and the very strong growth numbers. it's the productivity numbers that look fairly solid. i think there is the supply-side issue with treasuries that is just not going to go away, no matter what you change with the mix of funding. at the end of the day, if we are not going to have a recession, the yield curve should normalize. it is so deeply inverted. i see that as more of a twist. some surgical rate cuts later in the year. long-term rates, drifting up. if we have a healthy economy with 3% inflation, there's no reason why long-term interest rates shouldn't align with nominal gdp. that puts you in the 5% range, at least. i don't think we should be as worried about that as we were with the rapid rise and rates that we saw in 2022 and 2023. lisa: i'm old enough to remove of the last time we got five year -- 5% and 10% 10 year

yields. are we taking that off the table and saying this is an economy that can handle that with no problem? >> i am. i think that this time last year, when we touched 5%, it was the speed at which interest rates moved up so fast. if somebody from warm weather moves to new york in the middle of winter, there's going to be an unpleasant shock and you will freeze up. the second winter, the third winter, you get used to it and you are out and about doing everything you would be doing normally. i think that is the right comparison here. the longer that we have these interest rates, the more that will price into the cost of refinancing, the cost of buying a home and the cost of mna activity. it will normalize -- m&a activity. lisa: you have about two or

three rate cuts priced in. are you prepared to pair them back to one or zero? >> i am. i've been on the fence about saying that i don't think two or three rate cuts are needed. i think it's what the fed seems to have conviction and they will deliver. i think that look at markets today, financial conditions, credit conditions, i don't think that we need these rate cuts. at the end of the day, you are looking at a world with higher interest rates offering a rich suite of alternative investments away from traditional equities. i think markets have digested these higher interest rates just fine. jonathan: winter eight or nine and no, i've not adopted. maybe i am like office vacancies in that analogy. lisa: you have an adaptive, public service announcement, get the right equipment.

you don't have the right equipment. that's all i can say. jonathan: so aggressive. annmarie: he's got the bond claire. jonathan: what's the equipment? lisa: you need to commit to the cold weather. whether it is a warm jacket, warm gloves, a hat, commit to going out there. it's about embracing the experience. jonathan: and ugly boots, what are we talking about? so critical of me. lisa: i'm not critical, i'm just saying if you want to enjoy the winter, you have to wear the equipment. jonathan: what does that mean? lisa: you have to have the right type some things, use hand warmers if you need to. jonathan: the only reason i get through it in new york is because you are promised a summer and the summer arrives. i can live with that. in england, it is this damp cold and then the sun shines for two weeks max and then there is a

heat wave. lisa: damp is worse than cold. jonathan: i totally agree. coming up next, jimmy chang. a note from my inbox just dropped in, recession delayed indefinitely. we will have that conversation in just a moment. lisa: very much so. that is what people are pricing in. what does that mean for the fed's commitment to cutting rates this year? jonathan: and we will check in with our guest to see if they have the right and quit metoo get through the month. -- the right equipment to get through the month. the 10 year basis yield is at 4.44. this is bloomberg, live in new york. ♪

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>> if we see inflation move higher, it calls the question powell's raising rate cuts. >> they are telling you of things slow down they will cut more. >> it is clear this is a fed chair that wants to cut rates and is willing to look through some of the hot inflation data. >> i think we will end up with two cuts this year. >> this is bloomberg surveillance with jonathan ferro

and annmarie hordern. jonathan: never insult the english weather again. brutal feedback. >> how do people defend it? jonathan: i would love to know as well. good morning. for audience worldwide, big week ahead. cpi wednesday. let's start with the bond market on an early run this morning. new highs for 2024. lisa: this raises the issue we have been grappling with all year. what level and at what point do bond yields creative a problem for stocks? so far can we have shrugged that question off because it has been rising for the right reasons. is the bond complex still losing value with yields rising for the right reasons for stocks to keep rallying? jonathan: the question is where the answer is now. based on friday, really strong data point.

that supply side story driving equities again. and that relationship is evolving day by day between treasuries and stocks. it is good news for stocks. >> a lot of it has to do with the fed pivot, the idea they indicated were biased to insurance cuts or cosmetics cuts, whatever you want to call it. are they sufficiently challenged in that thesis and desire to reduce benchmark rates give the data that a strong but not necessarily inflationary? that is why cpi wednesday is going to be so important. jonathan: cold recently breaking out to new all-time highs and silver with a big run and crude, new highs for the year my the highest since october, a move of close to 5% last week. >> we have passed through a psychological level of $90 a

barrel. everyone is talking about can we get 100? you see a lot of notes coming out, potentially in the sumer. can we see $100 a barrel? this will be tense given that we are in this moment now geopolitically where we are still waiting for iran's response. jonathan: does that derail the happy talk at the federal reserve? >> they will say they do not look in oil prices and oil prices are transitory, but there is a real question about how that feeds into consumer sentiment and expectations of inflation. we see that at the university of michigan survey. just call jon and then he will like the survey. at a certain point, will that feature some of the fed prognostications? jonathan: i have looked into that before, the questions they ask. i want to speak to the people who put together the report.

what are the five-year inflation expectations? 10. >> you are going to single-handedly skew the results. jonathan: i walked past the garage the other day and saw gasoline at four dollars and that is it for me, 10% from here. is that how it works? >> i understand it is arbitrary. how do you survey people and have this number that is actually relevant? it is a good gauge of sentiment and it does feed into it and reasons the fed was concerned about inflation. >> the fed moved on this once, which i thought was ridiculous. they have moved the goalpost how many times? are we on quits now? is that the data that matters? >> i file little bad for them. -- feel a little bad for them.

this is a difficult economy to understand. how do they communicate that? jonathan: equity futures right now just about unchanged. price action is shaping up as follows. who are you, feeling bad for the fed? >> i empathize with the challenge. >> yields up on a 10 year. coming up, the rockefeller family office ahead of a busy week of data as congress returns to washington and the wednesday cpi report. we will begin with investors bracing for a busy week of data, weighing in on the fed path forward and the case for rate cuts in 2024. the case for no cuts is what is the rush and growth is still above trend? markets near all-time highs and spreads near all-time lows. jimmy is at the table with us.

which case is stronger from your standpoint? >> i believe there is no rush to cut. i suspect there will be probably one or two after the election. for the first cut to happen, they need a unanimous decision and i think that is difficult in june or july based on current data. >> you would push it back to november. what would that mean for the stock markets? we have price in cuts. stocks are up by double digits. do you think we can continue trading in that fashion? >> i think the road ahead is more difficult. part of it is the liquidity. liquidity has been strong, but we are drawing down the source of excess liquidity in the market, so as you continue to draw down after the tax season, i believe the liquidity gets

more challenging. this is why the fed signaled they want to start to reduce the pace of cutie soon. -- qt soon. >> why has that been an area that is so difficult to gauge? if the fed holds rates steady, does that lead to a rally? does that lead to more conviction that the fed could get inflation and rates back down to a level can't what we have seen in the past? >> probably. if the fed were to pivot too early, that raises the fear that inflation can make a comeback, so by staying tighter for longer , that is probably building credibility into the market, but a lot depends on supply. we are always at a risk of one more bad option that can send yields higher and then at what level does a start to trigger equity to pullback? it is not just the relationship

between bonds and equities. it is also between bonds and gold. when yields start to climb higher, gold prices are supposed to come down come and get we have been seeing a strong rally in gold price. lisa: there have been a number of articles trying to explain it. >> i think a combination from the market rallying from potential geopolitical problems, potentially sticky inflation, and we have so much debt to be issued that at some point to the fed will need to start easing aggressively. the question is how will the fed restock without bringing interest rates down to zero? the biggest question that reporters should be asking of the fed is the cbo projects over the next 10 years the federal reserve will have $5 trillion of

treasuries, so someone should be asking chair powell, what do you think? lisa: are you going to engage in another round of quantitative easing soon? what does this mean for the traditional portfolio, that the bond portion is now gold and oil and maybe chocolate and not really bonds? >> if you believe the secular interest rates are somewhat higher or a lot higher than we are used to over the last decade and potentially more volatility ahead in interest rates, that portfolio will not work as well, so i would suspect that you will need more diversification to get that hedging effect while looking into real assets and alternative strategies. jonathan: what about foreign equities? >> foreign equities get more interesting when you have synchronized global recovery. we are not there yet.

they work better when the dollar is weaker and at this point we believe the ecb is going to ease and the fed may choose to stay higher for longer, than the dollar will move higher. which argues at least in the near term it is probably not time to overweight overseas equities. jonathan: you expect a stronger dollar and think we could get a break in commodities in places like gold? >> that is what it has been interesting year to date. i thing that is pointing to the markets concerned with a longer fiscal sustainability in washington. >> we were talking earlier today about jp morgan and how ai is this huge theme. you have focused on technology your whole career. how much do you think that is going to reduce staffing? how will it transform financial centers given your experience in the area?

>> initially, it will make us more productive. over time, competes will realize if i can get more throughput for employee may be i do not need as many people, even with expansion plans. you may not have to hire as many additional employees, so i think that raises issues about social benefits, should there be universal basic income, if we see displacement caused by ai. those are probably five years out. >> when it comes to stock investing, does that mean the u.s. benefits from these things because we have not been the same kind of industrial center as other areas, areas that might get depopulated in terms of jobs because of artificial intelligence? that the u.s. stock market will benefit most from these and that -- advancements rather than international? >> we are ahead of the rest of the world.

there's also the open source movement in ai and smart programmers elsewhere, so it is competition over time and how you apply ai to each industry. it is the business applications that will come out in the coming years. at this stage, we are looking at infrastructure. the basic level infrastructure software. over time, it will be individual businesses and that is yet to come. >> you talk about the sugar crash. what is the catalyst? >> exhausting the unusually high stimulus from the covid era. we are still benefiting from it, so just look at the overnight reverse as a source of excess liquidity. we have been getting net liquidity injection into the market in 2020 and 2024.

2022 was the only year with a net withdrawal of liquidity and that is when we had a bear market. if the fed continues with cutie and we deplete overnight reverse repo, 2025 the liquidity backdrop will be challenging. we will run out of other stimulus, such as the employee retention tax credit this spring. that gets paid out for the remainder of the year and what we do for an encore in 2025? also, a potential debt ceiling negotiation. jonathan: stimulus exhaustion, potential for sticky inflation, later start for rate cuts -- how is this federal reserve going to balance financial stability and price stability given everything you have told us in the last eight minutes? >> i do not think anyone knows.

this is why many of the traditional market indicators, the yield curve, leading economic indicators, have not worked in the cycle, because we have been overwhelmed by monetary and fiscal stimulus. we are still benefiting from it, so everything may be ok into the election, but beyond that who is going to gain control of congress on the white house? what will the policies be? there is a lot of uncertainty. jonathan: do you think we could be close to the market projecting a policy effort from the administration? lisa has been talking about the prospect of a liz truss moment. does this treasury -- does washington still have the privilege of behaving recklessly or are we close to that being challenged by fixed income? >> ultimately, it will take revolts from individual entities to push washington to be more fiscally responsible. jonathan: a lot to chew over.

thank you. equity futures right now totally in chain -- unchanged on the s&p 500. here is your bloomberg brief. >> for a few moments, americans will turn their gaze upwards as the path of the total eclipse tracks across cities and towns. the entire event last several hours. the main spectacle is expected to last for about four minutes. the event has sparked a tourist boom. areas along the path are fully booked. the u.s. will lose about 30 gigawatts of solar energy, roughly the equivalent of 30 nuclear reactors. the ceo of rolex has warned against viewing luxury investments -- luxury watches as investments. the ceo said, i do not like it when people compare watches with stocks. it sends the wrong message and is dangerous.

he sees a slowdown hitting sales of smaller watch brands the hardest. it is a battle of the number one seeds. yukon faces purdue tonight. the uconn huskies are looking for a win. the boilermakers have a chance to win their first ever championship. that is your newburgh brief. jonathan: next, janet yellen's tough message to china. >> when the global market is flooded by artificially cheap chinese products, viability of american and other foreign firms is put into question. jonathan: that conversation up next. good morning. ♪ .. is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management.

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jonathan: good morning. welcome to the program. yields are up by four basis points. under surveillance this morning, treasury secretary janet yellen's tough message to china. >> china is now too large for the rest of the world to absorb this capacity. when the global market is flooded by artificially cheap chinese products, the viability of american and other foreign firms is put into question. jonathan: treasury secretary janet yellen express concern over chinese manufacturing capacity, urging leaders to focus on domestic demand. china's premier advising her against turning economic and trade issues into political matters. in what way aren't economic and trade issues political matters? >> they always are. good morning. the thing with this

administration is the -- the ability to lecture is inversely proportional to the ability to actually achieve results you want. so everybody understands the drill over there. yellen complains about these policies and wants to tell the chinese to redo their entire economic program they spent a couple years coming up with. she knows they are not going to do that. they know they are not going to do that. they call the charges that janet yellen made groundless when it comes to flooding the world with ev's, for example. nobody expects a different result, not in the political or economic sphere. >> the result seems to be tariffs, especially from the treasury secretary. what do you view is the timeline? >> i am with you all.

i heard your previous discussion. i'm with you all that they try to do something closer to the election to produce a bigger bang for the buck and they will probably try to fold that in with additional evidence of china helping russia and ukraine , which everybody knows is happening, not just economically. russia is effectively a client state of china. you are going to get a heightened and sharpened chinese rhetoric about the time we go into the general election campaign, partially in the hopes that it actually makes a difference in the election. i do not see that much at all, but they do. annmarie: what should washington be preparing for from beijing? terry: a lot of things. they will tit-for-tat those

sanctions and ramp up plans to flood the united states market with ev's and the rest and maybe even take additional steps in places like the south china sea or to rattle the geopolitical cage some. i think markets continue to forget we are in the highest geopolitical risk for 50 years and they think taiwan has gone quiet. the taiwan issue has not gone quiet. it is just that china is threatening the philippines instead of directly threating taiwan so it seems quieter in markets. lisa: this is the reason i found it so interesting that president biden is holding the first trilateral summit thursday between the japanese prime minister and leader of the philippines to talk about some sort of alliance to counter china. how much is this tied to preparing for potential retaliation to tariffs placed on china? terry: 100%.

there are broader geopolitical issues here and the idea of adding japan to the office on rella has been around for a while. they are trying to move on that. it is not just japan either. the biden administration has been spending time cozying up to india. i'm not suggesting india is about to join, but the idea is there is a pushback in asia against chinese hegemony in the region. that will continue -- the economic sanctions will continue to be part of that come but there is the broader geopolitics as well. jonathan: not exactly an embrace of u.s. germany. i wonder -- hegemony. i wonder to what extent the u.s. is been rejected by the region. terry: i do not think it is being rejected by the region, but there are tensions there. the idea of working with the

country that is closer to you to get some immediate economic benefits always is tempting. and they are under a lot of pressure to do so. at the same time, you have a situation where china has been pushing down the road for some years and that has mixed results. because of those mixed results, it seems like the pendulum today is moving back towards united states and the western alliance when it comes to wanting to establish a more independent, less china-centric position in the region for these countries. annmarie: how difficult is that position for the election? the japanese have said this means that we are stronger against china. with this deal. and the u.s. is using national security concerns about china to block the deal, but it is about domestic jobs. when i talk to officials abroad,

they sometimes feel the u.s. is speaking out of both sides of their mouth. how does the u.s. combat that? terry: stopping speaking out of both sides of their mouths. i think this is something that gets the biden administration in trouble. they do a lot and they do a lot in foreign policy. you saw this in the run up to the ukraine war and in israel and gaza. you are seeing it in a lot of places. they ought to be focusing on whether it convinces anybody politically. i do not think it does. western pennsylvania, one of the big battlegrounds in the election, biden's people think they are helping their cause by being prounion, but on the other hand they are engaging in bans and pauses that leave people

unbalanced. i do not think the strategies are thought out politically or economically. jonathan: you are implying there is a strategy and i'm not sure there is one. thank you. it seems you do one thing to try to please pennsylvania, another to please michigan, and this is what 2024 will be about going into the election. >> which is why the real litmus test is the international allies and saying, what are you doing? jonathan: if there is a strategy, that is kind of it. coming up, jamie dimon's annual letter to shareholders.

jonathan: welcome to the program. equities on the s&p 500 totally unchanged, the nasdaq pretty flat this morning. the russell this morning positive by 0.1%. the equity market coming off the back of the biggest one-week loss since the start of the year. if you turned -- turn to the bond market, the high of the year on a 10 year, this morning, just off those levels at the moment. the high of the year on a 10 year, which is where we are right now. yields up by five basis points on a 10 year maturity. >> this is derived from the idea that the data is not cooperating

with the federal reserve. what i find interesting is where yields are rising. it is not inflation expectations. it is real yields. you are seeing that north of 2%. this is the expectation that the fed will have to remain higher for longer. at what point does it bleed into risk assets? jonathan: when payrolls comes in at 303,000. what was that number? lisa: we did not get down on revisions. this perfect response -- you did not get any wage growth that cause real concerns or alarm bells. this is the disinflationary growth that is perfect on all accounts. the question will be wednesday. does that hold or do you have to rethink that thesis? >> immigration means the u.s. can expand without overheating. i caught up with the acting labor secretary and she did not want to say it was immigration. she did a lot of verbal

gymnastics to say it was teenagers driving this capacity. jonathan: they will say things like bigger, not tighter. the economy can get bigger without the labor market tightening. if it is all immigration, are they not going to spend money elsewhere given the jobs? it is a tricky thing for this administration to embrace, hence the verbal gymnastics. is that politically palatable? lisa: not if you are not getting wage increases in low-wage jobs who previously would have because of an increase of people coming in. it is a difficult moment free the administration and economy. it looks like economic nirvana -- for how long? you are seeing a level of strength in consumer spending that leads to a different reality. >> one nugget in the jobs report i thought was interesting was the number of multiple job

holders increasing, up 27% since the former president left office. that is why you saw trump say there are things in the jobs report you need to look out for. jonathan: thanks for the federal reserve to look out for? the market has this constructive view because it believes chairman powell can respond to weakness. is there anything about the discussion we had the changes that? >> if it is people getting multiple jobs, they are concerned about ability to pay for their bills, so that does not speak to confidence. which is a reason why there is caution. this is why the fed is being so cautious and they are saying they should probably cut rates in july even though you are getting economic data coming in strong. jonathan: mohammed with us in new york at 7:00 eastern time.

the euro against the u.s. dollar looks like this, just want to use that as an excuse to talk about this, the difference between the federal reserve and ecb, fantastic note over the weekend. the fed says it does not know when we will start the rate cut cycle but sends a signal about the expected pace of cuts and a view on the expected end point. the ecb has all but announced the first rate cut two to three months at of the decision but says the path remains virtually invisible. when you compare and contrast what is happening between the ecb and fed, there is a big difference now and how they are approaching communication on policy. lisa: especially given this is a live meeting thursday with the ecb. which raises the question of whether the market is ahead of the game right now and is saying, your rate cut path is more can create. you have more to go because you had a weaker economy and you

have more economic weakness filtered into a more significant disinflation. jonathan: jeff is looking for parity right now. a busy week of data on tap. thursday, we get ppi and jobless claims. consumer sentiment rounds it out friday. big -- bank earnings or >> data, take your pick. cpi will be treated as basically a beat, but bank earnings might give a sense of how much consumer pushback there is not whether jp diamond speaking as a concerned american or from some sense of worry in the numbers. annmarie: for the fed to be able to cut given the strong support in the jobs market, they need to see softer inflation. bank of america is not what the consensus. they say it is 2%. they say this is much more important than last week's drop

report. -- jobs report. jonathan: paramount global is nearing a deal to merge with sky dance media. backers have agreed to pay $2 billion, the two sides agreed to a month of extrusive talks to work out details. plenty of moves in lisa:. are they really going to be stronger together and is it really going to be the bundle that we are going back to essentially? jonathan: haven't we already returned to that? we like my hulu -- would you like my hulu complaint? the algo is terrible. i want to watch sports. what should be on the front page? sports. not there. it is just not there. lisa: what is there?

jonathan: the farmer who wants to find a wife. lisa: it is because you love also ron calms. -- romcoms. because you watch those lifetime movies. jonathan: at christmas, i watch hallmark movies. jonathan: but shouldn't they know it is now april? >> hulu algorithm public service announcement, sports on sunday. jonathan: great golf over the weekend. let's turn the story to jp morgan ceo jamie morgan come out with his annual letter to shareholders. >> you actually watched it. jonathan: we are moving on, saying it could be a transformational steam engine for the economy. they anticipate our use of ai has potential dog went virtually

every job. it could be transformational as the steam engine for the u.s. economy. walk us through the logic. >> jp morgan has been talking about this in their annual letter for years. he thousand -- he has thousands of people devoted to ai. they're looking at data and technology across the whole firm. they do use it in a lot of businesses already. figuring out how to incorporate it to figuring out investment advice. trading desks already use ai at scale. what is generative artificial intelligence mean for trading desk? you look across the spectrum and ai has a huge role. not to mention security concerns within a bank. if you have ai actors that can cause harm, as a bank you need to have that defense properly in place to ward actors off.

>> you have been reading jp diamond letters for a long time. what is the relationship between the two? sonali: you think about what he says about expectations for first republic. they set earlier that 500 million dollars of earnings annually would be added and now they think that is closer to $2 billion. on top of that, he draws out his concerns. we always look on friday at what he is going to say about the forward look for the economy and he gives a little of that in the letter. a lot of concerns about persistent inflation and the idea inflation could stay higher for longer. he balances that out and talks about persistent inflation relative to federal spending and worries about geopolitics, but he also talks about economic growth not only in ai but also

when you think about how much money economies have to spend for a green economy and this idea that he puts a specific statistic. 70,000 electricians need it, for example. so how much productivity is needed to offset those forces? lisa: is this jamie dimon as treasury secretary or ceo? sonali: this letter has always been the swansong to the world, his way of really weighing in on a lot of issues that impact jp morgan customers but also governments around the world. there is a section that talks about what it is like to be a good leader and you have to wonder if that is the handoff story, that not just of people looking at qualities for the next ceo but also his own letter here to whoever his successor may be. >> he said trump was kind of

right in davos. he went to the white house and had lunch with kamala harris. what is he doing in terms of politics? he is walking a fine line. sonali: he always has. he says he is a cold-blooded, free-market capitalist. it is important to remember his economic thinking as we think about how he deals with politicians. it is interesting to watch them go to congress now that they have the annual grilling of the bankers. they do not ask the same political questions the use to about green energy. the balance has swayed for these banks, so he has been able to step up on things like energy financing in a way that has been unpopular at times, but a few years later it is less unpopular, so you see he stands the test of time when he is fighting back on these issues. lisa: jp morgan shares are up more than 17% this year. i find it fascinating what he

pointed out about first republic. how much are we expecting them to consolidate their gains? and really dominate a lot areas that previously were not open to competitors? >> the beginning of the letter starts about the history of bank mergers and the idea here that jp morgan by 2004 represented the consolidation of four of the 10 largest u.s. banks from 1990, if you can believe it. you forget exactly how much. now when he is talking about bank rules he is making the case for the banking system to keep consolidating toward off the idea that even apple acts as a bank. he is talking about the competition they are facing and he calls out one big tech player by name. >> everything is changing. >> the idea is, what is your biggest competitor? big tech was sort of three years

ago. now it is basically apollo and other firms. >> great to see you. stock is up 16%. bank of america up by about 10. all of those banks having a decent year so far today -- year to date. let's catch up with dani burger. >> crude oil is declining coming off a five month high. israel is preparing an offensive in rafah. a chipmaker will receive grants and loans from the u.s. to help build factories in arizona, an agreement that they come he will build a new factory in phoenix at the facilities in the state come a expected to begin production in 2025. the newest factory will build nexgen ships essential to emerging technologies like ai and military applications.

spirit airlines reach an agreement that will differ aircraft scheduled to be delivered in 2020 five. deliveries will be pushed to the end of 2026 and should improve spirit's liquidity position. spirit will furlough pilots effective september 1. jonathan: next, traders trimming rate cut bets. dark out the policy mistake would be to go after inflation too quickly. if the fed is continuously over data dependent, maybe we do not get cuts.

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jonathan: the s&p 500 negative. in the bond market but yields are higher on a u.s. 10 year. in the quantity market, we are just about negative by 0.7%. under surveillance this morning, trade is trimming their rate cut bets. >> there is slow migration in markets to the view that we are not going to get to 2%. we will get closer to 3% and that will be stable and the policy mistake would be to go after 2% inflation too quickly. >> if this fed is overly data dependent, maybe we do not get cuts, but i hope they will see through the backward looking data and look forward and i think we will end up with two cuts this year. jonathan: traders cutting rate cut bets from three to two, all eyes now on march cpi.

the market is on the cost of looking to wednesday to further price out a june rate cut. strong fundamentals bring into question the need for three rate cuts this year. good morning to you. equity markets are at all-time highs. we have jobs growth. why are we having this conversation about reducing interest rates? >> it is a tricky year. the fed thought the economy -- more dramatic lee than we saw in the first quarter. we saw decent momentum growth and i think they were somewhat eager to at least start the rate adjustment policy ahead of the election so they do not appear partisan. that's what leaves them in this tough spot where the data has been performing better than

their expectations and now might be an optimal time to cut but that comes in line with the elections. dark out so we are pricing in stronger growth and sticky inflation and the bond board looks like this, the 10 year getting closer to 450, 30 year basically at 460. how much potential is there for high yields from here? >> i think it will be tricky for yields because i see this environment as being different than we saw in the fourth quarter of last year. the fourth quarter of last year, the fed was bias toward hiking more by the end of the year. you are also looking at environments where treasures supply was in the forefront. you so i built up because of an increase in coupon issuance sizes and now we are in an environment where fed bias is toward easing, so they have told

us they are thinking about rate cuts in the second half of this year, so that mechanically puts it cap on how high yields can rise. supply has not changed meaningfully, but the markets could be biased toward lower yields. >> are you saying there is not any cumulative data points it would sway the federal reserve from cutting rates? >> the fed could end up not cutting rates of data continues to be strong, but the bias in the bond market will be toward lower yields given that the market is always going to be looking toward something in the data that would cause the fed to need to pivot and cut rates, so i think that is where the market focus is going to be. >> is a more bullish for the 10 year yield of data underperforms or outperforms this week and terms of inflation data? if the inflation data comes in hotter than expected and forces

the federal reserve to hold rates higher, is that more positive or negative for the 10 year? >> that is an interesting question. if you think about reaction function of the bond market or friday, the wage print was actually benign, so that would argue perhaps for the fed to be able to adjust policy, but you have a strong headline print and it was hard to see any sort of weakness in the employment picture, overall it short and narrowly strong, and then you're looking at an environment where inflict -- inflation takes lower , will the fed need to cut rates at an environment where everything else is strong? that is where it gets tricky. you need to see employment crack. you need to see weakness in manufacturing or other indicators that would suggest the we need to cut rates. >> you are predicting the 10

year yield ends around 4%. are you rethinking that? are you nervous as you see the strength you have described? >> the longer the fed keeps policy higher, there's potential that will feed through into the economy. our call is 10 year yields will start to decline toward may be 375 by the third quarter into the election. beyond that, past the elections, just the certainty of that should cause yields to rise and then you start looking at things like debt ceiling. that should see a rebuild in premiums, so higher yields after the election is our call. jonathan: because of that, there are better places to take duration risk, beyond the united states. is that something you would agree with? >> yes.

you look at the sequencing of policy adjustments. the ecb has basically told us they will just policy in june, not what we expected coming into the year. the expectation this year was the fed would go first, but now it looks like the ecb and bank of england might cut rates sooner than the fed, so i think it makes sense to go along bonds and other g3 countries as opposed to treasuries. jonathan: sooner and further at the ecb? do you think they will take rates lower than the federal reserve? >> probably not. labor costs are starting to rise. inflation is a concern. i was surprised they suggested or started communicating they would cut rates as early as the june meeting. now the markets say they will cut in june but might not have to cut that frequently after.

it is a communication game at this point. jonathan: when they start to talk about the ultimate destination, how much higher is that destination than the previous rate cutting cycles? >> the destination looks higher. we raised our forecast for europe higher from around 2.5%. it is the same in the u.s.. i do not think the rate is going to be close to the long run fed funds rate, which is 2.5%. when the cycle ends, i think the fed funds rate might end up around 3% to 3.5% and they path getting there might be slower than people anticipate. >> you talk about rising oil and commodity prices. who is more vulnerable to that? >> the ecb because they are more

dependent on energy. the ecb looks at headline inflation more than the u.s.. the u.s. for the most part is energy independent, so there are some positives that come out of higher oil prices to certain sectors of the u.s. economy. for the most part, the focus at least for the ecb will be not just core inflation but also headline inflation. higher geopolitical risks i think will way more on european bonds than the u.s.. jonathan: great to see you on a morning where we have new highs for 2024 across the curve. the 10 here right now up five basis points, getting closer. what was the line in the sand for equity last week? >> for one person, it was 556. we are not necessarily seeing it

completely derail the equity rally, but we are seeing it in certain pockets. jonathan: the 30 year got my attention, the small caps underperforming last week. we started last week having a conversation about small caps doing better and they got hammered. >> those are the companies that could feel higher rates where they are. it is still a mystery about how resilient the economy is. jonathan: super long, some people might say. the third hour of bloomberg surveillance just around the corner. equity futures totally unchanged. massive week ahead. cpi on wednesday. ♪

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>> ingredients are there for the markets to continue in a healthy way. >> we are still technically in an uptrend. >> a lot of economic strength, more than most economists have predicted. >> that debate is pushing more

on the side of this is actually a stronger economy than we thought. >> the u.s. is an economic exception among all the economies. jonathan: the third hour of bloomberg surveillance begins right now live from new york city. good morning. alongside lisa abramovitz with annmarie hordern. your equity market is totally unchanged. cpi coming up on wednesday. fed minutes on the same day. ppi on thursday together with job claims. then bank earnings around the corner. you started the conversation earlier, lisa, by asking what is the most important? lisa: you can make an argument for why earnings will tell more of a picture that could keep this rally going. you can make the argument that if cpi comes in hotter than expected, the bump has become

the new transitory, we are talking about higher inflation, federal reserve doesn't have the ability to cut rates as much. annmarie: stellar unemployment below 2%, the bigger issue that this fit has been fighting has been inflation. we have had upside surprises. jonathan: let's get to the board, looking at the 2-year, 10 -year. approaching 4.80 on the 2-year. up by five basis points on the 10 year. lisa: ultimately the key question that maybe we will get some answers from if we get q1 earnings that come in strong, get the response of good news being good news for stocks. people have shrugged off rising yields but they are rising faster, rising with the idea that the fed will respond. if that persists, that will be the narrative.

jonathan: they sort of speak for themselves. monday, ism manufacturing with a punchy prices paid number. bond yields up. friday, a punchy jobs number. the equity market can deal with those. we had two different sessions where yields were up for the wrong reasons, up for the right reasons. lisa: if you get this disinflationary growth, that's fantastic but do you have this conviction that the fed can avoid cutting rates in the face of a job spread north of 300,000, the fact that we are seeing people talking about the stickiness to the services? jonathan: payroll over the last 18 months. equities just about unchanged. we talked about the bond market. crude backing away from the highs of the year, which we have not seen since october.

$86.27. coming up, jack manley on what he sees equities broadening out. nationwide's kathy bostjancic looking ahead to inflation data. looking ahead to a busy week of data and earnings. jack manley still says eggs are looking good for the equity market. the u.s. economy is doing so well that investors should be exuberant. maybe things are a little too rich right now, but i think it's possible the market sees right through that. jack is with us this morning. like in this carry-on, why can it broaden out? jack: we are talking about the economy doing well for the right reasons, the rate environment changing for all the right reasons. very strong gains, low unemployment rate, but not the pop in wages we would have feared. to answer the question you were talking about earlier, inflation

is the most important thing to be paying attention to. at least that is how the market is interpreting it. no individual report sways the fed's narrative. if the pop in inflation comes from the pop and energy prices, that is by definition outside the control of the central bank. hopefully they see right through it. jonathan: this is not because you don't want to talk about jp morgan results. we will talk about inflation, cpi. do you buy into this not inflation growth story that people are talking about over the past months? jack: i do. a lot of what is happening with inflation can be linked to the level of interest rates. whether you are looking at the headline number, core number, so much has to do with the rate environment. shelter on the headline side of things. automobile on the core services side of things. both of these will be direct

reflections of the interest rate environment. we are in a funny, chicken or egg situation, where you will not see meaningful downward pressure on inflation until you see pressure on shelter costs. you will not see pressure on shelter costs until the fed lowers interest rates, mortgages come down to a reasonable level, and supply comes online. i don't think the inflation is what we need to be wearing about now. lisa: do you think rates, where they are, are inherently inflationary? jack: i think so. if you think about where inflation was two years ago, we are looking at scarcity issues, looking at shortages of energy, shortages of food, finished goods. all of these things related china, ukraine. we christ inflation from -- crushed inflation.

purely to do with supply chain issues getting better. now the stuff that is here now is the more complicated stuff, the stuff tied directly to interest rates. the path from three to two is more complicated. we have seen plenty of evidence over the last six months. lisa: does this leave you bowing bonds and stocks because you think ultimately the fed will cut rates and that will be positive for yields? higher rates are inflationary. jack: like a tongue twister. when i think about fixed income, i have to acknowledge there's a lot of short-term uncertainty about the direction of interest rates. we don't know how the data will play out. the fed elected to not course correct at its most recent meeting, held onto that 75 basis point cut. they may change their tune, i'm not sure. in bonds, i like the risk reward

profile. even if i am too early, yields backup more, so long as i'm not way out on the curve, i don't have much to be worried about. from a fixed income perspective, it is a three to five-year sweet spot from the duration of things. i like the high quality corporate's, not worried about high-yield. on the stock market side of things, valuations are clearly stretched. even if you don't believe in reversion, probably a little bit too high. but we are looking at the broadening out of the recovery as the earnings season gets better. that makes me constructive on that. jonathan: some people think away from the s&p 500, away from the dominant stocks of last year, others going abroad, going from large to small. jack: when it comes to the

broadening out of the recovery, it is overly simplistic perhaps, but important that investors remember there are another 493 plus names in the s&p that no one is talking a lot about, that have only just now started to pick up from a price perspective, that are trading at reasonable valuations. as the interest rate environment gets better this year, inflation continues to normalize, all of these will be tailwinds for those laggards of 2023. not a big fan of stepping down in the market cap space, particularly small-cap names. the profitability situation is abysmal. from an international perspective, i like the ex-u.s. story as long as you are careful what you are buying. if i am buying the em index, a third of that will be state owned enterprises. i'm not very interested in that.

annmarie: huge upswing in commodities. how do you want to expose yourself to that? jack: that could result in short-term performance but that is not why i own e.m. i own em for the manufacturing player, the growth of the middle class, demographics, all of that leading to consumption and production of physical goods and services. commodities is not what is exciting for me for em long-term. if i'm looking for exposure, i want to maybe get some price action. i like the higher quality stuff. i even like u.s. energy producers. that is a shorter play, too, because there is not much capex. for where things are at the moment, energy companies are making money hand over fist, returning a lot to you the shareholder. lisa: you said something pretty radical, this idea that high

interest rates are actually inflationary for the economy. how many people agree with you? jack: i get a lot of questions looks when i say that. if you break it down, it start to make more sense. on the shelter side of things, the fed has raised interest rates to crush inflation. but by raisin interest rates, mortgage rates have gone up considerably, forcing any would-be homebuyer who can no longer afford a home into the rental market. rental inflation has stayed robust. rent is what feeds through into cpi. if you tease out the connection a little bit, it starts to make more sense. first blush, i get a lot of, are you sure about that? lisa: we heard that from often oppenheimer. that is the key, lowering mortgage rates.

really bad for him. jack: poor guy. jonathan: good to see you. jack manley of jp morgan. equities on the s&p just about unchanged. let's get to the bloomberg brief. dani: for a few moments today, americans will look up to the sun, hopefully with glasses on, as the total equips tracks across the country -- it clips -- eclipse tracks across the country. the event has sparked a taurus boom -- tourist boom. the south carolina gamecocks are national champions, defeating the iowa hawkeyes in the women's ncaa title game. it is the third south carolina national title in seven seasons. they are the 10 the team to complete an undefeated season.

but the real highlight was iowa's caitlin clark. she leaves as the all-time leading scorer in both men's and women's college basketball. on the men's side, it's a battle of the number one seeds. yukon faces purdue tonight. the uconn huskies are looking for back-to-back titles. the purdue boilermakers have their chance for their first ever championship. jonathan: as many of you know, our manager is a purdue graduate, so that means boiler up. lisa: does that actually work? jonathan: great weekend in sports. liverpool dropping points, what is better than that? coming up, the oil rally taking a breather. >> the saudi's would love the price to go to 90. you cannot really manage a market to that degree.

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jonathan: that was good. equities look like this on the s&p 500. future just about positive by 0.05%. the 10 year, 4.4581. the oil rally taking a breather. >> the saudi's would love to have a $90 price, not going to 95 or 100, but you cannot manage a market to that degree. a real, deeper understanding now of the dynamic effect between traditional flows in and out of markets. $90 would be the perfect number if it was stable for a long period. jonathan: israel removes some

troop from gaza but still higher on brent. ellen wald writes $90 a barrel can be a difficult spot. especially during periods of high demand like the summer. it is harder to maintain adherence to quotas because producers have the ability to make more money with higher per barrel prices. this line that came from ed morse, $90 would be the perfect number if it would be stable for a long period. you make an interesting point. how difficult is it for that number to be stable for a long period? ellen: very difficult to be stable for long periods because once that number seems like it is here to stay as opposed to a spike due to geopolitical occurrence or an environmental occurrence, you start to get

really, really uptight and anticonsumer nations. india will be upset. china will be upset. not to mention the biden administration will be very upset if we see this going on all through the summer. that could damage their election chances. for some reason, american voters really associate gasoline prices with the political party in power currently. there is really a reason for this but it is a prevailing element amongst the american electorate. if the $90 stays, it could become a problem. opec is going to have a very, very hard time resisting the pressure, both to put more barrels on the market, especially saudi arabia, that has these extra voluntary cuts beyond what they are required to do under their quotas. annmarie: at some point, you are

saying we will need to see supply come from the saudi's, spr release. at what price level do you think the kingdom steps in? ellen: they don't necessarily step in for price level but they respond to pressure. if they see prices going much above $90 a barrel, i see them step in. i think they are also looking at their demand. they will want to see what kind of orders they are getting from asia especially because they don't want to see that drop off. if it looks like there oil is getting too expensive for the radiation customers, we would see them -- their asian customers, we would see them put together a price increase at the next meeting. i'm sorry, production increase. annmarie: let's talk about the potential use of the spr. we are well below the highs of the obama administration but still at 360 million barrels. the biden administration could

have a meaningful tap of the spr before the election, no? ellen: that is difficult to do because they have already tapped into the spr earlier and there was a lot of pushback, especially because a lot of that we'll was exported to china or other countries and was not used domestically. the purpose of the spr is not to lower gasoline prices because they happen to be too high, or they are too high for what they prefer for an election. the purpose is to have this in-store in case there is a geopolitical event that prevents oil from getting to the united states or other countries, or there is a hurricane, for example, that could take up production. we saw spr releases after there was a significant time where production in the gulf of mexico was out due to a hurricane. if the biden administration starts releasing the spr because gasoline prices are too high,

they are setting a difficult precedent. when will they refill this? they have to refill this constantly if they are going to be using it. the summer months are coming, hurricane season is coming. hurricanes are strongest in september and october, right before the election. they may want to save the spr in case they need it for that time. jonathan: when you are a net energy exporter, what is the appropriate level of the spr, what should it be? ellen: really good question. that is not so relevant because we are technically members of the iea. the iea, in order to be a member, you have to maintain a certain amount in your spr, a certain amount of your consumption. it is a tough call. you should maintain more than you think because you don't want to screw up all of your exports by deciding we have to halt

exports because we need this domestically. you don't want to have to do that. it's a good idea to maintain a amount in the spr to be used in the event of some kind of embargo, stoppage, natural disaster, not to just use it because gasoline prices are $.50 per gallon higher than you think they should be. jonathan: remind us about the conversation with the fed. at the end of the day, we probably agree on the same things with regard to the spr and how it should be used. how it is being used is more important. do you anticipate they will be draining the spr going into the election? ellen: that depends on where oil prices go. if opec increases production at the june meeting, less likelihood they will drain the spr. they will not refill it until it is below $75 a barrel, but it opec increases production, i

don't think we will see that. they will also try to push american producers to increase production, which i don't think they'll be very receptive to, given how much pressure they have had, how much vilification they have had at the hands of the biden administration. they will do what they think is best for their business regardless of what the administration says. lisa: two points. saudi arabia's response and u.s. producers. you wrote the book on the saudi family. how will he they be to help the biden administration heading into the selection? ellen: they will not be that wheeling and will want a lot in response. that doesn't mean that they are totally unwilling, especially if they think it's a good idea for the markets. if they are getting pressure from the biden administration, iraq, kuwait, other producers that want to increase output, and they see $90 a barrel.

if it looks like it could be heading to 100, which i think is unlikely, but absolutely a possibility, they will want to increase production to stave that off. once you hit higher than that, you see demand destruction, something they don't want to get. they want to keep their asian customers happy. they can also keep the biden administration happy by getting new military equipment sold to them, if they can get concessions on other things they want, it would be a win-win for saudi arabia, especially if they can portray it as a big pr coup. lisa: when it come to the domestic picture, how much can the u.s. produce after pumping 13 million barrels a day? ellen: good question. production could be higher, but do they think that's a good idea? the u.s. is not really a swing producer because its production

is not centralized. we have all sorts of different company doing what they think is best. what they have been saying is best for them for a while is to not drill that many more wells. they are getting more productivity out of each of those wells, but they are not interested in spending money, especially if interest rates remain high. they will not want to spend more money. they may try to get something out of the biden administration like approvals for new drilling in the gulf of mexico, for example. it's possible they could use that leverage, especially if they think biden will be reelected. jonathan: we have to leave it there. ellen wald of the atlantic council. crude down by three quarters of 1%. wti, 86.31. fascinating note from goldman sachs on the economy. recent immigrants, disproportionately younger

coming from latin america. we estimate that immigration surged to 2.5 million in 2023 versus one million per year before the pandemic, boosting labor force growth and potential gdp growth. lisa: that is what we hear from every economist. a chart showing how many new jobs, how much employment has come from new arrivals. jonathan: we will talk about the economics of that. we will talk with kathy bostjancic looking at inflation data. live from new york, this is bloomberg. ♪

jonathan: equities on the s&p 500 positive by .1%. 60 minutes from the opening bell. a little bit of a lift on the russell beyer 0.4%. in the bond market, up by 60 points year to date. 4.4581 on 10's. new highs right across the curve, including at the front and, the 2-year good and closer to 4.80. lisa: incredible employment picture we are seeing. it is still viewed as positive. yields at 2024 highs, and stocks

eking out again. we have not seen a down day of more than 2% going back to february of 2023. this is a completely entrenched kind of feeling of optimism. this bond market has not been able to stymie it. jonathan: low number of jobs on friday. does that sound consistent with rate cuts? bank of america says it is. the employment report is consistent with the fed starting to ease in june. a jump in labor supply can allow for stronger growth without overheating affects. that is the story they are all embracing at the fomc. lisa: and then you have jack manley saying actually maybe higher rates are inflationary, not deflationary. maybe the fed is contribute into inflation. people are looking at this, saying if you lower rates, more supply will come onto the market in terms of housing, prices go down. this is how uncertain the moment

is. jonathan: i think jack is just in my camp, wants to buy some proper in manhattan, lo of rates to come down. people from a certain demo, generation are all think the same way about interest rates and housing prices. lisa: will it lower prices for you? get that two-bedroom apartment with the roof deck? jonathan: for 200k? don't the boomers drive you nuts on these issue? friends with t.k., but on this issue i get wound up. lisa: although he still rents. jonathan: he has stories about that. let's look at commodities. brent crude and wti look like this. brent crude, 90.50.

annmarie, what stood out for you? annmarie: $90 a barrel, especially as we have more risk for geopolitical concerns, the pressure coming on saudi arabia. she made a great point, it is not just from united states, but china, india. potentially if more pressure comes from asian countries, maybe that gets uncomfortable for the kingdom. jonathan: under surveillance, treasury secretary janet yellen framing china's excess production as a risk for the economy, saying it poses significant risk to workers and businesses in the u.s. and the rest of the world. these complaints are not new, they are really old. i wonder what the purpose of them this time around is, if not to lay the groundwork for more moves on tariffs later this year. lisa: that is what a lot of people are expecting. the data behind it is fascinating.

cfr came out with this chart showing how exports from china of electric vehicles and lithium related batteries have skyrocketed, grown exponentially since the beginning of the pandemic. it has moved away from computer parts to these areas where the tariffs are likely to be put on. there is this new urgency, that they feel they have to get ahead of it before the election. annmarie: yellen's line here, biden and i will not except the reality again, talking about when it was cheap steel coming onto the u.s. market, what it meant for jobs. but i think they will wait until right before the election. goldman has a note out today about how high inflation can go if we get more tariffs on china, blanket 60%, if the election go the other way for trump. jonathan: complaining about american jobs as may the right

political move, but complaining about inflation right now, not sure about that path politically, not economically. lisa: people want prices to come down. this is the reason why it is so difficult to have a real conversation because all of these issues have multiple parts. there is not a level of consistency where you can say, we have to accept higher prices if we want to have things made mystically -- domestically. it will come with higher prices and it will come with certain other sacrifices. that's a conversation people don't want to have. jonathan: on this issue, they don't want to talk about this. let's imagine union membership was leveled or was in the 1970's. imagine how different this inflation story would be. jack was talking about how quickly inflation has come down from double digits to around three currently. would that have been as easy if we had union ever ship as it was

in the 1970's? can you imagine what that would have been like? lisa: interesting to imagine, because it also speaks to the globalization that led to the disbanding of some of those unions. it's a lot of questions and a lot of people are thinking really big, what kind of new era are we entering, one that is more headed toward industrialization with a heavy component of ai? jonathan: careful to wish for. it is easy for the president to campaign with members, but in the 1970's, the cost of doing that would have been higher. anyways, you understand the story. jamie dimon out with his annual letter to shareholders, devoting a large part of it to ai, saying it will have wide reaching impacts across all industries. also writing "these markets seem

to be pricing in at a 70% to 80% chance of a soft landing. i believe the are a lot lower than that." lisa: let's see what he says on friday. how often do you hear the gloom and doom, and then we just need to million dollars from the acquisition. annmarie: 50%? jonathan: i think we get confused with jamie sometimes. i hear a risk manager talking about a range of possibilities and we are too quick to compare. from a risk management perspective, what would you worry about, that it may not be a soft landing, inflation could be stickier. if you are a bank ceo, these are things that you spent a lot of time thinking about. lisa: he runs the biggest bank in the country, people want to understand his view on things, which is why we hear executives talking about the debt, deficit,

talking about a liz truss moment, not so much in those words, but this function in d.c. at a certain point -- jonathan: who is the business friendly party? lisa: there is not a consistent policy because of the protectionism on both sides of the aisle. if you think from a business perspective, they are getting concerned about the deficit. when i talk to certain investors, this is what keeps them up at night. jonathan: it is the auctions, big auctions. coming up, a busy week of data. u.s. inflation on wednesday. ecb decision on thursday. the big banks kicking of earnings season on friday. kathy bostjancic is the chief economist at nationwide mutual. i want to talk about the

supply-side story which is almost like code for immigration. these numbers from goldman sachs are just stunning. we are talking about millions of people coming into this country, 2.5 million in 2023 that immigration. -- net immigration. versus one million per year before the pandemic. how important is that as a theme to ensure the numbers that we saw on friday? kathy: good morning, happy to be with you. it is critical. i was saying a year ago, you cannot continue to have 300,000 per month job gains with the labor force we have. how low could unemployment go and still have enough available workers? immigration changes that story completely. if indeed we are having closer to 3 million, estimated by the cbo, compared to one million,

that is a game changer. that means employment gains can be 100,000 more per month than what we thought before. it is a big game changer, increases the supply side of the economy, helps explain why this expansion continues. jonathan: don't we have to think about how sustainable this is? if you get a change in the white house, this may change quickly. kathy: it is something that we are looking at. when you try to handicap the election, the different outcomes, that could be a big game changer. we know that if there is tough talk on immigration -- under the previous trump administration, it also deterred legal immigration. some of what we are seeing could be reversed. we will have to watch that as we go forward.

for now, we are seeing that, that the immigration numbers look very high. lisa: an argument to be made that because of how big the numbers are, how much is taken up by new arrivals to the country, it is masking an underlying stasis in the labor markets, churning that is slowing down. do you buy that argument, masking the idea that this economy will slow substantially in the second half? kathy: i think it is less likely now. what you are seeing is, companies are backfilling jobs they would have otherwise filled. it is not just getting back to pre-pandemic levels but getting back to the pre-pandemic trend. the fact that you have more workers, generating more income, that means more consumption.

it can continue to support itself on the upside. less likely that we see a downturn in the second half of the year. earlier we were seeing signs of that. five months ago, we were seeing a big concentration of jobs in the more noncyclical sectors, but that has changed. we have seen and brought it out quite nicely. i don't think at this point the momentum is so strong, i don't see that happening in the second half of the year. lisa: fast forward to wednesday, this idea of growth with inflation ongoing. what do you have to see in wednesday's cpi numbers to challenge the concept? kathy: everyone will be very focused on the core number particularly. we are coming up with our estimate, .3, both total and core. as long as that number is not .4

or higher, you could have the narrative -- in addition to that you have three reports before july. if you start to get .2 prints, that leaves the door open for them to cut rates in july. but we need to see that slowdown. i think there are factors underneath. housing, you spoke about. our model still suggest rental inflation should slow. transportation services, we are seeing some of that frothiness slow. we are encouraged. i think the fed may get that supply-side increase and still see inflation slow. annmarie: i want to marry these stories. an uptick in multiple job holders, individuals having multiple jobs to pay their bills. how much are we seeing higher

inflation keep fueling a tighter labor market? kathy: rate point in that there is -- great point in that there is a dichotomy in our economy, and has gotten worse. if you are reliant on variable rights, like you see in the housing market, the existing homes market is completely paralyzed. if you look at the workers, yes, if interest rates are facing higher credit card bills, they have to take multiple jobs, that only adds to the pressure on them. but they can continue to spend and borrow but there is pressure there. let's put it this way, many consumers are not prepared if we get a labor market slowdown. looking ahead, that is more of a 2025 story. annmarie: what do you think of jack manley's point that rates are so high this is putting

pressure on the housing market, and shelter makes up a wide swath of the inflation number that is having a hard time coming down? kathy: that is a good point, although we have seen housing starts, construction has been stronger than the existing market. i would say builders are finding a way, either buying down the mortgage rate, or other incentives going on, or maybe we have more cash buyers, but we are seeing more supply come on. we need to see more. i think that restrict mobility across the country. but that said, over all, we need to see lower rates to get the housing market up and running. even on the new housing supply, we do better if rates were lower. lisa: jack manley's point was that higher rates is also inflationary. do you believe that?

kathy: i can see the argument for the housing market. other than that, no, i don't think that's true. higher rates do depress activity. when that happens, less orders for companies, they will feel a pinch, will not be able to raise rates as much. jonathan: can we finish on immigration? let's stay clear of the politics because i know you want to focus on the economics. it is welcomed in the labor market for the following reasons. embrace the supply-side, more people come into the workforce. we can talk about whether that is a good thing, keeping a lid on wages. what i struggle with, from the perspective of this being not inflationary growth, if we are talking about 3.5 million versus one million, are those people spending money elsewhere, competing for housing, pushing rent?

is that not inflationary growth away from the labor market? kathy: excellent point. it is the housing market where you have the largest issue. there has to be a response on the supply-side. if they are working and spending, have jobs, they need housing. that will put pressure. eventually, you get the supply-side response on housing. that will help greatly. that takes time. away from housing, i don't necessarily see it as inflationary. as you say, wade grote have been moderating because of the supply-side. but i agree, we are in a unique period and that we lack the housing supply. that goes back to the financial crisis. pendulum swings far the other way, we have seen a depressing effect on housing supply. that is catching up with us

right now. for now, we are in that conundrum, but i would expect away from housing, you see disinflationary effects still underway. jonathan: kathy bostjancic shove nationwide. let's get to your bloomberg brief with dani burger. dani: goldman sachs say that european stocks are likely to outperform the u.s. over the next year. factors include a manufacturing upswing, pickup and global pmi, ecb rate cuts that begin in june. they also expect better performance or financial, energy, and consumer discretionary stocks. chipmaker tsmc will receive $6.6 billion in grants, $5 billion in loans from the u.s. to build factories in arizona. the company will build a new company factory in phoenix. production is expected to begin in 2025, 2028.

they will be building two nanometer chips, essential to ai and military use as well. spirit airlines has reached an agreement with airbus for all aircraft to be delivered in the second quarter of 2025. deliveries will be pushed through the middle of 26 through 31. spirit will also be furloughing about 260 pilots effective september 1. they cited aircraft deferrals and engine availability issues. jonathan: next on the program, looking ahead to q1 earnings. >> our attention has shifted to the earnings season which is upon us. ingredients are there, even though we may see moves here and therefore the bull market to continue in a healthy way. jonathan: that conversation is

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jonathan: the opening bell, 39 minutes away. equities trying to bounce back by 0.2%, the biggest one we gloss on the s&p since the start of the year. 4.44 u.s. 10 year. crude pulling back by 0.9%. under surveillance, looking ahead to q1 earnings. >> our attention has shifted to the earnings season which is upon us. higher for longer interest-rate. tech is still holding in from an ai demand. the ingredients are there that even though we may see some here or there, reasons one bull market to continue in a healthy way. jonathan: earnings season

kicking off with big banks leading the way. gina martin adams of bloomberg intelligence joins us now to discuss. great to catch up with you going into those numbers. what are you and the team looking for? gina: it will be an interesting earnings season not necessarily because of financials. financials has been in a pretty consistent low earnings recovery but there are more interesting things happening in the index. if i would say what to look forward to, financials usually set a pretty positive tone, they have the last several quarters, but what we are looking for is revenue growth to surprise expectations. revenue growth has gotten a bad rap. analysts had been somewhat scared, frankly, to increase numbers for revenue expectations. revenue continues to beat expectations. volume sales continue to beat

expectations despite the macro weakness. analysts have not adopted the revenue trends. over, expect a beat on topline revenue growth for the s&p at large, in particular driven by tech and communications, also by consumer sectors. you might also see a pretty big surprise in commodity sectors where we have seen stabilization in prices but analysts still expect double-digit declines. lisa: are we looking at wednesday, delta earnings coming up? gina: i know that we are all anxious to get it going with this week, but i think the most important part of earnings season will come in a couple of weeks. we start with a slow roll into industrials and financials and then we move into the tech, communications, and then at the end of the season, the bulk of the commodity space. as much as we are excited about

the next week as we enter the season, the real ramp up, the most interesting components of earnings season will not happen for another week and a half, two weeks. jonathan: we are just trying to get excited, thank you. may 22, nvidia. lisa: i'm interested in wednesday, delta earnings. the perfect intersection of consumer discretionary and commodity. jonathan: may 2, apple. all the talk of this broadening out, the focus is elsewhere. lisa: can they continue to deliver gangbusters expectations? annmarie: wednesday is the only thing that matters. march cpi will eclipse, pun intended, all other reports. lisa: if it is in line, we will

be talking about the thing that never happened. jonathan: i guarantee we are barely talking about delta learnings -- earnings, unless they have some sort of discount. coming up tomorrow, stuart kaiser of citi, mohamed el-erian will be joining us. we will speak to seth carpenter of morgan stanley. going into the opening bell, 34 minutes away. bond yields at new highs for 2024. the 10-year, 4.4480. live from new york city, this was bloomberg surveillance. ♪

>> from new york city, good morning. despite the rise in yields, 24 basis points in six days, these equity markets have a sense of immunity. will it last? countdown to the open right now. >> everything you need to get start for the start of u.s. trading. this is bloomberg: the open with jonathan ferro. ♪ manus: treasury yields rise to their highest levels of 2024. jamie dimon warning of stickier inflation and higher rates.