>> the economy is not as interest rate sensitive as it was in previous cycles. >> you are seeing a bite. >> we are seeing them bite different parts of the economy at various speeds. >> equity returns are likely to moderate. >> the housing market was really the first domino to fall in a slower growth story down the road. >> this is "bloomberg surveillance." jonathan: let's get you to the

weekend. live from new york city, good morning, good morning. for our audience worldwide, equity futures negative by 0.2% as we head towards a week of losses on the benchmark equity markets stateside just before we get another read on inflation. plenty of coverage on that in a moment but we begin with our top story, president of the united states found guilty. annmarie: 34 counts in the hush money trial taking place in downtown manhattan and it has to do with falsifying business records. coming out of this, the former president called it a disgrace. something that he and the former president -- he and the current president, joe biden, agree upon, it will be up to the american people to decide who's in the white house. jonathan: it's quite a calendar. june 27, debate between trump and biden. july 11, the trump sentencing is four days later that the rnc.

lisa: how much to the republicans continue to consolidate around trump right now? he has had the gravitational force around the congress members, but can you imagine what it looks like if he is sentenced to jail right before the convention in milwaukee, wisconsin. a lot of questions and polls suggesting it won't change anything. it just feels uncertain how to weigh it from the market perspective. jonathan: the fundraising started almost immediately. the former president's campaign, they've convicted me before the day is over, calling on pro-trump patriots to chip in. well, billionaires are about to chip in. steve schwarzman, harold hamm, bill ackman, doing the same thing. annmarie: absolutely. last night you saw the campaign website falter because too many

people were trying to logon on friday. what we saw from schwartzman was that she was prepared to come in with cash and bill ackman was prepared to endorse him. sean maguire, partner at sequoia capital, partnering with several of the companies putting $300,000 towards the trump world to make sure that trump becomes president. some of it has unnerved big donors and they will stay behind him. lisa: they talked about one question, whether the u.s. will be a banana republic, but then there is lot in order with 12 jurors that convicted him. what does this do to the establishment institutions? will there be an attack on both sides when a lot of people are casting doubt on the importance of why this case was brought?

not so much the legitimacy, but wyatt was tried at a time when people are saying -- ok. jonathan: what actually changed in the electorate? the incoming polls will be closely watched, but coming into this, the old cited from npr's pbs before the verdict, two out of three voters saying that a guilty verdict would have no effect on who they plan to vote for in november. annmarie: what is so interesting about that poll is that 74% were independents, a key margin for both of these individuals to win. trump will being the base, biden will bring the base. seven swing states matter, but polls were mixed going into the verdict. we had a pull from the marquette law school with a guilty verdict producing a or point lead in the head-to-head match for trump with a six point lead. what it says is its mixed, so

what matters now is the messaging going into november. jonathan: we've got a lot to talk about now going into june, let alone november. yields are just a bit higher by one basis point. yesterday, there was a bond friendly round of economic data. we will see if we get the same thing again. yesterday was fascinating, the former fed president in an opinion column saying that maybe we are not restrictive enough. the fed president in new york came out to say that we are restrictive enough. we could see what was happening. lisa: basically the new york fed president came out and said no way. the exact words -- i expect inflation to resume moderating. lori logan i thought was really interesting, she supported of it of what bill dudley said. the dallas fed president saying that policy may not be as

restrictive. yes, we pay attention to the big three but it is interesting how much differential there is. jonathan: you want good news? no more fed speak through next week. former president donald trump prepares to campaign is a convicted fan -- felon. investors are waiting for the top inflation gauge with the atlantic council and opec debated production cuts into 2025. former president donald trump, found guilty, our big story. >> this was a disgrace. it was a rigged trial by a convicted judge who was corrupt. a rigged trial. a disgrace. they wouldn't give us the venue change. 5% to 6% in this district and area.

it was a rigged disgraceful trial. the real verdict will be november 5, by the people. jonathan: former president donald trump set to campaign as a convicted felon as 12 new yorkers found trump guilty of falsify business records to hide a hush money payment to an adult film star. the joe biden campaign sing there's only one way to keep him out of office, the ballot boxes. terry, your reaction, sir, to yesterday afternoon? terry: as far as the election goes, i would keep my focus on markets. it's a small immediate net negative for his chances. what trump needs to do is unify republicans and get a majority of independents on his side. he didn't make that into thousand 20 and right now it looks like he's not going to make it into thousand 24 with

nikki haley voters showing 20% in primaries depending, right? even after she got out of the race, she got 15% in pennsylvania, which shows you a lot, but i don't think it's a seismic negative. as you point out in the visual from a minute ago, there will be other bumps in the next month or two. this thing will go back and forth for quite a while. annmarie: is this just an electorate that is fickle on whether or not the case matters? terry: i think so, i think so. you got a lot of things here, the people, there were a ton of people, as you well know, who hadn't been paying much attention to the case at all. what we are likely to see here, i think -- this is instinct at the moment, what you are likely to see is the convicted felon

thing getting hammered in, a measurable but small drip away from trump as things go. also understand that a vast majority of the polls this month of registered voters, not likely voters. that matters a great deal. you have a 66.6 percent turnout in 2020, that means a lot of things. looking just at registered voters, it was a huge polling skew all by itself. annmarie: your note after conviction was you reminded the audience that the conviction makes it harder for trump to attract serious financial backing from wall street. i haven't seen any evidence of that. to the contrary, bill ackman, schwartzman, adelson, getting involved. who do you think this will actually impact on wall street? terry: i think it's a lot of people.

the people that you cite are people that are, they are either private or have the ability to essentially say i'm going to do what i want her simile and not get any blowback. on the other hand if you're looking at the average fortune 500 ceo or c-suite person who has to answer to shareholders, they will be awfully circumspect about how they put themselves out there or if they put themselves out there at all. they don't want to risk public blowback from supporting trump, i think. lisa: people are exhausted. a lot of voters are not following the trials. at the same time, this drumbeat, this drip drip drip steadily undermines faith in federal institutions. we have seen this in poll after poll that this is part of what is behind the negative sentiment of people around better data on paper. how much do you think this will

affect turnout at a time when there are a lot of double haters? terry: i honestly think it's too soon to say. in 2020 you had a 6% turnout bump up. so, i think that was in large part responsible for biden squeaking through there. as peggy noonan pointed out in "the wall street journal," we are a country that is starting to like to hate. she's not touting this, of course, but in part because it is energizing. what political parties and candidates count on here is that sort of energizing leading to greater turnout. so you know, i think there will be a lot of energy around the race, still. lisa: do you think the sentence single galvanized yard the

convention? -- galvanize the rnc? terry: it depends on the sentence, whether it involves jail time or something much less. you know, either way, the convention in milwaukee is going to be put forward at a very high fitch. my sense of that is that it's not going to help the base. i think it turns off the independents that trump needs in order to win the general. i think it might be a problem for him. jonathan: you are sticking with biden for the last seven months. what is the road to november for joe biden? terry: to continue to show that

he's up to the job. really specifically, the biden cognitive issues are always front and center with people. i want to point out that trump's cognitive issues are recognized by voters as well. voters think that he has some issues, too. what tears it is that biden is the incumbent president and he needs to show he's up to it. if he's not for some reason, things change dramatically in unprintable ways. jonathan: terry, good to hear from you, sir. plenty of coverage on this story throughout the morning. more coming up in the next hour, don't miss that conversation. let's get back to the conversation briefly. the end of june, next month, the debate between trump and biden, must watch tv in a much bigger way after yesterday. annmarie: absolutely.

especially as you see both of the campaigns saying that this is about the voters as they are the ones to deliver the final verdict. this'll be the first time potentially that biden is going to have to address this so head on. he's obviously going to be asked about this from reporters, air force one, this will be a moment where he will face trump and really have to say what he means about trump being the first former president in american history to be convicted of crimes. lisa: i'm looking forward to that debate. jonathan: you are hopeful. we are all hoping for something like that. let's see if we get it. if you are joining us just now, welcome to the program. big moves on single names in the last 24 hours. we will be talking about that in a moment. let's get to the bloomberg brief with dani burger. dani: president biden will allow

for munitions to enter ukraine inside of a limited area for use against russia. this so ukraine can help neutralize the russian advance in the area. here is one of those companies getting punished in premarket trade, dell, down 14.3% despite the fact that it reported its first revenue increase since 2022, but it wasn't enough. there were high expectations for that service and in the post earnings call the ceo was questioned by a bernstein analyst who pointed out it was effectively zero as she expected demand to continue for the service business as dell stock more than tripled the last month. gap shares are surging in the premarket trade, up 24% with results topping wall street estimates and raising the outlook for the full year. all of the gap france had comparable sales out posting

expectations. they added a new creative director in february and has turned to celebrities to boost visibility. that is your bloomberg brief. jonathan: if the 90's are back, abercrombie is back, shouldn't gap be back? lisa: i guess. annmarie: anne hathaway recently wore a cool looking shirt dress. i looked it up, it was from the gap. jonathan: you bought one? annmarie: i didn't, but i might check it out. jonathan: up next, signs of a slowdown. >> one cut, two cuts at the end of the year. we are looking for the economy to continue slowdown. jonathan: inflation data is on deck this morning. live from new york, good morning. ♪

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jonathan: down on the week, down on the day, one third of 1% obviously p5 hundred, faces light on the 10 year. under surveillance this morning, looking for signs of a slowdown. >> looking for a possibility of one to two cuts near the end of the year with inflation coming down in the economy slowing down. we are seeing inflation coming down. when we look at the next couple of quarters you will see changes in the economic outlook. jonathan: pce, do it 8:30 eastern time, easing after downward revisions to consumer spending. this quote, "my current view is

a band, i'm rethinking it." now what are you thinking? >> that we will see another rise to the 4.8 percent, 5%, where people start fixating on the deficit. one thing that is new is japanese options, up, but i don't think we're going to stay there. i am worried the are going to see one of these continued grind highers. jonathan: after the memorial day weekend you set the clients that you spoke to are not concerned by the prospect of rate hikes. if not, what is driving this? peter: that seems almost crazy, right? people don't seem to care much about the timing, but the market reacts to every bit of inflation data as if it is super

important. i can't tell if it is outlook on it or not. you have these sloppy charts going up and down for no good reason. i'm concerned that there is very little direct participation in the market in the market and that the rally has been driven by a lot of share repurchases and you are not seeing a true believer in the market. lisa: when you talk about lack of liquidity, is that just bonds or could it be stocks? peter: when we are down .2%, it's nothing, moving and reversing, end of day closes that are weird. it's very outlook driven. there's no true. anytime a real human comes through the trade, markets move. lisa: on that point, peter, something interesting has been

happening where if any company reports earnings that miss or don't blow things out of the water, they get punished incredibly. dell, down 15% after find earnings, just not blockbuster. what might be overpriced, if not publish us? peter: it scenes -- it seems unusual, but now has become the norm. we are priced to perfection in a lot of areas. utilities have been such a big part of the market, it's the latest sector to grab ai attention. have we overpriced? where it is right now, companies will start pulling back on the purchases of it. that is where the big decline comes from. a bit of air taken out of the sales of the entire ai related things.

annmarie: including utilities? peter: i think so. it's like we say we are building data centers everywhere, so utilities are going to make a lot of money? it will take time. saudi arabia, for example, is pretty welded -- well-positioned to become a hub for data centers . a lot is going on globally and i think we got some far-fetched that's overvalued but we can purchase a sector that people have not caught on to and it's overdone. that is where we see the fullback. annmarie: overnight we heard president biden will allow ukraine to hit russian target u.s. weaponry. narrow, but a change of policy from the white house. how are the markets so strong with the geopolitical risk? is this a fresh risk that geopolitical markets need to be more to two? peter: it's allowing ukraine to

prosecute the war more properly, i guess, for lack of a better word? across-the-board they were able to recoup, rearm, and be safe across the border and go back to ukraine. this creates a slightly more level playing field in terms of their ability to fight in terms of the pre-positioning to come over and i think that russia and ukraine will give volatile into the summer and it seems that all of the world leaders, of all of them, vladimir putin is the most interested, it would seem, in having trump reelected. i'm very concerned that we will see disruption the summer led by vladimir putin. jonathan: big question for you, pete, what do you like, what are you telling clients to purchase? peter: i still like china, reloading there. china is going to continue to grow and to be pushing their brands.

china growth is not going to benefit the u.s. as much as it has in the past. it will benefit china much more. i like india, still. i think there is potential for disruption there. commodities, rebuilding. suddenly there's a bit of a chance that we start hearing peace talks between russia and ukraine ahead of the election, which would be inflationary as ukraine would have to rebuild very quickly. i like commodities as a whole. jonathan: pete, good to get your thoughts, that's something you have been saying for a while. big news on the single name level. lisa talked about this, down by 14% in the premarket with a reaction from the south side, j.p. morgan had a more attractive buying opportunity. morgan stanley saying that the expectations got ahead of themselves confidently. lisa: a lot of people calling this high valuation expectations

that were not met. i was looking through the numbers to decide what the negative was and i couldn't find it. it was a blowout with a broader takeaway. this lack of conviction, i wonder how much the economic data feeds into that? we don't have macro framework. algorithms can be in charge. speaking to the big news. jonathan: another reason we are getting whipsawed from data point. two hours away, the last big data point before the quiet time and the federal reserve decision. coming up, opec-plus looks to extend production cuts. that conversation is up next. you are watching bloomberg tv. ♪ what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch

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jonathan: the s&p 500 going five weeks without losses but based on today, that's about to change. the s&p 500 down half of 1%. on the month, higher by 6%. thank you, and. off by 28% month to date. 550 $8 billion plus market cap. lisa: that's unfathomable, more than a walmart added to the name when you are talking about market caps of half $1 trillion. it's notable that we had the

worst back to back to dave performance of the s&p on this decline. this is basically a market that has been rage -- range bound with massive moves underpinning it. jonathan: let's go to the bond market, yields are up, bad for stocks. yields are down, bad for stocks. like the last couple of days, bad for stocks. yields down on the back of bonded data, bad for stocks. what's the read from this bond market to the equity market? lisa: the simple read is bad news is good news and good news is bad news. fewer rate cuts with no rate cuts negative for equity valuations, but there is a bigger readthrough as i don't think everyone would agree with that, they would say it depends on why yields are staying high. there is a lack of up word momentum right now in stocks that has been there for much of

the year. seems like the momentum trade has faded and that is the real jonathan: takeaway. jonathan:upside surprise on the core cpi, the euro looking like this. we are still expecting the ecb to cut interest rates, based on everything they have told us over the last month. the conversation at the next meeting and the one after that, lisa, gets more interesting. incidentally, talking about u.s. yields, look at the german bund. lisa: this is about the ecb not necessarily being able to cut july or september. or october. basically, the bar has gotten a lot higher to go further. it has been three straight european gpi prints that were higher than expected. to me, that has to raise some eyebrows about this being hard to kill, globally. jonathan: under surveillance this morning, the former

president, donald trump, set to campaign for reelection as a convicted felon related to a hush money payment to stormy daniels. he faces sentencing july 11, just days before the republican national convention. annmarie: the timing is interesting and then we will have a debate between trump and biden. that matters because this conviction resonates with the electorate. if you look at polling, the electorate looks fickle. 67% of voters said that the convention would make no difference. marquette law school say it's a guilty verdict would produce a four point leave for biden. saying to me that the electorate hasn't really decided if it matters. until we know that, maybe it doesn't matter for the markets. jonathan: clearly doesn't matter for fundraising based on the events we saw the literal minutes after the verdict. both sides. lisa: which is one thing that

they boast -- annmarie: which is one thing they both agreed upon. it's up to the american people. sean maguire elon musk, who has been getting cozy with trunk, said they donated money to trump world because there is a legal issue around how much you can donate per person to a single individual and he said the timing isn't a coincidence. he doesn't see wall street backing down the way it might be harder for public facing fortune 500 ceos to come in. writ large, if you have money, millionaires are pushing trump. lisa: but those c-suite ceos facing more pressure, this is a hard thing to focus on. donald trump with an email, saying that i'm a political prisoner. then people on the others calling it justice running its course. it's people in the fishbowl

tuning out. i'm wondering at what point this moves the needle. these facts getting disputed. jonathan: this is the campaign for the next five months, six months, picking up in a month from now. the first debate will be absolutely huge. maybe more so for the sitting president. how he navigates the issue now, for a lot of people yesterday, they thought they should stay away from this. he will be able to stay away for the next several weeks, but what about the debate stage? lisa: i think that trump will make it a mainstay of his campaign. how does he respond without alienating people? then there are the trump supporters in the never trumpers and the people in between, how do you get them on board or not? annmarie: the biden aides say that they are putting daylight between them and this verdict. they say one, no need to spike

the football when the conviction dominates the news. polling suggests things will turn on other issues, conviction being a trap, and then they can always readjust, moving now to see the dust settle. jonathan: that conversation, 30 minutes away. that's not miss that. john williams at the fed saying there's ample evidence that monetary policy could be restrictive. not as restrictive as believed but there is good reason to think it's headed to 2%. compare what we heard from williams, from the former new york fed president, bill dudley, here on bloomberg, these are different views about how restrictive policy actually is. lisa: you think that john williams read the column? jonathan: i think so. lisa: it seems like a pretty direct response. we got the message, basically, the mainstay, powell and williams, two of the ones on the committee, they expect this to

be ongoing disinflation with rate cuts thing up speed. then what is the impact of the neel kashkari's of the world, echoing what bill dudley said? jonathan: sufficient restriction is the big debate going into the fmc next week. lisa: absolutely, how much longer do they have to go, how much downward pressure is the current rate putting on the economy? it's a subject of massive debate and no economist can agree. the fact that the fed has to rule on this, good luck, we feel for you. jonathan: once we come out the other side, it's two wednesdays until the decision. opec-plus, meeting this weekend, looking to extend voluntary cut through the second half of the year as exporters look to compete with record u.s. output.

adam, wonderful to catch up with you to get your perspective on this. we have seen it before, opec-plus meetings. is this one different? fax this one is different, because they are trying out to put together a much longer production cut extension and are looking now well into 2025. the issue is that they want to redo the baseline production capacities for the different opec producers. remember, we have really old function passages that no longer reflect back the what these countries can produce, so they are kind of using this production cut extension as a way to compel these countries to accept new quotas and new baseline capacities. so, it could take a bit longer. a lot of this getting done by the scene, so as long as they

have agreement before the meeting, it could be pretty short. jonathan: they don't give us a price target. we wish they would. is this the sweet spot for where the price is and has been over the last few months? ellen: they are clearly comfortable in the 80's. they probably prefer mid 80's, if you want to get more specific , but anywhere in the 80's is good for them. once you get closer to the 90's, they get nervous about demand destruction, but that is just the saudi's. other opec members want to see prices higher. the saudi's always take this view that too high is not beneficial for them or any other producers. obviously, too low is not good either. lisa: when it comes to messaging, what is it me that they wanted to do this remotely?

ellen: it's a good point, i was thinking about that before coming on. the issue is they want to try to avoid the spectacle, which is interesting, because before they really embrace the spectacle, but they have come to realize that the spectacle can create more controversy and drag things out longer. if they can kind of get everything done remotely before in the whatsapp and whatnot, it could actually result in a lot more conformity and a lot more -- it's much easier to reach consensus that way. lisa: how much is the discussion not being held out loud? the quiet part being that the u.s. is a major competitor in the more they cut production, they lose share to the united states, they could be pumping 13 million barrels per day. how much is that going to be front and center in terms of discussing strategy? ellen:

yeah, i think that is a big issue for them, but i think they are looking at the wave of recent acquisitions in seeing something positive for their group. the fewer the players are out there, the more incentive there is for companies to curb their own production. now instead of having so many little companies all overproducing and drilling, breaking even if they can, now we are talking about a huge consolidation. a lot of these companies are now under the umbrella of archer producers so they are looking at this and saying it's not a wild west out there anymore. i think that gives opec and the ability to look farther into the future and they can say look, coming down the road yes the u.s. is a big producer but they can expect them to act a little bit more conservatively, perhaps, in terms of production, because a lot of the wells are under the control of the same

companies. so, i think they are looking at this and saying hey, we can plan more for the longer term, now. annmarie: one of our bloomberg opinion writers recently wrote a piece about hodgepodge production cut. there are some voluntary compensation cuts. can you make sense of this? is opec muddying the waters by doing it in this fashion? ellen: it's so confusing. sometimes i wonder if only the guys who work for opec know what is going on in terms of the numbers and that they have confused everyone, including themselves, and they agree to what someone proposes. it's a good point. i do think that if they can redo the production baselines, it will generally alleviate the confusion that goes on. some of this is very confusing.

we don't really know. the cuts are based on old baseline. if they can redo them all, with confusion, it remains to be seen. annmarie: republicans in washington sent a letter to secretary granholm but it is my understanding that if we get north of four dollars per gallon of gasoline it's a lever that the administration will pull. how do you read this going into the summer? ellen: they are really concerned about this. the move to tap the gasoline spr on the east coast, they are playing it as a way to bring down gasoline prices this summer but it is a result of the fact that it is expensive to store a lot of gasoline and this one was just put in place after superstorm sandy and they realize they cannot store all this gasoline for that much longer, so put it on the market. i do not think that the spr itself is designed to be used.

if they keep tapping at as a way to relieve high gasoline prices, they will find themselves in a bad situation on wednesday with a big hurricane knocking out the production in the gulf and they haven't got the spr that they need to true shortages. it's a delicate balancing act, here. there are other reasons why gasoline prices get high. it has to do with refining. we don't refine as much as we use to and a lot of it has been switched to biofuels, which are not nearly as useful or necessary as gasoline. there are other things they can do to help alleviate i gasoline price crunch that don't involve using the spr. jonathan: there we are. lisa: not needed, prices going

down, but the fact that they are sending these letters out? jonathan: well, we know exactly where this is going if the prices spiked. lisa: right they want to lay the groundwork of ire. annmarie: four dollars per gallon of gasoline, the summer before an election? they have to pull a lever. imagine it hits five dollars. jonathan: for the white house, this might be what they want to see. opec-plus, i'm not so sure. the sweet spot right now, right? lisa: they will basically try to keep things status quo. frankly i think that's the message for why they are holding remote. don't make waves, zoom in. jonathan: let's get you an update this morning with your bloomberg brief. hey, dani burger. annmarie: bill ackman is -- dani: bill ackman is planning a new ipo a pershing square. as a precursor to the listing he will sell estate to the

investors in the coming day with a valuation of $10.5 billion. brookfield has a slightly higher valuation and manages $525 billion. ipo's have a challenge this year. global shares are up for premarket trade, following a report that sky dance and a sweetened offer for the company. the paramount committee is set to look at the offer shortly. sony, apollo, warner bros. discovery, brian allen, all expressing interest in paramount. the nba finals matchup is set. the mavericks took the series in five games with a statement performance from their star duo. they will be facing the boston celtics, who are coming off of their sweep of the pacers and

that series kicks off in boston next thursday. that is your brief. jonathan: we will catch up with you in about 30 minutes time. up next, central-bank convergence. >> they will need more rate cuts than the u.s.. it does add to the attractiveness. jonathan: all of that, coming up. this is bloomberg. ♪

jonathan: equities on the s&p 500 pulling negative here by one third of 1%, yields higher by a single basis point. under surveillance this morning, diverging paths. >> the general perspective on the broad european economy is that it will need more rate cuts than the u.s., so from that

perspective it changes the attractiveness and i don't know how long it will be sustained. i do find this to be a tactical opportunity at this point. jonathan: things picking up more than anticipated, the central bank is widely expected to cut rates months ahead of a possible move by the reserve. aberdeen writing that the ecb won't be differed from cutting, but there could be a pause where they wait until the fourth quarter or even later in order to cut again. the fed, we expect rate cuts to begin in september. we have talked a lot about central-bank divergence, the federal reserve going nowhere. from what i see in your research, you think there are limits to the divergence. can you walk us through it? >> there is a sequencing in terms of timing. from the ecb we have inflation

data that was out this morning, but that won't necessarily change the timing. christine lagarde has already committed to june. then we could see some staggered beginnings for other central banks. the bank of england, there was already market pricing pushing out the timing towards later on this year. june, easing the first cut, that's not likely to happen now. really, it is a staggered easing cycle. but we have a common theme in terms of very sticky service inflation, core inflation. the underlying trend proving to be stubborn across the different countries. it really poses the question -- how much can ease after that? that's the debate amongst investors at the moment. yes, they will start cutting, but the ecb is the case for pausing after that. how quickly can they start using

from here? -- easing from here? jonathan: christine lagarde has done a good job keeping a consensus together. do you think the typical north-south divide will reappear as we have to fight be on june and deeper into summer about what to do next? sree: i'm not sure that there will be a big division within the ecb itself. what we are seeing is data dependence and hawkish voices within the ecb. however, there is still a consensus around kicking off the easing cycle or they don't necessarily need to be as restrictive as they are. then there will be the timing where we could see the next rate cut later on in q4 from the ecb and a quicker pace moving into 2025. really it's about the disinflationary path already underway. there are bumps in the final

mile that everyone is talking about. that is where the focus is going to be and it seems more data dependent. moving to the fed, there is a bit more of the fed and some members talking potentially about delaying rates, easing, not just delaying but moving into rate, even. so, we think that the most likely scenario for the fed is that in q4, september, they start using -- well, it's dependent on what we see today in terms of core pce outlook and the trend thereafter, very much the key problem and common theme, the stickiness in service wages. lisa: to john's point, there is a question about the different regions of europe and how they are benefited or not, particularly when it comes to a weakening euro. some might welcome a weaker euro

during vacation season while germany pushes back with manufacturing becoming more expensive. how much does that color the debate on the ecb in a way that is different for the federal reserve? sree: it's true that the ecb is trying to manage a number of very diverse economies there. but even when we look within that, i think germany obviously has been quite key in this morning's number and driving it. there have been technicalities there. it's led to the cheap transport tickets that that ace effect has led to, a bit of a stronger number there for germany. those economies are responding to the head of the euro in a different way.

the ultimate mandate for the ecb is to look at those aggregate numbers and see where the inflation all trends overall are going. they are looking at the overall good for the euro area economy. it's difficult to come up with an answer according to journey in southern economies. lisa: is the inflation more similar to that of the u.s. than people thought? sree: i think that in the u.s., the economy has been more resilient and that has been a key difference. the euro area is recovering out of this, some recessionary work that we saw at the end of last year. there was a bit of recovery there. the u.s. has been remarkably resilient, despite the aggressive rate hikes. it's a key difference the economies and the underlying

drivers of wage growth. there are similarities as you mentioned with service sectors inflation, but it seems that in the u.s. it is correct that they would wait before they start easing. it's also correct that the ecb doesn't have to wait for the fed. does everyone have to wait for the fed? it's definitely not the case. we are seeing that clearly in the message with the central bank focused on domestic drivers, now. the pattern of inflated global drivers has unbound and they are looking at the sequencing and timing being different because of the relative strength of each economy. so, the u.s. i would say has a big difference in terms of the resilience around consumer spending starting to slow, which is another feature that we will be monitoring over the course of the coming months. jonathan: sree, good to catch up, got to leave it there. thank you. "bloomberg surveillance," we've

got sam, libby, ed, bob, coming up. from new york, this is bloomberg. ♪ do you want to close out? should i? normally i'd hold. but... taking the gains 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. are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> it is not unreasonable to worry about inflation. >> i think when we look at the next couple of quarters we will probably see some evan flow. -- ebb and flow. >> to get to the july cut we would need a combination of soft enough labor market data and enough decline in the run

rate in inflation. >> they would be cutting rates all of sudden. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: 90 minutes from inflation data in america. that is all bramo wants to talk about. you take the fed speak over u.s. politics right now? lisa: they are the people entrenched in saying this is a rigged trial and then the people saying that this shows that justice works. a jury of 12 piers were able to convict him. you won't get any cross dialogue between the two. jonathan: these are the dates that alisa won't be at work. june 27, big debate taking place next month. july 11, trump sentencing. july 15, the rnc. annmarie: where they will basically say this is our

candidate and he is a convicted felon as of yesterday. 34 counts he was found guilty on. lisa is less excited about all of this. it is unprecedented times. what matters to the market is, does this shift the electorate? the electorate looks fickle on whether or not this actually matters if they're going to cast a vote for trump or biden. what is key is that both of these individuals came out yesterday fundraising on this saying that it is november 5 that matters, the verdict for the american people. lisa: it's not that i don't find it interesting, it is just now the people that are tuned and are going with what they already believe and then there are people who feel further tuned out because it feels like this never matters the way that people think it will matter one way or the other. it becomes exhausting. at least feeling disenfranchised by so many people who are not hardened on either side of the political aisle. jonathan: if you are voting for trump yesterday you are still voting for trump. if you're voting for biden before yesterday you're still voting for biden. this poll from npr and pbs that we have been referencing this

morning, two in three registered voters say that a guilty verdict would have no effect on who they plan to vote for in the presidential election. what they decide to do could be very important. annmarie: 67% of voters say that a conviction would make no difference in november, including 74% of independents. that is the key part of the pole. to my fickle electorate, marquette law school polling, they talked about a guilty verdict would produce a four point biden lead in national head-to-head matchup with trump while a not guilty verdict would have resulted in a six-point trump lead. that is why the debate will be interesting. who moves the needle after the debate? jonathan: a month away. welcome to the program. plenty of market coverage, i promise. equity futures down on the s&p. excited for pce later this morning. the 10 year, 4.5560. lisa: the fact that there was a

bit softer consumer spending and softer core inflation read move the market, think if we get a surprise one where the other. that is true excitement. the whisper number is the lowest rate going back to december. jonathan: we can see what bramo is excited about. donald trump is convicted on 34 criminal accounts. ed bastian sitting down with guy johnson on the airlines outlook for the summer. and bob michele looking for a september rate cut. a groundbreaking moment in u.s. history. mr. trump: this was a rigged, disgraceful trial. the real verdict will be november 5 by the people. jonathan: a 12 person jury finding former president trump guilty of 34 counts of falsifying business records to conceal a hush money payment an adult film star with sentencing set for july 11, four days before the gop convention.

outside trump towers in new york city, david, good to catch up with you. what is next for the former president? david: we will hear from him later today. he will hold a press conference at 11:00 in new york and that is when he will try to move this from the political arena fully. talking about this being an intellectual exercise in people's views being calcified, we are at the moment where we are yet to be determined how much this will resonate with the electorate. we will hear an effort to situate this in politics, in the campaign to cast doubt on the proceedings that just ended yesterday but also to look ahead squarely to the general election november 5. july 11 looms large, the sentencing date. here we are in this strange vacuum where it will be filings in that matter, what each side thinks the sentence should be, if there should be a sentence at

all on the part of the defense. this effort to raise money off of what happened on both sides to do a very delicate ballet around what has happened. you saw a tweet from president biden looking ahead to the election in november. this awareness that yes, this is a significant, historic, unprecedented moment, but how is the country going to react? the election day being the moment when this truly will be sorted out. i will add as an addendum that it bears mentioning over and over, what transpired yesterday, the guilt verdict, does nothing to do to the president's ability to run for reelection by november. annmarie: any reaction that they are shying away from potentially pouring money into trump? david: no, the contrary. you're looking at a story that bloomberg has this morning taking stock of the way that wall street is headed. a few days ago steve schwarzman

of blackstone through his support fully behind the president after he passed out on the virility of the campaign. we are seeing reports that bill ackman the hedge fund manager is close to endorsing donald trump as well. if anything, among top financiers we are seeing a willingness to embrace this candidate in a way they had it before. that bears watching as this goes forward. they, from the commentary i've read and what we've heard from those people, see this as an aberration, a distraction from the policy matters at hand and the general election more broadly. they seem to be at the vanguard of casting doubt or throwing shade on what happened yesterday and looking ahead to the election in november. jonathan: looking forward to your coverage. with us around the table in new york is libby cantrell. what are you telling clients? libby: your analysis before david gura's segment was right. this will embolden the base of

each party. what we saw yesterday that republicans on capitol hill had one of their most successful fundraising days in history. this will be a great fundraising perspective and emboldening the base. where it matters and i think that it's too early to tell is how does this influence the independent voter? the suburban voter? this election will likely be very close. this election will likely be determined at the margins. any marginal issue that may move the marginal voter actually matters. it is again too early to tell. five months before the election. we have been telling our clients incessantly that it's too early to have a high conviction at the top of the ticket either way. what happened yesterday underscores that. annmarie: what does each camp need to say to the independents to make sure november 5 they cast a vote for their party?

libby: that is important. it's not only this event yesterday but how each candidate responds to the event. does president biden use this as an example to pivot to issues that americans really care about? as you said, a lot of americans are disillusioned, discouraged, befuddled by the choice in front of them. they don't want to talk about this. they want to talk about the future. can biden compartmentalize this and move to the future? for president trump, can he also -- he will use this for fundraising and that will be successful for him, but can he also appeal to the middle of the country in terms of his vision going forward? elections are about the future, not the past. if he is just relitigating the past that could hurt him with the marginal voter. lisa: the biden campaign needs to be careful? this is a fine line that they walk? do they come out and say that trump is a felon or go further

without looking like they are benefiting from what trump is calling this, a politicized case? libby: it is a delicate balance. president biden needs to make this a choice between the two candidates and not just a referendum on him. what you saw yesterday is probably going to be indicative of the biden campaign response which is just to say that justice has run its course and we are focused on other issues. lisa: i wonder if there is a broader take away. people are feeling disillusioned, disenfranchised, frustrated. we see that in youth polls in particular that people are befuddled as to why we have this combo. is there a larger application for the political system and what will transpire after this election as a result of not only this prosecution but in general how this is playing out? libby: we are focused between now and the election -- i'm very quick to pivot to 2028.

let's talk about the 2028 presidential cycle. [laughter] this is the election that very few people want. if you look at polling between 50% and 70% of americans don't want either candidate to be the next president of the united states. it may have practical implications running up to the election, what is voter turnout? there is a risk that this is a low turnout election. the question for political analysts is, who does that help? historically, low turnout has helped republicans. high turnout has helped democrats because of the realignment of the parties the dynamic could switch. jonathan: to be fair, there is a policy conversation going on. maybe not yesterday afternoon, but it's happening. what are you saying at the moment about who will be the bearish candidate? i know that super difficult to draw a conclusion on. we are hearing from people like deutsche bank to say that the

federal reserve may have to stay on the hold for 2025 if we get the tariffs that the former president is talking about. where are we on that at the moment? libby: this is what our clients want to focus on. not the horse race. to your delight, they want to focus on the policy applications. i think that it will likely be a mixed picture. under a trump administration. it will be so dependent on the composition of congress. also, does he do exactly what he says he's going to do? on tariffs and immigration is where we think there could be an inflationary impulse. of course, tariffs are likely going to be inflationary. that is what we sell with the original trump tariffs on china. they were basically completely passed through to the consumer. will he really put 60% tariffs on china? annmarie and i have talked about this that not only does that have an inflationary impulse but may be even more so an impact on growth.

further fed, -- for the fed, that could be a conundrum should he put the 60% tariffs on china. if anything, you could have a more severe impact. the bottom line is there is a lot that's unknown and difficult to prognosticate the fed's behavior going into 2025 when there are so many unknowns. lisa: when it comes to tariffs -- annmarie: when it comes to tariffs trump could do that unilaterally pretty quickly but the composition of congress matters for everything else. what is your base case? libby: tariffs and immigration. both on terms of the flow of immigrants and the stock of immigrants. we know that immigrants have had a pretty profound impact on the economic circumstances of the country over the past year or so . we should point out in every segment that we are talking about politics. jonathan: thank you.

[laughter] libby: in terms of fiscal policy, most importantly that is what resides with congress. does what happened yesterday impact these down ballot races? maybe. we know the senate is incredibly vulnerable for the democrats who hold the senate by one vote. it is high odds that we could see the senate flip. the house is an open question. the house is much more of a national election. the senate, only 34 100 are up for reelection. these types of things can influence the direction of the house. it's too early to say. jonathan: too early, but we are talking about it. libby cantrill talking about it because bramo might go nuts if we don't. lisa: that is so sweet of you. i haven't already gone nuts. jonathan: 50 minutes away from pce data in america. let's get an update on stories

elsewhere. here is your bloomberg brief with dani burger. >> lori logan says that policy might not be as restrictive as believed because of that it is important to keep all options on the table. that contrasts with the new york fed president john williams who sees ample evidence that policy is restricted and doesn't believe that the neutral rate has risen. it's a rare but growing convergence among fed officials. tesla shareholders are being urged by proxy advisor to reject elon musk's 56 billion dollar pay package. the compensation plan was "outsized from the start." in january judge struck down the pay package saying the board wasn't transparent with shareholders when they made the deal. new yorkers will get a taste of international -- the next few weeks. a temporary stadium on long island will host nine matches of the t-20 world cup.

the match between india and pakistan sold out immediately. tickets on the secondary market start at 1300. jonathan: if anyone wants tickets, annmarie has them. keen on cricket after her time in england and looking forward to the big event? annmarie: what did i call it, cricket reminds me of quidditch? jonathan: i forgot about that. truly insulting. i don't really care. the calm beneath the surface. >> for the majority they are seeing relatively moderate growth. they think equities will be pretty much sideways for the next few months. jonathan: how dare you. that is my posh voice. does it work? annmarie: i know that you don't want cricket, you want world cup. i'm working on it. jonathan: make that happen. from new york, this is bloomberg. ♪

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jonathan: equities a little bit softer this friday morning. down by 0.2% on the s&p 500. under surveillance, the calm beneath the surface. >> the rest of the market isn't seeing anything like the kind of growth of that small number of large companies. while the index has gone up because the weight of these super large tech stocks, for the majority of companies they are seeing relatively moderate growth. we think equities will be pretty much sideways for the next few months. jonathan: futures lower ahead of key inflation data at 8:30 eastern. the s&p 500 poised for gains from may. down on the week. sam stovall writing, it has been rumored that between memorial day and labor day investors focus more on their tans than their portfolios. the s&p 500 only gained 1.6% in price between these two holiday

since 1945. instead of experiencing the summertime blues, it frequently enjoys a summertime snooze. hopefully you will wake us up more. what are you waiting for clients? to sit back, chill, and ignore everything? sam: there are a lot of reasons why one might say this memorial day through labor day might be quite different from other election years since world war ii. certainly now we know that ai has been driving tech and semiconductors. ei has been driving the rest of the market. earnings and inflation. now the worry once again that the fed could be raising interest rates, possibly staying higher for longer causing a recession. i think that is in a sense causing cracks to form under the confidence of investors today. lisa: does that mean that you think people should not

try to tan? they should be in the office trading otherwise they could lose their shirt? sam: very good, we set. typically what we find -- i like that one. typically what we find is investors gravitate towards the more defensive areas of the market. i say that you're better off rotating than you are retreating in this traditionally stayed period of the year. it is usually areas like health care, utilities, etc. that have done well. i guess this time around what we are seeing is since the dow hit 40,000 there has been no place to hide. the market has been selling off quite a bit with technology being the only group in positive territory. lisa: it seems like any miss or line that is not off the chart for some of the biggest winners this year have been punished

severely in terms of market reaction. i wonder if there is a larger take away? we were exploring this with peter oppenheimer of goldman sachs. based on how much yields have moved up, that's going to be the tail wagging the dog when it comes to the equity markets. the further yields go up the more punitive it becomes for the stock market. do believe that? sam: yes, because i think that is the real factor that is causing concern. our expectations had been that we would see a gradual decline in the 10 year yield as the year progresses. obviously, with it going in the opposite direction that makes us second-guess our own opinions. i think that the same is being done by other investors. our belief is still that the fed will be cutting twice this year, september and december. knowing that september is more like a coin toss as to whether that will happen. we also remind investors that every election year since 1992,

except 2012, had the fed raise or lower rates prior to the election, many times occurring in september. i think that the fed would love the opportunity to show that they are apolitical should the data allow for that. annmarie: why does the fed need to see in the data before september to have the confidence to cut before an election? sam: i think they will have to see today's pce and successive pce indicators show continue downward trend. i think we are likely to see the unemployment rate tick up a couple of basis points and also see the second quarter gdp doesn't come in as the atlanta fed is anticipating well above the 3% level. i think that the fed is going to be sticking to its mandate by saying, can we see inflation come down while not having a

material impact on employment? jonathan: finish this conversation somewhere lisa has been leaning. what happened with salesforce in the last 24 hours? down by about 20%. what happened with dell down by about 15% in premarket. the down numbers polices point were not terrible. they were upbeat. it just wasn't a big enough beat. you are seeing a monster move in a sizable company. i wonder if the team is a signal you're taking away from this price action? sam: as lisa was saying, companies are being punished if they don't meet the published numbers or whispered numbers. technology for this first quarter is showing a 25% gain in earnings versus the earlier anticipated 20% rise. we have seen an improvement in not only 2024 2025 estimates.

-- not only 2024, but 2025 estimates. it bumps up against the 30 pe for the sector itself on forward 12 month earnings, which has resulted in pretty much a locked ceiling, if you will. with these numbers at stretch valuations i think that there is the need for the resetting of the dials, at least in the near term. jonathan: some single names for sure. sam stovall there. talking about a 20% move on salesforce, which is a big company. that market cap was something like 52 billion dollars in the period which is a hefty chunk of change. i know the we got used to it because we see big moves in nvidia, but those are big moves. lisa: the reason why is because ai adoption won't monetize that quickly for them. it will take until next year or the year after to reap the financial gains.

if you take a step back, i wonder how much people are getting worried that artificial intelligence and the hopes that it will be borne out in different industries, if they are worried that we've gotten over our skis with that narrative? that is how i reada lot of these moves. jonathan: with the exception of nvidia. similar on american airlines, 13.5% lower a couple of days ago off at the back of their outlook. the outlook from delta next from the ceo. ed bastian sitting down with guy johnson. that conversation is around the corner. the s&p 500 -5.25%. the main event -- negative by .25%. the main event, pce data one hour away. ♪

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jonathan: 60 minutes from pce data in america. equity futures on the s&p 500 negative by .2%.another read on inflation going into the fed speak into the weekend. you won't get any. there is a lot that lisa is excited about this morning. inflation data in about an hour. the lack of fed speak after the weekend. let's get you to the weekend. don .2% on the s&p. the scores in the bond market, 10-year, 30-year, shape up as follows. we have seen 5% wants this

month, the first day of may. since then we have backed away and we got closer and the last couple of days and we backed away again. lisa: it is hard to know how much credence to put into this. it seems like there is a lack of liquidity. sam stovall is saying the people are trying to go to the beach aggressively. there is the feeling that lori logan crystallized. we don't know how restrictive rates really are. we can say that they are sufficiently restrictive or not. we don't know. with that ambiguity is a framework that i think you can see some of these options will per around the action. especially with a dearth of other actionable moves. jonathan: i think it is a recipe for an interesting conversation into wednesday's time. it will be interesting to see how that debate takes place. how the chairman tries to reflect the lack of consensus in the news conference. we have seen daylight between him and the minutes a few times. lisa: how much has he addressed the idea of the neutral rate long term? to me, it seems like jackson hole will be a big moment

because they have to come out and make some kind of proclamation about how they have engaged this or the strategic framework of how they filter in data points that seem to matter or not depending on the day. jonathan: tk stopped me out the door the other way. are we going to jackson hole? going together. we are trying to make that happen. lisa: are you booking that? jonathan: something else is happening at the end of august. the dnc. a lot of events this summer. let's talk about the politics. a new york jury finds former president donald trump guilty of 34 counts of falsifying business records, and sentencing is set for july 11. two weeks after the first presidential debate. four days before the rnc. annmarie: where they will crown 100% the trump will be the nominee going into the november for the election. this comes down to, how do the voters feel about the fact that trump was guilty on 34 counts? that is what the markets care

about. what the voters decide will potentially shape this election. going into this verdict, the polling has been murky. it is a fickle electorate. which is why how they campaign will be interesting and the start will have an 11:00 a.m. today when we hear from former president donald trump. jonathan: looking forward to the polls coming in. the premarket, shares of dell following down hard. the company reporting his first revenue increase since 2022, but not enough to impress investors. they are facing lofty expectations for the ai server business with the stock soaring 122% so far this year before this move. lisa: on one hand, 122%, you dropped 16%, it looks less significant in the scope of the drop to me, the fact that they beat expectations. if they talked about a 30% quarter over quarter increase in some of the ai-equipped servers, to me that that wasn't enough highlights the question that looms over the entire market. how much have people gotten over

their skis with the non-nvidia rest of the world being able to adopt ai as quickly as people previously priced in? nvidia is making bank, they are consolidating, but it is nvidia 's winning. not everyone else is winning. that is what we are learning. jonathan: that company is down by 15%. getting confirmation that we are going to jackson hole. you are at the d&c. good to know. that is the schedule for august. we don't need to know that now, but we are going to go. tom is watching. boeing will remain under close scrutiny from aviation regulators after sharing a detailed plan to address quality breakdowns at its factories. the plane is based around six measures including employee skill end of the number of hours worked to spend addressing defects during final assembly. this story has gone nowhere. annmarie: that is how i feel. what is new? we are left wondering when they will figure it out. in the meantime there's the

question of if there will be a backlog and if we end up with people saying if you do not want your plane i will buy it at a discount. there is a disconnect between the practical implications for airlines waiting for the deliveries and the reality on the ground that we don't have answers as to what went wrong. jonathan: some of the airlines are struggling this week after american slashed its outline. dragging down the broader industry heading into a busy summer. i'm pleased to say that guy johnson is joined by the delta airline ceo in dubai. over to you. guy jon ferro, thank you. ed bastian in dubai. he will receive the atw 2024 airline of the year award. he is also here for the 80th agm which will be taking place here at the start of next week. jon, you bring up what is happening with boeing but also the issue that we had earlier on in the week with the american

numbers and the impact that that had on the rest of the sector. ed, it is great to see you. congratulations on the award. ed: thank you. it is good to be with you, in dubai, and we are really proud of our team and their ability to deliver outstanding results for our customers. it is what makes these awards humbling to receive but hungry to continue to win. guy: you have to keep it up, don't you? ed: keep it up. guy: let's talk about the market and the customers you talk about. we did see the american downgrade in terms of its guidance a few days back. your comments about what is happening at american. also to get comments on whether you are comfortable with your current guidance. ed: demand has been strong. i think that was the issue with the american numbers. as we have indicated through the last several years, consumer demand and priority to invest in experiences continues to be really healthy. june for us is always the largest travel month of the year

, of the calendar. we have to see how general go, but i'm confident it will be a good result for the quarter. guy: are you seeing any evidence that inflation and it is inflation day, that inflation is starting to hit the middle class traveler? the middle-class traveler is beginning to rethink the attitude towards traveler, which has been strong over the last few years? ed: i don't see it. our consumer tends to be on the upper end of the income scale. our traveler tends to go internationally. our consumer is prioritizing travel above things. while you may be hearing from a number of industrial sectors trade downs occurring, we are not seeing that in our numbers. guy: do think you will at some point? is this the new normal in terms of what travel is going to look like? will this continue to persist? the stock market continues to do well. we are seeing an upper and

consumer that is fairly flush with cash. is that something that lasts years? ed: i think it will continue for quite a few years to come. one factor people don't give enough consideration to is our industry's capacity is lower. it has been given constraints around oems. boeing or engine issues. our economy is a lot larger than we were historically if you go back pre-pandemic, yet the capacity we are able to fly is significantly constrained. that is what is keeping demand and pricing. guy: so pricing fares are robust? ed: 20% higher than they were pre-pandemic. guy: you bring up business travel. has that come back more slowly than we have seen in terms of the retail story? given the bigger economy, is that a bigger number somewhere down the road? ed: business travel in 2024 has stepped up. as we went through the return

from the pandemic in 2022-2023, business travelers were sluggish largely because they were not back in their offices and working from remote locations. once companies have finally laid down the edict that you needed to get back, and as some businesses started to get challenged, people wanted to be back in the office. that opened up the need to travel for consultants to visit clients, for people to get on the road to see their own people. we saw a 10 point increase in business travel at the start of the year and that is continuing to climb. guy: we talked about the top line. what is happening in the middle? what inflation are you seeing in the business? ed: we are seeing inflation starting to moderate. for us, the biggest part of our inflation story is our people, wages, which is the best inflation we can have. our people continue to grow. wages in the 4% to 5% rate.

we continue to work on productivity and efficiency to take some of those rates and make sure that they are reductive increases. other parts of the supply chain, the supply chain still not where it needs to be, we talked about the engine issues. guy: how much is that holding you back? ed: significant against not only dealt but the industry. you now have turn times on planes that can extend to months rather than weeks, which they should be. parts are higher than ever. material costs are growing. manufacturers across the industry are having challenges. guy: this doesn't sound like an economy that needs rate cuts right now. ed: it is an economy from my standpoint that is doing well, but there is not just one consumer. our consumer tends to be in the upper end. our consumer generates a tremendous amount of wealth through the pandemic. market is up, real estate is up, unemployment is extraordinarily low.

the lower end, i think there are some challenges. that is something that the fed will look at all of the data. i don't think an airline -- guy: you have a pretty good view of what is happening in the economy. ed: our business is doing quite well. guy: you bring up boeing with the oems on airbus and the engines issues. how long does this last? how much of a struggle is it to get a hold of the kit that you need right now? how long do you think the problems we are seeing at boeing and airbus and pratt and whitney are going to be lasting? ed: right now we have no boeing orders that we are to zepeda and delivery on for the next several years. from our standpoint it is an airbus story. airbus continues to provide the planes and the technology that we have been expecting from them. they worked through the pandemic. the engines will be a bigger issue for us. that is slowing down a little bit the amount of new deliveries

that we can take. that is more engines than plane s. it is causing us to maintain the existing fleet that we have a little longer, so that is another cost of doing business. guy: you are well known for keeping your fleet for longer. the age of the average aircraft has come down over the last few years. does that strategy work in an environment where the sustainability question comes in? if you fly all the planes they tend to be less efficient. is that a problem that you will come across? ed: i don't think so. i think that this is transitory. the oems will get their parts. a lot of this is about labor and the fact that not only the tier one but the tier three and tier four of the supply chain let go a lot of people, so it is experiencing and staffing and rates. it is a complex story, but long-term i feel good about our sustainability. we are taking our overall footprint down in the range of 1% to 2% per year every year,

and that will continue on. as we get new planes, those numbers will go down faster. guy: politics will become a bigger issue over the next few weeks and months as we approach november. when you think about who goes next into the white house, what does the next administration need to do to keep the aviation market that you have described, the buoyant market, the market with momentum going? what do you need to see from the next administration to keep it on track? ed: infrastructure investment. maintaining the current infrastructure is challenging and they need to continue to modernize the technologies. they need to get air traffic controllers staffed and in position to enable us to grow. from an investment standpoint, that is where we are happy to say that the faa reauthorization bill finally came about. and unfortunately took months if not a year overdue in its delivery, but it is here and we will work with the faa make that

happen. guy: to wrap up the conversation, you feel like you are on the front foot at the moment. this is an airline that is growing.what is the capacity constraint that you are seeing that will slow your rate of growth down? if i'm looking at delta, is this as good as it gets or does it get better? ed: we are doing well. we expect to grow our top line in the mid to single digits -- mid single digits in the 4% to 7% range which is healthy considering the growth we've had over the last years. this year will be the highest revenues in our country's history. $60 million plus or minus. the supply chain will only get a little better as we move forward. guy: congratulations on the award that you will be getting into by this evening. it is great to see you. thank you for stopping by to see us. ed: it is great to be with you. guy: from dubai, back to you. jonathan: thank you, buddy.

great to hear that conversation. guy johnson with the airlines ceo, delta ceo ed bastian. paraphrasing, we are not american airlines. one. two, we are having a more affluent traveler and we are not losing business. two big takeaways. lisa: american airlines were penalized because delta is doing a better job monetizing some of their clients and catering to higher end, particularly business-class travelers. jonathan: this is how we start the week. is it an american airlines problem or airlines problem? we are finding out that it is the former and not the latter. up next on the program, diverting fed speak. >> looking at this broader context, the behavior of the economy over the last year, provides ample evidence that monetary policy is restrictive in a way that helps achieve our goals. jonathan: that conversation is around the quarter. that's around the corner.

bramo is disappointed we didn't get questions about the lounge. lisa: we can discuss this later. jonathan: this is bloomberg. jonathan: this is bloomberg. ♪\\\ ♪ at morgan stanley,

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to make someone's day. get started today at constantcontact.com. helping the small stand tall. jonathan: the first thing he says is, what are you doing here? it is friday. we don't have to be here on friday? lisa: please, sign me up. if you weren't here who would say "let's get us to the weekend?" jonathan: it is a duty that i am here to fulfill. let's get us to the weekend. under surveillance this morning, sufficiently restrictive. >> looking at the broader context, the behavior of the economy over the last year provides ample evidence that monetary policy is restrictive in a way that helps achieve our

goals. we are seeing clear and consistent signs of the imbalances between supply and demand are receding and broad-based decline in inflation. jonathan: the current new york fed president thinks that we are sufficiently restrictive and the former new york fed president is asking if we actually are were not. he has company in the dallas fed president lori logan. "a soft landing continues to unfold and should allow the fed to cut rates in september and december." bob, good morning. are we sufficiently restrictive or not? bob: 100% we are sufficiently restrictive. 100%. this is the highest fed funds rate, 6.5% of 2000 when we were in the midst of the dot-com bubble. even then 6.5% was strong enough to slow things down. i think 5.5% is plenty strong.

we will get core personal consumption expenditures in about 40 minutes.that should come in year-over-year around 2.7%, 2.8%, half of where it was a couple of years ago. things have slowed down a lot. we have a high real yield fed funds rate. you look at the bottom half of businesses and households, they are slowing down. don't listen to me. listen to brian monahan who was out yesterday saying, goodness me, look at the slowdown that is occurring. jonathan: how relevant is payrolls next friday? in about 40 minutes we will get that number. a week from today. how relevant is the number? bob: personal consumption expenditures number is very important so we know the disinflationary trend is underway. we are not going to get that close to the 2% target, but will confirm that we are on that path. that is good enough. for the fed to think about

moving earlier, you're going to have to see more stress in the labor market.they're going to have to see unemployment start to go higher meaningfully. think 4.2%, 4.3%. we are a little away from that now, but that could change of the next few months. lisa: you said definitely restrictive, so why haven't we seen more of a slowdown? why have we been surprised how hot inflation has come in and how strong growth is? bob: there is a lot of money sloshing around in the system from all of the fiscal transfers that have occurred during the pandemic. that takes time to work its way through. it is. you are seeing the pressure on the bottom half of income earners. they are putting more on credit, cutting back purchases across the board. maybe they are still trying to get in more spending on services, traveling, leisure in

particular. that probably slows down over the summer. there is sticker shock in prices and you are seeing the stress and businesses. when you look at small and middle market corporate america, that is where the amend and extend is occurring. that is where they are cutting back on cap-x. lisa: we agree there has been weakness in the lower and middle income consumer with small caps. there is definitely stress there. people say even with that if you cut rates now it adds the money that is sloshing around -- we saw the amount of money in the system actually increase for the first time in a couple of years in the past quarter. if you cut rates now you will turbocharge inflation next year, potentially, especially if there are certain types of fiscal policies put into place? bob: it depends how far and how quickly you cut rates. if you do with the fed did in 1995, and i believe fed chair powell is well aware of what they did, they just took the

edge off of businesses and households. they hiked rates from 3% to 6% and then they cut rates 25 basis points and then 50 basis points. that was enough to ensure a soft landing. i think that that is what fed chair powell is playing for. he wants to ensure that they just take the edge off of businesses and households. not reignite stuff. i think his concern is if they don't do something soon the long and variable lags will catch up in a bigger way. the pressure that you are seeing on the lower half of businesses and households will continue to spread above the line into the top half. jonathan: how much cash is on the sidelines and where does it go? bob: a massive amount of cash on the sidelines. i'm surprised lisa did not ask me about the treasury issuance. thank you very much for that. lisa: i like to be unpredictable. bob: i love that everyone talks about you cannot touch the bond

market, look at all of the supply. i get loads of questions from clients. we are trading 100 basis points through the fed funds rate. it isn't like the treasury curve is at 5.5%, 6% going north to 7%. there is a lot of buying going on willing to accept yields below cash. we see three vast pools of money out there that are waiting for the yield curve to dissen -- disinvert because right now they are comfortable. when i meet with clients from a private bank they are comfortable with cash getting 5.5%. why do they need to go out on the curve? sure, some money has leaked onto the market but when you look at the $6 trillion in cash, that's a lot of money that can come into the market. they have had the right trade to sit in cash for the last couple of years. when the fed cuts rate that is the first pull. the second is banks. banks are better off keeping

cash overnight in reverse repo then going out into the mortgage market and buying a combination of five-and-a-half's. you have the 575 blended coupon. 30 basis points or sell above overnight reversed repo. you have all of that negative can vexing. why do you do that for a handful of basis points?they are doing it . i was in -- they aren't doing it. i was in tokyo a few weeks ago. i know that you say everyone goes to tokyo. jonathan: i didn't say anything. bob: your producer told me there would be no hard questions on friday morning. you have fired off three. it is foreign buyers. if you talk to the big japanese historic investors in the bond e historic investors in the bond market, they are saying that the cost of hedging to you in his

5.5%. that is at your hurdle rate. 6.5 is because we can put money in at 1%. when the yield curve starts to disinvert and retain normal shape that is the third p ool of money in the market. i think that is in play from september on. jonathan: disappointed i am here, apparently. thank you. it's not the auctions it is the inverted curve. did you get that? lisa: fully understood that. jonathan: ready to be deployed when the curve starts to dis invert. it is stephen's and people want to buy it. thank you. bob: always a pleasure to be here. jonathan: i hope. your pce data is 34 minutes

away. from new york city, this is bloomberg. ♪

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>> it is not unreasonable to

worry about inflation. >> i think when we look at the next couple quarters we will probably see some ebb and flow. >> optimistic about inflation in the near term. >> to get to the july cut you would need a combination of soft enough labor market data and enough decline in the run rate for inflation. >> there aren't going to be cutting rates because inflation is magically to target, they will cut rates because all of a sudden they have to worry about the labor market. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the next minutes are dedicated to financial markets. the third hour of bloomberg surveillance begins now. equity futures, down by 0.1% on the s&p 500. down on the session. just off on the week after five weeks without losses on the s&p. we are still up on the month for the month of may on the s&p 500

and the nasdaq. the next 60 minutes looks like this. in 30 minutes we will get pce data in america, the last big data point before the fed goes quiet. that is a good news. no fed speak for the next week going into the federal reserve meeting two wednesdays away. lisa: how big is the market reaction going to be in about 30 minutes time? the idea of if we get a downside surprise on the key metric that the fed looks at to get a sense of inflation, do we see the idea of a delight rate cut back on the table? how aggressive could you see given the moves we've seen lately to even strong data points? jonathan: what happens with prices is more important to the outcome of november than what happened esther day afternoon. is that fair? annmarie: it is. when you look at the economy and inflation being top of mind for american voters, what we see is that there is a trust deficit between the electorate and died in when it comes to handling the economy.

a lot of individuals think that trump would do a better job. when it comes to this convention, the trick is muddy waters. jonathan: looking for more polling over the next week. i want to pick out a single name as we get closer in about 90 minutes time. dell is down in the premarket by 16%. when you look at a move like this following earnings you think that that is a big mess, downside surprise. it went down by 17% because its beat isn't big enough. lisa: the estimate, $21.6 billion. this should be rewarded. how many of the rewards have been baked into dell and other companies? we have been talking about this through the show and its fair during the spotty trading we are seeing ahead of the market open? how much have we overpriced? overpriced how quickly we can

bring artificial intelligence to these sectors and bring a productivity wave when we are facing pressures in terms of inflation and a weakening lower end consumer? jonathan: i am reminded of jack caffrey of jp morgan. he thinks that some of these look stretched. the fact that we piled into second derivative ai trades like utilities, which have had a stellar month in may. lisa: peter scheer was speaking about that as well. he was speaking about, listen, people are looking at utilities, permitting, how quickly they can get this off the ground, building it out.we were speaking with the ceo of baker hughes saying that the electricity demands will be incredible but right now it is a vice on the percolation of artificial intelligence through the industry because there isn't enough energy. annmarie: is there enough in the commodity space to support this? this is why he says that copper

is the best he has seen in his lifetime. jonathan: speaking of punishment and single name moves, american airlines down after cutting their outlook.the others did not do the same thing. united affirmed their outlook. we caught up with the ceo of delta. the basic highlights. we are not american airlines. we are still constructive on the summer ahead of us. yes, we have a more affluent consumer but we are not seeing the trade down that you're are seeing in other organizations. their stock is going to be ok. lisa: the other thing ed bastian said was that business travel has stepped up. how many people have come on this set, every one of them, i have been traveling so much. jonathan: bob michele to tokyo. everyone is going to tokyo. lisa: there is a reason. you think it is because they have good buying power with the currency. jonathan: that is the tourism.

talk to japanese investors about what they're doing now, i get that. lisa: you're right. people are going there just like the south of europe. jonathan: the dollar-yen 160, we will take that. the equities on the s&p down by 1/10 of 1%. in the bond market, yields about unchanged on the 10 year. .5521. -- 4.552 one. i love the expectations for the magnificent seven. extern reports. an pce data about 30 minutes away. heading towards week of losses, inflation data. writing, if investors get a with of the lofty growth expectations for secular ai spending need to be lowered, they will inflict swift punishment. two s&p 500 sectors would bear

the brunt of price declines: information technology and communication services. ed, do you think that this move in dell speaks to exactly what you are flagging? ed: i didn't expect the view i had would be validated so quickly. i think it is also salesforce. suddenly there is a recognition that all of the revenues that nvidia is accumulating and is likely to accumulate come from increased capital spending by every other technology company in the world. initially, that is going to be a burden on profitability adn the -- and there's not going to be an immediate payoff in artificial intelligence. jonathan: does that make you bearish on some of the big names across the broader market? ed: i think that it is a healthy development that the markets have started to recognize a more balanced view of what is going on in technology and the economy

in general. i think with the market is recognizing is that it won't be straight up in artificial intelligence. it will take a while and it will be expensive. so far, we know that artificial intelligence is artificial. we are not sure if it is that intelligent. it does make a lot of mistakes. there is a lot of work to perfect it. to put it together, yes, it validates our view that we are still in a bull market but it will be slowing down from here. we are looking for 5400 by year end. a few days ago people were asking why i wasn't raising my numbers. now i feel comfortable that i didn't. lisa: there is an argument, and you have been bullish with the tempered reality of how quickly we can go to some of these technology cool advancements -- technological advancements, there is a tag on the implications for productivity and broader economic gains that come with ai adoption.

if it will take longer than we baked in, does that mean some of our expectations of increased productivity bringing inflation down and economic growth not being as strong as they previously were assumed to be? ed: i have been a pool of productivity for a while. i've been talking about the roaring 2020's based on the idea that there is a shortage of labor and companies will figure out how to boost productivity. i based that not on ai. i said there are enough technologies already that can increase the productivity of labor. last year was a great year for productivity. it was over 2%, which is quite a strong move. i think that will continue to be the case. if we recognize that artificial intelligence is part of the productivity puzzle, we will have a more realistic view of what that technology can deliver. lisa: you have said this is not

a technology that needs rate cuts and if you do you turbocharge potential inflation as well as some of the stock market moves we've already seen. i want to tie back to the idea of some of the pitfalls we are seeing in specific names in technology. if the fed were to cut rates and we see some slowdown in inflation, do you see some of these losses on these names actually retrace quickly as people say it is cheaper for us to bet on future growth at a time of potentially lower yields? ed: i think that if the market starts to get a whiff of the possibility that the fed put is back, the scenario you laid out could play out quickly. we are only a few weeks ago having concerns about a melt up. now i am less concerned because the market is getting more realistic about what technology can deliver. i don't think that the economy needs rate cuts.

sure, the fed is tightened, but the reality is they have normalized. interest rates are where they were before the great financial crisis. the economy was resilient then and i think the economy is proving itself to be resilient now. annmarie: are you team williams or dudley in terms of sufficiently restrictive? ed: my own view is simply that these levels of interest rates are where they should be. the fed officials, dudley and williams, these folks still talk about this ideal level of interest rates in which you get an economy that is growing reasonably well with an unemployment rate that is low with inflation coming down. folks, that is where we are now. we are in that nirvana situation. why mess with success? jonathan: i would love to talk to about that a little bit. had a bit of pushback from some

of the auctions this week.about $183 billion across three year, 10 year, seven year. what did you make of that this week? ed: it was certainly an immediate wake-up call in the supply-demand issue. we had that issue last year during august, september, and october when the bond yield soared from 4.25% to 5% and a short period of time. once again, the deficit really could be a serious problem and create a debt crisis. i think that we want to be aware of that. i attribute that to the small backup in the bond yield, not so much to the auctions as to the realization that the fed is in no rush to lower interest rates and short-term rates could stay here for a while. to give us the new fed playbook. he said he wants to see

inflation rates stay low for several months. even if we get a good reading at 8:30 it doesn't mean that the fed will be in easing mode. the fed view that we need several months of inflation at our 2% level. we aren't there yet, clearly. jonathan: given the lack of visibility around 25, what is your best guess? note cuts in 24? -- no cuts in 24? ed: no cuts this year. i didn't understand why there would even be two or three, maybe i was missing something. along the way everybody has kind of come to the conclusion that maybe it is 1, 2 and i am at zero. jonathan: you have company for sure. thank you for this morning. i appreciate it. the bob michele explanation from j.p. morgan, if you missed it he was with us 15 minutes ago, i

thought was interesting. three pools of cash, don't want to go along the curb because they can sit in money market funds and get paid 5% mroe. why would you go along the curve and taken additional 10 years, go to the 10-year for 100 basis points less? why bother? lisa: when you have long end yields these pools of cash will be unleashed and billions of dollars will come in. what will it take to normalize the curve? how many rate cuts? is that feasible? do you see normalization on the other end? jonathan: it is the bull steepener everyone was looking like that got pushed out pretty quickly.equity futures on the s&p 500 down by 0.1%. let's get you up to speed with your bloomberg brief. dani: torrential rainfall in brazil has lead to catastrophic flooding in the country's southernmost state.at least

160 people have been killed and 600,000 displaced. it is the third major flood to hit the region in the last year. local mayors are weighing the idea of relocating entire neighborhoods away from high risk areas. officials say it is impossible to estimate how many areas will have to move their residents because the rainfall is ongoing. donald trump was found guilty on 34 counts of falsifying business records to conceal hush-money payments to an adult film star. prosecutors argued it was a conspiracy theory that deprived voters of vital information ahead of the 2016 election. trump faces as many as four years in prison when he is sentenced july 11, four days before the start of the republican national convention. boeing and u.s. aviation safety regulators will track six measures to judge the health of the company's reduction system. indicators will include the number of hours spent repairing the aircraft during final assembly, employees skill and efficiency, and shortages of

parts from suppliers. regulators vowed to retained scrutiny of the playmaker. -- plane maker. jonathan: up next, the dow's missed ai expectations. that is just around the corner. this is bloomberg. ♪ do you want to close out? should i? normally i'd hold. but... taking the gains 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.

jonathan: back economic data point about 12 minutes away. waiting for pce data in america the fed's preferred gauge of inflation. going into that print, negative by 0.1%. morning calls, morgan stanley raising its price target to 27. highlighting stronger than expected results across the brand portfolio, but noting an

expensive valuation. the stock is up 22%. next, raising the price target on micron saying the chip maker is well-positioned as the demand for ai smartphones and pcs is expected to increase. barclays lowered the price target on delta 97. a miss on ai server expectations given the run-up in stock. expecting more disappointing results in the future. dell shares down by 16%. can we start with those numbers yesterday? where was the grand disappointment for this market given that name down by 15, 17 percentage points all morning? wu: there are a couple of areas of disappointment for dell. it was the backlog number first of all. the backlog numbers came in at 3.8 billion. i think the whisper numbers were

much higher given where the valuations were at the time. the second is the ai server profitability. it is probably going to be more earnings neutral versus a more typical 9% to 10% server profitability. you are not getting any return on your ai server numbers. jonathan: can we finish on that point? elaborate more on that. that came up on the call. i think it was the question the margins on the servers. where are they going to get the best revenue growth in the future? a product that dilutes margins. woo jin: that was a brilliant question, frankly. we have to keep in mind that we are in the early days of the ai server boom or ai infrastructure buildout boom. what dell is up against is trying to gain footprint. the best way to get early footprint is pricing.

if we listen to micro's earning call a month back, they said that their margins were going to be a little deluded from competitor pressure. there are a lot of deals out there. the first to win those deals will have a long runway to win more deals in the future. lisa: we have been spending the morning wondering if dell is indicative of a broader over enthusiasm of where ai is taking non-nvidia companies. they seem to be the global winner in all of this. do you think that that's right or that this is a dell specific story and how they are trying to win market share? what sort of services and hardware they are providing? woo jin: sure, i want to take that question in a couple of ways. if we look at the dell forecast, what i back into is about an $8 billion annual revenue in ai

servers. roughly $2.2 billion of it is coming in next quarter. they already booked $1.7 billion this past quarter. that revenue is flattening out in the second half of this year. given there is a huge pipeline of deals that dell keeps talking about. the gatekeeper of those deals is nvidia. they still hold the valuable chips. depending on where nvidia wants to send those chips the vendor wins. the second aspect is valuation. prior to the print, they were trading roughly 21 times forward earnings. at the end of the day it is a hardware company. before the ai frenzy hardware names were trading seven times to nine times, so you are

getting a 10 point premium just for ai alone. jonathan: it is good to hear from you. woo jin ho of bloomberg intelligence. it was morgan stanley's mike wilson who said the ai is everywhere but in the numbers. he was talking loosely about the broader equity market, but this is an example. it is not in the profits yet. lisa: if you strip nvidia out it is in the profits. what i find fascinating is nvidia holds all the cards, or all the chips, in terms of what they decide to charge and who they decide to ship to. it is their profits, not necessarily everyone else's. jonathan: nvidia is still positive in the premarket. the broader equity market, erasing this morning's losses. pce data is just around the corner. michael mckee is with us in the studio ready to break that down. what should we be looking for in

about seven minutes? michael: one thing economists think will happen is that core will come in at a slightly lower basis for april. while that will really not affect the year-over-year trajectory, it will reignite the idea that inflation is going down and the fed can at least start thinking about thinking about cuts. we have heard over the last 72 hours or so a lot of people at the fed say higher for longer, we will stay where we are. i don't think that this number will change that. certainly not in the short run. lisa: it is a compelling theory of neel kashkari speaks for the committee saying that the threshold is a couple of months of data that cooperate. is that a more mainstream view? or if we get a downside surprise in this print could that increase the likelihood of a july rate cut? michael: it would change some thinking on wall street but not

the way the fed is thinking. chris waller said the same thing as neel kashkari they all said kind of the same thing. we need a couple of months to make sure it is still going down. a big drop could have been a one-off that reverses and you don't want to be in a position to make a decision that you then have to reverse. they will wait. the big debate now seems to be, are we tight enough? laurie logan said last night we may not be. she joins that camp. the question is, do we need to raise rates or leave them where they are for longer? the majority of the committee is, leave them where they are. if we get numbers like we are expecting today, you can do that. jonathan: if you had bill dudley here, williams over there, and you had a roundtable, what would you ask them? michael: you could ask what bill sees as the reasons for why the neutral rate is higher and if they will be sustained.

the second part of the question isn't is it higher, but does this last? is it a temporary thing because there are things in the economy that you do not want to overreact to? that would be the issue. john williams, you could ask him what r-star is since he invented the index. but it hasn't worked. basically since the pandemic. jonathan: it is the roundtable we want to now. williams and dudley. lisa: just introduce them and let them hash it out. jonathan: an intellectual battle. so sophisticated at bloomberg. equity futures are down just a little bit from new york. this is bloomberg. ♪

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jonathan: inflation data about 20 seconds away. opening bell about 60 minutes away. equity futures on the s&p negative. nasdaq down about 0.2. two-year and ten-year. two-year, 4.93. ten-year, 4.5431. what we have? michael: key have the income and spending numbers dropped. we are waiting for the deflators.

twos-tens gain and personal spending lower than the three tens forecasted -- from the a-10 to the prior month. personal income number is 3/10ths. we have had some movement in incomes. unilever -- you never know if it is wages or salaries. we have the inflation numbers. the pce headline comes up .3%. 2.7% year-over-year. that is what it was last month. we get the 2/10th for the core at 220%. pce -- 2.8%. pce is the number they get right. to get the mbits from that inputs and put them together and we have been on point with this for a long time. jonathan: no bad news is good news.

a meat is a beat. futures are positive on the s&p 500. if you turn to the bond market, a quick snapshot. databases point or two on the ten-year. it came really close to 5% this week on the two-year. lisa: it's interesting to note. i have been waiting for the revisions that came in. also with downward revisions. not only did personal income and personal spending, and, personal income and spending lower. it was revised to lower in the prior months. it indicates the consumer's may be losing steam and giving people confidence we are on this disinflationary trend. at least on the margins it seems that is what the market is reacting to. jonathan: the survey, 0.2. the median estimate year-over-year coming in at 2.8% in our survey.

mike mckee, we go to the quiet period into next week. no more fed speak. how does this change things going into not next wednesday with the following wednesday? michael: in no way, shape or form does it change anything. it shows there is progress. the economy is slowing but not falling off a cliff, which is what is supposed to happen with the fed raises rates. they will say we are on track. this is what we expected. kit tells us inflation is going down but we need to continue to see more progress. we are only at 2.8%. we need to get to 2% or maybe 2.4% or 2.5%. you can ask our guests what they think the starting point will be. jay powell has said we will not wait until we get to 2%. lisa: i like what jon says, a meat is the new beat. there is this miss in terms of personal spending. people want to see cooling and spending.

what do you make that revisions are so frequently downward these days that we get these data points that are revised sometimes significantly, sometimes not, but usually in a downward fashion? michael: there was a rule proposed by larry meyer. if you get a surprising number, the revision will surprise the same direction. lately that is what we have been getting in the employment numbers. that just changed last month. we will see if it continues. we have seen surprisingly all of a sudden weaker growth. it should not be surprising. that is what the fed has been waiting for. the surprise was a did not happen sooner. jonathan: the surprise was q1. welcome. pce data about three or four minutes ago. the core pce deflator comes in at 0.2% month over month, in line with estimates for our survey with bloomberg.

equity futures just about positive by .2% on the s&p 500. a picture of bonds for you which have been all over the place this week. yields up a little bit on soft auctions, down on bond friendly economic data. you have the final word. michael: when we look at the income numbers, wages and salaries only up 2/10th. wages and salary growth is slowing which is what the fed wants to see. they were afraid we would see continued upward wage pressure. as the labor market loses that kind of comes off. you have disposable personal income only up .2%. on the inflation-adjusted basis it is down .1%. suspending might be we going forward. jonathan: let's get to the guest panel. futures positive.

laura, let's start with you. you had five minutes to chew over it. what stands out? laura: we've had four months of unfriendly inflation data and growth really continuing to surprise to the upside. today has to be a huge relief. some early numbers for april were confirmed at the broader look at this broader data. this is a more dovish report. you have to acknowledge that. i noticed the slow down and spending. it's the real spending. we are getting data for q2. we had the underlying data was fairly strong. i think we are waiting to see how q2 shapes up. it looks like it is also going to be a little bit slower. i think the landing may be orchestrated in q2. jonathan: is that landing inside? subadra: we think the fed will stay on hold for the remainder

of the year. the data point does not really push -- there is no sense of urgency from the fed. with the inflation starting to ease up, growth is starting to come down. we heard from williams yesterday. he's inspecting growth in the context of 2% to 2.5% for the year. inflation core pce heading to 2.5% at the end of the year. there is no urgency for the fed to cut rates anytime this year. the earliest we are looking for the fed to cut rates is after the election, the december meeting, if the data requires them to do so. lisa: given the fact this isn't necessarily a game changer but it does confirm the idea that maybe this inflationary trend is back on track, is that more conviction with your closely held beliefs the idea that you should buy bonds and inflation will come down and eventually we will normalize? subadra: you can buy bonds at the long input it's more

attractive the whole front end treasuries. the yields are way more attractive. that's exactly what you are seeing investors -- in investors. aum's at $6 trillion. returns look very attractive when the yield curve is inverted. that trend is here to stay until we know the fed will be cutting rates aggressively. this is when he gets a little bit tricky for me. you look at the policy priced in the markets. you are looking at very few cuts between now and the middle of next year. you are looking at less than 100 basis points of cuts by the middle of next year. that argues for investors to continue to plow money into the front end of the yield curve, not so much on the long end. lisa: this raises a larger question. doesn't matter if the fed cuts rates once? our people looking for evidence of a real slowdown that could lead to a protracted rate cut

cycle? does this data go anywhere near beginning to move us in that direction? lara: i will take that question in a different direction. i agree. 25 basis points, especially given where we are over 5.25 is not going to move the needle tremendously on interest rate sensitive sectors. the question to me is we are probably not focused and not on growth -- enough on growth which has been strong at 3%. expectations of high-growth are now so built into the markets. nominal gdp growth of 6% turns out is enough to power equities higher even the rate cut expectations have been ratcheted very far back. going forward, if that's close to 5%, you know, this is not a big slowdown. we need to pay attention to the fact that so much growth is priced into earnings expectations.

there is so much optimism priced into the markets. the two-way risk on growth numbers in a really significant. we have not seen that any year-and-a-half. jonathan: can we sit on inflation just for one be longer. you have said for a while we get stuck around 3%. are you rethinking that? lara: i'm not. at the end of the year we are going to see rent inflation pressures continue to creep back up. we are going to see the inflationary process really stick around 3%. i don't think that stops the fed from cutting of the economy slows a lot but it is hard to maneuver. jonathan: mohamed el-erian talks about stagflation re-wins. lara: the economy looks solid. business investment is going to ratchet back up again. i think we are any good place for the economy. i'm trying not to overthink it too much.

jonathan: probably overthinking it? you're looking at inflation, what does growth look like at the back end of 2024? subadra: probably it will gradually slow down to the remainder the year. we are not overthinking it. the simplest path is for the fed to stay on hold for the remainder of the year instead of the conundrum that the ecb is in right now. the market is pricing in for a june cut. then the debate on whether they will cut again in july, if they will cut in september. this volatility of expectations is what is confusing investors. to me a very straightforward path this for the fed to stay on hold for as long as they possibly can and then embark on maybe a cut a quarter or some sort of a very steady path of rate cuts from then on as opposed to back-and-forth. lisa: lara raises the idea of inflation and growth and what happens when you move out of the inflation being offset by strong

growth to maybe not stagflation but inflation not being offset as much. does that make you, if there is clear slowing growth, clear growing and spending, a little less sanguine about riskier securities with fixed income because you both have rates on hold, still enough inflation to make the fed nervous. an economy that does not have the same kind of juice in it. subadra: that's one of the reasons why we think across the yield curve yields are going to struggle to get above that 5% level. two-year above 5% will require a much more different stance of policy. the fed has the hike or not cut for the next several years. for the ten-year to get about 5% , the market is always going to be looking towards growth slowing down in the second half. that is going to cap the rising yields. even though we had discussions about whether the stars are higher and whether debt and

deficits start to matter, i really think the focus for the second half is going to be on the slowdown in growth. that will really cap the rise in yields. ten-years will struggle to get to 5%. lisa: where are you on the debate? subadra: there's a case to be made and i'm sympathetic to the comments from both bill dudley and lori logan. maybe r-star is higher. it might be higher than what we are hearing from fed president williams. how can the fed actually act on that? what they really need to see is the data support a higher r-star. we will find out the maybe three to four years where r-star is today. it is hard to know where it is right now as it stands. lisa: this goes to the framework of being hard to and over the end zones going to be. you think inflation will remain

stuck around 3%. what would you have to see to rethink that? we have neal dunn a coming out with a note after the data came out saying every month this year we have seen month over month core inflation lower than the same month of 2023. what happens if this holds into the summer? cannot make you rethink the idea 3% as a sticky spot for inflation? lara: to me the problem is that we really don't remember how much everything had to go perfectly to get inflation at 2%. today we have commodity prices really moving higher. i think rents are going to re-accelerate. ironically, really restrictive fed policy has stopped home construction, which is what is needed to help unravel this whole real estate stagnation and stop at higher prices environment we are in. long story short, when you put it altogether we may well see inflation dip a little lower but

my forecast is a longer run problem of stubborn inflation above 2%. kind of the mirror image of where we were for the five years before covid stuck below 2%. jonathan: i always feel like neil is regulating us. it always feels personal. lisa: it feels like he watches us and screams at the screen when i speak. you have no idea what you're talking about! jonathan: basically what he has done for. let's look at the next week. we get the payrolls report. in the survey right now we are giving you a sneak peek. 180,000 is the median estimate in the survey. the previous number, 175,000. can we talk about the ecb and the payrolls report. we will finish on the european central bank and a couple of minutes. what you looking for next friday? subadra: we have a slightly higher forecast for apparels

than the consensus. i would not be surprised if you get a 200,000ish number. the unappointed rate will stay below 4% for perhaps the remainder of the year. very strong employment report is what we are respecting for next week. if is any misses, that is when the market will react. it will shrug off upside surprise, i think. lisa: do you agree? lara: the market seems to have happy ears right now. they want rate cuts. that is the news they react to more than anything that would push that back. when we look to rate cuts then when i could happen we are starting to push up against the election calendar. we will give up the ghost slowly on a rate cut before the election and focus on those december or november meeting. jonathan: i get your point.

lara, thank you for that. a big conversation around the table about central-bank diversions. the limits of that divergence. how far can the ecb go without the federal reserve? subadra: the european economists said it best. it is data independence. the ecb is committed to cutting rates in june. they will do it even though the inflation data we got recently does not really justify them to cut rates in june. the question becomes what happened -- what happens after that. what really dictates the price action in the bond market is the divergent between the ecb in the fed. that will keep rates between the u.s. and europe diverging as well. the fed will stay on hold for the remainder of the year and the ecb will be biased towards cutting rates. lisa: we came into this week saying it was kind of going to be a sleepy week.

next week will be actually massive when it comes to both the data, the payrolls, the ecb. jonathan: you are excited about next week. lisa: i am excited. i want to know what you are most excited about. the ism data, manufacturing and services. subadra: i will start with jolts. if you look at the job openings, do you want to see the head toward that pre-pandemic level relative to the number of unemployed. that's a very important first metric on jobs. i would be looking to hear from the ecb and what they are thinking about policy not just for june but beyond for the remainder of the year. then payrolls. payrolls is very important. whether we keep the momentum that we have have about this year it will inform us on whether the fed will look at perhaps cutting rates in july or

september, which is not our base case but something we are looking towards. the fed really wants to see the job market cool off as inflation is coming down as a justification to cut rates. they want to see the data soften. jonathan: we are hitting the ground running in the month of june. just not on the politics, not this morning. we know how you feel about it all. lisa: i don't think i'm alone. good. jonathan: i think there is a good chunk of the country that feels the same way. double haters is a real thing in this country right now. job openings, good stuff. equity futures on the s&p positive by one third of a percent. dani: surging in the premarket nearly 25%. the retail reported first quarter results at topped estimates and races outlook for the full year. all of gap's brands had sales gains in outperformed expectations. but coming at it a creative

director in february and has turned to boost visibility. paramount global shares also rising in the premarket. only half a percent. that follows the report this guidance media submitted its offer for emergent -- skydance media submitted its offer for a merger. sony, apollo, warner bros., and byron allen expect interest in paramount. apple is planning to overhaul its siri virtual assistant using more advanced ai. the move will allow users to control the functions within app functions with their voice. the upgrade is one piece of apple's larger strategy which is said to be unveiled at the company's worldwide developers conference on june 10. that is your bloomberg brief. jonathan: thanks for this morning. setting you up for the day ahead. you are watching "bloomberg

surveillance." ♪ ♪ but... taking the gains 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.

jonathan: equities near session highs. county get down to the opening bell. here's the trading diary for the week ahead. monday, u.s. manufacturing pmi. wednesday, adp jobs data. thursday, ecb rate decision plus another round of jobless claims. on friday, the payrolls report. you will notice no fed speak. two wednesdays away. we need to wrap up make. some of the standout themes. the ai wins and misses. the renaissance and retail. gap this morning absolutely surging. look at the equity market ma.

-- in may. lisa: there is a shift in momentum. there's more discretion. there are areas that have been bid up . there is a reality check and how much is this driven by yields at this level that become more punitive as growth slows? that's probably the big takeaway. jonathan: would you have guessed the dow would have an ai miss and utilities would be ai wins? lisa: if i said yes, you would laugh. jonathan: it is kind of shocking. lisa: people don't have a handle on how quickly this can be rolled out, how feasible it is to get all the elements like copper to build out some of the utilities, the infrastructure. there is a change underway. how do you bet on that is the big question. jonathan: bifurcation is one with the consumer. the bifurcation within industries. the winners and retail, the losers and retail.

kohl's is a loser. we talked of that already. in the airline business as well. american, loser. everyone else doing better. that has been the theme through may and potentially june and beyond. lisa: who can cater to the high-end customer better? who can keep the customer base? two, who wins? there is a shrinking pool of cash at the lower end. willoughby the walmarts for the coscos report -- cost co's for the dollar generals? jonathan: lots of economic data going into june. we are really kicking off the election season now for november with the first debate at the end of next month. lisa: the first debate and then comes the sentencing for trump's verdict yesterday. that will be on july 11. just around the corner a few does later the rnc where he will officially become the republican nominee for president. it really kicks off today at 11:00 a.m. trump will give a press conference and his message will

likely be similar to what it was last night. this has to now do the verdict coming down to november 5 with the american people. jonathan: and the president navigates the issue going into that big debate. lisa: we will all be tracking every move of it. jonathan: i don't buy that for minute. lisa: is not going to change everything. jonathan: coming up on monday, united airlines ceo scott kirby. cameron dawson of new age wealth. amh taking a little bit of a break. enjoy. this was "bloomberg surveillance ." ♪

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katie: pc providing some needed relief to the market. a lift in futures right now. the countdown to the open starts right now. ♪ we begin with the big issue, pce comes in right in line. >> we think the fed will stay on hold for the remainder of the year. the data point does not really -- there is no sense