in >> we are seeing those lower middle income consumers struggle. >> there is always a high-end and low-end in terms of income, and in this market is mattering more. >> consumer spending will slow. and if consumer spending will slow, corporate earnings will slow. >> the market is softening, and we think that is going to flow through the wage pressures, declining through the year. >> when and if that changes it will be a problem. announcer: this is "bloomberg surveillance." jonathan: who remembers that conversation we had with james athey? who said this was like narrative table tennis? back-and-forth, back-and-forth? we started the are talking about rate cuts. you're starting to talk about hikes again. this piece from bill dudley this morning getting tons of attention. thank you very much for reaching

out. the fed thinks it is finding inflation? think again. are we tight enough? never mind cuts, is their conversation about whether we are sufficiently restrictive? lisa: it is a logical pre-directive -- progression. now no one can really explain why we have not seen the kind of economic downdraft a lot of people were expecting from rates at the highest levels, going back two decades. now people are wondering, are we restrictive? the fed is saying yes. other people saying, maybe not. that is a question on a lot of people's minds. jonathan: speaking at the economic club of new york, john williams, coming up later. together with the data in about 28 minutes time. jobless claims and gdp. this is one to watch. annmarie: we talked to michael mckee about a month ago, he talked what it means on rates. but this is the current monetary policy. the deutsche bank note from matt is eddie, this does not even

mean encountering one inflation may be in 2025 if we get massive policy changes out of washington. i'm looking at tariffs. if you are thinking about cutting rates at the end of this year, does that change your thinking and you find it in november who is going to be in the white house? jonathan: matt is saying this could be another reason to remain on hold. in 2025. let's say trump wins in november. you've got to wait until january to see if they could become policy. really start to form some ideas about the outlook for inflation, for growth. it is not something you can immediately act on as a policymaker. lisa: if you expect that to increase inflation by more than one percentage point, which is what the outlook says, then it really raises a conundrum for this federal reserve. you could argue on the whole you are not seeing that restrictive of a policy, but in pockets there is rear weakness. we have talked about this divergence of the two halves of the economy.

how did they weigh the mandate, the dual mandate of inflation, as well as employment at a time where potentially you could see taro's also curtailing spending? it becomes a very difficult equation for them. jonathan: jamie dimon enters the room room. stan mentioned yesterday. -- stagflation mentioned yesterday. lisa: they sort of are dismissing it, how far are we from shifting over into the conversation? annmarie: that is why i am so interested in cosco earnings. have heard from walmart, we have heard from starbucks. it is target going to say? consumers pay a premium to join the cosco club to get cheaper prices. are there bringing more of in? did they see them looking for even more discounts? jonathan: equity futures, the scores look like this. equity futures negative by .4% on the s&p 500? 0 . -- s&p 500.

cpi. we will hear from christine lagarde following what most people imagine will be that first interest rate cut from the ecb. lisa: the question is going to be where did they go next and how much are their hands tied? the divergence from pat -- from fed policy, but we have seen an inflation surprise to the upside. germany first, then we get another one today. maybe they have not killed the beast either. jonathan: australia too. another reason for yields to encz higher over the last couple of days. we will catch up with bankim chadha on his bullish outlook for the second half. looking ahead to cosco earnings later today. in robert sockin weighing in on u.s. gdp. bankim chadha saying this, we are adopting the top of the range is our year-and target.

s&p 500 at 5500. while all of the growth may not materialize this year we see market confidence in a continued recovery rising by year end, but look for pullbacks about geopolitical risk and the u.s. election. binky, good morning to you. let's start with the underperformance of cyclicals recently. what explains that for you? bankim: it is, you know, trepidation. regarding inflation -- jonathan: misplaced trepidation? bankim: it is not unreasonable to worry about inflation. we have all of the stories about the 70's in the background. i don't think that is happening, and i would argue the risks to inflation are very clearly to the downside. you can we get it starting tomorrow or it takes another month, two months. but i would argue risk to inflation are clearly to the downside.

you were talking about european inflation. if you look at u.s. inflation in the same way, which is using the index of consumer prices, u.s. core fell to 2% in july of last year. it has been sitting there for the last month -- last nine months. it is running lower than in europe. european inflation is catching down to u.s. inflation, as opposed to the other way around. jonathan: are you saying to buy cyclicals in america? bankim: along with cyclicals we are now in the sixth quarter of recovery, so it is not just about the cyclical trade anymore. you know, if you think that the cycle is fine, it's going to move up, a lot of the cyclical repricing has really been happening for a while. we are still overweight in cyclicals, but you want to start looking more widely, and not

just painting with that broad brush, because i think that first phase is pretty much done. you really have to look at it industry group-wise as opposed to broadbrush. lisa: how much have we moved beyond? how much are we looking behind earnings analysis and every equity investor is basically an interest-rate strategist at this point? bankim: i would say in terms of earnings, of course numbers are open to interpretation. the same numbers people calculate differently. our take on earnings is positive on q1 earnings. we put in round numbers, 12% growth year on year, helped by mega cap growth in tech. i think if you take the largest part, you take the cyclicals and offensives and leave out the global cyclicals, energy and materials, we put in a percent earnings growth. that is very reasonable earnings

growth, and it has been rising. and we have 12% earnings growth at the headline level when energy and materials are down 25%. that is just reflecting year-over-year changes in commodity prices, so you would get upside in earnings from commodity prices simply not falling, and they stopped falling are ready. lisa: this is possibly priced in. valuations have gotten to a high place, and all of a sudden you are looking at the difficulty of being a macro strategist, which has been a failed practice for pretty much many of us. because it is difficult to get a handle on what is going to happen at any given time. but the interest rates dictate more of the path of equity returns at this point than any of the fundamentals. would you agree we have tipped over to a point where higher yields is bad news? bankim: i wouldn't say we have tipped over, i would argue that the lesson of the last two

years, it has been about the speed of the move in rates or, you know, what i will call rates volatility. and that is, you know, when rates volatility rose, you saw equities selloff. what i would invite you to do is take a look at the rates volatility. it is at a two-year low. and it looks like it is going to continue to fall. i would argue rates fall to where it is in other asset classes, and it is only uncertainty about the fed that has kept rates elevated. rates coming down is used for lower yields. lisa: we can have a discussion about the volatility index. a 30 basis point move in 10 weeks. it has not been stagnant, but we will not go there right now. you talk about broadening out into the cyclicals, a lot of people look at the russell 2000 and see every day, basically it is just the inverse of what is going on, having to do with

yields. it is completely correlated right now with the yield sphere. can you get bullish on some of the more leveraged companies at this point? bankim: i would completely agree. i was thinking more of the large-cap s&p 500. leverage is higher for the small caps, and leverage unfortunately for the small caps on the russell 2000 is concentrated in the cyclical sector. so you would need a relatively clear view on where rates are going to go. but i think that rates are sort of -- using the 10-year yield as my measure, sort of the lower end of the range that is reasonable right now. and so, once it becomes clear that rates are going to stay in this range, i would argue the small caps and cyclicals do very well. annmarie: you mentioned pullbacks around geopolitical risks and the election. you talk about a hung election is the real risk. what would that look like for

equities? bankim: we only have one example historically. that is the bush/gore election. you have to keep in mind that there are other things going on, so in 2000 the equity bubble was bursting and we were on a downward trajectory. but if you isolate the period from the time of the election, what typically happens in an election is, if you have a clean win the market, after having sold off in the run-up, tends to rally regardless of which party wins. that is the uncertainty premium coming out. it is pretty sizable. but in the event of a lack of a clean win, the spirit of uncertainty basically extends. now, on that occasion when the uncertainty was resolved, you know, the market did rally, and then, of course, continued to fall as the tech bubble was bursting.

the election, geopolitical risk, and it is a similar playbook, which is the cycle drives, you have this -- the shock, the pullback, and then the market goes back to doing what it was doing, basically, following the prior trend, which is driven by the business cycle. i would argue it is about growth and inflation. jonathan: have you established which candidate is the more market-from the candidate? bankim: i have not. you can make arguments on both sides. but i would say the point about the election is, you know, be careful about how you interpret the polls. as we saw in 2016, because the real matches between, is it going to be a close election or not? if it is not going to be a close election, then there is no need to buy protection and the market is not going to, you know, it is largely irrelevant, basically in predictable elections. in 2016 what we saw is, we would

fluctuate between it being a close election and it being, you know, hillary clinton, basically leading. that led to -- but, hillary clinton always led, it was just a question of the gap. that led to an interpretation that one trump lead in the polls it became a close election. markets sold off. that led to the misperception that, you know, donald trump was bad for the equity markets. in that belief sort of endured for several months afterwards, and you saw the market rally, but you saw basically positioning get cut in a big way until they got stopped out in january or february, and the rest is history. jonathan: it is wonderful to get your perspective. bankim chadha of deutsche bank. i was there, trump becomes the

president of the united states and i remember the speech. starts talking about infrastructure spending. you could see equity futures bottom out, and then the trump trade, he was off to the races. lisa: i remember the discussions beforehand, and immediately this blockbuster rally. everyone was trying to say, wait a couple of days, it's going to die down. not so much. annmarie: and infrastructure became this joke in washington. they were able to get it done under biden. jonathan: let's give an update on stories elsewhere this morning. here is your bloomberg reef with dani burger. dani: the biden administration is hosting a high competition today. microsoft and nvidia were not invited to speak. instead the shop is being held at stanford and will feature smaller vc firms, along with antitrust enforcers from the u.s., u.k., and eu. antitrust concerns have grown over how dependent ai startups may be on dominant tech

companies for financing and infrastructure needs. golden goose is making plans to go public. the sneaker brand is hoping to raise $108 million in ipo. luxury has been struggling, but the ceo of golden globes said he has not seen any pullback. there is still plenty of demand regardless of price point, even in shoes, like their $2000-plus range of sneakers. >> i have more than 3000 sneakers, so there is a part of your journey where you feel to buy, you know, a shoe of $2000, and there are days, you know, and part of your journey, especially when you enter, whether you want to enter without reasonable price. that is why it is important for golden goose to offer the entire price range and protected and develop all of the price ranges. dani: he went on to say that they have never raised prices, which has kept customers loyal. spoke with me earlier on bloomberg reef. diplomacy returns to washington,

d.c.. china is set to get a pair of pandas to d.c.'s national zoo by the end of the year. can you previously took back its pandas in november, failing to renew an agreement for them to stay. the bears will remain through 2034, and any offspring they produce will remain china's property. that is your bloomberg reef. jonathan: thank you. does he actually have 3000 pairs of sneakers? lisa: what is he put them? jonathan: is he saying there is 3000 different pairs of sneakers they have had a golden goose? lisa: he was specifically saying, you've got 3000, and it depends on who he feels like that day. jonathan: it is like a $1.5 million sneaker collection? annmarie: he probably has us mayor romero -- a spare room for them. lisa: more than that. you probably have to have a remote control. this is giving me anxiety. annmarie: it is the clueless

cost. have you seen it? jonathan: i'm not sure they would fit. up next, morning calls, plus sucharita kodali coming up next. this is bloomberg. ♪ ♪ when you own a small business every second counts. 120 seconds to add the finishing touches. 900 seconds to arrange the displays. if you're short on time for marketing constant contact's powerful tools can help. you can automate email and sms messages so customers get the right message at the right time. save time marketing with constant contact. because all it takes is 30 seconds

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jonathan: one hour 10 minutes away from the opening bell. stocks still lower by .3% on the s&p 500. just a little bit softer following the losses from yesterday. oppenheimer lowering its price target on salesforce. the analyst growing concerned about her slowdown in software spend. we are down by 16% in the premarket. your second call from city, raising his price target on abercrombie & fitch to one

hundred $90. i did not know this company was back. lisa: oh yeah, it is. it is hot with a lot of people. you can see the lines outside in places. annmarie: europeans love abercrombie. they lined up to get those deals. jonathan: ubs boosting its price target on cosco. the analyst highlighting foot traffic gains and catalyst-like faster e-commerce growth. sucharita kodali looking ahead to cosco earnings after the closing bell. saying, cosco is one of the leaders in retail and it has fared well in a high inflation, low consumer confidence environment. retailers like walmart, club stores, and the dollar channel usually could do very well in this environment. let's talk about that. what is the vibe-session all about and why does this company benefit from it?

sucharita: what we have been seeing is this disconnect between consumers purchasing at retail, yet saying they are so done on the economy. when you look at consumer confidence numbers, they are not confident about the future of the u.s. economy. they are not confident in their own personal finances, yet we still continue to see higher consumer spend at retail. now, what we have seen in recent months is that it is a little bit -- it is a hair lower than inflation, which suggests people are finally cutting back. we have seen grocery numbers actually be relatively soft. it is not keeping pace with inflation, so consumers are pulling back in that sector. i think that it is a bit of a canary in the coal mine that we are not going to see softer consumers been through the remainder of the year. jonathan: who do you think cosco is taking that spend away from? we have walmart recently. they talked about trade down and we were thinking that target was the loser.

who is the loser when costco gains? sucharita: certainly target had a soft quarter when they reported the other day. so, target is likely a victim here. they are also some of the larger big box specialty stores. it could be in sporting goods. it could be some of these grocery players as well that are certainly losing share to costco. we expect cosco's numbers to be strong, but it is also important to remember that we are in a bit of a k-shaped economy, where there are people at the high and doing very well, and that of course is cosco's core shopper. the very affluent, and hundred thousand-plus income shopper. that consumer is experiencing record high stock valuations, great 401(k) numbers, so they are going to be spending at cosco and buying those gold bars, whereas at the lower end of the economy that is where the consumer is absolutely trading down.

they are substituting. they are looking for the private label items that are often the higher value goods. lisa: this it speaks to what we saw earlier this morning with cole's coming out, typically catering to more middle-income families, saying they are worried about the uncertainty in the consumer environment and drawing down some of their expectations for full-year earnings. at what point do you see any kind of corollary for this in history? there is a time period which can persist with this k-shaped recovery, at which point it leads to some sort of wholesale decline? is there any sort of analogy of this period of time? sucharita: i think that what we likely are going to see it -- see as the market retreats, as our previous speaker suggested could potentially happen if interest rates continue to stay high, these are all of the scenarios that could impede the

net worth of those high-income individuals. and if those individuals then choose to pull back, then that is where we are going to see the retreat in retail. now, if interest rates do go down and the market continues to do well, i expect that will probably continue to see a bit of k-shaped in equity. but the inequity story is not new. we have had growing in equity in the u.s. economy, and that has been reflected in retail at the high-end and low-end doing well. and those metal players, like the department stores, the mass department stores like kohl's and macy's have been some of the ones that has suffered the most. jonathan: we have to leave it there. it is great to catch up with you. sucharita kodali of forrester research on the latest from cosco coming out later this afternoon. these retailers losing pricing power. lisa: but to her point, cosco is

serving some of those on the upper and. which begs the question, potentially are they in a place to maybe raise their prices to become part of the costco family? i do go to costco with my mom on occasion. jonathan: for the hot dog and soda as well? annmarie: no, gold bars. lisa: is that what you're there? loading up? annmarie: you can buy gold bars at cosco. jonathan: you can buy gold bars at cosco? annmarie: i heard it is a good trade. jonathan: i'm not sure you are allowed to say that, but annmarie did. annmarie: it is a joke. jonathan: gdp, jobless. robert sockin, michael cloherty here to react on the other site. this is bloomberg. ♪

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jonathan: equities right now on the s&p 500 -5.4%. on the nasdaq we are down about .3%. jobless claims and a bunch of other data points as well. another read on gdp just around the corner. the estimate, 217. with the number and the look ahead to the fed speak we can cross over to michael mckee. like, what have we got? mike: nothing at the moment.

here comes now. the first numbers just dropping are the jobless claims numbers. 219, as you said the forecast was for 217. we are certainly within that range. the continuing claims number, one million, 791,000. so, no real change in jobless claims. that story remains the same. gdp comes in as forecast, up 1.3%. this is a revision to the first quarter number, and that is down from one point 6% that was originally reported. a bit of that is consumer spending, personal consumption at 2%, down from 2.5% initially reported. the gdp price index is a little bit lower. 3%, from -- from 3.1 percent. that is a quarterly number. not what we get tomorrow. pce on a monthly basis, which is what the fed is going to want to see. at this point not a lot of change in the gdp numbers.

i will take a look and see what the breakdown is and jobless claims, no real change at all. one other number, advanced trade for april, the trade balance is a -$99.4 billion. that is up from -$92.3 billion in march. so, a little bit of bad news to the start of the quarter on a trade basis, and that may be out of what happened with gdp for the first quarter. i will take a look at that and you guys can look at whether anybody has even noticed in the markets. jonathan: we will come back to you, mike. stay spike, a tiny one. the s&p 500, raising some of the losses this morning, but still down. on the nasdaq we are down by .2%. neil's pulling back from where were your -- from where we were yesterday. on a two year getting back down to 495 -- 4.95. on a 10 year, back the other way, we are back down to about

4.58. lisa: core pce, the price index was revised lower in terms of the second read from the first quarter gdp. that said, on the margins this is not that big of a deal in terms of shifting the direction or any kind of viewpoint, and it goes to what kathy jones was saying, which is people have to trade on the slow day, so the auctions are going to matter. jonathan: global pmi mattered more this week than nvidia earnings dead. lisa: this is a market looking for the new narrative in what james athey called the narrative ping-pong. jonathan: we are back and forth over the last 12 months. 219,000 on-the-job claims. mike, i'm going to come back to. second read on gdp, what did you see? mike: i'm just getting these numbers into my head. the change in inventories is smaller than it was in the initial report. 27.8 billion, so that subtracts

from growth, and net exports, little change, -$975 million, so both of those things contributing to part of the reason the numbers are so low. but here's the thing everybody is watching. the final sales to private, domestic purchasers, 2.8%. that is down. that tells you there is momentum in the economy. it is higher than what people think the normal, sustainable rate of growth is, so at this point these are minor changes. it is mostly due to consumer spending being a little bit lower, but remember that the atlanta fed gdp for the second quarter is posting 3.5% at the moment, so we will have to see if this is a one-off quarter or not. jonathan: we will come back to in just a moment. starting with jobless claims, that came in at 219,000. the estimate was 217 thousand. a lot of this data coming in in

line with expectations. another read with the gdp coming in line with expectations. lisa: other people might be called -- might be pointing to core pce coming in at 3.6% versus the first read, on the margins if you want to see something that is this inflationary you can, which might explain that small spike, that retracement from some of the losses in equities. jonathan: an extra basis point lower off of the back of this. down three basis points on a two-year. 10-year down. with us around the table, robert sockin and michael cloherty. your reactions this morning? >> there has been a little bit of slowdown in growth from the hot numbers last year. still solid, and compositions are still good right now, but i do think we are going to continue to get some slowing as we go forward. one of the issues for the rates folks out there is everyone has

been mesmerized by this rise in the equity market. thinking that strong equities means stronger economy, therefore high rates. the problem with that is, earnings were solid, but an awful lot of this rally has been a i and other non-cyclical factors. i think as we go forward a little bit we will see you some slowing. we have taken out most of the downside risk in rates, after a long time we are expecting lots of the easing, decent recession probability. we priced most of that out, so i think the market is cheap. jonathan: rob, you are looking for slowing. you have a rate cut for july. i'm working out what that data needs to look like for that to take place. let's start with payrolls next friday. how bad is that friday and number need to be to keep your breaker call in play? robert: absolutely. to get there you need some type of non-linear slowing in the labor market, and right now these jobless claims figures,

which are some of the best indicators in the labor market, are not pointing to that. they are still quite low, quite stable, point to a robust labor market. right now our u.s. team is looking for a shade below 150 on payrolls. you're probably have to see an even larger slowing in other labor market indicators and in the labor market more broadly to get that july cut on the table. so, i think if they're call is right on payrolls you are still not quite in that danger zone yet, where the fed really be worried about that nonlinear slowing, it would be a notable slowdown from where we have been. that said, there is a lot of uncertainty around the report. for example, bad weather in april likely depressed april payrolls. it is possible you get some payback in may, so there is upside risk to that figure. annmarie: lisa: it doesn't sound like you have as much conviction about the july rate cut as a month ago. are you basically thinking, how far before we have to backpedal on this one?

robert: it is a tough call and you are seeing that reflected in markets. to get to that july cut you would need some kind of combination of soft enough labor market data and enough decline in the run rate for inflation that the fed is seeing progress on the inflation side of its mandate and gets worried about activity. the bar for that to happen, both of those things, is pretty high. we are still holding onto -- as i said, we see a lot of softness in more minor labor market indicators like surveys of small businesses, hiring within the pmi reports, but even so, as you said, the bar is high to get there, and i think over the last month it has become more challenged. lisa: this is something people have been grappling with and suddenly bill dudley is talking about the fact that if you hold rates for higher longer it is not going to be restrictive. and we should be talking about holding rates here indefinitely.

in robert's view of things -- and i believe you are sympathetic -- it is actually not the case and if the fed does not lower rates soon, it could actually tipped the economy over into a hard landing. how much more are you thinking about that type of scenario at a time when the data is not cooperating with the fed cuts as quickly? michael: i think that is an issue for later in the year. we are seeing it in housing numbers starting to soften a little more right there. so, some of these most interest-rate-sensitive sectors of the economy you are seeing a bite. it does have some effect. it has been a little bit offset by the fact that credit spreads are extraordinarily tight and you are getting these other loosening of financial conditions offsetting in. if you stay here eventually you will feel a squeeze. jonathan: mike mckee, we wanted to come back to you on a final word on this. this piece that lisa just

mentioned from bill dudley, getting everyone's attention, the fed thanks it is fighting inflation, think again. the central bank's short-term interest rate target may not be high enough to cause the cup -- to call the economy. wiki, what is your reaction to to that and what would you look for later this afternoon? mike: it is something a number of officials have been talking about, including john williams, who spoke to me about a month ago here on bloomberg television and said he was beginning to think that the neutral rate is higher than the fed basic consensus is, of about .6%. if that is the case it would have implications for how much the fed funds rate is holding back the economy. it raises the question you have heard people talk about, of whether they might have to raise rates. the other option is that we still see lags at work and we

are going to see them hit the economy and bring growth down and inflation down at the same time. the interesting thing, i think, from williams, would be if he speaks about that. we sort of know what he thinks it is going to be like. everyone else will take higher for longer to get inflation down and are committed to that. but what does he say beyond that that might make news? that could be it. lisa: i know that neither of the people around the table, both of you are not sympathetic with that view. you believe there is a restrictiveness and we are seeing that come through. what would you have to see to actually go around to the bill dudley school of thought? robert: we are seeing interest rates by different parts of the economy at varying speeds. we are seeing ongoing tightening , weakening credit demand, stresses in lower income consumers. that being said, if you look at the data, growth continues overall to hold up quite well. even at rates at a fairly high level a rate i would think is

fairly restrictive. i would say if we are getting into the second half of this year and it was mentioned earlier the atlanta fed now cast is running strong growth for the second quarter, if we keep running at numbers that look like that, it would lead me to believe that either rates would have to stay at these levels for a longer period, because maybe short-term our star has risen more significantly than expected, or maybe even rates could have to go higher from here. i basically would have to look at the data. if we don't get that type of cooling in activity i think i would move more into that camp. annmarie: if you move into that camp what does that do to your july call? is that the back end of the year? do you push it to 2025? robert: depending on how well the economy continues to hold up we would have to probably push out the call even further. that may raise the risk of some type of harder landing ahead if the economy has to face very

elevated rates for an extended period. normally we don't have to face rates at these levels for such an extended period. i would think it would get pushed out toward later that she -- this year. lisa: michael, do you go with that? if you do see this ongoing strength in the economy you might have to reset and come around to this idea that maybe rates are not that restrictive at all? michael: even if our star is 50 basis points higher, we are much tighter than that. you are still tied anyway. in addition, for some of this high fed funds rates forever, one of the challenges to that is, our shark -- our star is shorthand for a financial conditions. everything will average out a certain way. if consensus is right and we are going to see steepening in the yield curve due to all of this supply, if you have a funds rate with no term premium that is very different financial conditions than a funds rate with a 100-basis point premium.

in that case the fed needs to have the funds rate lower rather than higher. to offset that higher rates out the curve. i think the hurdle to get rates here, very high, does feel like inflation is going to slow too. jonathan: are you in the team saying by bonds? michael: yes, i think at this level. we are more out in the 10 year sector. at these levels you have real yields at 2.25 percent. so, value there. lisa: you believe that one way or another inflation is going to come down, the fed is going to cut rates? about the other component? what we have been talking about, the term premium, and these questions around the physical profile of the country? michael: over long-term supply has a huge effect. you know, every time my teenage daughters give me a hard time i just roll with it, because they should be angry. no, all of this debt they are going to inherit from us. lisa: you are a better human

than i. carry on. [laughter] michael: the problem is, the swings in the short-term are so much larger than the swings in supply. the biggest supply shock in history was the u.s. ran a budget surplus. for the first 2.5 years of that the term premium went the wrong way. it is really the demand shifts overwhelm supply shifts. if you do the supply trades they will probably work eventually, but it is going to be an awfully bumpy ride. annmarie: paul donovan overnight after the auctions said, treasuries obviously fell. are you saying this is basically something that it is not immediate in the back burner? this is a problem the market should care about? michael: the issue is, we don't know where the breaking point is. it feels like congress, because they have been hearing about this tree branch breaking for a long time, so they are sprinting

as fast as they can out the tree branch right now. so, we don't know. we are in new territory. it is one of those things where, the supply, you don't trade based off of that. you size your trades based off of that. if the supply works for your idea, you upsize your risk a little bit. if it works against your trade you downsize a little bit. it is more of a terrorist. jonathan: it sends the volume up and down. that is an interesting way of thinking about it. when i read about doom i think of brammo too. lisa: so kind. jonathan: first place i go. we are all talking about a suppose that inflationary outcome in november, whether it is going to be tariffs, additional supply, fiscal easing coming from whichever administration we might get. is it still too early to think about those things? have guests coming on at the end of may thinking about them. michael: i think those are real. whichever party wins you are

going to see tightening on that side. it is a scale difference. that said, the reason we are optimistic about inflation in the near term is, if you look at all of these rental surveys, those pete and rolled over a while ago. we thought that meant oer was going to roll over too. the problem is that those surveys have run well ahead of oer, and it turned out oer had to fill the gap between those. at this stage it has filled a gap for all of the surveys except one. it does feel like we are finally going to start to see, you know, some of this oer start to slow. we cannot be 100% sure, because there is still some gap to fill, but the preponderance of data says it will slow. annmarie: how are you thinking about 2025? robert: i think for the election , and looking at the domestic implications, i know there is a lot of debate about this but we still think deficits are going

to stay pretty large matter who comes to power. the ceo is projecting 5.5%, or something around those levels, for deficits per year as a percent of gdp. i would look at that as sort of a floor estimate of where things could go. i think it is interesting, when trump and the republicans were in power they cut taxes and boosted deficits, and when democrats and biden were in power they boosted spending and deficits. until the market tells them this is a huge problem and it would have to be a lot of market pressure, i think we are going to get large deficits for the foreseeable future. and then thinking about some of these international components, as you mentioned, i think both parties are going to be very tough on china. he saw that recently with the biden administration's new tariffs on china. and in terms of tariff policy, trump is probably going to be even more aggressive than biden. i don't think he would go as far as 60% tariffs on china, but 10%

across-the-board is something we have to take seriously. the biden administration is not going to shy away from using them and at a minimum keeping what is there now in place. tariff policy is going to be used, or in place pretty extensively, and i think deficits bending is here to stay until markets tell them otherwise. jonathan: abrupt, it is good to see. robert sockin alongside michael cloherty of ubs. two friday's way, payrolls. the estimate at the moment, just a sneak, 170,000. median estimate against the previous number of 100 75,000. futures negative .25% on the s&p. here is your bloomberg brief. dani: shares of salesforce falling more than 16% in the premarket trade. the sales outlook for the current quarter missed estimates.

salesforce also expects single-digit sales growth this quarter, which would be the lowest in the company's history. that outlook has fueled concern about its ability to stay relevant as the rest of the industry shifts toward a i. shares of palantir, higher by nearly 2.5% in the premarket trade. u.s. army awarded a contract to the company through 2029. it is for work on a project called maven smart system. the deal extends palantir's relationship with the military and makes use of the company's ai offerings. boeing's do to submit its plan to deal with quality control issues to regulators. seek -- regulators are meeting with the faa chief to discuss the action plan. earlier this month calhoun said, we anticipate the faa will take whatever time is necessary to review the plan and hold us accountable to the various control parameters that are put in place as we move forward. that is your bloomberg brief. jonathan: up next on the

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jonathan: 38 minutes away from the opening bell. equity futures on the s&p 500 just a little bit softer. we are down by .3% as we count you down to the cash open. he was the trading diary. more fed speak today from williams and logan. we will get numbers from dell, nordstrom, gap, and cosco. and we will round out tomorrow morning with a pce deflator and personal income and spending. a lot to look forward to. can we talk about dell briefly? you today is up 134%. -- year-to-date is up 134%. lisa: without the return of the personal computer would be a thing? yet here we are.

that seems to be boosting dell's revenue outlook. how long can this last? this room with hardware that can quickly adapt to certain artificial intelligence but simply using what is out there versus when we start to see the shift into the software and some of the other sort of highly-technical aspects on the other ends? annmarie: how much does this have to do with jen-hsun huang, saying, they see this for the future. it is a total resurgence of the dell pc. jonathan: he is in good company. when jensen starts mentioning your name, that's going to do good things for your stock. lisa: that's right. jonathan: dan ives will call him the pope of ai or something like that. that is dell. less talk about costco. we have seen it from retailer to retailer, to retailer to retailer.

if you miss you get punished. posco is going to be interesting. lisa: -- costco is going to be interesting. lisa: specially because we have seen trading down. people went to whole foods going to costco or walmart to buy groceries. the mix of goods versus groceries is going to be interesting. the grocery food component seems to be lifting sales. rather than, say, clothing stores. annmarie: oppenheimer says it's superior value proposition, merchandising capabilities. what does this mean for the help of the u.s. consumer? are they trading down? it is costco really your trade down? it is just buying bulk. intentionally they are going to see an uptick. for costco you have to pay to play. jonathan: need a word from john williams. as the former new york fed president, bill dudley made some headlines about whether we are tight enough at the federal reserve. lisa: when does this become the

mainstream discussion if we don't get a more material slowdown? john williams has been ahead of the curve. he came on this show several years ago and said he thinks the fed funds rate should go above 5%. we all laughed. he said, that is where we see it going. he was correct. how many months of strong data do we need to see before the likes of robert sockin, was just saying you have to start considering this? annmarie: deadly and his peace with, the fed's mantra should be higher indefinitely. jonathan: here is the lineup tomorrow morning. don't miss this. we will catch up with pimco's libby cantrell. ed bastian. all of that and a whole lot more from new york. this was "bloomberg surveillance." ♪

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>> from new york city, i'm matt miller. a revision down for gdp and personal spending. the countdown to the open starts right now. we begin with the big issue. can rising bonds trigger a stock rally stall?