>> this is the crescendo about a narrow market reaches its peak, massive reversal. >> it's what we all expected to happen. >> we see the fundamental change, i'm not sure your tennessee the broadening out a lot of people hope. >> the market is aggressively pricing in for several cuts that feels like it's a little bit too much. >> that's what they are queuing on is the fact you can now be an interest rate cutting cycle. that's the chapter at work. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> jonathan: i typically say let's get you to the weekend on a friday morning. weekend feels ago lifetime away. busy this morning.

good morning for our audience worldwide, bloomberg surveillance starts right now. your top headline global aviation grinding to a halt following a worldwide computer outage. united delta, american airlines grounding flights because of communication issues. related to issues with one company in particular, that is crowdstrike. crowdstrike down about 17 percentage points. we were off the lows, this is what we've heard from the company so far in the last five minutes. saying they are actively working with customers impacted by the effect found in a single content update for windows. this is not a security incident or cyberattack. the issue has been identified, isolated and a fix has been deployed. what a start, the disruption goes worldwide. >> in one very real way this is

a story about supply chains and concentration, of the amount of companies reliant on crowd strike and on microsoft, for airlines is particularly acute because we think about after covid they lost a lot of talent. if they want to get around this table of a hard time doing so because they don't have the people in place to do it. jonathan: let's get straight to it. equity futures on the s&p 500 just a little bit softer down by 1/10 of 1%. in the bond market it's quiet for now at least. and in foreign-exchange the euro. a little bit weaker. coming up on the program we will catch up with guy johnson on the latest aztec outages lead to global is disruption. the former president addresses the rnc and will speak to rbcs a new silverman on two big events on the horizon. we begin with our top story, widespread global computer outage hitting businesses worldwide. a series of technical glitches led to microsoft and crowd strike grounding airlines,

hitting banks and around the world but they are aware of the issue where there was a service and the resolution is forthcoming. i think we all woke up to this, what are you seeing on your side? guy: it's worked its way through europe and it's now starting to affect the united states. we saw u.s. carriers issuing ground stops earlier on. american is now lifted its burden. you'll see significant disruption in the airline sector today potentially into the weekend as well. as i say it started in asia. i've never seen a global story develop in this way. we've seen limited and regional issues with i.t. and airlines, with other sectors and now we get one connected. maybe as well to lessons learned we got out of the pandemic. we learned how interconnected the supply chains are. we are learning how interconnected the global i.t. system is paid that crowdstrike

update having a significant update. we don't know how long it will last but in the airline sector at least the effectiveness with aircraft out of position, with passengers backing up and that's what we are seeing at airports globally it could take a number of days to fix this issue. >> i'm sure a lot of people want to know can planes get into the air this morning. i understand the backup and that sort of thing but, actually get flying. is there any hope for anyone trying to travel this weekend. >> is not an issue with the airplanes per se it's an issue with everything that goes around them. we are hearing some airlines and airports doing check in manually. they are sharpening their pencil at some airports to make this happen but it's payment systems. traditionally airlines have been updating their i.t. systems. some of the systems have been migrated to the cloud. the problem is with some of it out, everything grinds to a halt. and that's the system.

it could be a check-in system. and may have nothing to do with the aircraft we could see delta and united issuing ground stops earlier, this is what aircraft on the ground and the commute occasion they have with the rest of the airport system which is why that happened, before that happened we seen something like that before but never on this kind of globally scale. different airlines and airports are affected in different ways. the reason to clean read on what's happening here. and that speaks to the idea airlines have been piecemeal upgrading that system taking it onto the cloud and leaving that system behind and that's the problem we are experiencing this morning. jonathan: you talk about sharpening pencils. can you walk us through what that looks like. are we talking about certain airlines writing out boarding passes this morning? guy: if you can check passengers in, i suspect john it's probably more complicated than that. we know these days when you fly

you to fill in various forms and this is the needs to know who you are and what your ideal looks like. it's a little more complicated than that but i think certain airlines will be reverting back to much more manual systems when you check in. the problem is it takes so much longer. we are all getting used to showing up at the airport and having a lot of this process automated. a lot of the airlines trying to take us in that direction. the process will be more manual today and potentially a lot slower. jonathan: have you got a decent sense of this was microsoft or crowd strike. i have a sense it was both in the last five or 10 minutes but it looks a good crowd strike. dr. looks like it's crowdstrike. >> the problem with cybersecurity is you see it everywhere in the system, it's not just something that sits at the level within the service it has to go into everything.

therefore it is much more embedded into everything because it has to see everything. the scaredy system is to see everything braid and that appears to have been the problems here. it's affecting different systems in different ways. i think that's where the challenge really lies in how quickly they can reverse engineer the process, take what they were putting in and put back what was there previously. it feels like it could take quite a while. jonathan: guy johnson out of london with what was going on with the airline business. promising an update about five or 10 minutes or so until ultimately this is resolved. the latest from crowdstrike in the last 10 to 15 minutes, this quote here a statement from the ceo. working with customers impacted in a single content update for windows host. this is not a security incident or cyberattack. it's an important line in this statement. the issue is been identified, isolated and the fix has been deployed. dani: it does show a vulnerability braid it wasn't

that long ago powell was saying cyber risks or the number one thing keeping him up at night. to the point of things being done manually. i'm struck by the breath of this. they are having to do liquidity auctions on email and telephone. everyone going back to basics. jonathan: we are used to to local outages in specific regions. i don't think we've seen much of this before where it's global around the world and across industries. dani: to the point you are people at jp morgan not being able to do it. it's not that planes can get out to the air, its people can logon. that's enough to disrupt locally. jonathan: a lot of people watching this program i assume are frustrated. logging into my company system i think i would be ok at that point. much more updates through the morning on bloomberg tv. turning to our next story, two

campaigns adding in two different directions. >> if i had not moved my head at the very last instant, the assassins would've perfectly hit is mark. and i would not be here tonight. four months from now we will have an incredible victory and we will begin the four greatest years in the history of our country. i will end the electric vehicle mandate on day one. saving the u.s. auto industry. which means two things on day one. drill baby drill and close our borders. our benefit is strong, otherwise we can't let that happen. jonathan: donald trump formally accept -- accepting the nomination. his grip feeling tighter than ever on the gop. washington post reporting former president obama believes biden's path to victory has greatly

diminished. annmarie hordern joins us from milwaukee. what was the big takeaway for you? annmarie: just the split screen is astonishing between president trump versus president biden. president biden isolated, more calls for him to step aside while president trump it was so clear last night in that room he has absolute control on this republican party. it was more than 90 minute speech and a lot of the times there was moments he veered off script and went into some of the similar rhetoric we are use to from former president trump and at times being very dark when he was talking about policies especially immigration. the start of the speech, the emotion he brought to the floor you could hear a pin drop. he was talking about the fact if another world, if his head was in another direction he would not be here to tell that story. he said god was on his side and is never going to recount the story again because it is too

painful. there were tears in some individuals eyes that see him almost as a god. this was the emotional part of the speech. a lot of this i imagine will get sliced and diced on tiktok, instagram and this is the appeal to the american people as he's recounting the story of this attempted assassination on his life, he's also talking about the fact he wants unity, there's too much division so is calling for unity and the fact he wants to be a president for all of america. he says what's the victory and winning just half of america. as the speech went on, more than 90 minutes long we heard a lot of the same things from donald trump. he wanted to tap into the concerns republican voters are seeing and a lot of voters are seeing across the board. and that's immigration talking about how it's an invasion of billions of the border and more of a darker language talking about how this has meant misery and crime on the streets of

america. he was trying to tap into the high prices of groceries and energy and when he said drill baby drill, members on that floor got up and started chanting with them. it was an arc of a speech, one ending with a lot of energy. jonathan: touching base with you from milwaukee wisconsin. with us through the table -- through the hour at the table is stuart kaiser. we have a lot to cover platelet start with market so far. how much of what we seen over the last one or two weeks is down to the so-called trump trade? >> i think some of it. i would credit more the report and cpi data then trump trade the trump odds have been favoring -- favorable. a very high conviction trump win the election over there, probably higher than we see in the u.s.. some of the popular trump trades, banks and yield curves i

think our tradespeople want to have on anyway. if the polling is getting an earlier little higher conviction. i don't know if there is necessarily a positioning they would be averse to. dani: it's using it as a bit of an excuse but how much is this down to positioning itself down to small caps and how over our skis we got on the big highflying tech. stuart: what's happening the last week or so is sort of a microcosm of what happened late last year which is you have solid economic growth to the downside and the market for the fed to signal cuts. it's lower volume than late last year but the recipe is the same. if you go back to the june fomc data, the first three hours saw a very similar trade. regional banks are rallying. this is the soft landing trade and we are in the soft landing trade. it does pressure positioning which gives us extra juice. jonathan: let's hope this tech

outage disappears by saturday. we don't have to worry about this anymore. the second is what will happen to the sitting president. we had reports in the last 24 hours. if we get that announcement over the weekend that president biden is stepping aside and is knocking to be in the race to get a second term, what do you think markets are monday morning? stuart: it's a great question. we had a very big political news over the weekend. i think the market opened up, i think you assume if the democrats were to change the candidate that that would get the odds a little bit tighter. we are still of the view the election is very close to a 50-50 call, probably right up until election day. if you would to get news over the weekend you probably start to push the market in that direction. our thinking is this is a very small number of states, a small vote differential and technically we don't know both candidates yet.

going too far either direction is probably a responsible jonathan: the contrast you draw between what people think abroad as they look to the united states and the conviction they have and how we feel about it here in the united states, what you think explains that? stuart: i think when you are in it you kind of appreciated as much. there's also a lot of international venture so we probably donors stand the exact details and how that works anyway. there sing the national poll is such a wide differential and maybe not as focused as the battleground states. >> sitting with us through the hour. stuart kaiser for the next 60 minutes or so with equity futures on the s&p 500 totally unchanged. promising an update on the global tech outage. >> companies around the world facing tech outages this morning, the issues plaguing firms including banks, broadcasters and airlines. crowdstrike has come out and said one of its products caused

microsoft windows operating system to crash. the ceo saying this is not a security incident or cyberattack. microsoft also warning its 365 apps and services may continue to run in its current state. earnings beat from netflix, netflix beating analyst expectations across all regions getting 8 million new subscribers in the second quarter. the results were nearly double the average estimate. the forecast for the third quarter coming in slightly weaker than expected. shows like bridgerton and the roast of tom brady help to the streaming giant hold on to 278 million subscribers worldwide. donald trump taking on president biden's electric vehicle probit -- policies at the republican national convention. trump vowing to end on day one bidens plan to have 50% of all new vehicles sold by 2030 b electric saying he would save the auto industry.

trump saying he would direct projects -- to project like roads, bridges and dams though it wasn't clear how he would make good on the pledge. that's your bloomberg brief. jonathan: the tension around that last one under the ev mandate at a time when elon musk is helping fund the campaign great work that out. dani: elon musk cozying up with china at a time trump's vp is using strong rhetoric against china paid there quite a few contradictions. >> points of tension around the world we need to explore per we will come back to that. equities about unchanged on the s&p. global aviation grinding to a halt. >> if it undermines confidence in cloud and solar ability to run ai models in the future, all the productivity growth we are expecting would be slowed down. jonathan: the conversation up next, the latest on a worldwide computer outage around the corner from new york city this morning, good morning.

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and you're in business. make now the future at godaddy.com/airo jonathan: live from new york city this morning welcome to the program. equity futures on the s&p just about positive as we close out the trading week. global aviation grinding to a halt. >> it undermines confidence in cloud and solar ability with future businesses to run ai models in the future. all the productivity growth we are expecting can be slowed down because there's hesitation around onboarding reliance on these cloud systems. it reinforces and exacerbates systemic risks and concentration with us. i think that topic will come up more and more in the future. jonathan: widespread outages disrupting the airlines, united, delta, american and spirit

granting flights, the latest from crowd strike reads as follows. a statement from the ceo we are actively working with customers impacted on a single content update from windows hosts, this is not a security incident or cyberattack the issue is been identified, isolated and the fix has been deployed to weigh in on what's happening in the airline industry. great to catch up with you. walk us through what's happened, how some of these companies are dealing with it. bendeikt: a bloodbath we are experiencing. a lot of it is erected in cascading from asia over europe and the u.s.. you mention some of the u.s. airlines they have this on the ground. it doesn't mean the aircraft couldn't fly but this is another issue that's very cautious taking these extra precautions so whenever there is a disruption, there is the directive to go slow. as what we are seeing right now. we have about 13 or 1400 flights

globally that are disrupted at the moment that are canceled and some cases give you a sense we are expecting about 110,000 moving today. it might not seem like a huge amount but this is something the ripples through the industry and takes days to fix. they've deftly think they fixed the actual technical issue on the cyber side but for the industry will mean a lot of aircraft out of position and a lot of planes will be needing to put themselves somewhere else. dani: we seen the images of people and airports lining up waiting for things to get done because of simple issues like airlines having a hard time logging into their systems. do they have the staff in a post-covid world to help clean some of this up once the i.t. issues are resolved? stuart: -- benedikt: in one word, no. that's been an issue with covid we have the ground staff very thinly spread. in times like these is becomes

noticeable. it's a worst-case scenario in terms of timing. today was was to be the busiest day of travel in the u.k. paid school holidays are upon us, a lot of people heading out so what was supposed to be a frantic and busy travel day has turned into something chaotic. berlin, amsterdam pretty heavy disruptions. a lot of these aircraft won't be able to land there. , it will take days. stuart: should i treat this differently than a weather disruption, something gets resolved in a reasonable amount of time or is this your typical airline disruption when the backlog clears? benedikt: it's atypical in the sense of the size and scale. a lot of people in the last couple of days you'll hear is

unprecedented. what it will raises the issue of are we facing industry that is under invested. do we have creaky technology and the answer in some cases is definitely yes. it's interesting to see they've got a lot of these issues over here in europe. some of them in the u.s.. in the middle east they have appeared to be unaffected so that will raise some questions as to is this an event with more isolated to shall we say legacy carriers dealing with legacy products and really haven't invested as heavily. that will be something that's quite heavily scrutinized going forward. jonathan: is it fair to say this was one small issue but it happens that there's one firm we all rely on parade isn't that the issue that we all rely on the same company. benedikt: that will be the other big question that will come up, or we spread too thin, are we all too reliant on one product and if something goes wrong there then suddenly everyone suffers. and should there be more

redundancy built into the system. the aviation industry has redundancies built in, every aircraft has multiple redundancies built into the systems. it's an interesting build on safety. for something like this to happen is unprecedented. what is our back up what are our redundancies. why didn't we have them, what kind of spending are we looking at. a lot of it has to do with taxpayers money, the faa and other regulators don't have bottomless amounts of money to spend so that will be very difficult to sort of pass to the next couple >> months and beyond. >>one of the best of bloomberg, great to catch up. appreciate your time. aviation around the world grinding to a halt. responsible forward, a crowd strike in some ways. the issue has been identified and isolated and fix has been deployed. you ask the perfect question even if the issue has been identified and the fix has been

deployed. for the airline industry the staffer in the wrong place this could take a long time. dani: you need to move planes, a get through people who have been waiting in lines and you just don't have the staff in place anymore. it's going to stretch probably for a couple of days. >> into the weekend most likely more updates their parade coming up on the program netflix shares falling after its forecast fall short of estimates. from new york, this is bloomberg. ♪

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jonathan: we've got a lot to work through so let's start with the price action. equity futures just about positive we are down on the week on the s&p steep two day decline on the benchmark in america poised for the worst week since april. russell just about unchanged. in the bond market twos, tens and 30's. jobless claims moving in the wrong direction. danny, yields which i really could make sense of. >> yesterday in general was a weird day. basically we've never had before we get the market hit an all-time high and fall more than 1% two days in a row so i think it's just a little bit of weirdness and panic in this market. >> let's get you a sense of

things on foreign-exchange we look at the euro against the u.s. dollar at the moment just south of 109. we are negative on the currency pair by 1/10 of 1%. let's get straight to it. under surveillance this morning a global tech outage hitting businesses worldwide. a series of technical glitches linked to microsoft and crowd strike systems impacting banks, restaurants and a whole lot more. a series of statements to share with you so let's start with crowd strike. one of the companies a lot of people are blaming for the outage this morning it's down about 16% in the premarket. here's a statement from that company. the companies actively working with customers impacted on a single content update. this is not a security incident or cyberattack. the issue has been identified, isolated and the fix is being deployed. this is hitting different industries and different ways. within those industries hitting those companies in different ways as well. they say their operations are mostly back to normal given this issue as we understand it flying

to amsterdam and berlin are disrupted paid other flights have departed. the latest is the important on the u.s. side of things waking up this morning working out with the flights are going in and out of airports this morning from united airlines this is what they have to say. a third party software outage impacted computer systems worldwide including at united. we are resuming some flights but expect schedule disruptions to continue throughout friday, i imagine we will hear from a series of airlines on this issue. >> delta pausing their flight schedule and will issue a waiver like united is doing. to your point it's not just airlines, the d.c. metro for anyone waking up hoping to take that apparently they are still operating but are facing delays prate it's a breath and it all stems from what we understand just from one company we are in this world where everyone wants to say that they are tech enabled and get their hands on nvidia chips. it's a concentrated market and

this raises the risk as companies move that way how vulnerable we are. jonathan: in this case it's crowd strike. crowd trick is down about 1% in the premarket. former president trump cementing his hold on the republican party in a speech formally accepting the nomination to run for a second term. residents in facing growing pressure from his own party to step out of the race. nancy pelosi is telling democrats biden may soon be persuaded to step aside. you heard the comments from the former president yesterday evening. drill baby drill. it's important to under -- understand how energy did in his first term and under president biden. typically it doesn't really matter what they've got to say because he was talking about that in his first term and energy did not do well. president biden wants to move away from fossil fuels, energy's ripped. >> i think they matter. if you look at u.s. oil production, it's the highest

it's ever been and that's under a democratic white house. you have three sectors, banks, health care and energy. health care and energy both put and takes per you want to drill but drilling puts downward pressure on oil prices themselves too if you're investing in the sector you need to pick where the energy stream you want to be. you might want to be more on the surfaces and drilling area as opposed to expiration production which is more sensitive to that line price. >> what do you make of the call on banks? chris harvey, a upgrading banks to outperform. this is what we heard of the start of the week. overweight u.s. banks is our preferred trump trade from scott. what do make of these calls. it's becoming quite consensus after the political developments. stuart: banks are something people are comfortable being long anyway even the outlook for rates and the fomc. you get some deregulatory and some positive news on the basel

side. those are being rolled back a bit. people wanting to belong as well from a production perspective it feels much cleaner than energy and health care so that's why people are using it so banks and corporate tax on the election right now. jonathan: markets leaning this way that biden -- dani: how difficult will be for this market to process a new presidential candidate and the policy implications with it. stuart: it will depend to they go with. you have to go with vice president harris you'll probably see some policy continuity and steady as she goes type thing. the question would be a lot of people are proposed to the should be a competitive process. the bed of process introduces uncertainty and you'll get election risk premiums if that happens. >> i want to turn to netflix, it's down in the premarket by one full percentage point. the streaming giant adding more than 8 million customers in the second quarter, a forecasting

third-quarter revenue that fell short of estimates. before we get to the forecast, let's talk about the numbers. they blew it out of the water. the numbers were fantastic. how impressed were you by what they did on the quarter? >> they crushed it, there's no doubt about it. this is been the question for netflix after the introduced those new initiatives with the password sharing crackdown and the ad based tier that yes they will capture some low hanging fruit. will they be able to sustain subscriber momentum. they blew it out of the water as you just said. 65% above consensus. just over the past four quarters ever since the implement of this initiative they've added roughly 40 million subscribers. that's a huge number, this was one of their strongest second quarters ever right after covid. 8 million subscribers, seasonably very soft. but the one thing i think we need to kind of take into

account here is going forward we will see subscriber momentum and the fact last year third-quarter was when all these changes went into place so we will be lapping that in the third quarter so we might see that slight slowdown coming in the third quarter and fourth quarter. >> taken by the success of their ad based tier. we have more space to fill and more people are joining this tear so we think we can bring in more people but the fact they still have more space and if not sold all of that ad space what is it tell you about the willingness of advertisers to come in and pay maybe would netflix wants them to. >> the ad based tier is a source of the greatest opportunity for them but it's also creating some headwinds right now. they are doing all the things putting all the plumbing in place, putting all the infrastructure in place to ramp up that business that they did point out it's knocking to be a meaningful growth driver in 2024 but in 2025 they will scale it

up so they are investing in programming, it's a category that advertisers are super interested in. you have a captive audience, they talked about the tom brady roasted performed well for them so they're definitely getting more into this life category that they have investments in nfl games to christmas day later this year you have the bw e programming, of the big boxing match between tyson and jake paul so they are doing things to capture the advertiser for sure. there is a lot of stuff that needs to happen on the tech side so there are a lot of in-house investments that need to take place before advertisers can really come on board. >> you mentioned a lot of really big titles that are programming coming through. to they start to become like we used to treat. where the company become super sensitive to these big chunky products each quarter and we have to cover them in that way. >> not so much for netflix because they have good depth and

breadth of titles and originals are performing really well for them. they called out bridgerton which was an absolute massive monstrous success over a billion hours of that one program in the second quarter, the biggest original by far globally across all streaming platforms. it's not just originals performing for them and is not just one content title. they have the advantage of having a lot of locally sourced titles that have done really well for them. they called out india as being one of their strongest markets. it was the second largest market in terms of subscriber growth and they spoke to a lot of local indian titles that have resonated with the audience there. then again they are going across different genres of programming and is not just their own programming they are investing in they are also licensing a whole lot more content. a licensed content is doing really well on their platform. suits was that great example but it's not just that. so many other shows from cbs,

warner studios are performing really well for them. jonathan: great to catch up on the latest with netflix. i know many of you are just tuning in so welcome to the program and i'm sure only interested in one story. it's what's happening with a lot of flights around the world and particularly in this country as well. so this is what we understand waking up this morning here in new york the global evasion is facing a lot of dust global aviation facing difficulties later to one specific company which is crowd strike. in the premarket it's down quite high in early trading. finding update from them in the last hour and getting an update on what we've heard from some of the airlines as well. crowd strike is saying they are working with customers impacted by the single update this is not a security incident or a cyberattack. the issue has been identified, isolated and the fix is being deployed. we've heard from a couple airline stateside already including united and delta. united saying to customers at the moment first, they say a

third party software outages impacting computer systems worldwide including at united. we think some flights but expect schedule disruptions to continue throughout today. we have issued a waiver to make it easier for customers to change their travel plans. that's united airlines. something similar as well they say they pause these global flight schedule this morning due to a technology issue that's impacting several airlines and businesses around the world. working to resolve the issue as quickly as possible to resume operations. >> there talking about it being pauses central this morning. united is talking about an issue for friday. i'm curious to see when these airlines start coming out and say not only will give you a waiver if you flew today but maybe for sunday because the problem is greater more than just the i.t. issue. planes are out of place, there are people waiting to get their tickets. it's impacting a lot of things and not something you conflict a switch. >> i promise you updates every

five or 10 minutes till we get that ultimate fix. we told bloomberg brief. >> shares of microsoft in staff and cybersecurity firm cloud strike moving in the premarket as we see a global i.t. outage stemming from the two firms. we are hearing from crowd strike ceo george kurtz saying the company is identified the update the crashed window systems around the globe. he says the fix has been deployed. the disruptions continued per united airlines and delta here in the u.s. have temporarily grounded flights according to the faa. new developments in the investigation on the attempted assassination of the former president. bloomberg has learned fbi used unreleased technology to access the phone of the man identified as the shooter. the agency appealed to israeli intelligence companies celebrate which supplies tech to several u.s. federal agencies read the fbi agent aimed to pull data from the device to help decipher his motives for the shooting last saturday.

a drone strike in the heart of tel aviv killed one man and injured at least eight others sprayed the attack is being claimed by houthi militants. iran backed group saying it hit israel's commercial capital with a new type of drone difficult for radar to protect -- detect. if confirmed it would mark the first deadly attack on israel by the houthis. jonathan: more from her later on in the program. up next the nasdaq and everything else. >> we went back to just last month the divergence between nasdaq and every thing else was becoming very stark. you can see tech fall down, the rest of the world catches up trade it's quite positive and durable. >> live from new york city this is bloomberg. ♪

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jonathan: equity futures just about unchanged on the s&p 500. the nasdaq and everything else. >> if we look back to the last month the divergence between nasdaq and everything else was becoming stuck -- you can see tech fall down of the rest of the world catch up. i think it's quite positive and durable. valuations are completely reasonable if not wildly cheap relative to history. >> tech stocks facing further pressure as global outages disrupt companies worldwide. the nasdaq 100 on track for its worst week since april. tech earnings kicking off with google reporting tuesday. we are in a lower point for volatility and i don't necessarily think we get much action to the democratic national convention on tech earnings.

i'm pleased to say amy is with us. you've talked about this for a while. the lack of demand from downside protection around some of these things has that changed since we last spoke? amy: it has and i think that in and of itself is quite important because we've been dealing in the options market with far more right tailed risk since the beginning of the year. to have that sucked out of the market, that exuberance with focus on the downside is telling in particular in tact. >> we've seen some downside just that cpr report. nvidia down 11. amazon eight, alphabet seven. people have been waiting for the shares to selloff. for some relief. is there any sense this is a dip you can actually buy? amy: it's a great question and we been watching that closely because in the past earnings cycles and pre-earnings cycles we do see that biden dip, that call skew version and people

need to participate i would say we are seeing a little bit less of that and when we look at the right tail versus left tail you're still focus on that left tail headed into earnings this season. and for a lot of us we talk to investors who are saying this earnings season can be a show me season for that ai story. you are seeing that sentiment in the market. we will see how that plays out it's why i think it such a major risk. stuart: my question would just be on the s&p quotes versus vicks upside. programming hasn't really worked, people of been looking at the low level of the vix. you have any view on how to approach hedging amy:? amy:i think when you look at s&p puts versus vicks calls my favorite stat is 2022 you have that when he percent drawdown in the s&p and the drawdown. i think that's burned some folks. when you look at this skull --

this call skew. you are seeing people deploy these call spreads throughout and i think that fat tail but flatter the money structure is something people are really thinking about this kind of low implied correlation environment and i think that is concerning to derivatives investors and that's why the focus is there. jonathan: what you do around the dnc in august when you don't know who the candidate will be? amy: i think when we saw that big rally in iw, versus s&p blowout some of that was rates related but some of it was a knee-jerk reaction to the trump trade. what we talked about a lot was this is a really long road, a very much anything can happen we don't really know how the market will behave with kamala harris against biden versus trump trade

i don't think you can count on the definitive way the markets with the election right now. >> this ran up a lot. is there a sense that if we do get news biden drops off and is dropping out and stepping aside that it is a plain and supple off event? amy: it could be. post the assassination, the markets that for a more definitive trump victory and when you saw that happen is we saw the market grab back to the 2016 playbook of trump versus biden. it was very knee-jerk in the sense you are assuming a lot of things. i don't know if it's necessarily true. if you look at some of the backers of trump, elon musk for instance that change his policy? i think the answer is yes where is on the biden side it's more continuous. that a lot of those policies are made the same.

a lot of that volatility is on the trump side versus the biden side. dani: it had the effect of stopping the momentum trade in its tracks. that it been the one thing everyone had clawed on too. that sony people were in this momentum trade but when it stopped it would be painful and violent. it's hard to say it's painful and violent. where do we stand on that? is that big momentum trade under threat? amy: i think that's very concerning and when you look back at the last even 10 years on a factor basis who is the big winner with momentum? we've seen evidence of that in the auctions market, with that right tail risk. when that starts to bleed and you get that really violent rotation underneath the question is one of the factors going forward. is it small-cap value, can they be sustainably true. i think people of been waiting for this for really long time but we've had this fit and start where it looks like momentum is losing steam and then we go

right back as soon as there is a flight to safety. i think that's the bet as we get closer to the potential first rate cut. >> stuart: are you more concerned about the falling market's or rising markets at this point? >> i think it comes down to the math of the markets. we talk about that and sometimes when you think about the math it's very simple in the sense if tech goes the whole market goes. we've had these big days where i w have substantially outperformed s&p but a lot of those days we look back to those specific gains. overall market is still down so to circle back to your question i would be more concerned in terms of down markets because if we go back to a normal spot down volatility of market then you are also more concerned about that correlation pick up as well in the market. >> amy silverman there of rbc.

i'm sure many of you watching in this case welcome to the program. plenty of updates hitting businesses worldwide in particular hitting the airline so let's start with the updates from crowd strike and microsoft. to the tech firms people are looking to responsible for some of this action. this is what crowd strike has to say they are working with customers impacted found in a single content update this is not a security incident, the issue has been identified, isolated, a fix is being deployed. the stock was down more than 13% currently paid microsoft lower by 1.7%. microsoft has this to say the underlying cause has been fixed. residual impact is continuing to affect microsoft 365 apps and services. those say were conducting additional mitigations to provide relief. dani: that will be concerning to a lot of people and industries because that's what has -- this

has affected. you'll see the line start piling up as the airports of people not being able to fly. ever from peoples commutes, metro system issues. having to conduct systems via email and the phone for liquidity operations. it's people getting back to basics and it's an issue that it is affecting so many industries and is stemming from one single one. jonathan: the likes of united and delta, united saying this third-party software outage impacting computer systems worldwide including a united we are resuming some flights but expect schedule disruptions through our friday. we have issued a waiver to make it easy for customers to change their travel plans. stuart kaiser with us. good news you are here. can we get a final word from you into the weekend? what should we be looking for? i still want to understand what the markets will look like next week if biden steps aside and we

are looking good at whoever it might be versus donald trump. this market ultimately does. stuart: if biden were to be replaced than it has to come under a little bit of pressure. you get a compression in the gop and that at some uncertainty back in the system. next week was on tap to be a huge micro week. no major events, it was all can be about earnings. we might get that reintroduced into the system so i think we are putting a little pressure on some of the trump trades that have worked over the course of the last week or so and just bigger picture i think it makes the dnc such an incredibly important event. i would imagine if they are going to do that they've teed up hopefully the process to deal with this. the bigger risk will be if he steps aside saying we will get back to you over deploying solutions. that's not what you want. >> it's quite an incredible rent -- risk. it used to be tech, where do we

hide? >> it's funny with tech because it's a growth stock but also the cleanest balance sheet in the world. multiple large-cap tech introduced dividends this year as well. i think some people view that as the quote unquote new defensive. in the defensive space the stuff that's on their own will be areas of staples, reit's and areas of health care. you've seen those performed very well. it's momentum growth and size this year. all three of those factors, all three of those sectors so if you get the risk off it should benefit those areas. jonathan: thanks for being with us sir. stuart kaiser of citi. coming up, rob casey of cigna, bloomberg's sid philip and jerome schneider of pimco. up next and the second hour of bloomberg surveillance. ♪

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>> the economy is not as strong as people expected. >>'s of moderating into a softening or sometimes of sharper slowdown? >> definitely a soft patch but it's been concentrated. >> the risk of that turning into something not so soft has to increase. >> the risks of a problem developing as opposed to a continuation is significant. announcer: this is "bloomberg surveillance." jonathan: the second hour of

"bloomberg surveillance" begins now. what a busy morning. a lot of you are struggling with global aviation. i promise updates throughout the program. planes have been grounded throughout the last 12 hours or so following issues related to the cybersecurity firm crowd strike and microsoft. i will go to those companies and visually crowdstrike is working with customers found -- with a defect found in a content update. a fix has been deployed. the important part is this is not a security incident or a cyberattack. we heard from microsoft in the last 20 to 30 minutes. the underlying cause has been fixed. it looks like we have a fix. they note the residual impact could continue. airlines in different places

will deal with this in different ways. dani: we would be having a different conversation if this was a cyberattack but perhaps we should have that conversation instead. it shows the interconnected nature of so many companies relying on one singular company to get there cybersecurity done. there's an irony that it is a cybersecurity company that caused all this. it shows fragility when you can have airlines, public transportation, hospitals in the u.k., other industry and banks in australia under issue. the fact it is cross industry is alarming. jonathan: that is what makes it unique and rare. guy nailed it. please to local -- we are used to local outages. we are not used to global outages that go beyond the airline businesses to restaurants, payments, banks. to login a jp morgan. you were talking about it. this is bizarre. dani: there are traitors talking about other issues. things like derivatives has been

more difficult. my favorite has to be norges bank doing liquidity operations via email and phone. what do you do about it? crowdstrike is so dominant. it is not like we can turn around and all of a sudden diversify. the conversation needs to be had. the world is becoming more tech enabled. we talk about how the tech players are dominant. maybe it is not just a crowdstrike. what happens we cannot rely on a chip company, or a geopolitical issue? the world is so interconnected. jonathan: crowdstrike negative by 12%. it was a lot worse earlier in the premarket. equities elsewhere on the s&p 500 shaping up as follows. equity futures look like this. just about unchanged. note price action in the bond market. coming up, we catch up with robert casey as president biden

faces growing cost about out. katrina dudley as stocks fall for a second straight station. jerome schneider as official signal a september rate cut. we begin with global tech outages linked to microsoft and crowdstrike causing widespread business disruptions. a growing list of companies reporting software glitches, including banks, airlines and restaurants. microsoft says the underlying cause has been fixed but the impacts continue to affect some of the365 apps and services. guy johnson on top of the story in london. going into the morning we spoke and it sounds like we have a fix and slowly the airlines are going to work. guy: it will take them a while. that is the issue we are faced with. united airlines putting a statement out recently in the last few minutes talking about it is resuming some flights but it's expecting disruption to

continue throughout the day. it has a waiver in place so airline passengers can rebook. delta is working on something similar now. the longer it continues the longer the disruption will last and aircraft will be out of debt in the wrong place -- aircraft will be in the wrong place. this is not just a u.s. problem or european problem. this is a global problem. dani talked about the interconnectedness. these are systems that talk to each other around the world and it takes a long time to resolve them. in some ways it is similar to the supply chain story we have been talking about during the pandemic and post-pandemic period and we are still experiencing in the aviation sector. maybe you can't rely on single source suppliers. you have to have multiple suppliers. you have to have multiple

systems. here's another example of that. dani: you will be heading to the farm bureau airshow. you will be speaking with a lot of industry leads. do you expect them to be able to actually put in place any differences to avoid something like this again considering this is an industry with a lot of post-covid issues and a lot of issues with investing into this exact type of infrastructure? guy: it's about redundancy and making sure your systems can cope with key parts -- if key parts go down. the interconnectedness is critical. you have a single point of failure and the easier cascading effect work through the rest of the system. if he can't check people in, get their backs checked in, can't communicate with pilots when they're sitting at the gate waiting to pushback for the aircraft, the single points of failure are so critical. that is where the redundancy story will come in. this is an industry already playing catch-up, significant catch up in terms of the

industry story. different airlines being affected in different ways. that speaks to the fact they are not all uniformly upgrading their systems at the same time. it is very piecemeal. that is where the problem is going to lie and will continue to lay. jonathan: super sharp as always. guy johnson on the latest with the airlines. it is not like they were having a great time anyway. delta and united, summer was already a bit soft. dani: this is supposed to be a weekend of high travel volume. already you have to issue vouchers to people. and the staff maybe is up to the task. not that individuals are not but you don't have the workforce he once did to work around some of these issues. it is basic stuff that guy was talking about. checking people in, getting tickets, putting luggage

somewhere. if you don't have the people to do stuff by hand it will be a problem and take a while to resolve. jonathan: we will come back to the story in about five and is. let's turn to politics. president biden facing mounting pressure from his own party to end his reelection bid. a person familiar telling bloomberg some members of the president's cabinet have discussed whether his campaign has reached a breaking point. the party in stark contrast with the gop which is firmly rallying behind donald trump. amh joins us now from the rnc. how close are we now? it feels like over the last 24 hours we got closer to president biden stepping aside. annmarie: absolutely. the pressure is mounting on president biden. he's going into one of the most consequential weekends of his political career. these are high level prominent democrats leaking to the press, talking about concerns he cannot win the election come november 5. here's what the new york times reported. biden has begun to accept he may not be able to win and they have

to drop out of the race. we heard from senator tester yesterday. there was a leak about president barack obama calling other democrats saying their concern is that his election viability has greatly diminished. the question remains who do they put at the top of the ticket? this is something republicans have been talking about. they don't want to get over their skis. they have run the data behind what a biden versus trump election would look like on november 5. they have not run the data in full or how they will run a campaign if it is someone else. we heard from frank lund. he said it is not so much that trump is winning. joe biden is losing. what kind of election could we see the democrats start to move? the issue is the timeline. the dnc is next month. some numbers of the party want to push up the rollcall for biden to get his grip on the party. there's a lot of infighting right now from the democrats. the timeline is key here if

they're able to move. the pressure is certainly mounting on the president. stark contrast from the grip donald trump has on this republican party. that was really out in the open yesterday with this emotional and energetic speech going into the election. jonathan: we need to talk about the process as well. amh, thank you. let's turn to rob casey. great to catch up with you and things are being with us. i would love your thoughts on the process because you specialize in this kind of stuff. i want to talk about how close we are. it feels like you have changed your base case about whether president biden stays in the race. we are we now? robert: thanks for having me on. as of yesterday the tide has turned. annmarie, i totally agree with her. the issue for biden and democrats is we have three weekends in a row or out of the last four that of the most

important of joe biden's career. after the debate, after the nato summit, and now the weekend coming up. we don't think the path is sustainable. every week in the question if he will drop out. joe biden can't have it. nobody can have it. we don't think it is sustainable. congressional leadership is thinking the same thing. we have heard from chuck schumer, leader jeffries, nancy pelosi. all of whom it seems they are going more public with further pressure on biden to step aside. jonathan: let's assume this happens for the sake of the following conversation. he sits there this weekend and delivers an address in talks about stepping aside. done. what does the process look like going into august? what do our audience needs to think about? rob: absolutely. the first moment after that there will be a scramble within the democratic party. everybody is sort of preparing

for this behind-the-scenes. nobody's able to expose of the prepare for it until it happens. we believe the vice president harris will be the democrats' plan b. it might not be she's in medially coordinated or biden says i'm moving on and handing it to kamala. we could have a mini contested convention in august but likely at all most immediately it will become clear the democrats are rallying around and coalescing around vice president harris, which they need to. they can't have a contested convention after republicans had one of the most successful conventions in recent history. entirely united around and behind donald trump. dani: the catch 22. if you have democrats that are united under one candidate, presumably kamala harris, it gets back to the criticism they have faced that they are running at undemocratic process to have their candidate up on stage.

rob: it's a fair criticism. we see backroom deal situations. they will be more criticism. the way for democrats to get around that is to say we will have an open convention. anyone who wants to throw their hat in the ring is welcome to.a little bit more privately from biden, schumer, jeffries, pelosi, leadership gang, a lot of pressure for people to stay on the sidelines and let kamala run her race. we have seen gavin newsom of california say he would not fit his hat into the ring. that's a surprise given he's essentially been campaigning for president over the last two or three years. we have heard similar from governor gretchen whitmer and others. it seems they are not willing to challenge harris in this hypothetical. dani: i can't wonder if they know they're going to walk into a difficult campaign and it might bruise them for their chances in four years from now. rob: i think that is fair.

one of most important aspects to remember is the biden-harris campaign has raised hundreds of millions of dollars. they have about $100 million on hand today. harris would be able to use that money almost immediately. she would not be able to use it immediately but essentially it would be hers should biden step aside because her name is on the ticket. newsom is not on the ticket. all these potential candidates would be phenomenal candidates either in 2024 or 2028 but they don't have the infrastructure or the funding available to them right now to immediately challenge harris and medially challenge trump. jonathan: what do you think in terms of a vp if it is kamala? rob: governor andy beshear kentucky, governor roy cooper of north carolina, potentially josh shapiro of pennsylvania. it doesn't take a genius to know the unifying factor among those three and others, moderate, white male. that's probably a necessity for

vice president harris who herself is not incredibly progressive on policy but profile certainly groundbreaking, ceiling shattering and perceived to be progressive by many americans. jonathan: i have a feeling we might be talking again this weekend. thank you, rob casey. i want to get you an update on stories elsewhere. is bloomberg brief. yahaira: microsoft and crowdstrike both saying they are working to fix the underlying cause of this global tech outage. shares of both companies moving lower in the premarket. microsoft saying it is still seeing residual impact for some of its 365 apps and services which are used by businesses around the world. the crowd struck ceo says the fix -- crowdstrike ceo says the problem has been fixed but it's closely monitoring the situation as major carriers like united and delta ground flights. mark zuckerberg called former

president trump's initial reaction of being shot at as bad ass, but stopped short of endorsing trump. he said changes are being made a facebook to have less political conflict. >> that includes not endorsing either of the candidates. there's always a lot of crazy stuff going on in the world, historic events over the last weekend. personally, seeing donald trump get up after getting shot in the face and pumped his fist in the air with the american flag is one of the most badass things i've ever seen in my life. look, as -- is an american it's hard to not get emotional about that spirit in that fight.

-- and that fight. that's why a lot of people like that guy. yahaira: hawaiian electric shares are up nearly 40% in premarket trading, one of several companies that are tentatively agreed to pay more than $4 billion to resolve hundreds of lawsuits over the wildfires that ripped through maui last year according to people familiar with the deal. it would settle suits on behalf of thousands of homeowners and businesses against the company which operates the utility on the island. it is not clear how much homeowners or business owners will receive. that is your bloomberg brief. jonathan: thank you. i want to go back to mark zuckerberg, and not the work the stylist has done which has been phenomenal. that felt to me like mark zuckerberg was trying to warm up to donald trump, the former president, after the former president and others have gone after his company and him directly quite a few times. dani: typically donald trump softens when you visit him in person. i don't know if zuckerberg can

wear that if he goes to visit donald trump. jonathan: up next, the great rotation. >> until you see the economy start to retailer rate is hard for the smaller cap companies that have a tremendous balance sheet and operational leveraged outperform over a sustained period of time. jonathan: live from new york city, good morning. ♪ ♪

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jonathan: live from new york city, welcome to the program. equity futures just about positive by .05%. bonds higher but not even a basis point. under surveillance, the great rotation paring back. >> i think the fund middle's favor your larger cap and growth names. we will see. on till we see the fundamentals change i'm not sure you will see

the broadening out a lot of people hope for. until you see the economy be accelerate, it is hard for smaller cap companies that have a terminus balance sheet and operational leveraged outperform pray sustained period of time. jonathan: coming back down to earth. katrina dudley with this to say. the biggest issue is the concentration we have seen in the market that is driving returns higher but with significantly lower breadth. we have been trying to address that. do you think this move is sustainable? katrina: we hope it is sustainable in terms of the rally we have seen in the small caps. why do we think that? as i said, the concentration of the market at the amount of market cap represented either by the magnificent seven or tech generally is at historically high levels. we are hoping some of that

performance can spread into the smaller cap area. one of the reasons we are optimistic is our view on investment and investment spending. we think that will disproportionately benefit the small-cap companies over the larger cap names. jonathan: what do you think of earnings so far? the likes of delta, united, pepsi. when i think about small caps, regional banks, it feels like we are piling into cyclicals when some companies are telling us things are not that great. what to say to that this morning? katrina: you are absolutely right. we have seen a lot of pressure coming from the consumer. that pressure and concern is not new. we have seen it for many quarters ahead of time. companies, when you see these trends early can prepare. we have seen mcdonald's talk about bringing down the cost of its offering and adjusting to this new reality. that is positive.

as long as companies are able to adapt what we see as a negative headline can actually be an opportunity to continue to develop and move the business forward. yes, we are watching the consumer. the second part is some of the pressure we are seeing is the lower end of the consumer. if you look at the bottom 40% of income earners, they represent less than 20% of spending. we need to really understand this broad range of spending across our economy and who's really driving the numbers. dani: there are pockets of weakness. if you look at the fund flow, people have been buying outright small-cap etf's. bank of america said it was the second-biggest inflow on record over the past week. is there an issue with people diving into the sector? do they need to be more picky? katrina: i like picky investors. they are my favorite type of investors. a picky investor is saying there

are benefits to being active and to really understand what you are buying. particularly in small caps. you are buying a basket of everything. you do need to sort through that basket of stocks and identify the companies that are trading at a good valuation. that is something i always talk about. valuation is one of the key drivers of stock performance. you want to look and make sure they have got strong financials, they are not pressured or prepared for the interest rate rises that are in the past but not really starting to come through our financials. in the small-cap land it really does pay to be an active investor. otherwise you are just buying whatever call hodgepodge. a diverse and highly varied range of investments. dani: some could argue as long as it seems like trump has good odds to be president and the fed will be cutting rates there are things that are under loved that should be going up anyway.

are those pillars of an argument to say maybe you can just buy it regardless that they are so unloved that it makes some sense? katrina: the idea that it was unloved and settling some macro factors will change and it will make everybody love a stock, that's really not understanding the reality of what drives stock performance. just because people did not like a company before, if you did not like a buggy whip manufacturer when we had that transition to cars, it doesn't matter if we had 100 or 1000 more cars on the road. we don't need those buggy whips. you need to understand the business. you can't just say because it was unloved yesterday i have this positive macro backdrop that things will get better. i think that is not the reality. particularly in small caps. jonathan: well said. katrina dudley of franklin templeton. we have spent some time on this, the everything cash rally. what would you buy? dani: investors are

indiscriminate. based on the fund flow come the second-biggest inflow ever to small-cap etfs, maybe some people will get punished when they realized the maturity well is coming and these companies will start to struggle. jonathan: what do you buy when you buy small caps? how many companies can you name on the russell 2000? dani: basically just abercrombie. jonathan: tech outages disrupting airlines around the globe. the latest update is up next. ♪ ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track.

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jonathan: two hours away from the opening bell. the biggest two day decline and number of months. pretty steep on the s&p. the worst week since april on the cards now. down over the last two days by something like 3%. even the small caps are caught up in this. the russell up five .1%. two-year a little confusing the last 24 hours. the fed has been consistent that we are closer to rate cuts. jobless claims were higher than expected. yields have started to climb a little out of the front end towards 4.48. euro-dollar at the moment, 108.90.

a lot of people commenting on the ecb. they are on course for a second rate cut in september. that is a view of the street at the moment. dani: christine lagarde left it wide open. some of what we heard from the ecb officials afterwards is they don't know whether it will be even more than one cut after that. it might be the stop start approaching the ecb. they over telegraphed the cut and the data made it awkward, coming in hot array before and upgrading their own inflation forecast. you can feel the reticence they don't want to make that mistake again. jonathan: yesterday there was the point that forward guidance is gone. it is so much harder to have forward guidance in this environment given the political considerations going into 20 25. dani: --2025. dani: we can talk about the u.s. but you have france where spreads are widening. they don't have the appearance of trying to help it. it makes it all the more tricky try to advocate for a cut but

maybe the data is not a sickly playing along. jonathan: we can talk about the federal reserve as well. ian lincoln put out this note and said, "we are operating under the assumption any shift in fiscal policy out of d.c. as a result of november's decision will be relevant for the fomc until the second half of 2025." the election went from being a steepener to a bear flatten or given that trump would lower the prospect of a glide path back to neutral. the idea that they cannot do anything until the second half of 22 any five. you need to see -- 2025. dani: they are saying we need more data and not ready to cut. they keep saying we need more data. again, they want to avoid the appearance of being political. how savory is it going to be if they say we are not cutting because we don't know what policy is going to look like in 2025? there are a lot of people that would really upset. i don't think they can go there. jonathan: we are going into the quiet period for fed speak this

weekend. i have not found the fed speak soak tedious. that so tedious -- fed speak so tedious. dani: i find it refreshing talking about labor risks. mary daly has talked about it. we even heard some lingers from powell that they are worried about the two-sided risk. it feels like a more classic fed. jonathan: the balance of risk has shifted. neil dutta is not relaxed about things. he thinks they should be cutting this month. look out for neil and vishwanath tirupattur and about 60 minutes time. under surveillance, widespread tech outages and packing services for companies around the world. it is not a cyber attack. microsoft says the underlying cause of the issue has been fixed. crowdstrike was down by close to 20% early this morning. we are now down by about 10% in the premarket. dani: it's a problem for

crowdstrike. they are the one singular company behind this. dan ives is writing about this and saying it becomes a household name but not any good way. it will take time to settle down but it doesn't change the positive long-term view or cybersecurity sector. he says it could create an opportunity for competitive displacements. this is the threat for crowdstrike. because everybody sees all vulnerable they are relying on one single the company, the issue, how long will it take to replace some of your i.t. systems? how long would it take to disintegrate crowdstrike from your service? are they really going to turn around and say we will look for a new guy to come in and fix all this? jonathan: these outages reveal how vulnerable we are and how dependent we are on one single company. just crowdstrike. how many people understood that before coming into this? i certainly didn't. we will catch up with ed ludlow and mandeep singh.

they do to some degree. the threat is ultimately their success that everyone has been so dependent on them. dani: exactly. it's a feature that has turned into a bug and is a cross industry. it is not we need to talk to executives and say we are sorry this one happen again. they basically need to put fires out around the world and around different industry. they will likely be some impact but the question is, how quickly can people pivot? how quickly can they turn to a different company? jonathan: we will get you wet update on some of the airlines. i want to turn to this. traders boosting bets on a september rate cut at the federal reserve. mary daly joining the growing chorus of fed officials saying recent inflation data has been good, adding the job market is at an inflection point. it is the nerves around labor. that is the difference in the last few months. dani: she also says we are not

there yet. she is a dove and getting louder but we don't have price stability now. many people argue if you're at an inflection point then you are there. you don't to be in a situation where you're cutting after on has moved in a nonlinear way. they are waiting for inflation to come down. you could argue maybe september is too late. they should have been ahead of this. jonathan: what is the difference in a couple of months? neil will tell you later. president biden facing mounting pressure to drop out. some numbers of the cabinet have discussed whether his campaign has reached a breaking point. it was democratic leadership as reported by cbs news or abc news in the last couple of days that is putting pressure on him. the pressure is ramping up going into the weekend. dani: the language you hear these people when you hear these reports from basically every single outlet, it is somewhat sad. they talk about a leader that they really respect and they really like. these are his allies but they

basically wanted him to go off the stage gracefully. they did not want to yank him off and there's a position where a lot of people look like they might be trying to yank him off by talking to all these different outlets. let's say joe biden decides he wants to bow out. i'm not sure what a graceful exit looks like at this point that doesn't leave lasting democratic on the party. jonathan: given how much is given to public, he deserves one. we will see what happens going into the weekend. let's get to it. the airline industry with widespread tech outages disrupting global service and temporarily grounded flights for united, delta and american airlines. sid, can you tell us what is behind this? what the state of play is with individual airlines at the moment? getting back to business and getting back to work? sid: essentially at the moment airlines are trying to get their networks back up and running. we have seen american airlines lift their so-called ground stop, which means they can now

start getting aircraft back in the air. delta airlines and united still have the ground stop going. they have not lifted those. airlines across the world are impacted differently. we have seen airports impacted. for some carriers that have massive network operations, for them the network operation centers went down. they were unable to communicate with aircraft. that really put their entire operation in jeopardy. some airlines have check in systems and booking systems affected. it is a mixed picture. there have been airlines affected from the u.s. to the u.k. to germany to india. it is wide across the go. local carriers in india are affected as well as the uniteds and deltas and american airlines. it will take a long time for the airline industry to get back up and running. that you have aircraft out of place. you have cruise out of place -- crews out of place in a backlog

of passengers you need to get to their destinations in a way that you can ensure your operations get back to normal, get your aircraft back and all those angry passengers who were stranded are moved back to where they need to be. dani: it can't come at a worse time. it is the summer when demand is there, especially on a weekend in july. we heard from some airlines. delta, united, lufthansa, all having issues when it comes to some of their revenue with some of the demand. how does the shape perception and the ability of these airlines to fight through what already is a difficult period? sid: this is the start of the summer travel season when the airlines make their money. this adds one more complication to account the kitty picture where airlines are starkly -- struggling to get demand and yield up and they have to deal with the outage. we will see airlines struggle to

try and get operations back up and running. it will be some sort of soul-searching in terms of reliance on technology and how they can go from increasing their resilience as they go forward. dani: i can't help but wonder if the conversation will shape up to be around cost. what the cost of this is going to be. how expensive it will be for the airlines to restructure some of their i.t. systems. they still have that firepower if they want to make big changes? sid: it is early days and obviously you can't really replace your i.t. providers overnight. given that the systems are incredibly complex, you need a lot of time and effort to get into replacing them. they will be a big question on who picks up the cost for this outage. i'm sure the airlines are already talking to the i.t. companies to try and resolve this asap and get some clarity on who picks up the tap for this. i imagine the cost will be tremendous given you have all

these canceled flights. we have had over 1300 or 1400 flights canceled today and the number is growing. it will be massive. jonathan: do we have a decent understanding of why some airlines have struggled more than others? united says they are resuming some flights and something similar from air france. some have their whole fleets grounded this morning. why are we having those greater struggles and some companies versus others? sid: it depends on how the network and i.t. infrastructure is organized. airlines with a larger presence in terms of their cloud and every thing else with the microsoft systems on their cloud are more affected in terms of the operations and the dispatch offices. if you're only relying on a booking system that is slightly easier that you can manually check in passengers. it depends on how complex and involved microsoft is in your operations and how the cloud impacts your operations going forward. jonathan: great to get your views. sid philip in london.

i think it is worth going over some stock price action. united, delta, american have had problems coming into this mess this morning. they are barely moving on this. crowdstrike down by about 10% in the premarket. i want to go back over the quote from dan ives. " today crowdstrike becomes a household name but not in a good way. it does not change our positive long-term view of crowdstrike or the cybersecurity sector." dani: it's the idea they are the incumbent. to try to replace him as a herculean task. dan ives says it could create opportunities for some sort of competitive displacement. i think the likelihood, you can't turn around overnight for an airline and put in a new i.t. system. it is not possible. i'm curious what the cost is going to be, whether crowdstrike has to have a real soul-searching and come to these corporations to make sure they don't go elsewhere.

that is why you see the stock down but it did bounce back. it was down worse and i'm winter it's because of the feeling that they can't be displaced. there really is not too many alternatives. jonathan: the stock is slowly recovering. welcome to the program. i promised updates so let's get you another one with your bloomberg brief. sid: --yahaira: microsoft says the underlying issue had been fixed. crowdstrike now sank issues are not related to a hack. shares of both companies are getting hit in the premarket as issues have taken down airlines and many other businesses. bankers around the world are caught up in the outage. bloomberg learning from a source at jp morgan that some staffers were unable to log onto the firm's system and the bank told some buy side clients it was unable to process certain trades. netflix meeting analyst expectations, adding 8 million

new subscribers in the second quarter. that is more than double what analysts were expecting. it was shows like bridgerton and the roast of tom brady that helped the streaming giant hold on to 278 million subscribers worldwide. the forecast for the third quarter coming in slightly weaker than expected. shares were lower after the results but have since recovered. prosecutors at the justice department say they need more time to finalize a plea deal for boeing in connection to two fatal crashes of its flagship airliner. boeing agreed earlier this month to plead guilty to fraud and paying nearly half a billion dollars in fines to avoid a criminal trial. the prosecution says they made progress towards finishing the deal and could file a final draft next week. the families of the crash victims have filed a notice with the court indicating they plan to object to the deal's terms. that is your bloomberg brief. jonathan: thank you. up next, setting you up for a rate cut. >> we have had some really good

incoming data, but even with the incoming data on inflation being positive and good data after last -- earlier this year, we are not there yet. jonathan: how many times have we heard that this week? closer but not there yet. that conversation is of next. you are watching "bloomberg surveillance." ♪

jonathan: live from new york, welcome to the program. equity futures on the s&p 500 look a little something like this. palm -- positive by almost .1%. yields higher by about a basis point. under surveillance this morning, setting up for a rate cut. >> we had some good incoming data but even with the incoming data on inflation being

positive, good data after last -- earlier this year, we are not there yet. we don't have price stability right now. we need to be very confident we are on a sustainable path to achieve it. jonathan: more fed speak ahead with remarks from williams and bostic. jerome schneider says consider moving out of cash with the prospect of inflation subsiding it is time to stop thinking -- start thinking about moving cash that's been on the sidelines. nice to have you on the east coast. it is time to move out of cash, why? jermone: although the market is trying to extrapolate the series of rate cuts what we are beginning to see is the rationalization of being in the curve that has been clients for the past 12 to 18 months rationally. it's beginning to be stale at this point.

with the federal reserve beginning to move to and easing bias we will see a series of one to two rate cuts this year and may be longer. focusing on that current income is going away. it is time to move out of the yield curve. it's prudent. given everything that's going on in the world there are four factors investors really need to focus on at this point. what is going to happen in the short-term interest rates? what is the federal reserve going to do? what is a longer-term impact on interest rates? fiscal policy will be a dominant feature in the coming years. what is risk appetite? we are seeing that an equity markets play out in real time. that is focused on growth. number four, something people do not have a top of mind which is liquidity. the liquidity transition -- and transaction mechanisms. will make cash and liquidity move to the global economy?

it's a factor that will play into how markets behave over the next 18 to 24 months. put those factors together and we have a little bit of uncertainty. the federal reserve will try to ease concerns by bringing rates lower. at the same time insight investors to recalibrate their risk expectations over the medium-term. jonathan: maybe a well-known point to all of this. i have heard it a million times. reinvestment risk, get out of cash, get out of cash. some people say we are only talking about 25 in september. i have time. what is the reinvestment risk? what is a message back to them? jerome: current income is a factor for people have become used for earning 5% on the cash. the reality is driving that cash and helping preserve returns a little longer in the face of more volatility is really the conversation to have. let's extrapolate and rationalize the smooth volatility we have appreciated in the past 5, 10 years from easing monetary policy may not persist.

we need to think to take a moment back, not get involved in the day-to-day minutia of these rotations in equities or this factor in terms of curves or where we are an interest rates but reset the x vacations in terms of where they are thinking their investors will be for the next 2, 3, 5 years. moving at a little bit of the curves he can drive price appreciation as bond yields move lower in the front end. it doesn't mean get out of -- move entirely out of cash. it means you can appreciate the value of fixed income at this point in time given the circumstances of price appreciation in the face of declining interest rates in the front end. dani: that will be impacted by what type of cutting cycle were going to have. you mentioned maybe one or two this year. maybe some next year. you don't sound like with the market is saying, something like seven cuts. jerome: this is a case where you will have the market appreciating day-to-day factors and data. the federal reserve is data

dependent but not data dependent on a daily basis. the reconciliation is timed difficult for the market today just. the federal reserve is trying to cross a river but the bridge may not necessarily be there. it might be washed out entirely. the destination, they think they know what it is but not necessarily have the monetary policy vehicle to stick the landing. the current market is knowing exactly the estimation is and they are willing to extrapolate. it is a question of perhaps two rate cuts this year. that has been born focus given the bias we have seen for the federal reserve from president williams and governor waller. we see that evolved to be a september meeting type of cut. is it going to happen throughout the course and in a sequential basis in 2025? there's a lot of ground to cover. the election, growth impacts, if we see inflation still hanging up above 3%. the simile see we are seeing

yields are pressing back against lower rate levels we saw earlier this week and last week, it's a little comforting that is beginning to be rationalization in the micro sense of where rates are. in the longer term let's understand we may not necessarily see the sequence of rate because materialized to the extent the market is. that is where active management comes in and more importantly try to find ways we can have structural enhancements or moving out of cash produces returns of not only 5% but 6% to 7% by moving and driving the price appreciation by being in bonds. dani: it's a very prevailing thought now that once you get one rate cut and it awakens the animal spirits and every thing follows. jerome: it's a middle -- little like pulling the fire alarm. people don't typically wake up from the money market malaise until 18 months after the first rate cut. that's a long time. yet it will see a series of rate cuts were that current income moves from 5% to something in the fours.

is that enough to wake people up? we are seeing those conversations moved to short-term strategies come into fixed income in general. that's a comforting thing because it's a rational response because the fixed income component of the portfolio has been grossly underappreciated for a decade. it's a volatility management mechanism at this point. given the uncertainties that are beginning to emerge in the marketplace we have to be rational about where returns can be on a risk-adjusted basis. whether you're an allocator or retail investor. those two things are a prudent mechanism to help reduce risk in the day-to-day volatility we are seeing. jonathan: what kind of risk mitigation characteristics do you get in treasuries at a time when the nature of the threat could be additional supply from the u.s. government? jerome: fiscal deficit, supply, things are we are continuing to weigh on conversations. admittedly is going to be part of the debate of what we will

see in congress and government develop over the coming years. it is a secular theme we deal with. it doesn't mean it's going to happen tomorrow or the bond vigilantes will reprice at the long end of the yield curve. we will see it happen over time. where does the proper term premium mean and take on more interest rate risk? it has to be something more than the negative term premium they are getting now. from pimco's perspective we believe a curve steepen her over the medium-term. it is iterative. the factors i mentioned at the top is simply something that will be very cumbersome to get to that destination at that point time. jonathan: how close do you focus on the political developments over the last few weeks? jerome: it's one of the things that it's minute to minute. it's a very dynamic situation. there's a lot of factors that can come in to play over the

next four months, including the candidates themselves. what we see is that the policy implications, the fiscal policy and locations are probably consistent through the course of 2025. if you look at that you can see and garner we are not going to see a significant change in the policy impulse anytime in the near future. jonathan: this was great. jerome schneider from pimco on the latest. i don't remember. a new cycle like this maybe the pandemic four years ago. it's been so intense. dani: and the market doesn't know what to do with it. we have gone back and forth. jonathan: it continues. the third hour of "bloomberg surveillance" just around the corner. sonali basak breaking down the disruption to banks. we will see -- we will speak to neil dutta and vishwanath tirupattur. this is bloomberg. ♪

>> this is a crescendo as it reaches its peak. boom. massive reversal. >> it is what we all expected to happen. >> i'm still not entirely sure you will see that broadening out a lot of people hope.

>> the market is aggressively pricing in her several cuts. that feels like it's a little too much. >> that is what small caps are -- you can be in an interest rate cutting cycle. that is the new chapter. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: let's get you to the weekend. it feels like we will be stuck in this week for the rest of this year. from new york city good morning, good morning. the third hour of "bloomberg surveillance" starts now. check that equity futures. just about unchanged. similar move on the nasdaq, on the russell. things seem calm. for a few review -- of you looking at the airlines there's nothing calm about it. crowdstrike down 11% in the premarket. the big focus on this one company. dani: a big focus and its implication across industry.

the most visible which is airlines. many said we will give you vouchers. things are disrupted. a few have been able to get back up in the air. american unchanged. they have had a few flights out. there is mass confusion because of how pervasive crowdstrike is and how many companies it's impacting. they say we have solutions out there. it is still taking time to get things back up and running. jonathan: it is not just the airlines. it is the financial industry. some struggling to log on a jp morgan according to reports. you talked about transactions. dani: norges bank, their liquidity operations have had to be done via email and phone. jonathan: some airlines are writing boarding passes with pen. dani: but they have no staff anymore post-covid. get your head around how the getting people through airports. jonathan: we will have an update on some of this. price action more broadly. equities on the s&p just about positive.

yields higher by less than a single basis points. 420.97 is where we are. jobless claims not fantastic. official after official saying we are closer but not there yet. i think with a decent picture of what they think, whether people have different views but a decent picture of what they think is going to happen in the next few months. dani: the choir is lining up behind september. it is notable the doves are getting louder. they are louder and introducing the idea as mary daly set of two-sided risk. the question is if the data has been as lumpy as it is, what happens after september? we got the feeling we will go there but can they keep cutting? can they keep cutting into 2025? jonathan: what happens this weekend on that front? this has been amazing. relentless. i think is the perfect word. braylen this for the president of the united states. has to step away from the campaign and as he steps away

the pressure cracks up again. you have democratic leadership in both the house and senate pushing back. president obama telling allies that president biden cannot win. we are seeing this on repeat. dani: the timeline has been incredible. after saturday, after the assassination attempt on trump it went quite. maybe things were so chaotic and so much from it to him is building behind trump that everybody just needs to rally behind biden. that was extreme short-lived. every single day the dam is breaking. when does it break? what does it take for biden to actually bow out? can we just live with the divided party? i don't see how that can happen with the down ballot races are seriously under threat. dani: everett -- jonathan: the report is swirling that the decision time is this weekend. the campaign keep saying we have made one. we made the decision. dani: that is wi-fi nancy pelosi's language interesting.

the report is she's pressuring biden to make a decision. by all accounts they have made the decision and is for him to stay in. if they change their mind, what does that even look like for a president to bow out of the race? what is that look like they have a new candidate? what is it look like we know it's a fractured party at this moment? jonathan: we are having a political conversation. we are not hearing -- talking about what we heard from donald trump. not just to the party yesterday. annmarie was in the room. we will catch up with her in about 40 minutes. we will also catch up with darrell cronk. mandeep singh is a worldwide tech outage disrupts business. and neil dutta on why the fed must cut rates at the end of this month. global tech outage is linked to microsoft and crowdstrike causing widespread business disruptions, including at the big banks. sonali basak has more. sonali: good morning.

the first thing i thought when i woke up was could you imagine if this were to happen during the covid times? how much activity has moved online for the banks and how much they have invested in cloud infrastructure, public and private? many rely on the private cloud infrastructure. how is it playing out? jp morgan, some staffers unable to log on. hedge funds have not been able to process certain traits across many funds across the world. hong kong, south africa, singapore. you have seen issues with trading desks and with employees able to logon. some people had to go home and hong kong, certainly in london. one big deal is the lse group, the parent of the london stock exchange reported issues with preventing news from getting published. the rns new service important here. 350,000 announcements a year. 70% of all price-sensitive news. think dealmaking.

if you're announcing a deal, this would have been a massive problem for you. not to mission the commute issues. if you're just trying to get to work in london, hong kong, new york, the systems are online but getting information about that might be difficult. if you're off on a business trip, forget about it. if you're not flying private you might be stuck in the airport right now. dani: presumably a lot of banking executives do that. there has not been reporting on citi having issues. citi has been hit with issues integrating some of their old and new i.t. systems together. considering we've had issues like that in the past, is that some of these large financial institutions which regulators look at closely have as simple of problem is not being able to log on in the morning? sonali: imagine this at a time when people could not going to work. to the point you are making, the problems that citigroup were

legacy financial systems. they were legacy technology issues. this is the new way of doing business. there have been a lot of warnings about what it would mean if they were -- crowdstrike said this is not a cyberattack. it was not an attack on the financial institutions directly or there balance sheets, their consumer funds. the issue here is the normal way of doing business, moving money around the world. citigroup very smart because they moved more money around the world than anybody else. if you're trying to make a simple transaction, what happens if your bank cannot make that happen for you and they are connected to microsoft? we don't know exactly which bank is working with microsoft and what issues are impacting banks of the moment. we are looking to find that out and contact the banks. they are more connected. they invested heavily in cloud. this is one way things could go wrong. jonathan: thank you for the update.

looking forward to your coverage later this morning as a countdown to the opening bell starts at 9:00 a.m. eastern time. sonali basak, matt miller and katie greifeld doing that for you in about an hour. as the odds of a trump presidency increase, so do the tenses of republicans keeping the house and winning the senate. he joins us for more. good to see you. let's start with the energy piece. on the former president tells the room drill, baby drill, should i run away from it? derrell: during the past trump presidency energy was one of the worst performing sectors. ironically during the biden administration if you market as of the date of joe biden's election, energy has been one of the best performing sectors.

there's a little bit of a contrarian element. it has rivaled tech. you can go back and run the numbers. everybody believes tech has consumed all the oxygen in the reality is energy has done extraordinaire well in the last four years since the last election. i actually do believe we are probably in a secular bull for energy. it is not a conviction we think fades next 3, 6, 9 months. it is a multiyear -- the world has too much demand coming out of ai, cybersecurity, defense spending. i can go down the list of inputs coming in to the demand side of energy. we don't have enough supply. that is the heart and reality of it. jonathan: the ought reality of politics that you can say drill, baby drill and there are few progressive democrats that are willing to correct him. the reality for them is we have record output, nearly 13 million barrels a day. they'll most on what to talk about it.

we have record output in america when it comes to crude. dani: it's a sector that has done very well under president biden, which gets to the idea of how much you want to trade the politics when they have had the same net result. jonathan: we have been trading politics and small caps. you have rates, earnings, and donald trump. out of those three, and it's difficult to do but based on your conversations, would you have seen in the price, the rally over the last week and small caps, is it about one versus the other or three combined? darrell: we've had a lot of conversations about this. it is a rip your face off rally in the last seven to eight trading days. everybody believed the fed was a go in september. here comes the rate cutting cycle. then the events over the weekend and the attempted assassination put a bid in a trump presidency and red wave. i would tel you this, jon.

is it a reaction to rotation? those are two different things. reaction is a short-term reaction. it blows through some technical resistance levels in every thing else. or, a true rotation where capital is living small caps can durably outperform over the next 6, 8, 12 months? we think it is the former. we think it is a reaction. if you look at small caps, still 40% are non-earners. if you look at the equity risk premium, a function of getting paid to take the risk, it's at an all-time low on smalls. all-time low. not like a cycle low or anything else. an all-time low today. you are not getting paid to take the risk. the leverage is high and small caps. they have to service that debt. that is hard on their earnings. the earnings both today and going forward are still expected to decelerate relative to large. the fundamental story is not there. what can change that?

if the fed cuts rates faster and more than people expect. small caps are highly indexed to floating-rate debt. almost 45% of the debt is floating-rate. if you bring the short side of the curve down quickly, that's a big tailwind to small caps along with they are highly leveraged. as rates come down and helps them in their business model margins earnings and the like. bottom line, we think it is a reaction and not a full rotation. dani: what about the rest of the market? it was basically everything but big tech. big tech kind of stayed flat. is that more enduring that you have a market that has maybe gone over his its skis with how concentrated it is an apple to look elsewhere? that's able to look elsewhere? -- and able to look elsewhere? darrell: big tech, the mag7, sitting on top of its 50-day.

if it pierces the 50-day support level, some of that selling accelerates to the downside. we all know breadth has been too narrow and the leadership needs to expand. i would postulate if you can get leadership to expand into financials, and to industrials, into other areas of the market, it's a healthy thing for the markets. we have had too little leadership that's too concentrated. it's a healthy thing if we can do that. the question is if. just a week ago before he started the rally the index was setting all-time highs and the number of disciplines above their 200 day moving average were at an all-time low on the s&p. jonathan: i worry people are piling into cyclicals as the cycle turns the wrong way. is that what you already about? darrell: what would make you buy small caps, a prime beta cyclical? either it has to be price

compelling, which to me the russell 2000 problem needs to be at 1850 or 1900 before you are price compelling, or i have to believe i'm really cycle and not late cycle. all the data tells me i'm still late cycle. if you can convince me, early, i'm a buyer small caps all day. jonathan: i have been asking this question for months. do you want to buy their recovery to a recession we have not had? darrell: unless there is compelling evidence, i guess you can make the case -- here's the contrarian case. we soft land so you never have the recession. you trough a little bit and then re-accelerate hard to the other side and when small caps make sense. i'm worried people are jumping on small caps because they did well as we closed 2016 and 2017 first trump presidency. they are replaying the same tape, if you will. bear steepener, small caps outperform, defense, financials,

reits, the whole thing is the same playbook. if that same playbook doesn't play out in policy in trump 2.0, if that's how the november election goes, you have the risk in trades and they become the reaction and not a durable rotation. dani: i huge part of that is going down ballot races and what they look like. what the house and senate looks like. the fact that biden likely to drop out of this pressure, does that play and maybe question seven the rotation? darrell: yes and no. our thought all the way along is the senate clearly -- the methods difficult for the democrats to hold the senate. everybody knows that. it is likely to go gop. without the house goes the way of the executive branch. whoever wins the presidency carries the house on coattails. right now you have to think that this drink has been towards the president trump and weakness towards president biden in the intensity of voters and what

they want to see. the democratic party seems to be united around one thing, trying to move to a different candidate at this point. if and when they do that, the question becomes can they unify from there or does it fracture the party? jonathan: the focus is winning in november and not governing the next four years. let's talk about policy more. good to see you. thank you. let's get an update on stories elsewhere this morning. here is your bloomberg green. yahaira: microsoft announcing the underlying cause of the global tech issues have been fixed while crowd strike --crowdstrike said the issues are not related to a hack. shares of both company's getting hit in the premarket as the tech issues have taken down airlines and many other businesses. delta airlines, which had grounded flights over the issues just now saying it has resumed some flight departures. as we get ready for the opening on wall street, the nasdaq

expects all the u.s. markets to open normally and there is no impact to its exchange systems. a russian court has convicted wall street journal reporter evan gershkovich with espionage and sentenced him to 16 years in prison, according to state media. the hearing had been moved up almost a month from its original date. the 32-year-old american was accused of spying for the cia when he was detained in march of last year. pressure is continuing to mount on president biden to step down from the race from within the democratic party. former president obama becoming the latest voice in the president's ear to urge him to reconsider according to the washington post. the report following similar sentiments from other top democratic lawmakers, including nancy pelosi, chuck schumer, hakeem jeffries and adam schiff. that is your bloomberg three. jonathan: -- brief. jonathan: the morning calls, plus mandeep singh as

crowdstrike works to contain a global tech outage. that conversation is of next. good morning. ♪

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jonathan: counting you down to the opening bell in one hour and 10 minutes away. equity futures on the s&p 500 just about unchanged. let's get you some morning calls. netflix. wells fargo raising its price target up to $758. analyst could spec -- expect consistent growth. ever court raising up to $710. they highlight the impressive subscriber growth numbers against estimates. blowing it out of the park. just phenomenal. the final call from ubs raising

the price target to $750. they note it still he direct to consumer giant. it is difficult to argue with that. let's turn back to widespread tech outage is disrupting businesses around the world. the ceo of crowdstrike says the issue has been identified in a fix has been deployed. "crowd strike becomes a household name but not in a good way. this will take some time to settle down but does not change our positive long-term view of crowdstrike or the cybersecurity sector." let's continue the conversation with mandeep singh a bloomberg intelligence. good morning to you. not the morning you expected, i'm sure. what happened here? mandeep: they shipped out an update to their software, crowdstrike did last night. it affected the asian companies first. but we learned was it was nothing malicious. a regular update but an update that affected microsoft operating system functionality. that is where whether it's an

agent-based security solution or agentless security solution, that comes in the picture. if something is changing operating system functionality, why didn't microsoft pick that? there was no malicious intent. it was just a bug. code-7 bugs. -- codes have bugs. why wasn't it caught when it was tested and shipped to impact microsoft in such a way? that is why i think everyone is time to figure out how did this get shipped when we test every change we make to our software 100 times. clearly that did not happen in this case. dani: it was not cot at first but crowdstrike said they isolated the issue and issued a fix for. give us a sense of how long it takes to repair some of the damage for i.d. systems specifically to get them back up and running. is this like you issue a fix and people can subtly log on again? mandeep: you bring the systems back online but there were a lot of missed transactions.

you have to do some rollbacks. your backup solutions, to play. there are certain businesses and companies that are benefiting right now because any company that provides a backup would be in business today. clearly, the longer-term question for microsoft is because they are deploying everything to their azure cloud and it affected windows, you have to ask yourself of their other vulnerabilities at the operating system level that could bring the whole system down. that is where the critical system updates are crucial. if it was data laws that we hear about with snowflake and other incidents, people move on. it was a one-off thing. companies fix it. if it's a complete systemwide outage it's a different ballgame. jonathan: there is a sense we just move on. it doesn't change things for him over the long-term. still positive on this company and the cybersecurity sector. mandeep: i'm saying agentless

solutions, where google is rumored -- google's rumored acquisition comes in a play. looking to buy a cybersecurity vendor. this is an agentless solution where company's will try to figure out what is it that brings the whole system down as opposed to the system did catch a cyber threat. at least your critical systems will keep running. i think this will bring a lot of questions. yes, companies have a tendency to move on when it comes to breaches and those sorts of things that happened in the past. this is a more architectural question. i do think crowdstrike will miss their 2q numbers. this incident will have an impact. down the line it comes to how they handle the outage. jonathan: mandeep singh on this global tech outage we are still trying to recover from across

several industries and into the weekend. dani: even if you fix the i.t. issue, there is the follow on effective airports, lines, things misplaced you need to get together. i'm interested to hear whether we start to have that conversation of crowdstrike's competitors. jonathan: logistical nightmare on the antitrust front. here get point. coming up, morgan stanley's vishwanath tirupattur and neil dutta. there will be nothing quite about this conversation up next. from new york, this is bloomberg. ♪ s are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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jonathan: 60 minutes away from the opening bell with equity futures just about unchanged on the s&p 500, down for the week. the benchmark for us over the last couple of weeks have in the russell. small caps have ripped but not been spared, down another .1 percent. two-year year, 10 year, 30, 2 year approaching two point 50, now at 4.44%. dani: the only thing you can point to is this is the market that is already priced in what the fed is saying and maybe we just need to back off and we got

to sure of ourselves. jonathan: let's get to the foreign exchange. the euro just about one changed -- unchanged. donald trump said we have a currency problem back in the day. basically unchanged. dani: it is the push and pull that we have a weaker dollar and that we want tariffs and raise the deficit that would strengthen the dollar. you have to say, what is more important, the job owning or the policy and we don't know who the democrat nominee will be. maybe you just have to go back to what is the and comfortable. jonathan: we talked about the fed and why they should start

cutting. widespread outages disrupting services to companies across the globe. the crowdstrike ceo saint it is not an attack. microsoft said the underlying problem has been fixed. a person familiar with the matter saying some members of the biden cabot discuss -- cabinet discuss whether his nomination is reaching a breaking point. it does not surprise me. dani: some reporting specifically from the new york times suggests biden is becoming more receptive to the idea that maybe he does need to bow out. if that is the case, what happens from here? you could say the party needs to get together and they need to hold hands and jump like with someone like harris.

then you get back to the initial primary that is undemocratic and you didn't have a fair competitor to biden and so what happens when that is the same for kamala harris. if you have a real primary in my underscore in already fractured party. jonathan: feels like this week is never going to end. the good news is the weekend for the federal reserve, today is the last day for the quiet period. we will hear from williams and bostic. with us to discuss is vishwanath tirupathur and neil dutta. the case for july and not september, how strong is the case to cut rates this month? neil: i think it is quite strong. the data are basically right there. the fed keeps talking about how uncertain everything is, but if

you are so uncertain about everything, you might as well revert back to a standard monetary policy or rules -- policy rules and the things into a computer and see what it spits out. across any monetary policy rule that people look at, it basically suggests that it is time now to move to a less restrictive policy stance. ultimately, there is no inflationary impulse from the market. that has been true for quite some time. the fed is now recognizing that to be the case. core inflation continues to moderate and will probably be 2.5% by the end of the summer is not lower. put it into a role and see what comes out. it does not amount 5.5%. the fed is not going to cut unless they see a path to several cuts because what is the point of going just once. i think what will happen is they

will use july 2 set up the september cut. i think there is institutional bias you could say for that to distribute the band-aid off and go. i do think essentially there is not much difference. if you are going to cut in september in use july to set it up, that is not a huge cost to the economy in a meaningful sense. they will use the july meeting to make more of the admission that inflation has improved. they talk about how inflation is still elevated and only modest improvement but i think you will see stronger language at the july meeting and that will be an important message to the market that cuts are on the way. dani: if all they use july is setting up september, what difference does it make? vishwanath: i don't think a

couple months will make much of a difference. i think they are communicating that they need one more data point and absorbing all the fed speak, i think they will use the july meeting and there will be clear indication for the language and that would suggest a september cut. the market is pricing that already. jonathan: this makes a lot of sense and no one listens to this conversation. but here is the question i have and it is inspired by a conversation we had with mohamed el-erian who agrees with you and thinks the federal reserve should be reducing rates this month. where he sounds concerned is he thinks this federal reserve is so sensitive to every data point there is a risk between now and september you get one bad cpi

print and it spooks them. do you share that view and concern and risk? neil: sure, as a former believer in emergent rate cut, i am definitely sympathetic to the idea that the fed is too much of a slave to the high-frequency data. if you're going to be data-dependent, i believe it was the ecb president lagarde that made the point that data dependence doesn't mean data point dependence. that is importance. you need to have a way of thinking about the economy. how is the data evolving? ultimately, what is the right to tell for growth and inflation right now? it is hard to come up with it. data points ebb and flow. if you look at the data out of the u.s. so far this week, a bit of a hodgepodge. we had a weak auto sales book

retail sales were stronger. there may be some seasonality with that. manufacturing employment fell but we had mixed survey data out of the regional manufacturing data. let's think about the overall picture. what is the right tell for the economy. there is no evidence that -- are we going to see an uptick in a shoulder prices, a big upturn in non-housing services with the labor markets cooling off and i share that and i think it is a valid critique. you can't just be a slave to the high-frequency data. you have to think about things using a big picture point of view. one of the points i have been making is that unit labor costs are low, running below 1%.

with the fed that has a labor market driven view of the world, where is the inflation coming from? there is no information that it is getting out of control and the dollar is not collapsing. you have do stick with first principles and not just be a slave to the height data. -- slave to the data. jonathan: i wonder if they heard the speech at the convention. could those considerations change the government? vishwanath: it could change it but maybe not in the most obvious ways. the first thing on top of most people's minds is terrorists and that is something you don't need the congress more. much of the discussion is tariffs on inflation and it is not so straightforward. we look to the 20 experience and

while those tariffs did lead to higher prices in the sectors but there was also a growth impact. the sectors that were particularly tariffs in 2018 showed up in contraction in manufacturing output and employment fell in those sectors then inflation began to show up. i am more concerned and everything depends on details and the extent of the tariffs. i think we should not forget that tariffs could also have significant downside on growth and employment. those may precede inflation. a lot depends on the details. dani: does that mean we could have tariffs and the net impact

is that we buy it bonds and months rally? vishwanath: i could construct a scenario where we see a significant growth impact and that depends on how broadly the tariffs are. in the best we could have said that tariffs on one particular country that you could product source those from somewhere else. but across many countries that potentially is lower and that results in cost of manufacturing in those things going up and passing that on may be limited. that could show up in unemployment and manufacturing output it is not clear. it depends on the details. dani: until then, you can construct a scenario for everything. how should we be thinking about this we don't have the details and maybe we will get them after

november. should be impacting the fed's thinking or should they be a straight narrow down, up blinders on and not looking at politics? neil: it is not that you keep the blinders on but you have to respond to the world as it is and not necessarily the world you think may unfold. the point i have been stressing is it is not so much about the outlook but about the evolution of the data up to this point. unemployment is up. core inflation is down. policy has not changed. we know that inflation is a lagging indicator. whatever inflation is today, that represents yesterday's monetary quality -- policy. if the policy is restrictive that means the fed should be much more concerned with potential downsides prices to growth and upside surprises to inflation. that is why they should recalibrate policy, they shouldn't be playing the

prediction probability games around what if trump wins and what if you have a democratic senate and a republican white house. the fed it should not be getting into that business. take the fiscal stuff as it comes to you. let's say it we have tariffs and you could easily see it significant devaluation in foreign currencies against the dollar and that would send the dollar to the moon and then what. it is pointless to get into these games without more information and what they will do. the more important point is look at what is already -- has already happened. that is enough to cut and i think the markets are understanding that. vishwanath: i agree with that. for the next six months or so, the trajectory of growth is unclear and especially shelter. i think shelter inflation has been sticky and we think there

is enough information in the system that we will see it slowing of the shelter inflation component. what you are asking earlier, all of these things, certainly the trajectory for the next six months is very much that of making steady progress in getting close to the 2% target. and do we need the amount of that in the economy and the straightforward answer is no and therefore there need to be cuts. jonathan: you sound like a bond bull. is that fair? vishwanath: it is fair. of all this plays out, we expect to see duration rallies. jonathan: good to see you. neil, always great to see you. into the opening bell, 46

minutes away. equities are just about unchanged on the s&p. let's get an update with your bloomberg brief. yahaira: the new york stock exchange said it expects a normal opening bell in less than an hour as widespread outages destruct services for companies around the world. companies starting to come online. delta airlines has resumed some flight departures. microsoft saying the underlying issues have been fixed while crowdstrike said it issue from a tech issue and not from a hack. american express lori -- lower in the premarket saying it is boosting spending on marketing after customer spending on credit cards slowed for the second quarter. the company expecting marketing expenses to jump 15% after billings growth came in below estimates. mark zuckerberg praising former

president donald trump's reaction to being shot at but stopping short of endorsing the gop nominee. >> i have done some stuff personally in the past and i'm not planning on doing that and that includes not endorsing either of the candidates. there is a lot of crazy stuff going on in the world, historic events, like over the weekend. on a personal note, it is seeing donald trump get up after getting shot in the face and pump his fist in the air with the american flag is one of the most bad things i have's -- i have seen in my life. it is hard to not get emotional about that spirit. that is why a lot of people like the guy. yahaira: mark zuckerberg with

emily chang on bloomberg television thursday, july 23 or you can stream it. jonathan: have a great weekend. that is most watched tv in the next week or so. up next, setting you up for the day and week ahead as well. we will get a final word from annmarie. this is bloomberg. ♪

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jonathan: the opening bell about 40 went minutes away. equity futures posited by .1% on the s&p 500. here is the trading diary. fed speak from williams and bostic throughout today. tuesday, alphabet and tesla reporting results. wednesday come ford and ibm and u.s. pmi. thursday, another round of jobless claims and rounding out

the week, the sentiment survey and spending data as well. before we get to all of that, let's talk about what we can expect this weekend. let's head out to milwaukee with annmarie hordern. what are we expecting? let's park the republicans and donald trump. what are we looking for from the democrats? annmarie: definitely a consequential we can for the democratic party, especially president joe biden, pressure mounting for the most prominent -- from the most prominent members of his party, nancy pelosi, chuck schumer, president obama. the washington post talks about the fact that he thinks the chances of beating donald trump are starting to dwindle. what we are hearing from the campaign and white house is that he is firmly in this race for the new york times says he has begun to accept the idea that he may not be able to win in november and they have to drop out of the race.

and whether aids should convince him to step aside. polling shows that even if kamala harris is the top of the ticket if biden steps aside, what does this mean for the ticket. does she take the top of the tickets and pick a vp or do they have maybe a potential many primary, open primary in august? these -- the split screen couldn't be more open. donald trump talked over the convention and the room was electric. this is his base. this is joe biden losing it right now as it was said. if there is a new nominee, then -- can that person unite and excite those independent voters,

those that both are trying to get votes for in november. jonathan: before we talk about what we can see at the democratic convention, let's talk about where we were. going into last weekend we set the clock was ticking, pressure building on president biden. then the tragic events of saturday evening happened. we woke up monday and it hasn't been a week and we have set the clock is run out. people were saying they can't put extra pressure on him because of what has happened in the last couple of days. it back up and say the clock is ticking and it is about this weekend. what is the firm deadline, cut off to put the story to bed one way or another? katie: i don't think anyone -- annmarie: i don't think anyone knows. you have members of the democratic party who want to bring up the roll call and official nomination they can do virtually until early august. i guess we can say around the

beginning of august, depending on until we know the date, we don't know. we are in a great, uncharted -- a great, uncharted area -- gray, uncharted area. the republicans were trying to paint a picture, even though a lot of division in the republican party, the rnc was run well and they were trying to paint the picture they are united, different than what you are seeing with the democratic party. biden is in delaware and they are not getting behind his -- their leader. i think biden understands that and potentially this could last a few more weeks. it gives the party the middle finger and says i have the delegates and firmly believes he is the person to beat donald

trump and he stays at the top of the ticket. dani: he have -- has given himself a few outs. most recently it was illness related and then he before that said polls. what about the down ballot polling? what does it mean having biden or a replacement? annmarie: this is why you saw hakeem jeffries and chuck schumer to potentially give his standing in the race another look. they are concerned they are going to lose their seats. house members, senators -- we heard from senator tester yesterday and they are concerned they are going to lose their seats. he is and in very tough race. there are three key things we saw a come the polling, the maps about where they are going to potentially lose the key races, and it is the donors. there is a lot of reports that

the donors do not want to throw more money behind the race and you will need a lot of money going into november. if that starts to dry up, it will be incredibly difficult for the democratic party. jonathan: thank you for the hard work this week. we will see you on monday. more updates on the global tech outage, this time from ups. another example of how many companies and industries it has hit. moments ago ups issuing a service alert on the website, there is a potential for delivery delays due to the global tech outage. contingency plans are in place. dani: it is a lot of industries and issues. everyone using crowdstrike and speaks to the vulnerability of this moment and so many companies which are reliant on crowdstrike itself. is this a time for governments to look at the concentration risk, to look at this wasn't a cyber attack but what if it was?

just how vulnerable are we? jonathan: i imagine there will be d.c. officials and officials around the planet that might have something later to say. crowdstrike negative by 13% in the premarket. on monday, once we get to monday, lori called the sena -- lori calvasina will join us. thank you for tuning in. this was bloomberg surveillance. we will see you in the next couple of days. ♪

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>> a massive i.t. outage not holding back futures. i am matt miller. >> i'm sonali basak. >> and i'm katie greifeld. "bloomberg open interest" starts right now. coming up, a major software crash disrupts travel, trading and banking across the globe in what could be the largest outage ever. matt: the disruptions adding to a week that saw the nasdaq shed more than 3%. >> trump outlines his america first policies. let's take a look on t