>> at the end of the day, what will drive the fed over the next few months through september is inflation. peter: reducing that will happen and this inflation will moderate. kathy: signals that rate cuts are coming. at least one more good inflation report. jeff: more importantly what we will see will drive the inflation data. john: they are reluctant to cut because they know how insidious inflation can be. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning. the s&p, a daily winning streak stretching today seven, the

longest stretch of the year so far. the fate of this market in the hands of this right here, your lineup is absolutely packed. this is what it looks like. numbers from delta, two hours later, cpi in america, a read on u.s. inflation. 5:30 eastern time, the president posting a news conference. lisa: in some ways, the week begins today. i think a lot of people are looking at determining the threshold as to whether the fed is basically locked in for a september rate cut. we heard from fed chair powell yesterday. really at 5:30 p.m., i have to give annmarie a bone here, because truly that will set the tone for a race that has been more unexpected than anyone had imagined. jonathan: look out for that conversation. another bizarre day in washington, d.c. let's go through some of the headlines together.

the senate majority leader will say, chuck schumer, off the record, behind closed doors, apparently according to axios, closer to replacing him. the president comes and says on the nominee, i'm not dropping out, pelosi says we've got to wait for him to decide. lisa: ok, i listened to the several times, actually, this interview, because i wanted to understand whether there was any other way of interpreting what he set said other than he just is not -- she just does not want to say "please leave the race." it was in response to the question "do you support joe biden to remain? in the race"? -- to remain in the race?" and then she said "we just all love him and hopes he makes a decision." jonathan: the news conference a

little bit later. we saw yesterday, there will be an interview on monday here in the united states. i find it interesting that we pre-announce that on wednesday, yesterday, looking ahead to monday. i just wonder if they are trying to push this off, just wait until monday, you get closer and closer to the republican convention. you hope president trump is back in the news cycle and this goes away. this is in the news cycle for a number of times. it's not going away. lisa: why there seems to be a coalescing around joe biden by democratic officials, though they are very concerned about their chance of being reelected. and it is not so much just falling in line and blindly following as much as if he says, "i'm not going to drop out, period, full stop," it is his decision to make. do they do more damage to the party by simply going against

him and speaking their mind? that is the calculus the number of people are making. you said george clooney reiterated that in his "washington post" op-ed. people are feeling desperate and this is someone they feel like is quickly deteriorating. jonathan: george clooney, typically like the rest of you, no way on this whatsoever, but someone who has actually seen the president behind closed doors, see what we have seen in public repeatedly. lisa: basically saying we saw in the debate a guy who i saw, again, in private during one of these fundraising campaigns, it is not an anomaly. that is essentially what he is saying. when people talk about the elites versus the rank and file of the democratic party, there is not really an apparatus for the rank-and-file to really speak, other than some of these donors, etc. if you have to go to the postal you talk to democratic officials who say, "we don't believe in

the polls, we have to change the polls," it becomes top policy. jonathan: we get numbers from delta. this is what the price action looks like. on the equity mark on the s&p 500, thursday at record highs, equity futures pulling back just a touch, .1%. yields are lower a basis point, and the euro for a second section -- session, 1.0848. ed mills of raymond james with mounting pressure on president biden to step aside, and michael pond of barclays, cpi data come on that. another record high for u.s. equities and another warning. on the equity side, we have moderated our overweight position, particular suit -- particularly some of the high flyers. let's get into that call. what prompted the change of

mind? when we talk about the high flyers come anything beyond nvidia? what kind of names are we talking about? russ: good morning, jonathan. our base case is still that equities will end the year higher than they are today. we are taking some chips off the table, and there are a couple of reasons. first of which shall you have a lot of good news counted in. we expect a strong key earnings season, including from any of the high flyers, for the main point is that expectations have become very high. when you have strong guidance, you can still see some disappointment in some of these trades around, whether we are talking semiconductors or areas deere's eai trade and just run an incredible amount. so, again, we have an opportunity to get these names as we get through the back half of the year, but we are at a point where it is going to be a little harder to beat and impress the market and it was

six months, nine months ago. jonathan: to be clear, this is an earnings call, not about incoming data, what might happen with cpi later, how the fed is going to respond to it. russ: i do think the earnings are going to be strong. these companies are going to continue to beat and guide higher. the cross guidance is tough to get over. we have companies that are up 30%, 50%, 70% in a short period of time. what they have to demonstrate to investors becomes very hard to beat. lisa: russ, i'm trying to imagine with the skull looks like. is that basically wait for nvidia, wait for it to fall, then buy into months when it falls and wait for the call? russ: i wish it were that simple. when you go beyond the stock price, how can you where you are exposure? one thing that is very cheap right now is volatility. we still have a market where

realize volatility over one month is in the bond and percentile we've seen over a number of years. one of the things you can do,, again, it is not just a matter of selling it and try to buy it back, can you take some of the exposure off the table by thinking about stop replacement, only the calls or the call spread, rather than owning the stock outline? it allows you to use that cheap volatility in a way that mitigates some of the downside risk. lisa: interesting at a time where we have a lot of uncertainty in times of -- in terms of what the macro backdrop and political backdrop will be. i do want to get to cpi. an important data point we get in about 2.5 hours' time, some people say it will determine whether the fed goes in september or not. what is the breakeven? what is the level we have to see in the cpi report today that would make the break -- make or break the idea of a september rate cut? russ: i'm not sure i would describe any number, even

something as important as the cpi, as the number to determine what the fed is going to do. we will get two labor market funds, two nonfarm payrolls between now and the september meeting, and those are also important. the fed is clear, they are looking at the market, watching for signs of moderation. i don't think it is one number. our view is it will come in around with a consensus is, and i think there will be some focus on the service component, the housing component, the parts that have been a little slower to come down. if you get in that ballpark of the consensus around .1 on the headline, .2 on the core, that will help solidify the case for a september cut. but, again, i'm not sure the 81 number is either going to, you know, nail it down or reject it. jonathan: for the purpose of this conversation, we can make a couple of assumptions. let's say it leaves the door wide open to cuts in september and maybe beyond. let's also assume the next month or so, employment continues to weaken somewhat.

i want to understand what the limits are to be rallies in the long game given what has been percolating the last couple of weeks. , you know, yeah. i think this is exactly -- russ: yeah. i think this is exactly the right question. the markets are likely to cut two times the share. certainly closer to what we seen at the start of the year. we have an environment where you have a couple things to keep in mind. the volatility of inflation is much higher than it was pre-pandemic. we've got considerable concerns about the amount of supply we are going to see in the back half of the year, 2020 5, 2026, and beyond. invite supply, i mean -- and by supply, i mean supply of treasuries. we are in an environment with the long end, the u.s. 10 year is in the trading range around roughly 420, 450, is probably reasonable going forward, even if we get the markets for today. lisa: yesterday, 39 billion

dollars of 10 year treasuries that were sold at a time when a lot of people are raising concerns about long-term inflation and the ability for longer-term rates to come down. given that, given the deficit, it was a riproaring option ,bidders really increase, taken down by the dealers, decrease, a below-market yield when it finally priced. russ, is this noise and not signal? russ: i think the one option is noise. if you take a look at last year, we had options that have not gone as well as expected, and we are realizing that the structural deficit we are likely to see going forward is going to be high and probably higher than we saw six months ago. so while it was a relief to the market, that you had a good option yesterday, we are going to have this come up again and again. if we think about, we were not talking about this three, four years ago. this is something that has come up in the landscape over the

last 9, 12 months. i don't think we are in the clear because we have one good option. jonathan: some of these people at the table were, to be clear. [laughter] thank you, sir. overweight, trimming some of the high flyers, on the equity side of things. in the bond market, even if we keep the door wide open to cuts in september, maybe beyond, even if you get weaker than expected labor market data, there is a belief from russ and the team at blackrock that there are limits to the bond market rally. lisa: talking about the long end in particular because the volatility will be greater going forward, because the deficit does matter, and people will be concerned about that. he sees the 10 year range bound between 4.2 and0 4.50. my point is, what point is that get shaken if there is a significant downturn? this is basically all still a soft landing call, and that to

me is basically baked into the assumptions we've gotten from guests and reports. jonathan: the 10-year this morning at 4.28. with your bloomberg brief coming years dani burger. dani: it took a jury one day to deliver a guilty verdict against octavia -- archegos' bill hwang, stemming from the collapse of his firm in 2021, of fraud and market manipulation. each count carries a penalty of 20 years in prison. and a rare miss for apple, if vision sales will not reach 500,000 units. market tracker ibt says it makes will not sell 100,000 units and a quarter. the international launch should offset the weakness, which would cost roughly half as much, and should help boost sales last year.

after an lifelong democrat george clooney has called for president biden to drop his bid for reelection. he is writing in a new york times op-ed saying that one battle he cannot win if the fight against time. it's devastating to say, but the joe biden i was with three weeks ago at the fundraiser was not the joe biden of 2010. he was not even the joe biden of 2020. he was the same man we all witnessed at the debate. clooney had headlined a fundraiser last month that has raised $30 million for's reelection campaign. that is your bloomberg brief. jonathan: thank you. we will see dani in about 30 minutes time. amh will be in my room in washington, d.c. up next on the program, pressure mounting for president biden. >> she has said -- he has said firmly this week he is going to run. do you want them to run? ms. pelosi: i wanted to do whatever he wants to do, and that is the way it is. jonathan: from new york, this is

bloomberg. ♪

jonathan: live from new york, welcome to the program. long day ahead. s&p 500 down about .1%, yields unchanged, 4.2782. on "surveillance" this morning, pressure mounting for president biden. speaker emerita pelosi: it is up to the president to decide if he is going to run. we are all encouraging him to make that decision, because time is running short. >> he has said firmly this week he is going to run. do you want him to run? speaker emerita pelosi: i want him to do whatever he decides to do, and that is the way it is. jonathan: this was the most bizarre exchange i think i've

ever seen on news before. this is absolutely ridiculous. he has come out, he has made the decision. they don't like the one he has make a list of the way they are going to dart around this is by saying, "we are waiting for him to make a decision." lisa: this is why i watched it three times. what am i missing about the answer here? there are two interpretations, one that he has privately still deciding and they want him to actually come to a decision, and it is different than the public response, and two, people say they all want him to step down, and if we will keep being warm and encouraging and just trying to let you come to the decision that we want jonathan: another one from another one you have already. 5:30 eastern time, there will be a news conference, and in that room will be annmarie hordern in washington, d.c. amh, how will this be, and how low is the bar for the president? annmarie: the bar is low but the

stakes are high for president joe biden. not only do journalists in the room have questions for him, every single democratic lawmaker is talking about his press conference as if this is going to be the end-all, be-all of whether or not he can do the job and be the nominee come november , not original to foreign leaders in the room who are talking about this on the sidelines. the fact that joe biden's age has completely eclipsed the entire nato conference, what they are here for. every eye not only in washington dc but around the world are looking at this press conference to see what the president says, how he acts. as you said some of the bar is low for him to clear but the stakes are incredibly high. it feels like he is on political life support at this moment. jonathan: looking forward to your coverage. i know you have a special guest lined up. in the nation's capital head of that news conference at 5:30 eastern time.

ed mills of raymond james, good morning. ed: good morning. jonathan: what was your reaction to it? dani: two nancy pelosi -- ed: two nancy pelosi? that was nancy pelosi, mother of five, not nancy pelosi, speaker of the house. are you sure you want to make the decision you have made? i think it was a turning point for democrats, because what we saw is that after the debate, clearly the momentum had built to have joe biden step aside. joe biden starts to push back. he does an interview with george stephanopoulos on abc come and he does just well enough to stay in the race, and he starts to kind of really campaign again. and then was getting support on the hill, and it looked as if he was securing the nomination once again, and then her comments open up the floodgates. chuck schumer last night, supposedly arguing that he is open to the ticket. so if this were to change, i'm looking at pelosi having a more

specific statement. jim clyburn, who essentially gave the political support to biden and a couple of other democrats, has to be the one that come out and tell biden that he has to step aside provided to step aside, because it is abc interview, he said they would never come and ask him to do that. if that changes, the conversation with the media also has to change. lisa: before we get there, it was an interesting dynamic, one of the reasons we saw the floodgates of a democratic official coming out and speaking about the desire for joe biden to step aside was curtailed because of nato. let's have nato, let's make sure it is ok, let's make sure the u.s. has a strong point, and we will figure it out afterwards. it seems like the cat's out of the bag. we are hearing nato leaders talk to trump advisors, to see the more likely outcome. how much is the floodgates, are they sort of shifting way beyond what you would have expected to really get this going in the

timeframe? ed: i was surprised by pelosi's comments yesterday. i think nato is an important point, to have the nato conference in d.c., to allow joe biden to continue to lead the country, leave the world is important, but the problem for democrats is the timing is really short here. we have a valid deadline in ohio that is on august 7 -- valid deadline in -- ballot deadline in ohio that is on august 7, so if you make a change, you will have to do it in an online convention, probably. how much is a strategy by the biden campaign to just delay things long enough where if we get past the nato press conference today, past the lesser ho -- lester holt interview on monday, if we have trump nominated next week, will there be a push by democrats to move up that virtual convention to the week after the republican

convention, and shut down any question whatsoever on whether or not biden is going to be the nominee. lisa: there have been inquiries into why the people around joe biden have kind of kept his condition quiet, why we have not heard more about this earlier and more vocally. do you think those are legitimate lines of inquiry? ed: when you are the president of the united states, that is a very legitimate line of inquiry. generally speaking, the president of the united states has to be available at all hours. it is pretty striking that we are all focused on a 5:30 p.m. press conference, where it is not that many questions that you get at these press conferences, and whether or not he is able to clear that bar. is not unusual to have a sit down interview with an anchor from a tv station, as a, ooh, we'll have to watch this moment. we have changed our kind of general barr for what it is to be president. we have not had a press conference at the white house where joe biden has stood there for an hour plus, taking all

questions. if you could do that, why hasn't he done that? is a very legitimate question for all of us to be asking. jonathan: donors and the polls. what are you hearing about where donors are come and what are you seeing in the polls right now that might change his mind? ed: if this were 20 years ago, it would be a completely different conversation, because folks that donate to campaigns have really broadened out. what we see from the biden campaign is actually really good fundraising, especially since the debate, and that is a lifeline for this presidency. if it was 20 years ago, before we really saw this level of online fundraising, fundraising would have already dried up, and that would have been a huge pressure point. the past flow of funds from small donors -- small dollar donors is allowing biden to stay on. on polls, i think we have so many polling errors not here in the united states but as recently as last weekend in

france that gives the ability provided to say, i don't believe those polls. if you look at biden's track record, every time he's been on the ballot in november, he has won, from senate to vice president to president companies on a winning streak he does not think he is going to stop. when you are someone who has won that frequently, you don't believe the polls. i think he is someone who thinks if he steps aside, if they're time to put together a campaign to go against trump. jonathan: ultimately, what is the call from you? does he step aside? ed: if we see a poor performance, absolutely. but i think it is his and only his decision to make. he has the delegates. i think as of right now, he's more likely than not to be the nominee for democrats this november. jonathan: ed mills of raymond james, good to see you. we are counting you down to the latest read on u.s. inflation and about two hours from now, with some considerations as well about what this ultimately means for inflation.

michael pond, can trump make a great again? lisa: the policies we are expecting potentially with tariffs, immigration, etc. this is what people have been saying, and other people are saying ignore the noise. jonathan: is it noise or is it news? s&p futures, -5.1%. from new york, doug -- negative by .1%. from new york, good morning. ♪

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>> equity futures on the s&p 500 negative by 01%, the nasdaq down by about .2%, the russell, as well. seven days of gains on the s&p 500, the longest winning streak of the year so far. lisa: it had been inching up, coughing and wheezing to new record highs. yesterday's was different with pepin at step, 1% gain, and you saw this across the board. this is the key question, are we starting to see the broadening out as people avoid from the high flyers? or start to look at other places, too? jonathan: every single group in the s&p 500 in positive territory yesterday. lots to talk about, particularly on the supply side. like rock said basically even if

you get softer inflation -- blackrock basically said even if you get softer inflation, there are limits to the long end because of the supply coming this year and next. lisa: and the range we expect 10 year treasuries to trade in. there are other people out there, including peter scheer, who are sympathetic to that view. at what point do we see a real growth slowed down that got checks the concerns of the deficit? you for that again and again, so maybe this is more of a near-term call until we get more visibility in the fog of 2025. jonathan: you will not just look for economic data. we will go through the other numbers. i would like to switch to foreign-exchange briefly. take a look at sterling, gdp was better this morning. we heard from the chief economist of the bank of england yesterday, saying to throw cold

water over the prospect of company time soon, highly dependent on inflation. sterling closer to 130. if you are rishi sunak, the data is better, what are you doing calling for an election in early july? what have we got? lisa: the forecast is lower than expected, in part because they see capacity decelerating in terms of how much going into the second half. they are talking about something like 170 -- 1.70 to two dollars, the expectation was to point 40's dollars -- was $2.40. meanwhile, when you look under the hood, they have been percent by a huge host of costs, whether it is labor discussions, equipment, at a time when demand is still there, but how much can they jack up prices? becomes

relevant. i would like to break down domestic and national -- international travel. jonathan: we will be on top of the story through the morning. the stock is down by 6% at the moment. under surveillance this morning, axios reporting that chuck schumer is privately signaling he is open to replacing president biden as the democratic nominee, telling bloomberg news, no further comment. we have seen this repeatedly. what they see on the record is different behind closed doors. lisa: on one hand, people are seeking reelection the next couple of years, democrats, who see it as political liability to not say something. this is an odd career risk on both sides. on the flipside, a number of

democrats are thinking of democrats are thinking if we do not back joe biden and he doesn't leave the race, we are ensuring that donald trump is the president. donald trump on his side reportedly is excited about the idea of facing off of joe biden, and people are talking about a landslide whe by him -- landslide win by him. these are underpinning the rumors we are hearing is the leadership tests out pushing back on joe biden. jonathan: espn, pay-per-view, something like that, that would help out a biker, he'd be happy with that, too. lisa: so little robot could do it for them. jonathan: how many people would pay to watch that? i would pay serious money. lisa: i'm sure you would. it will not happen. jonathan: anyway. lisa: you think will be worse? jonathan: i think we know the answer. it is the guy who thinks he had a six handicap. lisa: eight. jonathan: inflation coming up later, costco hiking membership

fees for the first time since 2017. a basic membership will go to $65 from $60, premium to $130 from $120, taking effect september 1. stock is positive. typically, they do this every three years and this one was overdue. lisa: that is what a lot of investors of the company have said. it affects 52 million memberships. that is why we care about a five dollar or $10 increase. this is the way for them to get a lot of money. at the same time, they have been gaining share. this is the calculus for costco, how much they would like to lower the bar for people to go there, or some of the other high-end grocery stores, how much are they trying to get some of the wealthier individuals who would like to maybe experience less food inflation? jonathan: they think they are in a position of strength to do it.

the stock is higher by 3%. u.s. cpi data is due. forecast expects consumer price to show the smallest back-to-back increases since last summer, boosting the case for the fed to cut rates. michael pond joins us from barclays. army underpricing inflation still? michael: we think so. the markets are essentially priced for fed perfection. as a baseline cog, assuming the fed gets it right over time is a good one, but the risks still seem like inflation is tilted to the upside. jonathan: what is it about the pillars of the call that you see? where is that risk coming from? michael: as measured through cpi, the most robust component is measured via rents. there has been a lot of new

supply coming into the rental market, but in single-family rental markets, there is still a lot of tightness, in part because of high rates and a lack of turnover in the housing market. that means those who would like to buy a home are left as winters, so there is strong rental demand pushing upon rents, so we are left with high rent inflation despite the fact that the fed has raised rates. lisa: a lot of people come on and site owners equivalent rent is a flawed metric and should not be used. rents have basically been stagnating across the country and we have not seen inflation. this metric of cpi would be a lot lower if they acknowledge that. how do you respond if you still see housing and rental inflation is a real factor driving inflation going forward? michael: our methodology is not the reason why but ours is the reason to understand the cpi.

that is what the markets are priced out of. when it comes to measurement, people are overemphasizing measures of multifamily rent inflation, whereas oer is a 50/50 blend between multifamily and single-family. so most of the indicators on the national rental market are on multifamily. historically, that has been useful in forecasting where we are, but things are changing. single-family rent inflation, as indicated by zillow data, is almost at 5% year-over-year. multifamily is under 3%. if you are just looking at multifamily data, you forecast inflation to be much lower. i think that is why many have missed the point on oer and getting it wrong. lisa: how much do you see policy is a big piece of this? the idea that you have rent components on one side and the question around tariffs that regardless of who wins, seems to be in an preceding relevant

point, as well as curtailing immigration, also probably irrelevant regardless of who gets elected? michael: we have heard from clients that they think a trump administration will be more inflationary than abiding, second biden administration. it isn't clear because biden policies of stimulating the economy through fiscal has been inflationary under our view, so maybe they are more inflationary under trump, we are getting tariffs, so either way. it is not clear, but the market says that the consensus seems to say a second trump administration would be more inflationary, and given that the odds have gone up, we think that the market from the standpoint should price and higher inflation. it is not, but we think shorter and breakevens are cheaper from a risk perspective. lisa: are you saying you don't

think the fed should cut rates? michael: we think they will cut in september and data will justify that. especially when looking at pc inflation, which has a lower sheltered rate, so we think data will come in soft enough on the inflation data, to clearly even their shift in focus towards labor market, which we heard from chair powell earlier this week that a year or so ago, it was all about inflation and the less inflation came down, they were not budging. now with the labor market weakening a little bit, they're watching both sides of the mandates. you could have a scenario where inflation stays relatively high, sticking to the upside, get the labor markets we can just enough that they cut even with high inflation. jonathan: that's a good point, so let's build on it. what is it about the inflation forces that you see? you mentioned france. that are durable -- emergent rent, that are durable? michael: businesses still have

pricing power, with costco and other still raising prices. we are still seeing food prices hit inflation, especially when it comes to restaurant requires, so there is still the pricing power. core goods price inflation though is gone for a little while. we are seeing that come in at a relatively negative rate. jonathan: it gives you the impression this coming back? michael: it could. look at shipping rates, look at the shanghai shipping index, retraced over 60% of its pandemic drop their. during 2021, a lot of the core goods price inflation was because of supply chain problems through high shipping rates. that is not going to impact june print, but if that stays high and goes higher still, eventually, contracts will be

reset to reflect higher shipping costs, and that will be reflected in higher core good price inflation. jonathan: michael pond, thank you, barclays. making inflation protection great again. paraphrasing but wonderful. lisa: lovely play on the reason why a lot of people think inflation will be higher. although, he poured cold water on that saying that inflation will be present regardless of who wins. jonathan: lots to talk about. we have numbers from pepsi, with a wrap up of all of that, with the bloomberg brief, dani burger. dani: we start with novo nordisk, they have failed to get approval from u.s. regulators. the government asked for more information to complete the review. novo nordisk asked for information on the type one diabetes implication, saying that they are evaluating the request and plans to work closely with the agency. they have climbed about 40% this

year thanks to the rising potential of its struggle. delta shares finally more than 8% premarket. it expects profit this quarter to fall short of expectation and the weaker forecast reflects issues plaguing the broader industry. delta and competitors are looking to fill extra seats, while rivals are pushed to lower fares to stay competitive. the ceo said price cuts have been particularly acute for june through august, estimating that the industry capacity exceeds demand by 3% to 4%. pepsi shares also falling in the premarket, down 2%. it reported second quarter profit that expectations, yet, revenue came up shy. organic revenue in the second quarter was 1.9% and the estimate was for 2.9%. amanda slipping after recent price raises, especially in north america, where revenue and volumes dropped year-over-year. jonathan: more in about 30

minutes. delta just briefly, this was the darling of the airline sector for most of the year before this, the stock was up by 16.5%. this thing is getting punished this morning. lisa: it was expected to be immune to the domestic trends because of strong international presence. second quarter profit fell 29% from a year earlier, saying this has to do with a glut of seats in the u.s. capacity has gone up faster than demand, particularly on the domestic side. also, higher fuel costs. also, the labor renegotiations. when i think is interesting, over half of delta revenue comes from sources like the loyalty program and premium ticket sales. jonathan: credit card companies. lisa: and that is an important point, it raises questions about what about the other airlines? i expect them to see more damaging outlook. jonathan: american airlines already having a tough year.

this is filling into the rest of the sector. american is down, united down. next, allies looking for leadership. >> week in europe need to be carrying are better weights when it comes to defense. and when trump is saying this, and we hear there's also from the democratic cabinet, rightly so, we take that seriously. jonathan: that conversation next. ♪

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carrying are only 20 comes to defense and tariffs, and when -- our own weight when it comes to defense and tariffs, and we hear this from trump and the democrat admit, rightly so. we take this seriously. i'm pretty certain that europe, who invests more into its own defense, is also a better partner and more attractive partner to the united states. jonathan: nato declaring that ukraine is on an irreversible path to membership once the war with russia ends, and announcing a long-term commitment of security assistance. this is as a look to shore up ties ahead of a second trump term, watching every move at the summit, including his news conference at 5:30 p.m. later today. annmarie hordern, good morning. annmarie: good morning. you have european diplomats

watching every move, including some aides who told us that it was not only biden's speech on tuesday, but they were concerned he would drop the middle as he was putting in doubt -- putting the metal on the outgoing chief's neck. this has overshadowed the summit. we have the chairman of the new york security conference, ambassador christoph heusgen. the elephant in the room, you have been nominating here on the sidelines, but the nato summit is about the november election and president biden's mental acuity. from a security standpoint, does it change the u.s. commitment to nato, takes on the ground, weapons to europe and ukraine come on who was in the white house? christoph: difficult to say what is bothering us, what we are watching for the summit as we would like to concentrate on the summit, we would like to be

strong, and when you are on the sidelines, everybody talks about the president, and their bets placed. annmarie: that set nato being placed? christoph: no, on will biden remain or not? if he is replaced, who will be the next? so how can we commit more forces to support ukraine? ukrainians are battling with russia, -- annmarie: because that is the state of play and this is what leaders are discussing, does that undermine the security landscape? are you potentially hearing from officials that they would also like foreign leaders like biden to step aside so they can focus on things like security? christoph: i don't see that, foreign leaders will like the elephant of the room to go out and see where they stand and to concentrate on the work and not have it overshadowed by this

never ending debate on should the president stay or not? we hope that we get over this as soon as possible. annmarie: i was in kyiv last week, victor or bond went to see vladek -- victor went to see vladimir putin and xi jinping, and this evening, according to our reporting, he will be going to mar-a-lago. you get a sense that more of them are trying to get in line with trump or individuals because they think he's going to win and they would like to fortify the nato alliance and the eastern flank? christoph: it is not wrong to talk to the leader of the opposition, and you may remember that david cameron went there, and i think he also help to get the former president agreed to the big 61 billion package, the problem is viktor orban. he is a nuisance value, and he

uses this to portray his position, so many people are mad about this guy. he is a strong country, and they are benefiting and undermining european unities, so this is from a country attacked by russia, 50 years, 60 years, and they know how aggressive the russians are, but somehow, he is manipulating the public. annmarie: if there is going to be a peace settlement and talks, could he facilitate that? christoph: he has not seen as someone neutral who is acceptable. we have to come to an agreement, but this has to come from a position of strength, and you cannot say, please be nice, that will not work. annmarie: when you look at

position of strength and the hindsight of the war, the end of 2022 was ukraine's best position. was that the moment that zelenskyy should've gone to the peace table? christoph: putin is clear right now, he is ready, but under his condition, so there was no hint that he would give up this war, so as long as putin believes he can win and has more staying power than we have, he does not stop. he has said that. annmarie: do you think nato should have come out with an actual invitation with ukraine to join the alliance? christoph: i think the only insurance the ukrainians have and we have that we do not have again to invest a lot of money to support ukraine from the next russian attack his nato membership because russia read

-- agreed. ukraine gave up their new we are weapons -- their nuclear weapons, and russia said we guaranteed their sovereignty, and they did not do it. so you cannot trust the russians. putin signature is not valid for the worth of paper it is put on, so you need support and nato membership. annmarie: you look back at your time when you work with angela merkel, wasn't a mistake to continue to rely on russian oil and gas and expanding that to nord stream 2? christoph: this was only part of the policy, and the most important is this is why it was a tough position. i was with the chancellor when we negotiated the minsk agreement, where there was a clear problematic way forward to solve the process, and putin destroyed everything. hindsight, it was about idea to

continue to rely on russian gas. our friends from baltic countries also they were against it. we have a long tradition, and we do not have the room to explain germany gratification, and they were responsible for 20 million killed during the second world war, so there is a lot of guilt, but now we see clearly where putin is headed, and the only way is a position of strength. annmarie: ambassador christoph heusgen, policy advisor to angela merkel, and at the end, he says germany sees clearly now. it is a distraction with what is going on with the president's age of the nato summit. jonathan: more from annmarie hordern in the next hour or so. clinically, pfizer is higher by almost 4% early trading.

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>> what has been winning the is the ai fueled trade, and this is a long-term trend playing itself out in phases. >> we don't think ai is the bubble yet. there is a growth and fundamental story here. that is what it is in a bubble. >> the spread between tech and magnificent seven earnings compresses as the years go on. >> the earnings have been revised a lot, and they have give or take delivered. >> in the near term, investors hunkered down a bit. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, welcome.

with a bit of a shakeup, let's get to it in the premarket, delta getting punished, down by about 8.5%. the headlines dropping 30 minutes ago. lisa: basically lowering their full-year forecast, talking about second quarter profit falling 29% from a year earlier. a lot of people expected this decline because the comps were pretty heavy. also because of costs going up, but the reason for it is curious because prices are getting cut at other airlines, so they have to compete to cut prices. capacity has gone up, even though when we go to the airport , it seems like all the flights are full. they talked about the paris olympics and how that is crimping transatlantic demand and makes people want to stay away. a lot to unpack here. jonathan: in a word, confusing. july 4 holiday weekend, record numbers going through tsa.

the number absolute -- the airports absolutely packed. every single plane that i went on, that other people went on, certainly packed, which tells you why so many people are surprised and why the stock is down so much in early trading. lisa: it raises questions. is this not the full story? if it is, will they lower capacity going forward, which should make it more expensive and even more crowded later on? there is also the other issue that goes to the heart of what we've talked about with boeing and united with the turnover in staff. that is that there heavy costs include $500 million of annual increase in just labor spending and they have a $350 million increase in maintenance spending. jonathan: that is the stock to watch, and the point of being a credit card company, true. it is not just delta down but also american, having a difficult year, lower by 4.5%,

united down by 4%. we will see if they confirm with delta has told us. here is the data to watch, 8:30 eastern, it is cpi in america. once we get through that, it is on to 5:30 eastern, the president of the u.s. holding a news conference as nato leaders convene in washington, d.c. typically, you might say, why do i care? you know why you care the last weeks in the country. lisa: basically as we heard from ed mills, the forest three to five questions if he can answer coherent. that will reduce some pressure. the question i have from the market perspective, we will talk about what the chances are and the behind the doors conversations with democratic readers, what does the implication of the market for this? do we have an implication of whether harris candidacy does

for the implication in markets? do you have a sense of how serious the markets are saying that donald trump will sweep unless joe biden steps out? if that is the case, does that trade become more heavily bet on? how much does this become market moving and how much does it just say it is always? jonathan: every 2:00 p.m. eastern time, i will sit here and say, we are waiting for them to make a decision. i would just sit here and say there waiting to make a decision. what was nancy pelosi doing yesterday? the president seems to have made his mind up, he is staying in the race, and that we had a series of party officials say yesterday that we are waiting for the president to make a decision. make sense of the mess. lisa: yeah, no, i'm not going to. basically, there's no way to make sense of it. they decided not to cut rates and after the press conference,

you said, i'm waiting for you to decide how you will shape your rate decision this time, it would be bizarre. nancy pelosi was dancing around either that joe biden is actively considering whether or not to drop out where the fact that she, as the former leader of the house, something he should keep running. either of those two are highly damaging and raise more questions about joe biden's candidacy. jonathan: we will catch up with annmarie hordern in about 10 minutes. futures -5.10% on the s&p 500. sneak peek at the bond market action, 4.28. plenty happening later. more supply. i think we get $22 billion worth later this afternoon. lisa: yesterday, the auction was very strong, the day before, very strong. is this just simply the volatility of auctions? how much do people care about auctions when they go well? or

do they wait until they don't to talk about the deficit? jonathan: i'm certain one of us might be doing one or not the other. coming up, sarah hunt of alpine saxon woods. congresswoman haley stevens admitted mounting pressure for president biden to step aside, and deborah cunningham from federated. we begin with big tech sending stocks all-time highs with the s&p 500 topping 5600 for the first time ever. sarah hunt of alpine saxon woods, still see a landgrab and a spending boom on the back of the ai infrastructure with valuations at high levels that will need to be further evidence that spending does not cause. she joins us now. good morning. are you nervous about what we might hear from customers later this earnings season? sarah: it's interesting because i saw a note goldman put out on the fact that ab were spending too much. -- fact that they were spending

too much. how can you say that? it reminds me of the dark fiber discussion. well, the internet absorbed it all, so what is enough and structure? i think we have the answer yet. it is just a lot of large numbers now. jonathan: should we reward the apples for having some kind of big stock backer or reward those investing money in the future? some big, big outlays very are seeing. sarah: i think that is trying to split the reality of your rewarding companies with low cash. we still have a lot of cash, and that is where i would like to be. for apple, that makes more sense for them now. for others, it makes sense what they are doing. it is not the acquisition of something that is making no money or something along those lines. lisa: what to make of the argument that essentially there is a positive story to tell with ai companies and big tech names

but sentiment has gotten so overinflated where people expect big beats that in the near term, it seems nearly impossible for them to exceed those of the same degree. do you agree? sarah: this is the most difficult point because they will come a point when spending on infrastructure goes down where the delta goes negative, and you have not got enough use cases for other companies that are supposed to get more profitable on the back of ai when that happens, and i think it may, that's when you see people worry about valuations. i don't think you're there yet, but i think the concern is, we built on the infrastructure, we have all this stuff but we cannot use it yet. but it will get used. lisa: it feels like it is easier to speculate on whether ai is available or not rather than talk about the other 493 names. you mentioned delta, it was

supposed to be the darling of a cycle of people who benefited -- cycle that benefited people who had the money to fly around the world. is there a problem that will percolate to broader number of consumer facing companies? sarah: is the problem the revenue line with the cost line? mentioned earlier the extra cost. this is a question of what happens when inflation comes down, do margins get squeezed? if it is a problem of margins getting squeezed, it is a problem on the individual company for. a lot of labor costs went up the last years, and those contracts are barely coming through, so they may blame it on having too much capacity, but having flow recently, i don't see that anywhere. jonathan: where you could -- if you could pick an industry, who has pricing power? ready see the pricing power?

sarah: i think it is in the technology space. nvidia is getting better pricing than before. i think any place where something is in short supply, you have power and pricing. i would argue the airlines have pricing power, having paid for tickets, but it also depends in where you're going and the timing in the end, any place where there was any capacity constraint, you have power. jonathan: what is it about delta airlines? why is it always miserable? sarah: because we are at a point where so many are flying that even though the increase capacity, air points and airlines cannot -- airports and airlines cannot handle it. there's notice it. it is hot. i could go on and on. lisa: i used to go to the midwest frequently because my family lived there, and we would fly in on midwest express. it was a nice experience, everything was first-class and it went out of business, but you

raise the question of how much you end up with cost structures that are only now getting bigger. do you think people are underestimating the margin compression we could potentially see this cycle? the pricing power is in nvidia, but it is not necessarily in delta. but it is not necessarily in these other areas dealing with fundamentally higher costs that have not come down. sarah: we were considered there would be margin oppression earlier than there had been, so there might be a lag on it because costs have not caught up yet. we are immediate people, and business cycles, things take longer. it takes longer for people to figure out their pricing structures. fuel should have come down, but it could have been that they are using fila higher class that inflation will take a while to come down. we are looking at things with

the wall street immediate level that i need to know what is happening today and tomorrow. that will have to play out the next several months, and we are starting to see whether or not that will happen. i don't know with delta isabel whether or that is a one-off. lisa: are you more interested in cpi or the president's press conference at 5:30? sarah: yes. [laughter] i think both are important. you had a guest on earlier today who said what number is not the most important thing. it isn't, sit goes very much in the wrong direction. if cpi went in the very wrong direction, it would be the most important. i think there has been chaos since the debate and it is an over. none of what anybody is saying makes sense except, tell me something i would like to hear. until i hear what i would like to hear, i'm not believing what you are saying. that is where we seem to be. i don't know that the press conference today will make that different. i don't think to the extent -- it is unfortunate -- but i don't think that it is not wrong that age is not something you cannot

take away. jonathan: i really was for the mark, the considerations percolating the last few weeks? sarah: to the extent that we have seen both of these people as president in the market has reacted to both, political chaos is not just noise, and that will take people's risk appetite down to some degree, but we don't know that yet or what decisions people are facing. we know where one side of the ledger is. jonathan: sarah hunt of alpine sachsen words, thank you -- alpine saxon woods, thank you. here is dani burger. dani: global oil demand growth slowed last quarter to the weakest and more than a year. that according to the international energy agency,

they are on track to grow more than one billion barrels a day this year and next, comfortably much higher flood of new supply from the american as, according to the agency. apple aims to ship at least 90 million ipo 16 devices the second half of the year. they are counting on ai services to fuel demand after above be 2023 -- after a bumpy 2023, targeting around 10% of new shipments of iphones compared to predecessors. and manhattan's apartments market reached new levels of competitiveness. a record high 24% of leases were signed after bidding wars. units listed for an average of 24 days before getting scooped up, and renters paid a premium of 1.4% above listing on average. rents were still steady. the new red hat release was

$4300, $50 more than a month prior that year ago. jonathan: do not let them get to you, the most important number, 4300, the median rent is unchanged, the brokerage would like us to think there must've bidding wars going on so we can start them between ourselves. lisa: how do you really feel about this? i hear about all these people who don't really move into the city. jonathan: but rents are unchanged from a year ago. i hated. -- i hate it. lisa: are you in a bidding war? jonathan: no, and they will not be either. next, pressure is mounting for president biden to step aside. >> should he just take the cognitive test and demand that donald trump do the same? >> i don't think that would hurt. >> do you think he should? >> i don't think it would hurt. jonathan: that is the conversation next on the program.

from new york city this morning, good morning. ♪

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jonathan: remember this. they made people think they were like bidding wars, say had to rush to take them off the shelves. lisa: cabbage patch kids, beanie babies. jonathan: quickly, go get one. lisa: like please, i would like an apartment. jonathan: in pink, the unicorn version. absolutely ridiculous. lisa: i remember that, beanie babies. jonathan: equity futures on the s&p 500 -- cannot do that with apartments. we are down .10% on the s&p 500. lisa: i don't think this is quite the same kind of issue. come on. we are going on different things. jonathan: 4.28 on the 10 year. under surveillance, pressure

mounting for president biden to step aside. >> president biden and vice president harris are showing up with real receipts making people's lives better. >> some people suggested to go ahead and take a cognitive testing demand donald trump do the same. >> i don't think that would hurt, to be honest. >> so you think you should take a cognitive test? >> i don't think it would hurt. jonathan: fractures deepening the democratic party as a growing number of party members questioned biden's fitness for a second term. the president is set to deliver a crucial news conference later this evening i 5:30 eastern. let's head to d.c. to catch up. good morning. annmarie: josh wingrove and i will both be in the news conference this evening. josh, you were talking to the white house and you have seen how it has been with the nato summit and the elephant in the room is joe biden's agent whether or not he can be different world.

does the white house feel the same way? high-stakes, do or die moment . josh: some do, some don't. a lot of people close to biden set a letter was sent on monday to lawmakers that says basically shut up, get in line, i'm running. that is his position. we were told by sources yesterday that biden has not wavered a bit in the decision to run. however we are interpreting it, pelosi surprised event yesterday has not wound him, but there are nerves across the democratic party, not only among lawmakers speaking publicly, but this has gained steam. i think if we were sitting here before pelosi had spoken, biden had felt pretty good, and they thought he said got back in the bag a little bit. on sunday, they said biden probably should not be a nominee, and then tuesday, we

are all team biden, and now it feels like the wheels are running off a little bit. all eyes are on the press conference. if he goes badly, that i think we will see more momentum towards the question of whether he should be the nominee. if it goes well, maybe they can put it back in the bag. annmarie: the financial times this morning has some quotes, one saying that they cannot believe they are saying this but they wish to could be a gaffe tonight because something so big that he fails that he just steps aside. we heard from one important owner from hollywood yesterday. who does the white house view, is it the nancy pelosi's remark yesterday? i wasn't the george clooney opinion piece -- or was it the george clooney opinion piece? josh: i think it was the george clooney piece. he was at an event, biden

skipped the ukrainian piece fundraiser to go to the -- ukrainian piece and wanted to go the fundraiser with george clooney, and he had to be stared off stage, handled, however you would like to say it, so clooney came out saying not only that biden should not be the nominee, but the guy he saw the fundraiser was the same at the debate, in other words, it was not just the debate but other things, as well. annmarie: this goes back to the nancy pelosi saying that is this just -- and this was back to clooney saying that this is not just one event, but this is a condition. josh: i will note, all eyes on tonight, it has not been a light week for him, especially one that has been successful as nato summits go, i'm sure he would like to talk about that. they would try to put the contrast more on trump. i would not be surprised if

google phrase 2025 comes out of his mouth, they would like to steer the conversation mortar that, if not only a message to their own party that this is a contrast election. annmarie: i would like to get a sense of how palatable it is, the concern? a source said to me once he worked for bush, anything you see in the press, it is always 20 times worse inside if it is that bad in the press. josh: some are putting on a happy face, but the mood yesterday was rough. people are not jazzed at the moment. for a range of reasons. something media are disproportionately going after the. some are mad that the democrats are speaking out. and some of them have a deep sense of dread about all of this and that when we were another, this is will do the democratic brand heading into the election. it is rough right now, and we think that for some of the who might have felt comfort 72 hours

ago, that everyone is sort of falling behind in the president, and now it is more of an open question. peter welch is not a firebrand who pops off to come out and say, and that is indicative of why the concern is as opposed to senator romney saying something about donald trump, when every other senator agreed. annmarie: if he has the press conference tonight, my schedule and promote on wednesday the nbc interview monday evening? josh: you are the media expert, you tell me. there will be a lot of eyes on that. he is also going on friday to michigan. this is important, biden is campaigning right now. he has his pedal to the floor, which is a signal that he does not intend to step aside. so democrats are coming out, essentially tried two the bubble -- trying to pop the bubble to

show they have deep concern but right now he's flooring it. he speaking to black voters, touting support from the congressional hispanic caucus, all these key constituencies of the democratic party who have been supporters of the party but of fighting specifically as a lifeline. annmarie: josh wingrove, white house reporter, thank you for joining me. we will be in the high-stakes of who is covered this evening, you talk about biden hitting the floor campaigning, there is a new poll today, more than 6% of democrats -- 56% of democrats think he should step aside. jonathan: thank you. economic the basic observation why would he announce an interview that would take place monday and it ousted on wednesday, ultimately, time runs out for people to stand aside. lisa: which has been the strategy that if they keep getting it, essentially, people have to get in line. also saying, i will still be

there monday. so stop trying to wait for me to drop out on friday after the press conference. jonathan: you know how low the bar's this evening, superlow. lisa: it is, but that is the real issue that it will not show concerns. jonathan: next, and recorder and sits down with congresswoman haley stevens of michigan. that conversation is next. from new york, this is bloomberg. ♪

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jonathan: stocks on a quite winning streak closing at all-time highs. equity futures -0.1%. this is a really mild pullback on the s&p. on the nasdaq down by a 10th grade the stock the morning is delta. that name is down hard in the premarket. more bond supply coming later. 30 year bonds coming into market. 30 yield -- authority -- 30 year yield down. on the 10 year four point 28. want to finish on foreign-exchange pre-the euro stronger. the strongest it's been since early june so in about six weeks or so. euro 1.0851. here's that name for you delta delivering a disappointing outlook expecting profits to

fall short of expectations as heavy competition in the domestic market is driving ticket prices down. the stock has been driven down by that announcement. down in the premarket by 9%. lisa: adjusted earnings in the third quarter per the expectation was for $2.04. not a massive miss when you take a look at things all things considered. that said we are talking about a huge decline in second-quarter profit from a year earlier. how much is it because of how much the cost based has increased. how much of this is because of fuel prices would -- that have gone up. and none of these airlines hedge anymore. how much does this have to do with the ticket prices having to be competitive on the domestic front and they throw in the paris olympics are producing transatlantic travel because people don't want to go to paris unless they absolutely have to. there is a mystery on this and you can see that percolating out in the other shares. jonathan: the one thing that

made the most sense was paris around the olympics. i wouldn't get that flight either. lisa: it makes me think it would be less crowded because fewer people would be going and everyone who does go would be in the stadium. >> let me know how that goes for you. i think this is perfect timing if cpi later this morning about an hour away. when you hearing from the airline sector. some discounting. i know for a lot of people who might've bought flights, airline tickets of the last few months maybe not feeling that but that's what's coming through in the numbers. >> neil sent out the story about delta and then said he put the headline, of the first line of the story that it expects profit to fall because heavy competition in the domestic market and he underlined this and made it extra large. drives ticket prices down. this is the disinflation people are talking about the consumer

pushback and we could see it even in one of the hottest sectors. >> chair powell acknowledging some of this believing inflation is heading lower but is not ready to declare mission complete. the question is and this is a quote from chairman powell directly are we sufficiently confident it's moving sustainably down to 2% and not prepared to say that just yet. >> he didn't want to open that completely services him not wanting to tip his hand. to me i thought it was fascinating this personal moment when they asked what keeps you up at night and he said finding that perfect balance between not seeing a spike in job cuts and achieving that 2% target is the number one thing that keeps me up trying to make decisions that give the best chance to happen that the thing i think about in the wee hours. this is a fed chair who wants to know a soft landing at a time where he is flying blind. we don't have a sense of how quickly any deterioration is happening or a sense of visibility. >> speaking of that on a serious

note linking it to chairman powell did you see what powell said yesterday. hasn't had a meeting with biden in two years. i haven't had a meeting with him. and of course i don't seek meetings. there was an interpretation here . the president is really focused on making sure the central bank retains independence. the less kind is the conspiracy the people around the president have been maybe slating him from having meetings outside. >> i listen to that clip repeatedly. but i was listening to his answer and he was trying to spin this as a vote of confidence in fed independent saying essentially this is a good thing we shouldn't be meeting with the president and he was saying to him actually inflation is incredibly high this is one of the main points isn't surprising he wouldn't meet with you and the fed chair was saying we just

do our thing. it does add to the questioning. i'm knocking to make a conclusive statement on that because i don't know. it's ongoing adds to the drip we've been hearing all around. >> two days of people trying and did not want to touch this. president biden is facing mounting pressure from his party to drop out of the race. the latest voice peter welch becoming the first sitting senator to directly endorse replacing him on the ticket. anne-marie is in washington. the democratic congressman of michigan. >> congresswoman stevens you are also going to be in michigan tomorrow with biden. you are a staunch supporter of him and not backing down. why? >> i'm enthusiastic about this campaign in michigan. i've been added since the beginning of the year. detroit is at its lowest levels of unemployment in 50 years. we have manufacturing growth. a really popular governor

gretchen whitmer bread who's endorse this president and was a cochair of this campaign whose met with him since some of the debate fallout and is sticking by him and the commitment to stand up for women's reproductive rights to tackle our gun violence academic -- epidemic and there's a team, we have built an incredible ground operation and it's hard work with persuasion voters, with turnout. i don't want to turn away from this now. i want to keep going let's bring this over the finish line and i believe that the biden harris ticket is the one to get this done for us. annmarie: do you think he is the best candidate though? you see the polling today from washington post abc more than 56 democrats say six and 10, -- democrats -- independent say he should step aside. is there concern about basically telling a sitting president the leader of the party that it's

time to go. >> the stakes are high. the other thing the polling is showing you is people are freaked out about donald trump coming back. what that means for young women, what it means for our economy that spiraled out of control when he was president during a global pandemic that was not well handled by him. annmarie: polling also shows people think trump would be better when it comes to things like the economy which are polling shows is still the number one issue. >> it is and it's not just look at the facts today. polling is absolutely important. i have had polls that have led me down a path of success and polls that have led me wrong before but what i know is people are concerned about trump. i hear that on the ground in michigan. it is palpable. people want to win the stakes are high. obviously when president biden was gathering his delegate votes

and campaigning in the small primary he had earlier this year it wasn't 100 percent clear every step of the way trump would be the nominee. now he is hiding in mar-a-lago. we don't see him very much. he's come to michigan maybe once or twice. a few circuits here in -- a few surrogates here and there. in part we have a president who is governing, who is leading nato, who has the backing of international leaders who support his plan. we have a major foreign aid package lick got done in a divided government. annmarie: i think the concern is not so much can he lead right now it's what is the next four years mean. governor whitmer was on cnn last night and was asked should he take a cognitive task. her answer was it wouldn't hurt. >> trump joked around about his own cognitive tests and that he was some super genius and spouting off things. anything the president needs to do to reassure people i have

been recently with him when he announced tariffs on chinese ev's and critical minerals paid i was in the oval office with him for an extended periods of time. i haven't seen one decision out of this administration under his leadership that concerns me. i also know that we have got a message for the next four years preyed it's clear people are spooked, it's also clear people are united to do whatever it takes to beat donald trump and we've got the campaign to do it. annmarie: you spent time with him recently pretty you'll be with him tomorrow. you say there's not a decision that makes you rethink this that's coming from president biden. but what about his speech, the way he walks? actual deterioration in his health, have you seen any of that? >> not really to be honest with you. i can't tell people to un-see what they saw in the debate. it's not news that he is the age he is.

i look at this and i see flawless execution from this administration. covid relief, infrastructure dollars paid not just bills that have gotten past but things that are being executed flawlessly like the chips act which is so important to our mission -- michigan manufacturing economy, something he has championed. there is more to do. its promises made, promises cap. there are more things we need to accomplish here that are on the horizon. paid leave, funding for public schools. support for our educators, the next generation. this is a real campaign and this is a tough moment, it's been quiet. we've had 20 47 trump tv in his convictions and all of that insanity. i don't want to go back to that. my voters are terrified of going back to that. the former president pretends he supports unions, goes to a nonunion shop. we worked with the uaw and got

that endorsement. we've had this whole process. we are weeks out from our own convention. we have to stand up to this. annmarie: union leaders are concerned. there was a behind-the-scenes meeting. shawn fain, president biden went and stood on the picket line with this man. he is voicing his concerns print so when you're in michigan and you hear from union leaders, trump is chipping away at these people. michigan potentially biden can lose, that's what congresswoman stockton even said in a donor call. >> we want the winning campaign and our union leaders they are deploying their members to knock doors, to evangelize this effort and that's what you do in closed-door meetings. you do say what's our plan, how will we do this. we are the democratic party. differing opinions, expression of opinions, i've got four to five republican members of congress from michigan who left the party, impeach the former president or got voted out.

give me a break. this is how it works in our party. it's a good and healthy thing. and i will tell you something else i know about joe biden he's the ultimate comeback king. the most underestimated individual in american politics. he always has been. he's got a good northstar. he's been through things that have tested him for this moment and yes he is our older, wiser president. he has not steered us wrong and he has a vision alongside this amazing team he has two win the future for us. annmarie: congress woman haley stevens thank you for your time. that was a congresswoman from the 11th district in michigan. kiefer the president if he wants to win that state and she will be with him tomorrow. jonathan: looking forward to more from annmarie this morning. annmarie with congresswoman haley stevens. let's give an update with your bloomberg brief and get to dani burger. >> costco's hiking membership

fees for the first time since 2017. a basic membership goes up to $65. a premium membership goes up to $130. those new prices take effect september 1. executives said the increase was a matter of time thanks to strong renewal rates, sign-ups and loyalty. costco usually raises fees about every five years. pfizer shares this morning are higher in the premarket just under 2%. the pharma company is making progress on its once daily weight loss pill. the drug cleared its first hurdle in a scientific study and progresses to a mid-stage study. it's a promising sign for the drugmaker trying to break into the market for obesity medications. an incredible end to england's match versus the netherlands. ali watkins scoring the winning goal after being subbed in and only touching the ball four times. along with the equalizer penalty

in the first half england winning 2-1 and will face spain in the final in berlin. that's your brief. jonathan: i'd love to see the back pages of the dutch newspapers this morning. and the netherlands we got that penalty that england received. going to save my own thoughts on that matter for another day. i'll do a lot of politicians do in washington. what i say on the record versus what i say behind closed doors. lisa: i'm to wait till you make a decision about that call you made. the referee did a great job. powell remaining patient. >> we want to be more confident that inflation is moving on a path sustainably down to 2%. not at 2% but on a path sustainably to 2%. that's the test we've articulated. jonathan: cpi 46 minutes away. ♪

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jonathan: just got a great note, the latest consumer checkpoint from bank of america and the bank of america institute. this line here is amazing. we funded 23% year-over-year increase in households with in person spending across europe where taylor swift is being performing. in the morning talking about delta may be struggling talking what international travel, 20 3% year-over-year increase in households with in person spending in cities across europe where swift has been performing. lisa: how many times we heard about this that it's cheaper to get tickets on a plane in a hotel into taylor swift over in germany over france. anywhere but the united states and that's what a lot of people are doing.

>> the latest from bank of america. if you're joining us welcome to the program. 8:30 eastern time. a little bit softer were down 1/10 of 1%. bonds unchanged on a 10 year maturity. under surveillance this morning, powell remaining patient. >> we want to be more confident that inflation is moving on a path sustainably down to 2%. not at 2% but on a path sustainably to 2%. that's the test we've articulated. i have some confidence as i said earlier but we are on a downward path and i think if you look at the data it's pretty clear but we have not said we have sufficient confidence and that will be a decision our committee makes. >> june cpi data down -- out. survey calling for a month of gains. saying the fed would have to see a plunge in the labor market and inflation to give a reason to

move in september and risk looking politically motivated. by some margin we anticipate two cuts to come in the fourth quarter after the election. deborah joins us for more. wonderful to catch up with you. why you think the politics is so important to the decision on the horizon. >> certainly that's not where the fed likes to focus. it's timing decisions. but having said that if it's kind of a 50-50 or one that could be biased in either direction i think they will pick the direction that has less potential political implications which would be the november meeting. the risk in that though that i see is if they moved in november and december, i don't think that sets the stage for in every meeting move expectation in 2025. we are looking at 2025 is something that's maybe 100 basis

points in cuts depending on what happens from inflation and with employment. what happens with gdp but i do feel like november december might risk the thought in the market being more than every other meeting. and i think that's another struggle the fed may be deciding around that decision in the coming meeting. >> just a cut that up into two different calls 24 ultimately what i'm hearing on political considerations. can we get into 2025, -- what's the dominant factor. are you expecting inflation to stay stickier than some people might expect. are you looking for employment to hold up better. where does it come from. >> i think you see weakening employment but you don't see it falling off a cliff. and i think we now sort of pivoted from a fed standpoint to looking at both the employment picture and inflation. for most of the last year and a

half or so, inflation has been the name of the game. where it goes is where the fed has been dealing and looking at to decide from a perspective of what their next moves will be. i think employment comes into that picture so inflation below 3% even if it's 2.9 i think that's considered a confidence level for the fed and i think that gives them a little bit of motivation that it rounds down to so it's enough. ultimately the labor market rather than 200,000 jobs a month is slowing to something that's more like 100,000 jobs per month is again something they want so those of the achievement goals that i believe they are looking to get to in 20 and if they do i think rather than 5% interest rates, 4% interest rates or high high threes makes a lot of sense. >> let's talk about the market call on the backs of when they start the rate cutting cycle but

how deep it goes. we've had a number of guests on the show who say a soon as the fed starts cutting rates that will unleash some of the trillion dollars of money market funds into other asset classes whether it's longer duration bonds or stocks, that's one reason they start to broaden out their investments. as someone who watches these money market funds every day how high is that bar for that money to go elsewhere. >> first of all i think it's not the lion's share of the cash flow that has come into the product. the lion's share that's into money market funds over the course of the fed hiking cycle and now stability cycle has been from the deposit product out of deposit products into money market funds by retail. that's very steady cash that stays where it is. the other 20% has some institutional associated with it but also has some let's hang out in a safer market nearing 5% type of cash flow in it and i

think that's the portion that will start to move in earnest once the fed makes its first rate cut. i don't think it's a huge lion's share but i think it's probably in the neighborhood of 10% may be of the assets of the product and it will likely be offset to some degree by institutional cash customers starting to pick up and increase their allocation to money funds simply because they lag. the wall of cash as it's been called i think is there but in a way that's much more muted with what the market oftentimes refers to it as. lisa: are you saying there's about 600 million dollars of cash on the sidelines when you look at what could potentially start moving around not 6 trillion like some say. deborah: that's exactly what i'm saying. lisa: how much is a feasible investment even at 3.5%. essentially how much is this transforming the concept of a money market investment at a

time we are seeing rates that we haven't in a very long time and people are kind of accepting that and starting to move more significantly. deborah: we are looking at something that doesn't go below 3% unless there's something in the marketplace in 2025 or 2026 that's completely unexpected and sort of out of control of the fed in a way they deal with that by taking interest rates lower. i think it a normal environment with a normal inclusive business in the u.s. as well as globally you end up with a rate environment that is sticky in that three to 4% area and that still represents pretty good value from a cash investment standpoint. jonathan: deborah cunningham at federated 2024 political considerations from that rate cutting cycle. they don't think september. >> so they don't look politically motivated but you have to see a more significant

deterioration in the labor market to get the fed to really have some conviction bind that call. that's not consensus. markets are pricing in more than a 70% chance of a september rate cut and a lot of people are saying the tone we heard from fed chair powell during the testimony would suggest he is softening to that view. it sort of this compelling moment where there's a lot of clarity all around. >> why is november a better time to go, same week as the election. >> people can say it's because you're not necessarily trying to put your thumb on the scale ahead of an election they are not trying to juice market action ahead of the election. that's what i would say. jonathan: i think they get criticized no matter what they do. >> jay powell has been sort of a lightning rod for everybody's thanks about inflation and frustration with market activity that doesn't seem to cohere with a set narrative and the reality is he has been consistent in

saying we are looking at these metrics preyed we can speculate though. >> tune in throughout this morning coming up in the next hour or so. we will catch up with david kelly of j.p. morgan asset management. steve of mizuho. it's a big one for this market. cpi around the corner. the question, will it unlock or keep the door open for a rate cut in september. after that the focus turns political prey 5:30 eastern time. a news conference in washington dc with the president of the united states. this is bloomberg. ♪

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>> at the end of the day what's going to drive the fed to september is inflation. >> the hope would be rate cuts would be forthcoming. we think that will happen and inflation moderates. >> we can really signal the rate cuts are coming until they get a least one more inflation report. >> september is really another round of data and more importantly what we see in terms of inflation data.

>> they are reluctant to cut because they know how insidious inflation can be. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the third hour bloomberg surveillance starts right now with 30 minutes away from the big one paid cpi data just around the corner. your s&p 500 so far on the longest day of 2024 -- longest winning streak of 2024. equity futures negative by 1/10 of 1%. chairman powell's assessment at the moment in his own words the question is are we sufficiently confident that it is moving sustainably down to 2%. his answer, i'm not prepared to say that just yet. lisa: will he be when we get cpi if it does come in below expectations or meets expectations is that enough to give him sufficient confidence to move september. it seems the market is sniffing that out and seems like that's what the market was buying yesterday. will it be able to complete the

trade today. >> another data point not to cpi it's jobless claims as well. the confidence they are lacking over the inflation outlook will it be replaced by worries on the outlook for the labor market and this is a key feature on wall street critically of the last few months with inflation going to the back burner a little bit. and were starting to focus on unemployment inching higher. jobless claims turned to breakout. the one to watch today: 30 eastern. lisa: especially as people don't have confidence over whether a getting an accurate mess trick. -- accurate metric. you understand given the influx of immigration, the post-pandemic trends and the retirement, leaving in the getting hired. if you see a market increase in weekly jobless claims that will shift the conversation possibly even more than a cpi print in line even slightly above. >> if you don't like the june cpi print, just ask for another

june cpi print. lisa: is that what they're going to do? jonathan: that's what they are doing. we are waiting for the june cpi print. the president comes out and says i'm the nominee i'm staying in the race am not stepping back in the former speaker says we are waiting for his decision. and she wasn't the only one to do it yesterday. we saw this repeatedly paid it's ridiculous. lisa: he's considering -- is that really how you want to understand inflation jay powell. is that your decision. to your point there is something going on which raises the question of whether joe biden is actually actively considering stepping down. all these things -- what is leadership going to do if they are concerned about how he performs later today. jonathan: 5:30 is the later today in that news conference.

we will feature that conversation. we will care just catch up in 40 minutes. i think we all want to know for the reporters in the room is this going to be 90% on his health and 10% on nato. is again to be 5%. i'd actually like to see the sitting president talk about substance. things happening in the world. talking about how cogent he is, how fluid that might be and not just have the shouting match about the health of a sitting president at the podium in front of a went to journalist to feel very scorned right now or hurt by the last few weeks. lisa: especially in a time when putin is meeting with the leaders of india, there's questions i pretty punchy communique talking about china and their aid to russia in the war against ukraine. these are things i want to hear him speak about. if he does that probably won't be what we necessarily are talking about tomorrow. it raises a larger question

about how much nato leaders are looking to him for that guidance and leadership the u.s. has taken or whether or not as reports are saying they are going to some of donald trump's advisors to trying get a sense of what he would do in certain situations. it highlights why this is the main story even when it comes to nato. >> somewhat pragmatics talk about the advisors just in case the former president comes back in. and that's the government you got to deal with. i would say that. on your point i think for those leaders i can't imagine how frustrated they would be. to have a conversation as nato leaders gather with two wars of the world are looking at. one is in ukraine and the other is in gaza. it would be of great disappointment that the only thing that talking about is the health of the sitting president and whether he will remain >> in the election in >> november. and what time he's going to go to bed. these are not things you will necessarily want to be focused

on and some very issue -- very serious issues they should be discussing great >> catching up with brent on recession risks. catching up in just a moment pray david kelly of jp morgan on why he's keeping an eye on the unemployment rate we need to talk about these numbers as well. price sensitivity coming to the surface. delta down in the premarket. then we speak to steve reacting to today's inflation report out and about 25 minutes time. it is june cpi data this -- at 8:30 eastern. saying it's a race to see which crack's first, inflation or the economy. if it is inflation, can the fed cut rates fast enough to keep what appears to be a weakening economic backdrop from pushing further down and ultimately into a recession. brent joins us for more. i'm good to you your own question. what crack's first, inflation or the labor market? the economy. brent: i think unfortunately

they crack together. the cpi report to the past few months you have to think about what's happening behind the scenes and you are seeing a weakening economy. using the services side, down but you had services negative two in the last few months. elton in the premarket. things are moving lower on the economy and historically the fed has been able to cut rates before the recession occurs but it hasn't stopped it from occurring. i don't think this time it will be anything different. i'm interested in the jobless claims played as you mentioned in your opening the labor market has weakened quite a bit. the unemployment rate is up 7/10 , the rule we talk about all the time now is 1/10. and 22 states have already violated it. >> if we trigger the rule of intrigued by this question i don't hear the urgency in the munication from the federal reserve around this issue. i don't hear it from claudia herself.

i hear from market participants how do you think they will respond to that data if we climb another 10 basis points on unemployment. >> we seem to be in a period of suspended disbelief. if you think about lai, all the different indicators of the past few months that if pointed to the recession i don't think -- i think many people are shrugging off every economic cycle so to me it's a normal behavior we are seeing. and that's what i think there is a bit of a risk because i think investors have largely ignored those signals and i don't think it's so odd they haven't worked this time. the consumer, the businesses are still filled with excess savings and have pretty much studied themselves against rising interest rates. to me the longer interest rates are higher the greater risk of a recession as a lag impact continue in the economy. i think you're seeing that in the low-end consumer, some weaker parts of the economy and

now it's seeping up into the higher amounts and even on the services side which is holding open for the u.s. economy for the past two years. lisa: at a time of confusion run which metrics to look at, mohammed el-erian has said just listen to what the companies are saying. we got three earnings reports this morning. pepsi, delta and conagra which is the grant -- brand that has slim jim and or full redenbacher and other common consumer brands. is this a signal to you this is just a marginal story or a true concern about consumer appetite willingness to keep spending. brent: i think it's huge. if you see consumers they are hurting a little bit especially lower income levels where those aren't levels that exceed the past two recession spread i think you're seeing it there and marching compression because they can't risk prices as much. at the same time compensation is still elevated. it's come down when chair powell talks about but it's still not

where it needs to be for inflation to be sustainably at 2% and that's where the issue is on both of those metrics and that's where markets are in for a bit of an awakening in the next couple of months. lisa: you wrote their hopes baked into equity markets that need to pull back before we get interested in large caps again speaking to some of the over enthusiasm you are seeing in markets. can you quantify that and give us a sense of how much of a pullback and where you would need to see it to once again reengage with the market? brent: my positioning is a bit interesting given the outlook. there are parts of the market that have already discounted some sort of recession. if you'll be the s&p 600 it trades at 8.1 times the cash flow. the only time it's traded there is coming out of a recession. so to me this is where it's interesting and we used to talk about risk on risk off on the show. risk off meant by bonds, a risk on meant by stocks. today risk off means by the mag

seven. risk on means by the other companies plus mid-cap and small-cap sector. they've been hiding away in quality. it's how much do you pay for the mag seven and can those earnings grow forever which i think is a question i've seen asked a few times and i think the answer is probably likely to be not. there are opportunities and things that are economically sensitive. i do think there opportunities for investors which are more intermediate to long-term focused to focus on the areas of the market that are under loved. jonathan: are you suggesting this market is quite well priced for the economic downturn you are anticipating? brent: i think there will still be a falter in the markets overall because investors are similar to what they have been in the past where they panic even though they know they shouldn't. if you think about 1999, small-cap and mid-cap did ok into that recession.

it was the stocks that had been up on the belief they were economic impervious that did not do as well. and then coming out of the recession the next five or six years those parts of the market there were undervalued stocks, small-cap stocks, mid-cap stocks performed quite well even the s&p 500 performed quite well. i think there's good news to go along with the concerning news about a recession. that's where i think i am still optimistic longer term. it's a little more cautious in the near term because i'm seeing evidence of investor over optimism. jonathan: this is the challenge investors have should i position for the recovery on the recession they we -- but we still haven't had. brent: i don't think you will time it perfectly. i do believe we are later in the business cycle. i think the evidence is pretty strong. i don't believe the fed has ever taken over a slack economy without unfortunately causing a

recession because they focus on the lagging labor market indicators. to me i do believe we will look at it downturn. i don't think you can time it perfectly so i want to continue to own those things that are economically sensitive but haven't done as well because i believe the opportunities are so large that i don't want to miss it. jonathan: thank you sir. some similarities in that conversation between what brent said and what we had earlier from ross which is i want to be in equities for the same reason brent described but where do i want to trim? some of the high flyers. lisa: even if the short term there might be a performance of some of the other 493 stocks there is this feeling that they have more upside than some of the magnificent seven especially the federal reserve cuts rates and allows them to borrow at more reasonable prices. that's what we are hearing in an increasing number of guests. >> that seems to be the conclusion.

what he said there, the question he's asking, is that a mistake if you go down to an economic downturn just how sensitive are the so-called secular growth themes. do we find out they're more sensitive than we thought they were. >> we will if we find out artificial intelligence isn't necessarily applicable in the sort of quick and easy way that is a game changer across a swathe of companies. maybe in some but if it's not in the same game changing way quickly in the others it might be more sensitive in terms of how far the demand can go. jonathan: welcome to the program equity future slightly softer. down 1/10 of 1% rate we get cpi data in america before we get to that would schedule an update on stories elsewhere with your bloomberg brief. >> the biden administration taking more steps to support the american ev industry. the white house is awarded $1.7 billion to at risk for close manufacturing and assembling facilities across eight states.

the plans would be converted to support clean vehicle manufacturing. stellantis plant in illinois and plants in michigan are two locations each set to receive over $500 million. they are subject to negotiations and other reviews before becoming final. a check on pepsico shares in the premarket down nearly 2%. he reported second-quarter profit that beat expectations yet revenue did come up shy. organic revenue rose 1.9% versus a 2.9% estimate. demand is slipping after consistent price raises from pepsico especially in north america. revenue and volumes drop year-over-year. prices for the most in demand luxury watches slipped on the secondary market last month extending a two-year decline. the bloomberg watch index fell 1% in june for a total decline of 8%. bad news for speculators who been snapping up watches. reading that could be other asset classes get the s&p for

its part is up 27% over the same time periods. the only brand to have gained among the 50 traded watches was cartier up 2% in a year. that's your brief. jonathan: i'm not sure i would wear that in new york city. lisa: i've heard about this and i've heard about how it's happening in a whole bunch of different places. it has been a problem and a lot of companies, a lot of restaurants are saying they are trying to install more security and cameras. how do you protect your staff, some of whom have been injured during these thefts. jonathan: arrive on a moped outside the restaurant seeing some thefts taken inside as well. part of that story there i want to talk about this briefly. delta is getting hammered. in the premarket. down by 9%, spilling over to the rest of the industry. united down 4.7. >> this timmy highlights the question of are we seeing crack's in the industry but

arguably were supposed to benefit the most from the new trends the post-pandemic experience economy at a time when those numbers have shown strength why are we not seeing the profitability? is this to be getting of margin compression, consumer pushback or is it a matter of cost-cutting. >> we will follow that story as we question whether we should be under paris this summer. lisa: i'm trying to put that together because i would think more people would flood paris to see the olympics and if they don't fly maybe it's a good time to. >> it can be the only reason. lisa: i want to dig a little bit more. jonathan: the morning calls plus david kelly of j.p. morgan counting us down to cpi data in america. that data just around the corner. ♪

jonathan: counting you down this morning, the opening bell one hour and 10 minutes away and about 10 minutes time we get cpi data going into it the scores look like this. we are down by 2/10 of 1%. yields are just about unchanged on a 10 year maturity south of 430 at 428. time now for some morning calls. rose securities raising its price target with a street high of 2400. including upside from ongoing ai trends. the second call cut to underperformer jeffries with a price target of 124. saying the olive garden parent could lose share thanks to rising promotional intensity in the casual dining sector. down by 1.6% and finally bear raising its price target on costco the analyst highlighting the membership fee increases

providing more oxygen to support their lead on foot traffic and market share gains. the stock is up by 2.4%. june's inflation report around the corner. core cpi expected to rise 0.2% for the second month in a row. marking the smallest back to get -- back-to-back gain since august. joining us is david kelly. good to see you. we are looking for cpi maybe to come in leaving the door wide open for a september rate cut do you see things quite the same way. david: it's a dangerous game to play this consensus game because it's easy to miss by a 10th one way or another. overall the year-over-year cpi inflation rate we think will come down to 3.2%. this is a steady decline i think it keeps on falling. and then it sort of stalls out a little bit. it is coming up but it is just coming down slowly. the other part of the story is we are seeing more notable shift

down in the face of consumer spending growth and so some of the data from the last few months on retail sales and auto sales, some of the signs for credit card delinquencies they are seeing the consumer spending is growing more slowly. so a little less inflation but also less growth. lisa: are you saying the disappointment we've seen the sort of downgrade of darden companies. , there is this question of whether that alone should be sufficient in your view to cut interest rates. and committee will be sufficient. >> first of all last year i seem to remember chair powell saying if we've got inflation coming down towards 2% even if the economy is still ok we can normalize rates. we are not -- i don't see any

reason we should be heading for recession. this number today should be consistent with the 2.5% year-over-year change. that's close enough to two as far as i'm concerned given the trend were on. i think it's a reason for the federal reserve to normalize rates. jonathan: what is normal in this regime? >> normal is higher than the fed says. the federal funds rate, i think it's higher than that. i think you take that 2% inflation rate, you add close to two percentage points and get to a 4% fed funds rate, i think that's reasonable. what's happened is we got a restrictive monetary policy which is not that much doing to the economy but messes up financial markets. in some risk to certain parts of this. just normalizing back down the

fed has to do something one way or the other is the right way to go. >> going into this print, mike mckee is with us to break this down. you'll break down the number when it drops. what are you focused on and what you think chair powell needs to see to gain this confidence he needs to reduce interest rates. mike: it's unlikely we will get a huge downside boom but if we get the slight downside economists are forecasting to keep the fed on the path to september within the report they are going to be looking at things that have surprised in recent months and of course housing. housing according to omar sharif of inflation insights could come in at its lowest since 2021 after some months of waiting for this to happen. you a look at airfares. talking about delta and others this morning. and insurance, that's been a big part of this is what's happening

to auto insurance and home insurance. it could be interesting to see what happens post hurricane with insurance. where were seeing a reversal of trend. >> which is more important, jobless claims or cpi? mike: cpi. jobless claims gives us an idea of where we are but it doesn't tell us how good or bad other than in broad general terms. where inflation is and probably where it's going. jonathan: mike will be back with us in about five minutes. great question. some people might have a different opinion. >> it depends what the numbers are. all of a sudden jobless claims, to 280. that is the balance the people are kind of making. >> something like north of 260.

the estimate for today to 35 the previous week 238. the numbers drop in a moment. cpi around the corner. the latest inflation read with those jobless claims numbers to break it down mike mckee, steve of mizuho and david kelly of j.p. morgan asset management. fantastic lineup to react to the latest economic data point. that data drops next. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon.

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>> economic data around the corner. 20 seconds away. jobless claims, cbi and more. these of the scores, down .1 percent on the s&p 500. in the bond market, yields on a two year, 10 year, 30, two is unchanged, 4.62. tens, 4.26 65. here is mike mckee. mike: good morning. we are remaining on the path to september. the cpi headline comes down .1%. the forecast was it would go up by .1. core is up. real progress on cpi. the fed will be glad to see. year over year the cpi is at 3% and the core is at three point

3%. a lot of good news in the inflation headline numbers. in terms of jobless claims, we go the other way. instead of a crisis level, we are going back to where we used to be, continuing claims 1,852,000. i will take a look at the underlying data and i am sure you are getting a market reaction. jonathan: you can guess and what direction. double digit decline at the front end of the yield curve. a double digit basis decline, down 11 basis points on a two-year year. tenure, down 10 basis points. once you have -- 10 year, down 10 basis points. build a weaker dollar, stronger euro and you can guess where equities are. the nasdaq firm, rustle up 1.3 percent. based on this data, and we

should talk about whether we should extrapolate the year, it is the best of both worlds. jobless claims better, downsize on cpi. lisa: is a goldilocks redux, that is what i was thinking. the previous week was a rise upward by 1000, not anything dramatic. that said, how much can you glean goldilocks from something that is a blip in the moment. you can see how it is translated to the market. if the fed cuts, it is a dovish and a positive view amid a cycle adjustment that would allow equities to keep rallying. jonathan: that is with the equity bulls want to see. mike mckee, i we repeat the words of chairman powell, are we significantly confident it is moving sustainably down to 2%. i am not prepared to say that just yet. after these numbers, would he be prepared to say that? mike: he might be.

it will be a lot harder to say we have a lot more work to do since seeing how -- do seeing how the numbers break down. oil prices have gone down. that is a big part of what all this is a. the big thing is housing and housing has finally gotten into the area the fed has been expecting for a long time. owners equivalent rent up just 3/10. rent and shoulder up .2%. rent of primary .3%. we see lodging away from home fell by 2%. it is interesting because this is the time of year where the tourist places like where i am would be full. lodging was a little bit of a surprise coming down in june by that much. i am looking to see motor vehicle insurance is what i am trying to get to hear because

that is a big deal. new cars and truck prices, new cars down by .4% and used cars down by one point 5%. all of that continues to be the kind of -- by 1.5 percent. lisa: you see the chance of a september rate cut go down after the numbers go out and it was higher yesterday at almost 75% and today it is below 70% in the wake of these numbers. if it doesn't seem like the labor market is cracking, how much will patients be the operative word for the federal reserve even at a time when inflation is coming steadily down? mike: you have to think they are not going to rush into it and my guess is they would not rush into july. we could get a really soft pce print. then you want to look at what happens with spending numbers, retail sales and pce spending at

the end of the month. if they get an indication the economy was cracking, they might go in july. this sets up the opportunity for them to start talking about september getting the market priced for that and basically saying, we are on the path if the economy continues to develop the way we think it is in the way we are seeing. jobless claims don't give any indication we are going to see any kind of major drop off the economy. jonathan: thank you. we will come back in 10 minutes. starting with the data, and then price action and reaction to economic data. headline inflation month over month cpi coming in -0.1%. the survey, median estimate positive 0.1. that is the right kind of downside surprise. stripping out food and energy month over month comes in at 0.1. we were looking in the survey for positive zero point two.

for jobless claims, looking for to 35 and that came in with the right kind of downside at two 22. the jobless claim picture healthier, inflation picture leaving the door wide open for the federal reserve to consider making a move. you can guess what is happening in financial markets. equities rally and futures up by .2%. seven days of gains on the s&p 500, already the longest streak in the year so far. we might add weight to it. the russell the outperformance is, small caps up close to 2% in early trading. lisa: this is exactly what was talked about that if you get a cooling in the economy in any way, the rate cuts will bolster the areas of the market that have not necessarily seen some of the gains that have been commensurate with what we have seen in big tech. it is just one set of data, but this would talk about the soft landing that fed chair jay powell says he stays up at night

worrying about landing. this is what they want to see. do they see a rate cut helping perpetuate this type of dynamic? jonathan: bond market, 10 basis point move. the 10 year breaking 4.20. down nine basis points on the 10 year yield. foreign exchange, a weaker dollar against a stronger euro. euro-dollar, firm or the currency, close to 1.09. with us is steven ricchiuto and still with us is david kelly. the doves have what they need. time to cut. do you agree? >> i think they should go in september. if they rush, it will actually look like they are scared about something and i don't think they should have gone this high in the first place. so now take it down easily. i still think september,

december, march, june, september is what they should do. dani: jay powell -- jonathan: jay powell said it gives him the luxury of time. do you think he has it? >> that could be cracks in it regional banks. we are worried about things that are not set up with normal interest rates. a normal business ought to be able to operate here. i think if it slows the economy a little bit by not accelerating this, ok. i would rather they take their time in not rush this because once they start rushing rate cuts, then it will scare people. lisa: steve, what is your impression? what about given how much inflation has come down? steven: we had an inflection point from 3.3% with an economy clearly growing too strong and inflation not going down.

you have shift to a slower growth economy, 2.2% or 3%. you have had a higher unemployment rate and lower level of inflation. is the economy going to stay or going beyond? that is now the question they have to answer. they have to worry about the risk because as david mentioned, the concern is if they move too quickly the expectation will set the market ahead of itself. you have already seen one or two strategist saying they are going to cut rates eight times next year you have an environment where if the market goes too far, they then have to think about will they have to reverse policy. the dots have put them in a bit of a tricky box for themselves. they can't do a hawkish cut. all they can do here is do a cut that fulfills the dot in the markets are likely to go well beyond that. lisa: this is something people used to talk about. we have gotten 37 record highs on the s&p 500 this year.

why is that not potentially problematic enough for them? steven: it should be but this is a different fed. you have to take a look at the people at this fed. these are political economists and not the old school anti-inflation hawks. the political economists want to play with the lovers they have written their dissertations on playing with the -- the levers. they have brought their dissertations on playing with the levers and they are going to play with the levers. we are not saying it but when the market will react. they think they can control the market's behavior into a certain extent they have done that. they are getting everything they want. the economy looks to be slowing and labor market back to normal and inflation coming down. to me this is a winning hand, why would you toss it out by doing something stupid in july? you wouldn't. you would wait. david: if there are parts of the

market that are over exuberant, the federal reserve going 10 years at zero. if you make the crazy zero than people do crazy things and so we saw that and then we got momentum going in bitcoin and meme stocks and the mag seven. what is happening is you have a stable economy and people doubling down. we want to see more fundamentals in investing rather than momentum investing but they have sort of because the momentum investing environment by keeping rates so low so long that you can get the irrational bets going. now the problem is, how do you get out of it? he returned to rational interest rates which makes sense due to the fundamentals and over time markets can return to that rather than manipulate markers by moving interest rates too quickly. lisa: steve, what do you make that if they just policy it will have the names that have not participated in the euphoria. the russell 2000 has

underperformed but outperformed but not necessarily nvidia. steven: there has been an environment where the underperformance has been a function the earnings for a lot of these companies haven't been good. the reason why they haven't been good is because the costs have gone up. not only that because of the discount or slower growth environment we see coming into the year, it is harder to pass the prices on so they are getting squeezed. the question is, what is the next reaction? i think the federal reserve begins to cut rates and the market goes aggressively which i think the market will do. the market will overstate what the fed is going to do. every time they cut they go to zero. i guarantee as soon you cut you will see zero hedge and news stories about there must be a collapse in the real estate market, something going on in the market, the fed knows something we don't know. we will be talking about 0% interest rates and they will be faced with a different situation

. that is why analysts are not willing to cut earnings because they know that whatever the fed cuts they go to zero. we expect the cut and expect to go to zero so i what i cut my earnings numbers. david: the most dangerous time is when the federal reserve decides they are going to help us. jonathan:'s is the point you're making on the timing of july because would -- is this the point you're making that the timing in july would scare people? david: there are four big reasons and i think a cadence of cutting rates at some economics say that make it predictable and you get down to the terminal rate which is essentially a normal rate of 4% or so in the federal funds rate. financial markets and the economy need to do something but they shouldn't tighter micromanage the economy because they end up causing bubbles and bursts in asset prices. jonathan: i love the view on --

i would love the view on both of you, are there other things in play here? david: they are trying hard not to make political decisions because they don't want it coming back on them. deep down i know they prefer a government that lets them do their job because while i don't agree with what they do, it would be infinitely worse if the other side of washington telling them what to do in that would make the situation worse. i would much rather the fed make honest mistakes on their own with the best intentions for the country rather than have the other side of washington make the decisions for them. jonathan: steve? steven: they want to maximize social welfare. we can argue the right way. inflation hawks with a keep inflation at 2% on a sustained level and let the economy find its own equilibrium. this fed wants to maximize social welfare by keeping unemployment low. there is a big difference in the fundamental profile and that is why i am saying it is nuts if

they cut interest rates and they run a lot of risk and they may have to reverse it down the road because they have created this response in the marketplace. i also think you have to keep in mind, this the federal reserve has been itching to cut rates. i think they would be crazy to go in july. i think it is an open issue to whether or not we can talk about september. it has always been not about if but when and we will see with the data shows us. lisa: what you are saying that essentially the most important number for them is the employment number and not necessarily the inflation number. is that correct? steven: they don't want to see a rise in unemployment, no. the rise in unemployment goes back to something david said earlier it which was the household employment is it dipping and payroll. whenever we benchmark these two, it is the household employment that is adjusting to payroll. the payroll is the better indicator of what is happening. you've had a dip in household employment and increase in participation rate in -- and the

unemployment rate has gone up. you have had very few layoffs according to that same survey. we are in an environment where people aren't losing jobs. the labor market is still tighter and that is what they are paying attention to. david: it is almost like we have seen a microeconomic change in the labor market because if you go back to where we had the trough in april 2023, if you could fog a mirror you had a job and frankly there are some who should not be employed. if you look at the unemployment numbers from the household survey, it is the long-term unemployed that went up and that is interesting in an economy with 8 million job openings. people after 15 weeks and 26 weeks cannot find a job. at that is not about the economy. that is, are these people employable? i think chairman powell is right and we have returned to a sort of normal market at 4.1%

unemployment. i would take issue with one thing. i am concerned the payroll survey may be overestimating things. when i look at business formation data is suggesting we are creating all of these businesses. they may be getting it a little wrong because there is a lot of churn in businesses and it doesn't mean a lot of new business creation as the data would suggest. lisa: fed fund futures have adjusted to 85 percent in september. that sounds a bit more in line with what i would expect. steve, given what you are talking about, how would you see the earnings we got today that indicated a real reduction in consumer spending and definitely less pricing power more broadly? steven: it indicated the pricing environment and still inflation above 2% even with these numbers. if we say, the deceleration from 3% to 2% is a big move in

growth, it is a movement from 3% in 2% and we are in that environment. the reality is when we balance and look back at the data in general, they are still well above the target on inflation and still a trend growth. where do we go from here? the reality is you see an environment where cost pressures are squeezing companies and that is really their problem and they will, if you cut interest rates and have a sharp rebound in economic activity, pass those prices along. when that happens, then it becomes a problem for them. this is why go slow, take your time, you've got a winning hand. why would you do anything today or potentially september to destroy that winning hand? it makes no sense to me. jonathan: i wanted to know if fogging mirrors is on the job description at j.p. morgan. lisa: is it that you get close to it and breathe? [laughter]

jonathan: just wonder if they are watching this at j.p. morgan. [laughter] jonathan: thank you both. just fantastic. mike mckee is with us. i wanted to return to you because you have had more time to go through the data. what jumps out at you now? mike: a number of numbers that jump out with the overall thing that is very interesting is how calm so many categories are. it shows a normal inflation and normal inflation that we had prior to the pandemic. a lot of things up a 10th or down a 10th. the biggest thing is rent because it is 30% of the cpi and the owners equivalent rent up 3/10. that is low from the fall of 2021. real progress. the fed finally seeing what it wants to see. food prices up just a tad --

just a 10th. airfares are down 5%. you can see delta getting a head of the cpi with the release it put out that -- put out. used cars were down a lot, car prices down. the one thing that rebounded from last drop. it is basically a benign inflation report and because it is a broadly benign, it gives the fed more confidence that inflation is going to remain under control because it is the whole process coming out as it used to. jonathan: the bond market rallying hard, yields dropping. thank you. mike mckee breaking down the cpi and jobless claims. let's get stories from elsewhere. dani: core and headline cpr soft on the month, setting the odds

for a september cut over 80%. the front end of the curve to the lowest since march. the 3.3% annual gaining core reading come of this since april 2021. only four of this anyone -- four of the 71 said the monthly gain would come in at 1%. everyone said higher. used cars at 1.5 percent, hotels down 2%, airfares tumbled by 5%. citadel security is crafting a new plan to handle more of wall street trading according to people with direct knowledge of the matter. the firm aims to offer a trading service where it manages the guts of the trading desk. it would allow struggling banks and brokerages to just focus on dealing with customers. the plan is in its early stages and could still evolve. shares of the major u.s. airlines all falling in sympathy

with delta premarket, down by as much as 5%, down at -- by 9% for delta after they forecast a quarterly profit that fell short of estimates. the weaker forecast suggests the broader industry plagues and the supply of seats exceeds demand prompting rivals to stay competitive and lower fares. delta says the price cuts have been particularly acute from june through august. jonathan: up next, setting you up for the day ahead. from new york and washington, bloomberg surveillance. ♪

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(♪♪) sandals rhythm and blues caribbean sale is now on. visit sandals.com or call 1-800-sandals. jonathan: equity futures slightly softer, gains don't stick on the s&p 500 but do on the russell.

bonds rallying, yields lower by at double digit basis points at the front end, down 10 basis points on a two year. inflation softer very jobless claims looking better. hunting down to the opening bell, here is the trading diary. president biden set told a news conference when the nato summit ends. friday is s ppi and bank earnings, jp morgan, wells fargo . what are you focused on? annmarie: it will be like the debate, what is more important, style or substance. this will be his style. is he answering clearly and not mumbling and how does he act and how many questions does he take? everyone are -- will be putting the president under the microscope and feels very make or break for the white house. yesterday we had one voice, peter welch of vermont saying he

needs to step aside. david: -- jonathan: will this be about his health or will we ask about nato or the wars around the world. annmarie: will be structured or will he do what he did through his presidency with two hours. jonathan: coming up tomorrow, jerry cassidy, the nato secretary general and a good friend of this program, mohamed el-erian. from new york city with softer inflation, this was bloomberg surveillance. ♪

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>> less than 30 minutes from the trading. katie: bloomberg open interest starts right now. >> u.s. inflation cooling broadly in june adding to a case for a september rate cut. matt: plenty of single stock stories and action after the delta outlook mix, pfizer's weight loss breakthrough interesting as well. katie: kicking off earnings season tomorrow let's take a look at the markets. we had the blockbuster cpi print , a contraction in cpi month over month. the s&p 500