>> we are seeing lower middle income consumers of the struggle. >> there is always a high and low end of income but in this market it is mattering more. >> real rates are contracting and consumer spending will slow and corporate earnings will slow. >> the labor market is softening and that will flow through the

wage declines through the year. >> the unemployment rate is low and if that changes it will be a problem. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: this is bloomberg surveillance. the equity bowls have been spoiled on the s&p going five weeks without losses. advancing for 23 of the last 30 weeks. this week the bond market has other ideas. lisa: there is the feeling that maybe the positive momentum in the market has been used up and now this is largely tied to bond auctions that didn't go as well. we had a 1, 2, 3 punch all weaker than expected despite seasonal reasons that they do better than that.

4.96 on a two year yield. you will hear from the new york fed president mr. williams and we will get earnings from the lights of costco. lisa: retail earnings will be interesting over consumer appetite given the fact that we get costco and dollar general and in gap and a summit retailers. do we get a sense they are facing consumer reluctance to spend and is it idiosyncratic? that may be the better tile. annmarie: see what costco comes in at given that we have heard from walmart and target and starbucks and possibly a more discerning consumer. but williams is very important and it comes before pce. and what mike mckee always says that it is a chance to potentially have a tweak of a policy or make a statement. jonathan: we two to dot plot and

american airlines. yesterday closing lower by 13.5%. we asked the question, is this an airlines problem or an american airlines problem. based on the communication we have from them and united in the last 24 hours it sounds like an american airlines problem. lisa: there is more intel on what happened to the chief commercial officer being fired. there was a scathing report about how he interacted with some of the corporate travel agents that basically were shunned from the whole process. he tried to do a direct to consumer process that completely failed. this highlights how frail the overall pool of capital is. if you don't grab your share, you will have problems and that is a different type of moment. annmarie: the ceo was at a conference and he said the forecast revision is due to a softer domestic environment. then you would think potentially this is an airline wide problem and then he says we were expecting and our performance

within that environment. the performance with misjudging where the industry is right now. jonathan: execution, execution and at american, poor execution. the s&p 500, negative by 0.44% yield lower by two basis points. 4.5938 on a 10 year. we will catch up with peter oppenheimer helane becker and -- and helane becker and lorenzo simonelli on record output. global stocks headed for the worst since april. peter oppenheimer of goldman sachs with this to say, equities could provide inflation protection with cash flow but

growth valuations are elevated with little risk of inflation or stagnation priced. wonderful to catch up with you. i know you can't speak to it directly but what has happened with nvidia and what hasn't happened to the rest of the market is getting tons of attention. the question was asked yesterday, have the top five we did stop ever been plus 20% or more in a three day period post earnings with the s&p index was down? the answer is no. what can we learn from that? what signal do you take away from an event like that one? peter: i think there is an extraordinary driver of a fundamentally powerful earnings for that company and a group of super large companies around it which are at the center of the ai ecosystem. that is a trend that will continue. it is important to emphasize that while these stocks are super large in the index, the biggest five or seven or 30% by weight, they don't have the

valuations we see in other bubble periods in the past, the technology bubble in the late 1990's, even japan in the late 1980's, what it is showing is the rest of the market is not seeing anything like the kind of growth of the small number of large companies. while the index has gone up because of the weight of the super large tech stocks, for the majority of companies, they are seeing relatively moderate growth and as you have been reporting, yields going up and that is restricting the up side. equities will be pretty much sideways for the next few months. jonathan: where you think the opportunity is within that? peter: we have seen some broadening out. our view has been investors should be looking at diversification geographically and indeed we have seen this year other markets, japan at least in local currency terms,

europe doing as well as the u.s. if not better depending on over what time period you take it, but also to diversify across different styles and sectors. there is huge focus rightly on the top technology stocks in the u.s. but we have been recommending an approach between quality defensive growth in big tech but with some deep value. that is really what has been happening a year to date. the utility sector in the u.s. is the best performing sector, up 15% in the last three months. who would have guessed it. european banks classic deep value, outperforming the nasdaq. i think diversification is really the opportunity investors have in a flatter market environment. lisa: we have been talking about this extensively, our utilities still defensive given the fact that people are using them as offense to artificial

intelligence? peter: they are very much in the ecosystem of the ai development and what we are seeing is a massive increase in demand for data centers and energy. therefore utilities which have long been neglected as a value sector and interest-rate sensitive are getting a new look because of a boost in electricity and energy demand and rising capex and rates likely to what you will see in the industry. what this is evidence of is the broadening out of the ai theme into other parts of the market which stand to benefit from the growth rates this development will provide. it will go beyond the tech sector into things like utilities, health care, where again some of the impact of ai will be felt in greater

innovation and drug discovery. lisa: i want to go back to the idea of interest rates and biting into equities more than they have in recent weeks. even nvidia's better than expected earnings couldn't overcome the downward move in the markets. is there a shift or tipping points we see in markets where suddenly it doesn't matter if it is rising for good or bad reasons, it is punitive given how far valuations have gotten extended. peter: that is absolutely right. equities are a function of growth and the cost of capital and the cost of capital is influenced by short and long-term interest rates. what we have seen in the last 20 years and particularly since the financial crisis is positive correlation between equity prices and bond yields and that has been an environment that has been very fertile for

multi-asset funds, equities and bonds have been a good hedge against each other, but generally interest rates have trended lower and pushing up the valuation asset classes. that correlation has shifted. we are now at a level a bond yields where rising yields from here are really going to weigh on asset classes. so we find the impact of rising bond yields or equities as being a function of the level and now where the levels where it begins to matter and also importantly the speed of adjustment. the faster any rise in yields of the impact on equities good what we are seeing is reasonably quick rises again in the very recent past. given the valuation vectors, this is going to be a steep speedbump. the other thing that is very important to emphasize is it wasn't that long ago, three or four years when a quarter of all government debt around the world

had a negative yield and investors were paying for the privilege of lending money to governments. that has changed dramatically and governments around the world including the u.s. are seeing deficits rising, and that is likely to spill over into term premier and stickier, higher, longer-term interest rates which affects all asset classes. jonathan: this is well aware. she gives us an update every morning of where we are. do you remember that? lisa: i do. it was absolutely ridiculous which raises the question of why we have been able to normalize without more disruptions. jonathan: in europe, is there a renewed interest in european equities? we haven't noticed on our side that there is an wonder whether you have taken calls from american clients looking forward to the first interest rate cut from the ecb and whether to go into european stocks or not. peter: we have seen a pickup of

interest. we should acknowledge, and rightly so, that the u.s. equity market has been a staggering outperformer since the end of the financial crisis and for good reason. the equity market has seen strong market growth in europe and other regions but that is beginning to change. if you exclude the small number of government tech stocks, fairly similar growth in the u.s. and europe but europe gives you that the exposure of much lower evaluation. the s&p trades over 20, europe at around 12 or 13 times, much more in line with its longer run average. you are seeing improvement in fundamentals with some of the very troubled industries that dominated the european market in the years after the financial crisis. i mentioned banks for example, a very poor performing sector for a very long time, particularly in europe but now paying

dividends, buying back stock and we are seeing big rises in the valuation and performance of those companies alongside some others. we are definitely getting a pick in interest. it reflects the theme we have been talking about for some time that in a world of higher interest rates when you are getting positive but not particularly strong growth, equity returns are likely to moderate and the value of diversifying by region and sector and style becomes more valuable for investors looking to enhance their ratios and risk-adjusted returns. we appreciate the update. there is a ton of interest in european equities. lisa: you framed it well that they have a better than expected economy that seems to be growing and potential rate cuts with morgan stanley saying overnight

midyear outlook said we think european equities are in the sweet spot in the second half. a lot of company. jonathan: the financial times running about the extent of diversification from the ecb and the limits as well. a big topic going into next week. lisa: at a certain point it becomes punitive for euro, not necessarily immediately but the toggle they are working at and they expected to be one half to one percentage point of divergence before it becomes a problem. annmarie: he says the best thing that your -- europe could have was that the fed is on us about the excessive dated dependencies and obsession of getting to the 2% that could hurt the lower individuals on the income scale as well as small businesses. jonathan: euro-dollar 1.0810. dani: early results in from the

south african elections. projections show that the african national congress is on track to win just 42% of the boat and will probably need to partner with a rival like the democratic alliance or the two populist parties that backed the nationalization of mines and banks. the possibility of an unstable coalition has affected markets. saudi arabia preparing to formally launch a secondary offering of aramco shares as soon and sunday. the deal could raise more than $100 billion and rank among the largest of its kind in recent years. the government said informal interest from investors in the middle east and europe already exceeds that amount. a check on salesforce, down more than 16% in the premarket on the sales outlook that missed estimates. they expect single-digit sales growth in the current quarter, the lowest in the two decade

history as a public company where the outlook is feeling investor concern about its ability to stay relevant as the rest of the industry shifts towards ai tools. that is your bloomberg brief. jonathan: if you missed this earnings season, you get punished big time, don't you? lisa: especially if you look like your beauty as you are going to be a loser in the ai. jonathan: up next, a miscalculation at american airlines. >> we didn't find a good revenue framework and clearly the story has gone awry with the chief commercial officer leaving. jonathan: that conversation is just around the corner. live from new york city this morning, good morning. ♪

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jonathan: live from new york, equity futures going back again. down to basis points. a miscalculation on american airlines. >> we started at the analyst day when we didn't find a good revenue framework and clearly the story has gone awry with the chief commercial officer leaving. what is happening is 75% of american markets which are short domestic, they are seeing pricing degradation as they are competing against low-cost carriers like jetblue. jonathan: the american airlines ceo admits the company misjudged demand into the summer travel season, suffering the biggest drop since june 2020 after slashing outlook and announcing the departure of its chief commercial officer.

a price target being cut from 16 to 18. good morning to you. what went wrong with the company? elaine: they were overoptimistic in terms of the summer forecast and they are not in the right routes to have a robust forecast. they are in the domestic market, the largest of the big three. 60 percent of capacity in the united states versus 52% for united and about 60% for delta. they are benefiting from a robust international demand which is what we are seeing and americans markets latin america and domestic are under the most pressure and that is what you saw it happening in the second quarter. jonathan: can they turn this

around? helane: they will not be able to turn it around in three months. it will take at least 18 months to two years to turn things around and it might take longer. a lot of what happened with respect to the regional routes, and medium small cities, that is really not where people are going. people are going to larger cities and they have pulled out in some cases of those markets and going back in will take a long time. getting the right aircraft will take a long time. we think 18 months to two years and maybe more. annmarie: why pull away from the booking agencies and tried to go direct, given the fact that most customers like booking agencies? helane: over time, the direct channels is where you saved the most money. the other opportunity is when things go wrong they can contact

you speedier, not that they won't contact you travel agent but for corporate travel primarily most of that is managed in-house or by an outside agency. that is where they screwed up by firing the entire sales staff, turning their back on corporate. we have seen small and medium-sized companies state strong during the pandemic but here we are four years removed and managed corporate is starting to come back. the two markets that lag, new york and san francisco tech centers of northern california, those are slow for sure, but they are back in the further we get away from 2020, the more people are returning to office five days a week, four days a week at least.

you need that managed agency and by getting rid of everybody they shot themselves in the foot. annmarie: who is taking their share? helane: delta and united. in chicago where united is the largest, they are taking the share. in charlotte, a lot of traffic going over atlanta. you have the domestic market and international. they are probably holding their own but when you get to l.a., new york, it is very fragmented and other airlines are in those markets. they had a miscalculation and it is probably a positive change and sometimes can be very good for a company. i am not sure we are done yet but at least they are starting to focus and get back on the right foot. lisa: is there a larger point? there are very specific contours to the american airlines story but is there a broader point about how there is more

discretion and any kind of small misstep in this economy is going to get much more unduly punished in terms of a lack of profits and loss of market share? helane: absolutely. one of the other things to think about is the u.s. government wants competition in the airline industry but you really don't have that. if a route is not profitable within six months of starting come it is probably never going to be profitable. when you think about airlines and the input costs, the two biggest our labor at 35% to 50% to now and the second biggest cost is fuel which is completely unpredictable. so depending on where fuel costs are, 60% and 70% are fixed in those two areas. if you don't buy fuel you are not flying so the rest of the costs you can kind of smooth around in terms of changing snacks or whatever. but when you think about the question you asked about the

ability to generate profits consistently in this industry, it is very hard to do because you always have some airline thinking they can lower fares and gain share and you can't do that. lisa: when you gauge what the success of an airline is going to be, the snacks. there is a question we have been asking which is at what point why not just become a financial company and a financial technology company and going to credit cards and data collection? how much could that buffer some of the other and how much is it buffering? who is doing the best job? helane: we thought that would be a catalyst for americans specifically because they are renegotiating their credit card as we speak. it was due in 2025 but they just extended it because of the pandemic and negotiating with c

iti and barclays and will probably allow others to bid on it. that is a huge amount of data collection that they do, the credit card loyalty programs create a lot of cash. delta discloses the most, $6.8 billion last year from american express on its way to the goal of 10 billion by the end of the decade. united is second, in the five to $7 billion range as well. we thought they would give us more information on may 1 but they postpone the investor date to the second half of the year. those are at the two that are doing best. jonathan: great to see you. helane becker after a difficult day for american airlines. coming up, lorenzo simonelli with the energy sector. that conversation is just around the corner. from new york, this is bloomberg. ♪

jonathan: fantastic article just dropped from the former new york fed president. the fed thinks it is fighting inflation, think again. lisa: talking about how it is potentially around 2%, 3% inflation and the current range is not exerting any data

pressure on the economy. jonathan: two weeks away from the fed decision. equity futures at the moment, negative by 0.5% on the s&p 500. on the nasdaq, down by .4%. amazing to see the four-day winning streak on nvidia up more than 20% over those four sessions. the equity market down. make sense of that. lisa: i can't accept or what peter oppenheimer said that at this level a bond yield given how much the stock market has run up, it seems like bond yields going higher at the pace they have been will exert downward pressure on equity valuations. nvidia's own story it not the market story. jonathan: two-year, 10 year, 30 year, on the front end of the curve coming close to 5% in pulling away, down to four point 964 three. on the 10 year, down two basis points.

loss of issuance, 100 83 billion dollars across two year and seven year maturities -- $183 billion across two year and seven year maturities. lisa: are people starting to push back? what kind of premium are people putting on this. is this going to what bill dudley was saying out moments ago saying that essentially people are coming around to maybe not higher for longer but higher indefinitely. that may be is the idea that we are not as restrictive we think we are. jonathan: the question for the ecb next week setting to cut next week, how far can you go. the fed, can they go whatsoever. the euro positive by .1%. fed president bostic saying he is optimistic a rate cut could come at the end of the year. williams and logan set to speak. u.s. jobless claims data and gdp

out in two hours time. annmarie: this is a place where williams might weigh in on what bostic said last night. bostic said looking at the end of the year, the fourth quarter as a time we might actually think about and be prepared to reduce rates. not cut them but to think about cutting them. jonathan: imagine if that is what they said five months ago and what people were talking about on the street. maybe you got one at the end of the year when we have people on this program talking about march of 2024. lisa: the biggest thing that people got wrong including the fed officials is how quickly the economy would deteriorate. they were carving out seven cuts because they expected a recession and it has not materialized. what does it mean to be restrictive? that is why i think bill dudley's comments can shape it. if they aren't seeing downward pressure in a consistent manner.

jonathan: i want to turn to the story, elon musk looking to persuade investors to improve a record $56 billion package for 15 shareholders voting by june 7. proxy advisor and the california pension fund telling them to reject. it was shot down in delaware earlier this year. they already voted for it and then they got an opening to vote against it. didn't we set out a bunch of milestones that he hit to trigger the pay package which now everyone is seemingly unhappy with? lisa: i was reading this story and you can make the arguments that he deserved $56 billion that the board is saying and you can make the argument that the board is packed with friends and sympathizers. everyone was upset that he paid $44 billion for twitter. think about a pay package of $56 billion, he could relieve some

of the loans that are out there with morgan stanley which i'm sure will be a relief to them. jonathan: i am sure it would be. the u.s. is leading global oil production for the sixth straight year according to data. record cash piles by energy giants feeling consolidation in the space, exxon, chevron, conocophillips announcing new deals this year. lorenzo simonelli is here, the ceo of baker hughes. what does it mean for your world and how will things change? lorenzo: we have seen these times before as consolidation is taken place. obviously we work with our customers and get stronger with them as well. as we see the bigger players get together, we see opportunities to partner with them on the technology forefront. they are looking at efficiency, productivity, looking for ways in which they can also reduce

emissions and if consolidation happens we see it as an opportunity to grow with them with a share perspective and introduce new technologies. jonathan: you talk about the new spending cycle, are you thinking about how to develop existing fields or discover new ones? lorenzo: it is definitely about existing fields. when you look at chemicals, esp's, pumps, doing more with what we have. we know that today 75% of the production is from mature assets. we've got to do more with those mature assets. green fields cost a lot of money so how do you drive the efficiency, productivity with the reservoirs we have today. lisa: there's been question around 13 million barrels a day being produced. how much higher could it be and how quickly could it go higher in response to some geopolitical pressure? given the technology, how quickly could you ramped that up beyond 13 million barrels a day?

lorenzo: we have always been surprised. we have been surprised by the shale and seeing technology coming in and it is hard to predict how much higher it could go. technology is going to be the advantage for the producers. how much more, that is a question mark. we need to make sure we are meeting demand and the demand is there and is growing. lisa: has it been more of an emphasis in developing mature assets in the fossil fuel industry and less so on the new energies that are being rewarded as much by shareholders? lorenzo: we have seen both. there is definitely focus across the globe on being able to meet the energy demand. both from a standpoint of the aspect of providing the energy but also lowering emissions. we are seeing both sides grow at the same time. last year if we look at our new

energy within baker hughes, we achieved over $750 million in new orders. this year we have a guidance for 800 million dollars to a billion and separate 2032 have $6 billion to $7 billion. we are seeing growth and seeing an increase in the aspect of energy demand from the fossil fuels, which requires also lower emissions. lisa: demand is there, a lot of people talking about ai in the chip centers in the energy it will require. when you talk about new technologies to produce more energy, how much of this will be through acquisitions versus organic growth? lorenzo: it will be a combination. there is a lot that is being done with regard to incubator technologies around cap sure, also -- capture, and also around the turbines and net power and

clean integrated power solutions. we have a partnership with net power the oxygen combustion process that allows us to provide 300 megawatts of clean integrated power, which is a great solution. it will be a combination of both . and one thing is for sure, we will need a lot of technology and investment and it will be both inorganic as well as organic development. annmarie: there is a lot of consolidation in the industry, but when baker hughes comes up people talk about speculation that you would split into two. is that something you think about as you reorganize the business? lorenzo: we have often looked at it and have a clear strategy with regard to sustainable energy development and helping our customers. as we look across the two segments, services and equipment, industrial energy technology, they go hand in hand with enabling our customers to be able to improve their efficiency, drive incremental

and lower emissions. we look at increasing energy demand you need both sides of the house. i look at saudi arabia and being in the middle east last week, they are growing their gas infrastructure. so we have advanced oil field and helping them with the gas reservoirs. but we are there with the industrial energy technology and the gas system and being able to help them with the development of that pipeline network and being able to help them with the power generation. so hand in hand baker hughes provides a portfolio that provides the full suite. annmarie: better together for now. lorenzo: yes. annmarie: i know you have a lot to say about the boom we have seen in lng. it basically had a promise to europe that it would be a supplier. lorenzo: we are disappointed with the decision and the

administration has to make decisions as it does and we think global demand for lng is still strong and robust. we think that by 2030 there needs to be a capacity of 800 million tons and we believe that is coming and will be international projects or u.s. projects that take place. we are seeing a lot of activity. you have seen announcements being made in qatar and announcements made in mozambique . we hope the administration releases the pause and moses -- moves forward. there are a lot of good projects and we think it is an opportunity to provide energy security to the world. jonathan: you think aspirations to move away from fossil fuels are realistic? what are you saying to officials? lorenzo: i think you need to be

pragmatic and need sustainable energy development. there is no doubt you need to move toward energy abundance and lower emissions and to do it in a way that is affordable, secure and sustainable. you need to marry a roadmap that introduces an aspect of let's stop talking about the fuel types and let's focus on emissions, abating, reducing emissions. i think that is the discussions we are having and that is where we are focused on the solutions around carbon capture, storage, direct capture, geothermal, hydrogen. we are looking at natural gas is not just a transition but a destination fuel. lng is available today and let's have a pragmatic, sustainable energy development discussion and let's go towards lower emissions. jonathan: we talk about nvidia

every day, a phenomenal run. energy demands are going to be massive. what are the additional energy demands going to be from the major tech firms? lorenzo: they are staggering. i will give numbers because they can be so vast. you look at numbers you get out there, cryptocurrencies today use as much energy as the country of poland. as you look at ai and generative ai, they are saying 20% increase in u.s. demands for energy just from new data centers. it is going to require a lot of installations of power generation, incremental natural gas, clean energy. it is an all of the above strategy and also the use of ai to drive efficiencies as well.

there is the aspect of us benefiting from the inclusion of ai into the way in which we operate for efficiencies. lisa: how long do you think it will take to build out the infrastructure to support the outgrowth of energy demand by ai that so many people are talking about? lorenzo: you are looking at a number of years and also it is going to require the right policies and permitting to be in place and particularly in the united states, that is one of the aspects that needs to be resolved is from a permitting perspective, how do you get that resolved and how do you move forward and internationally, as you look at europe, how do you make sure the regulations are in place. that is something they are working for. jonathan: you are in an exciting space and it will catch up with you. thank you. equity futures negative by 0.4% on the s&p.

with your bloomberg brief, here is dani burger. dani: the race to run the largest private bank heating up, ubs has appointed rob kerensky to oversee with kahn. caress fee has run -- kerensky has ran it since 2021. shares of palantir up 3%. the u.s. army awarded a $480 million contract to the company through 2029 for work on a project called the maven smart system. the deal extends the relationship with military and make sure the ai offerings grow. golden goose making plans to go public. the sneaker ran looking to raise

$108 million and eight milan ipo. they have been struggling as of late but the ceo said he hasn't seen any of the pullback. he said there is still plenty of demand regardless of price point, even in issues like the $2000 plus range of swarovski blinged sneakers. >> there is a part of the journey where you feel to buy a shoe of $2000 and there are days and part of your journey where you want to enter with a reasonable price. golden goose offers the entire price ranges. dani: he said they have never raised prices which has kept customers loyal. jonathan: they have never needed to raise them because they cost so much money. i like them and i have a pair and they are great shoes but you

don't have to spend that much money on them. get them in a sale. who needs to spend a million dollars on 3000 sneakers? lisa: this is a set of stock option, he gets shoe options and gets paid a bonus in sneakers and he can be fashionable. jonathan: college grads are thinking sign me up. lisa: i live with a couple of them. jonathan: mortgage rates on the rise. >> we have told you relative to pre-pandemic having mortgage rates where they are in the fund rates as high as it is, mid fives, that would be putting two feet on the brakes slowing down the economy. it seems like there is more resilience in the economy than i had expected. jonathan: that conversation up next. ♪ en insights, i'm a rock star. great job putting finance and hr on one platform with workday.

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jonathan: equities right now

down by 0.4% on the s&p 500. the 10 year, 4.5918, crude at 78.86. mortgage rates on the rise. >> the big question mark on my mind is how restrictive his policy right now? i would've told you relative to pre-pandemic having mortgage rates where they are in the funds rates as high that that would feel like we will be putting two foot on the brakes. jonathan: u.s. mortgage rates rising for the first time in a month, a 30 year fixed mortgage hovering above 7%, more than double what it was three years ago. brian nick writing that the housing market with whiplash taking a toll and mortgage demand and building activity.

good morning to you. brian: good morning. jonathan: neel kashkari seemingly moving in the direction. where are you at on the side of the debate? brian: you can project the next week what will happen to mortgage demand and confidence in these are the two canaries in the coal mine for interest rates. we are seeing it in the housing market and lower homebuilding activity from q1 to q2 will be incrementally lower gdp and downstream consumers will buy less stuff and fewer people are moving. those things you are relying on, lower interest rates helping the mortgage and stirring more consumer activity in the latter half of the year will not be here because of what we have seen rates to. lisa: haven't we seen this mortgage -- this market dead in the water with people staying in

the same place and not moving because it is unaffordable. at what point have we seen this and the rest of the market is overwhelming that with inflationary pressure and resilience? brian: the consumer is slowing down. fed speakers are talking about inflation sticky and economy resilient but wage growth is slowing. wage growth is slowing and consumer demand and push back against price hikes is happening . you see this in the retail earnings reports. we are looking for who is going to step up and what kind of investment will we see on the residential and nonresidential side. we saw a huge contribution in the first quarter from homebuilding and that will not be in the second third and fourth quarters. when we see the economy is slowing in one area, where will we see a pickup and we were hoping it was in the dead in the water residential market. lisa: we have a whole slew of housing data.

the price index rose more than expected. prices are still rising at a faster clip because those who have will spend and there are many new homes up for sale. at what point is it just a market that is somehow independent from the rest of the world that maybe we are not seeing consumer appetite to pick up overwhelming that and in certain sectors you do, certain areas of travel or eating out in certain areas? what do you have to see to have more conviction? brian: interest rates holding where they are, consumers slowing things. existing homes for sale is the highest we seen since the financial crisis on a financial basis. on a percentage basis as we see that move up that will put downward pressure on prices in three to six months. what we are seeing is in the summer months coming into the

fault we should start to see home prices decline and we are concerned about what it does to consumer confidence. consumers have remain confident because they are confident about their jobs and also the value of their homes which is tied to their wealth and overall ability to spend. once they start seeing housing prices following, it may be the home going for a little less than asking as opposed to what they have been seeing, that will dip their willingness to spend. the housing market is the first domino to fall in what we think will be a slower growth story down the road. annmarie: when you say inventories of homes are rising, where? brian: everywhere. the number has been creeping up. year over year it is now 8% to 10% higher than it was a year ago. that will mean that prices will start to fall. there are that many people listing homes but fewer people with mortgage rates at 7% and rising from here who will be willing to go out and look for

homes. that supply and demand imbalance is starting to correct, which could mean you start to see lower prices as soon as the summer. jonathan: are we seeing the end of the bull market? brian: we are seeing a risk of rally. cyclicals at the bottom of distribution in terms of leading and we are starting with the april 19 point where we at the bottom at the s&p and we have seen things bounce back but the story is different. utilities have been leading. that is not a sector historically that will be leading an aggressive bull market higher. when the fed is keeping interest rates high, the economy is slowing down, the defensive parts of the market start to lead, even though the s&p is climbing. you think you are continuing to make new highs in seeing progress on the equity side but being led by defensive sectors as investors turn incrementally more bearish. jonathan: so into the end of the year? brian: the fed will not be

cutting rates because inflation is magically down to target, they will be cutting because they have to worry about the labor market. jonathan: thank you. utilities leading, distorted somewhat by the ai theme. it is hard to get a clean read on the market right now. lisa: utilities in their own world. some people looking at transports lagging which has been a huge issue because people say that is usually a clean read on the economy and that that is laying it is hard to see the rally. that could be distorted because of the ai theme and how much more is going into the rest of the market. jonathan: the metaverse. lisa: exactly, we will beam in. jonathan: i am beaming in, on the beach is behind me. coming, kathy jones of charles

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>> the fed would prefer to keep policy in a typesetting for a longer period of time. >>