>> we are at a point where i think we can all agree the economy is slowing. >> there is some evidence that some of that slowing in the macro debt is starting to feed through to earnings. >> policy rates are restrictive. why not have a less restrictive policy? >> what is going to matter most is clarity. >> have got to say, we have never had this intensity of debates between bulls and bears. >> this is "bloomberg surveillance." jonathan: it is just another quiet summer's week. live from new york city this

morning, good morning, good morning. a sneak peek get futures. equity futures look like this on the s&p 500 doing just about unchanged. the s&p, the first 2%-plus drop in more than a year. it is beginning to smell like a bit of a growth scare. japanese yen just a little bit stronger. commodities pulling back as well. one standup quote, will dudley -- will dudley joining us on this program and 8:15 eastern time, the quote, the fed needs to cut rates now. winning until september increases the risk of a recession. lisa: he really set the tone at a time where there seems to be a shift in sentiment more broadly in the markets. it seems like something has changed in the rhetoric from companies to really increase the urgency of cutting rates. mohamed el-erian, talking about

how if the fed does not cut rates this month or in september they will be making a policy error can to not hiking rates when it was clear there was an inflation problem. jonathan: one a morning like this it is important to point out that both mohamed and bill were ahead of the curve on the other end the conversation. we were two individuals saying this federal reserve needs to make a move, make a move now. they hiked too late, and here are two individuals out in front of the federal reserve saying, now is the time to go. lisa: the real question -- and this is something i want to get into with our guests this morning -- is how have things changed so quickly? how has the pace of deterioration -- and that actually the fed does not have the luxury of waiting in the same way they did two months ago? jonathan: we will get some jobless claims data. jobless claims are interesting. will they be higher or lower?

the difference between being lower and higher tells you how much time this federal reserve has. it is the difference between having time and running out of it. annmarie: and how much is the labor market going to push them into may cutting sooner or fully next week powell putting september on the board? him we do know they think inflation is coming down. what strikes me when you say dudley and mohamed el-erian were ahead of the curve, it was mohamed el-erian that said investors are not listening to earnings. what ceos kept talking about, price pressures. i'm waking up to earnings the fed officials might want to take a look at, because it does look at -- does look like it is in the option -- opposite direction. jonathan: let's get to some of the earnings. let's talk about stellantis and ford. ford is down in the premarket by 14.6%. stellantis is pulling back by almost 7%. one has a quality issue, the other has a product issue, but

at the same time it has been a tough streak for this sector. lisa: especially at a time where the signal from dealers is they are having to increase incentives to move cars off of their lots. gm is looking like an outlier. they beat expectations, but fort having an issue with quality. what does that mean? the fact that stellantis is also having an issue with quality. what is their bread-and-butter they can go back to? is this an electric vehicle problem? is this something broad with consumer sentiment? or something that has an echo to what we saw with boeing, in terms of personnel and the ability to get the required people to make sure quality is good? jonathan: we have seen this in a few industries. tough business for the automakers. through in european luxury. for barry, awful. lvmh, tough. gucci, we are down 7% in europe.

this selloff in the united states, it extends to europe. it is not just about big tech. the cac down 1.8 percent. the ftse down by 2.5 percent. the story out of gucci is bad now too. annmarie: it is two thirds of caring's -- kering's profit. lvmh was doing better. now it feels bleak. besides gm, it feels like it is a bleak morning for these two industries. lisa: the problem is understanding whether this is weak or weakening. have been talking about this for a long time. is this normalizing or deteriorating? to me the idea of, yes, we saw the worst day for the magnificent seven going back to 2022. yes, we saw the worst day for the s&p 500 going back to september. at the same time the s&p 500 is

up for 28 of the last 38 weeks, which is something that has not been exceeded since 1989. jonathan: quite a streak. it is a point worth taking. we are down by .2%, pulling back a little bit in the bond -- pulling back a little bit. in the bond market, on the front end of the curve we are down eight. the difference between the two is getting narrower. that curve is going to stay big. lisa: is it the right kind of steepening? we talk about of the steepener. the fed may cut rates as early as this month. our mark -- our markets pricing in too great of a right-cutting cycle? -- rate-cutting cycle? how concerned with the market be a fee fed were to week? these are some of the conversations people are having, especially because a former fed

official, saying the fed should cut, has been blamed for the selloff we got yesterday. jonathan: it spooked people. can you imagine if a sitting fed official said the same thing? i think it would speed people more. here is the lineup through the next 60 minutes or so. we will speak to max kettner of hsbc. bloomberg's josh wingrove as biden calls for younger voices in office. and julie norman headed the presidents meeting with benjamin netanyahu. big tech's big reality check. the s&p 500 posting its worst day since 2020 two as the ai rally faces it toughest test yet. max kettner writes this. we believe in a broadening, but not a full-blown rotation away from tech and ai stacks -- stocks. what is the difference between a rotation, broadening, and growth scare? and what are we looking at in

the last 24 hours? max: a full-blown rotation would be something if we saw something like august, september, october last year, we have seen that tail risk of further fed rate coming back into play. remember, we have 15 year yield lashed are going to 5%. people were really talking about the real possibility about possibly the fed having to hike again. that is no longer the tail risk. the tail risk now is, by the end of next year maybe they will not be able to cut seven times. maybe they will only cut two or three times. that is probably the new tail risk. if that is the new tail risk there is a bit of the tailwind a bit for tech. it is not like last year when there is a constant headwind for valuations where there is a full-blown rotation away from all of these tech and ai and high-duration stocks and long-duration stocks toward the

other stocks, for the more economically-sensitive ones. now it is tech, and tech earnings are expected sequentially to go down in q2. earnings expectations, still pretty benign, whereas when we look toward the end of the year we could see a broadening out. i do think there are the stories that you guys will be talking about now at the beginning of the segment, but when we look at the broader earnings story, average surprise factors are still around 4.5%. on aggregate the earnings season so far has been solid, and that speaks for other sectors ready to participate as well. jonathan: at the moment, though, this feels like a global unwind of big consensus positions across the board. equities, bonds, foreign exchange. a massive rally at the front end of the curve. a big selloff in tech in the

united states. look at what is happening in foreign exchange. all of a sudden those big unwinds, when they start to gain momentum is that something you want to step in front of? max: it is exactly what you are saying. what we are seeing is largely unwinding. when we look at our positioning indicators, ctas have been long equity. it is more positioning-driven, position unwinding, but it is absent of a fundamental change. remember, we're talking about gdp now still signaling almost 3% real gdp growth. we are talking something around 5% to 6% nominal gdp growth for the second quarter. when we look at higher-frequency indicators, look at the cree activity index from the dallas fed, that has been picking up, right? we are starting to see things like same-store retail sales.

we are starting to see that re-accelerate in the last two months. on aggregate i think we are getting too carried away with negative surprises, where in fact we are still seeing broadly-stable data. that is still pretty good. when we go across the asset classes -- look at the last couple of days -- high-yield credit spreads barely reacting. emerging-market debt spreads barely reacting. it is largely a rotation. it is a rotation away from long carrie, but that is largely consensus unwinding, what it is in the absence of a fundamental driver, and therefore that keeps me constructive overall in risk assets. lisa: some people would say the way up like the fundamental driver at a certain point. other people would say the way down may lack a fundamental driver, and yet technicals are sort of imposing and can last for longer than many people would like. i'm wondering whether you would

have the conviction to go in and buy, say, tech stocks right now? because there has been a dip that fully does represent a correction. are you buying? max: absolutely. we have been and we remain overweight in tech. in u.s. stocks, absolutely. let's remember, we had one decent earning set from alphabet, tesla. find, not that great. but i do think going into the next two weeks in terms of the broader tech earnings there is potential for tech also on the earnings side not only to deliver, but actually ready to beat on those expectations. because on a sequential basis compared to q1 consensus is saying earnings for the tech sector should be going down by about one dollar on the index level side, and that is anything

but exuberant. it is anything but spectacularly exuberant expectations. that sets us up for a pretty good entry-level in tech as well. as well as some other sectors. it is really these technically-driven selloffs in the absence of a fundamental driver where i would disagree -- driver. or i would disagree with you is there is no fundamental upside. as long as nominal gdp growth is growing at 5%, that should be filtering through into good earnings growth. lisa: that is a pretty strong caveat. what do you make of the growth scare that a lot of people are assessing out? including bill dudley. including mohamed el-erian? max: i'm not buying that. when we look at the higher-frequency indicators. consumer spending is showing no signs of deceleration.

new orders of inventories are still picking up. we look now at the global central banks moving from hikes to cuts, remember how for two years we have been talking about the impact of monetary tightening. if we are now moving globally to write cuts we should be starting to talk about the tailwind in the next couple of quarters that will come from easier monetary policy. that should be helping growth. look in the u.s. we are starting to see things like freight volumes. things like same-store retail sales slightly picking up. we are also starting to see residential investment that has been picking up in the last three quarters. we have been starting to see a tailwind even for housing data, for housing surprises as yields have come down. i'm not a board with that growth scare because we look at economic indices we know they have gone down in the past four or five months. because by design they are a

mean-reversing series, the next move is going to be up, not down. annmarie: does the german data give you any pause? max: in parts of the euro zone, when we look at germany, some of that growth model is probably structurally somewhat challenged. the issue with that is i think we should not confuse a possibility with the bounce relative to extremely depressed expectations. remember, october last year what we had was consensus growth expectations for the u.s., for friends, for germany, for the u.k. that were roughly at similar levels. now you've got core eurozone company -- the bar to beat, the bar for positive surprises out there is extremely low. jonathan: not low enough for the

luxury players. max kettner of hsbc. it is good to catch up with you, sir. in italy we are down by 2.6%. in asia, cutting rates in china, equities down there too. four days of the against strength unlocking some real equity week is on the japanese side of things. it goes beyond big tech in america. after the downdraft yesterday of more than 2% on the s&p 500. let's get you a bloomberg brief with dani burger. dani: let's start with the tough set of earnings for automakers. stellantis shares falling in the european trade this morning. it is currently trading at the lowest since last november. earnings plunged by almost half in the first half of the year. the problem is most acute in the u.s., where it had high inventories, executive departures, and quality issues. stellantis' cfo said it is likely to cut prices and is

bringing back old models to win clients back. carlos tavares will be joining the program. shares of ford also continuing to slump, down nearly 14%. it missed on profit for the second quarter, saying quality issues lead to a surge in warranty cost. specifically $800 million in the first quarter. ceo jon lawler said, we cannot read this quarter as the year coming off the track. it is not. or did keep its earnings outlook for the year. elsewhere, kamala harris is about to receive some big political support. bc news is reporting that barack obama plans to endorse harris soon. nbc saying obama and harris have been in close touch. that is your brief. jonathan: more in about 30 minutes time. up next, the president addressing the nation. pres. biden: there is a time and

a place where you -- where long years of experience in public life. there is also a time for new voices. fresh voices. yes, younger voices. that time and places now. jonathan: that conversation up next. live from new york city this morning, good morning. ♪ (♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

jonathan: live from new york

city, welcome to the program. equity futures pulling back a touch on the s&p. a big selloff yesterday. we are down about 25%. yields are lower by six basis points on a 10 year. under surveillance this morning, the president addressing the nation. pres. biden: i believe my record as president, my leadership in the world, my vision for america's future, all merited a second term. but nothing -- nothing -- can come in the way of saving our democracy. that includes personal ambition. there is a time and place where long years of experience in public life. there is also a time into place for new voices. fresh voices. yes, younger voices. that time and places now. jonathan: president biden seeking to define his legacy and

an 11-minute oval office address, casting his decision to step aside as a sacrifice. capping a frenzied month since biden's disastrous debate performance reshaped this election. josh, it was the beginning of a graceful exit. josh: and when they came a bit under duress, which hung over the sentimentality of it. the backup, this was a capstone moment. he's going to be president for several months, but this felt like i goodbye of sorts. hundreds of staff streamed into the residence of the white house to watch it, to greet biden in the rose garden after. this really was this sort of rallying moment at a time after this brutal month he has had now . in the speech itself he spoke to the reality. saying he is doing this to unify his party. that is a nod to the rising storm of calls for him to step

aside, including from very prominent democrats, front-line democrats, swing state democrats. he in some ways had no choice. that is why we have had this bonkers pace of stuff. a week ago we were saying, accurately i think, that biden was insisting on running, absolutely committed to seeking a second term at age 81. and it just flipped, it seems, on a dime, leading us to where we are. the pace of this is wild. you heard in that first clip, an almost defiant tone, saying, my record, i think i deserve a second term. but it is what it is. annmarie: it is four weeks today since that disastrous debate that kicked all of this off. he did admit to this point. the reason he is stepping aside is, it has become clear i need to unite my party. how much fracture is there right now between biden and people

like nancy pelosi within his party? josh: pretty much none, because he has taken the step they wanted him to take, so they have rallied both around him and praising his legacy to call him any hurt feelings that might be coming from this, but pelosi was clearly one of the figures that thought a change had to be made. biden throwing his help -- his weight behind harris has helped unify the party as well. even if those big figures were thinking they might throw their hat in a ring -- the ring, right now it looks like a coronation of kamala harris and a tailwind for the party we did not see when biden was at the top of the ticket, including on fundraising, including the number of donors, and including donald trump. among those taking notice of the energy, comparing his rally size yesterday. trump also took the moment yesterday to take a little bit of a photo op on his plane flying home from a rally in north carolina.

seems almost to be celebrating this chain of events, beginning with his debate with biden, and leading to last night, capstoneing the career for biden. annmarie: celebrating or trolling. last night he said he is going to keep working -- this is biden -- to end the war in gaza. do you think he is really going to town more pressure for this cease fire? what is the status for this potential deal? josh: speaking of trolling, you could argue netanyahu has been doing some of that on his visit to america as well. it is one of the things biden says he is going to focus on. they have been saying they are on the verge of getting some sort of agreement. the proof will be in the pudding. we don't know how close they are, so we will be watching biden closely on whether he will publicly or privately think that his not running again leaves him more elbow room to make

concessions on that. another one is, he mentioned he still wanted to do something on supreme court ethics reform. a big question mark on that, whether it is calling for something or trying something by executive action. this trip trip of clarence thomas stories really seemed to be driving him to make some change there. the supreme court and potential appointments hangs over the next president as well. jonathan: josh wingrove down in washington, d.c. on that story later in the program. investors looking for more return on ai spending. we will get the thoughts of kkr next on the program. ♪ wealth-changing question -- are you keeping as much of your investment gains as possible? high taxes can erode returns quickly,

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jonathan: what a week so far. equity futures on the s&p 500 look something like this. pulling back just a touch. down on the nasdaq by .5%. one day, biggest one-day rally since june. all over the place. the epicenter of the selloff is tech. it is not isolated just to attack. at the moment it is global. it is china. it is japan. it is europe as well. i want to talk about the shape of the yield curve. the yield curve was getting pulled in two different directions. we were pushing higher at the long and. however way you chop it up the

spread between the two year and 10 year narrower. it is not steep, but the hope is it starts to normalize and you get this deeper curve again. is it going to be driven by check him will it be driven by a weaker side? based on the comments from bill dudley, that is what he is looking for. lisa: is this weakening just enough to get the fed into gear to cut rates or is this something more pernicious that will drag risk assets down with it? the signals from the market are confusing. i want to be very clear about that, and today is another example. you see the russell 2000 are performing at a time of ongoing rallies in the bond market. that is unclear. right now it seems like goldilocks for a lot of people and this might be more squeezing out positions. this is the question we have to see and that is why initial jobless claims today are important. jonathan: it will not feel like

goldilocks if you have been short the japanese yen. to cut the japanese yen. four days of strength. longest such streak going back to march of this year. we are down another percentage point. going into the boj where there is a question mark hanging over that committee. will they raise rates? lisa: the u.s. is having an increasing urgency of for lower rates at the time the bank of japan is considering higher rates. that said, you put it perfectly this morning when you said we are seeing a big global unwind of consensus positions. this is one of them. big tech is another one. how much is this profit-taking at a time when valuations have gotten pretty elevated versus something that has legs? jonathan: is it something you want to step in front of? this is something we asked max kettner. the aggressive stuff -- pretty aggressive stuff.

our top story, president biden framing his decision to end his reelection efforts as a bid to reunify the nation. in an oval office address, biden also recognizing the need for younger voices in office. i think we can agree it was the beginning of what should be a graceful exit from 50 years of public service. there was nothing graceful about some of the scenes taking place in the nation's capital yesterday afternoon. at a time when a very polarizing figure, the prime minister of israel, was addressing congress, there were protests outside where we saw them burning the american flag. i want to step back. just a couple of weeks, maybe a month or so steve eisman on this program, saying that donald trump will win the election, and let me tell you why. and he basically described the scenes that took place yesterday afternoon. annmarie: this is likely the preview of what we can expect in chicago when the dnc kicks off their convention. not just burning of the american

flag, waving hamas flag, which has been designated a terrorist organization by the united states. also spray painting things like "hamas is coming." this is going to unnerve moderates, and that is what steve eisman was getting at. that is why he thinks trump has the upper hand. jonathan: if you see that on august 19 you would imagine democrats have a big problem. more on that just a little bit later. i want to turn to china. there has been a rate cut again. the people's bank of china lowering its policy rate by the most since 2020. the move underscoring china's growing urgency to support growth, which came in worse than expected in the second quarter. what did we see overnight in asia? difficulty for china off the back of the japanese yen. but there is a growth problem, and they are struggling to respond to it. lisa: i'm glad you went to them

-- the market response. we did not see any rally of significance in chinese bonds. that is typically the response he would get. it raises a question of, what is behind the growth scare? it is not necessarily a lack of borrowing available. it is not a lack of capital. it is a lack of demand. cutting rates will not attack that, and that highlights how much the market is aware of that and not responding to this in the same way it might. jonathan: it puts even more emphasis on fiscal stimulus and the need for. goldman talking about chinese authorities waiting to see the outcome of the november election. want to turn to the automakers. shares of ford slumping. the automaker posting profit that fell short of estimates. quality problems that led to a jump in warranty costs. that stock is down by 14%. the cfo saying it was a one-time issue. lisa: there are a lot of

questions remaining. this was a warranty issue. they had one particular vehicle that had a warranty and people brought it in for a technical failure and the cost was in the billions. the question is, what was behind that? why are there these technical failures? is it a matter of personnel getting back to the pandemic? or is this a matter of, where do you focus at a time where consumers are not dying electric vehicles as quickly as people thought? how do you go back to the bread and butter while having and not to the future? jonathan: we will try to answer those questions when we catch up with the stellantis ceo on this program. high spending on ai programs at google parent alphabet prompting a selloff in big tech stocks as investors look for more return on ai spending. one area companies are investing heavily is data center capacity. waldemar szlezak says that two

mega-trends are driving the demand for data center capacity. migrating data to the cloud and the rise of ai. good to see you, sir. let's talk about what is digital infrastructure. what are we describing here? waldemar: it is a great question. infrastructure has three big pillars. there is mobile infrastructure. you traditionally think of it as telecom towers. there is the fixed infrastructure. it could be fiber that delivers conductivity to homes or enterprises. and of course the topic we are about to discuss is cloud storage and computing infrastructure, right? those two are the three big pillars, how we define digital infrastructure within kkr. jonathan: let's talk about opportunities and how much is going to be invested over the next several years. i want to pinpoint a quote from the google ceo. he said the key is under

investing and not over investing. i suspect you are going to agree? waldemar: yes. jonathan: why is this such a big moment and why is that the way to look at the balance of risk? waldemar: let's look at the computing piece. two mega-themes are computing and last mile conductivity. we will touch later on metronet, which is a deal we announced yesterday. but focusing on their centerpiece, if you look at the united states and say, what was the spend to help facilitate your structure or cloud infrastructure? the cycle from 1990 to 2006, two gigawatts. no longer do we think of data centers in terms of square feet. it is the amount of power data centers have. that is a factor to consider and we will touch on that in a second. the next phase was internet 2.0 and cloud. eight gigawatts, about 15 years. technology cycles have accelerated.

we are now talking about ai buildout, cloud 2.0, internet 3.0 as of -- as a five-years cycle. i think, you know, you had a more patient, highly-visible investment cycle that has now gotten compressed, and perhaps it is creating -- scaring some of the investors out there. lisa: some people might argue this is the reason for the selloff we have seen in tech. there was one investor who said this. the overarching concern is, where is the return on investment in the ai infrastructure spending? it will pay off in a few years but it is not going to come anytime soon. how much are you seeing near-term returns on some of these infrastructure projects that a lot of people would agree may be crucial in 10 years? waldemar: i think it is a great question. i would draw an analogy to similar questions raised during the buildout of cloud in 2006 or

2007. and amazon emerged as the cloud provider i think similar questions were raised about, where is the roi? a tremendous amount of investment is needed before you start seeing the applications of that. if you fast-forward, 2007 to today amazon stock is uppermost 3000%, right? i think the concerns are valid. i do think there will be -- there is frothiness in parts of the ecosystem. within digital infrastructure and how we are positioning ourselves we don't see that. most of the capacity on the data center side that is coming online is fully-leased. so, the type of risks we are looking to take, we are not necessarily exposed to some of the volatility. but i think it is a fair question to ask. what is the roi? i think ai will be potentially larger than cloud. cloud is about a $500 billion business annually.

i think the view is that this feels different than late 90's bubble. lisa: he said there are certain pockets that feel frothy and certain pockets that seem worthy. what are those pockets? how do you distinguish the two? waldemar: that is why i think we are trying to figure that out. a big part of what we are doing is not the entire ecosystem from the silicon side -- chips -- to the ultimate endpoint of applications layer and trying to figure out, how do we participate? we are not a venture investor, so we are staying away from that. in 1990's, a lot of analogies are being drawn to the tech bubble and bust. there were 39 stocks in 1999 that were up 100% in a year. today there is only one. private markets, there is $15 billion of capital that has gone

from venture capital funds into generative ai platforms. that is 10 times the prior trendline. perhaps there are parts of frothiness in the private markets. we think of it as a long-term trend, sort of an industry three point know if you think about it in terms of long-term, 300-years cycle. we are confident we are in the early innings of that. annmarie: when you look at the investment is an actual market demand, or some of this has to do with the physical push coming out of washington? waldemar: it is fundamental market demand. we are seeing government part of this investment has not played a large role. we think that in the long term a comprehensive solution which includes private capital, which includes a combination of the tech companies, intervention from some government policies to facilitate buildout of some of its power infrastructure, which is a key component of this, will be required. from a kkr perspective, we are

uniquely positioned to play a major role in that. lisa: you just announced a deal, and it was not on cyber prowess in artificial intelligence. this in medium-sized cities getting basic conductivity to the internet. to the cell phone. how far behind our week, basic infrastructure, at a time when we are trying to build out a massive network? waldemar: two big mega-themes. we have made 10 investments globally over 10 billion dollars capital just in fiber to home. we are pretty bullish. we think this is important. in the u.s. about 50 million homes still do not have access to full fiber. we think that is unacceptable and about to change. intranet, which is the deal we announced with t-mobile, it is really meant to facilitate the growth of that and bridge the digital divide not only in the

smaller cities, which by the way, a smaller city in the united states is sub-50,000 population center, is about 1/5 of this speeds you see in the major urban areas. even in the urban areas it is inadequate. we believe there is a large decade-long investment cycle to build up fiber infrastructure in the united states, and we are happy to partner with a premier telecom operator like t-mobile to do that. jonathan: you need to come back soon. we have only scratched the surface, haven't we? waldemar szlezak of kkr. let's give an update with your bloomberg brief. dani: the pboc has unexpectedly lowered the cost of its one-year policy loans by the most since april 2020. days ago it also cut a key short-term right to give greater support for a slowing economy. those rate cuts amount to a modest round of easing, which economists say is unlikely to

move the needle. shares of caring getting slammed this morning, down more than 7%, treading at the lowest since 2017. the owner of gucci has warned its profit will tumble in the second half of the year. luxury demand is cooling. it has lost half of its value over the past 12 months. the company's market cap is now 37 billion dollars. that is roughly 1/10 the size of lvmh. while luxury is struggling, so too are consumer staples. nestle down 4.5%. it cut its sales guidance for the year, with consumers turning to cheaper food options. nearly all of that growth came from higher pricing, which also slowed sharply in the second quarter. the ceo said the company is still in repair mode and gross margins will come under pressure thanks to higher costs of coffee

and cocoa. that is your bloomberg brief. jonathan: things are look for -- looking tough over there in staples and discretionary in europe. netanyahu staying the course. >> for the forces of civilization to triumph, america and israel must stand together. israel will fight until we destroy hamas' of terry capabilities and bring all of our hostages home. jonathan: that conversation, up next. live from new york, you are watching "bloomberg surveillance." ♪

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jonathan: the equity selloff going worldwide. once again, off the back of that stronger japanese yen. equities down just a bit. we are -.25% on the s&p. netanyahu staying the course.

>> for the forces of civilization to triumph, america and israel must stand together. this is an exceptional moment. fast-tracking u.s. military aid to dramatically expedite the crown and to the war in gaza and help prevent a broader war in the middle east. israel will fight until we destroy hamas' military capabilities and bring all of our hostages home. jonathan: israeli prime minister benjamin netanyahu set to meet with president joe biden and vice president kamala harris later on today. thousands protesting netanyahu's visit, including burning american flags. julie norman of university college london saying this. expect close size on kamala harris' mid east comments this week. she has held the administration's line, but is also seen as less personally connected to israel than biden. julie, we will spend some time

about how these individual leaders are going to navigate these issues. i want to set the scene for where we are in the conflict, because it seems to change day-to-day. are we closer to a cease-fire or broader conflict? julie: i would say it is both at the same time. on the one hand we are closer to a cease-fire than almost any time before. with that said we have gotten closed for and things have fallen apart at the last minute. -- before and things have fallen apart at the last minute. it is not done. even with a cease-fire this war is not going to close down and go away. as we heard yesterday from netanyahu, and as we have heard from him for months, israel will expect to retain a security presence in gaza. there is still no plan for a day after, and my guess is we would be looking at an insurgency-counterinsurgency dynamic for some time to come. annmarie: what needs to change to open up the negotiation for a cease-fire?

netanyahu is in the country, but there is a lot of reporting that he has been holding this back. julie: that is right. there has been finger-pointing both ways for months now about who is holding it up. right now there are some elements that netanyahu keeps pushing, and some say slowing the negotiations. specific details, such as who is going to control the southern border no -- border of gaza with egypt. how will people move from south to north? the crux of this is, what the tension has always been. hamas wants to ensure this will lead to a permanent cease-fire and full withdrawal of israeli army and troops. and israel wants to ensure they can maintain some kind of security and military presence in the strip. those things keep coming to a head in some of the final wording. annmarie: as it comes to my understanding at this moment there are five americans still being held hostage by hamas. yesterday we saw protesters in

washington, d.c. waving hamas flags and burning american flags. how much of a gift are those images? julie: the protests have been going on for months, and they give some sense of support to hamas, but also palestinians more broadly. with that said, i think a lot of the messages in the protests reflect a small slice of many who are taking to the streets around this. i would say protests have been a big heart of this in israel as well, in terms of trying to bring hostages home. i would say that is where netanyahu is feeling the pressure more. from the protests ongoing within his own country. lisa: it does put a spotlight on the differing views that are associated currently with respect to israel from both republican party, as well as the democratic party. it is viewed in popular culture right now that republicans are a lot more friendly to israel than

democrats. that is one of the reasons why you are seeing an increasing number of the jewish vote shifting republican, which is really the first time you have seen that in a long time. how is this reshaping the concept of the u.s. relationship with israel, depending on whether it is a republican or democratic administration? julie: lisa, this was certainly part of netanyahu's calculation with coming at this time. he sees the political landscape shifting and he wanted to give this speech to really sure that bipartisan support, and almost challenge democratic lawmakers to turn their back on him. i think the case we heard him making yesterday was trying to appeal a bit more to bipartisanship than he has in a couple of his recent visits. that was trying to frame this conflict in moral terms and very strategic terms, saying this is civilization versus, you know, barbarism. and on top of that, all of this

is nested within iran, within other regional tensions, the u.s., this is in your interest. that is the message netanyahu is trying to get home this week to both parties. lisa: one question has been that currently we have a lame-duck president. president biden has four more months left in his 10 year as he prepares for another administration. does that lack of another term, the lack of his being in the running, make it easier or harder for him to play a significant role in some of the cease-fire, end of the conflict type of discussions? julie: i think a bit of both. we still have six months with biden in office, and a lot of what is going to play out with the cease-fire in the short term is going to be under his watch. that is one reason why this meeting today still matters. at the same time we all know looking ahead it is going to be a different leader after six

months. that is also why netanyahu has to meet with paris and trump and trying to get those relationships on track as well. with biden i think it will be interesting. some are saying he might be more open to tough talk with netanyahu today, simple because he doesn't have reelection hanging over him. his strategy up to now has been what they call a bear hug approach, a public embrace by private speaking a bit more frankly. i think we might expect a bit more frank yesterday. jonathan: julie norman of ucl. appreciate it. just reconnecting my microphone there. good. i think your question is an important one. the lack of appreciable continuity around the key foreign policy issue is going to be really important here. you think about two issues at the moment, ukraine and israel could have two very different partners come january next year. you mentioned israel. ukraine too. lisa: terry haynes put out a

note and said, on the margins this speech was markets-negative because he expects the increase in geopolitical tensions to result from that lack of continuity and unclear sense of how he plans to proceed. annmarie: you have netanyahu going down to mar-a-lago to meet with trump. we're going to hear a lot more policy leak out this week. i have reported that a trump 2.0 might mean pushing data when it comes to ukraine, pushing data to spend 3% on defense of their gdp. jonathan: the second hour of "bloomberg surveillance" is next. we will catch up with anastasia amoroso, carlos tavares, and group peak hour wall, alongside libby cantrill of pimco. this is bloomberg. ♪ ♪

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>> i think we can all agree the economy is slowing. >> there is evidence some of that slowing is starting to feedthrough to corporate earnings. >> policy rates are restrictive. why not have less restrictive policy? >> what will matter most is clarity. so long as there is clarity, the business environment can handle it. >> but never had this intensity of debates between bulls and bears. >> this is "bloomberg surveillance."

jonathan: coming up the back of the biggest one-day selloff of the year so far on the s&p 500 and the nasdaq. good morning. your equity picture looks a little something like this. equity futures pulling back on the s&p by .1%. down .2% on the nasdaq. mohamed el-erian said they need to cut rates in july. goldman saying why wait? bill dudley, i have changed my mind and they need to cut interest rates. lisa: that was partly by markets took this as an onerous and potentially problematic signal. credit card balances. the share of credit card balances past due reached a serious height and philly fed data going back to 2012 when it was clear there has been a shift in consumer preferences.

this is the key. weak or weakening? jonathan: bill will have thoughts on that. don't miss that conversation later on this morning. think about what has worked so far and what is unwinding out. we characterized things as a monster unwind of consensus positions across equities, bonds and foreign-exchange. in equities, big tech is selling off. in europe, luxury selling off. in japan, what has unwound? we have seen this across the board in an aggressive way. it is not just u.s. tech. it is global. a series of consensus positions unwinding cross asset. lisa: that is what you will hear max kettner say this is technical, not a matter of a fundamental change. people are trying to put a narrative around it. we have all been trying to do that. at a certain time when that is true, these are consensus traits

that are simply underperforming after a hyperbolic move up, there are some real signals. we are getting earnings, including from the airlines that are hugely disappointing. including from some auto manufacturers that are disappointing. the commentary highlighting how consumers are pushing back and not spending as freely. annmarie: max kettner saying don't buy the growth scare. nestle. talk about the cost of living crisis. those consumers trading down our struggling to get them back. look at the automakers. it is bleak when you look at autos and luxury. you thought it was a higher in consumer that was going to keep chugging along. you are seeing cracks at the higher end. it is not just the lower end trading down. jonathan: check at american this morning. the stock just dropped down by 6%. new range and new outlook. $.70 to $1.30. lisa, we are down seven percent in early trading.

lisa: they see third-quarter adjusting earnings-per-share -- adjusted earnings-per-share. zero dollars. it was expected to be around $.50. they cannot pass along pricing increases to the consumers. same thing for nestle. they are seeing margins squeezed. is this just a consequence of inflation coming down? it is less clear that they can pass it along to consumers. or is it something different? that is crating issues and markets. jonathan: look at this move. we are down 9%. think about how much lower the bar should have been for this company. we heard it from delta, from united. surely the bar was low enough going into earnings and it shows you something. look at the information and you can look at how the market responds to it. this is a really bad time to report bad news. we saw that in the automakers. you are seeing it with american this morning. lisa: essentially if you present something that is disappointing

you are punished, especially if it is consumer facing. there is a sense that in the airline industry there's a normalization or rolling over in the post-pandemic travel boom. how deep does ago? these are pretty bad. full-year adjusted earnings-per-share from $.70 to $1.50. that is a huge adjustment downward. jonathan: the airline business is a tough one right now. the broader price action. equity futures settled down a little bit. the losses follow-through from the u.s. to asia to europe. europe is getting dragged down big time on the continent. in the fx market, just a little bit of yen strength against the weaker dollar. 152. in the bond market, how big rally once again. down six basis point on 10's. two 's are down six or seven basis

points. lisa: whether next week they cut rates is going to be a huge question. mohamed el-erian talked about how they probably won't because they want a signal and create enough distance from the pluto process. if they don't -- political process. if they don't cut rates this will be a policy error i can to transitory. jonathan: let's check up with michael mckee. he said the markets have cut the rates for them based on these moves. they just have to validate it by giving a nod to september. lisa: maybe. if they come up with a certain rhetoric that they have patients and they continue this rhetoric that they don't except to cut rates all that much that year, that could change the market's perception of the reaction function to a fed looking at the same data they are. jonathan: we will checkup with anastasia amoroso as the sb 500 snaps this longest streak. -- since 2007.

the stellantis ceo and libby cantrill as the presidential race heats up. a big selloff in big tech, sending the s&p 500 to its worst day since 2022. anastasia amoroso writing, "tech consolidation and salafi likely has more to go. outperformance in terms of positive surprises like two magnificent seven outperformance in the last year and half, but it may be coming to an end." anastasia, good money. what are we seeing take place here? a massive technical unwind? is it a growth scare? a rotation? anastasia: the technical backdrop is part of the story. technicals were stretched coming into june for technology shares. they looked at positioning, the overbought conditions. the relative strength indicator was over 70 for quite some time. when you see a set up like that, something will happen to take us down. i think there's a more fundamental story here.

the earnings surprises really lifted them mag seven stocks higher. if you look at by how much they were beating us vacations, that was one way to look at it. the other thing to think about is how much where the earnings revisions going up for some of those technology stocks? by a significant amount. that is not likely to be the case going forward. alphabet and tesla did not see the positive surprises or solid negative surprise. the market is severely punishing that. we have lofty expectations and valuations. now you have the same surprise that you did before. that is why i think investors will continue this unwind trade. lisa: it's a confusing market to me. i believe in the unwind story and it doesn't seem so pernicious. it is basically cashing in technically for risk adjustment. on the flipside, i want to stick with american.

i'm not asking you to comment specifically but the shares are down so much even after being punished all through the year. it is down 26% year-to-date. it suggests we are coming off low expectations and still getting punished when earnings disappoint. doesn't that reflect this feeling of the unknown of how much and how quickly growth is weakening? anastasia: the expectations were probably not below enough coming into this quarter. if you think about how much the expectations typically get revised down, let's say 3% or 4%, this time it was half of a percent. i do think we reset the bar substantially lower and that is why going into the reporting season one thing we have been flagging is there likely a disconnect building between the earnings expectations and what is happening in the economy. if you look at the economic surprise index, it's been negative for quite some time. the u.s. consumer, i'm now may finally joining you in that camp. there is a weakening in the

consumer and the unappointed rate they did go up from 3.4% to 4.1%. that is not something to disregard. that is the squaring we have to do in the markets, acknowledge the fact earnings expectations were too high for the economic growth we have today. lisa: what is that mean for how bullish or bearish you are on tech stocks which used to really love and lean into? you can't just throw them out because everybody loves them. are you looking to buy? is this something you stay away from because he don't get in front of a freight train? anastasia: you don't buy just yet or you buy slowly with the idea this is likely to play out over the coming months. the reason i say that is there is a gardener's hype chart a lot of viewers have seen. if you go through this peak of inflated expectations cycle and what is on the other end is the trough of disillusionment. i'm not saying we are necessarily going that way for

all of the ai stocks. i think for some of them we are likely -- we likely our where it will be longer to monetize the ai that we are also excited about. i think that part will take a little longer to play out. the other part is given how long investors have been with the artificial intelligence stocks there is still selling pressure likely to come forward. that is why i would think about having a shopping list but executing the shopping list over the next few months. the other thing, the markets typically consolidate into the -- after the first rate cut. whether it is july or september, three months after his when they tend to consolidate. information technology. if you look at the 1995 cycle as the soft landing scenario, infotech rallied into the first rate cut but it sold off or consolidated after. that is why i don't think it is a quick buy the dip in technology but think about it as a protracted three-month consolidation. annmarie: given you have come

onto lisa's side, where will that play out in the market? if consumers are not spending, what is it mean for potential stocks you want to pull back? anastasia: the consumers are spending but not as much as they used to. if you look at credit card spending data, if it was up 7% a percent year-over-year, it is 3% to 5%. it is a slowdown story versus a recessionary consumer spending threat. -- thread. one of my favorite trades are the rotation traits, the other side of the technology trade which is going to things like regional banks. it is probably not as leveraged as it is to the commercial real estate market. regional banks are really levered to lower interest rates. the one certainty we have is that the fed is likely to cut rates. not this month and probably in the next couple of months. you want to go to those rate cutting beneficiaries.

if you have lower rates than some of the unrealized losses on the balance sheets of those banks, it should be less so than before. if you have lower rates, you should have better income margins than interest margins for the banks. that is where i would be looking to position. regionals and small caps and utilities. all of the sort of avoid the consumer. jonathan: equity futures on the rustle up by about .2%. more and more people sort of shifting into bramo's camp. you run the camp. lisa: i run the camp of being a pessimist, gloom and doom. i think about the 60-40, sebastien page's allocation committee. there is a cloud hanging over. jonathan: you are a bond person. anastasia amoroso, thank you. let's get an update on the news

elsewhere with your bloomberg brief. dani: shares of american down 8%. they beat on second-quarter earnings. they did slash guidance for the full year. it is lowered to $.70 to $1.30. "they did not perform to initial expectation suited prior sales and distribution strategy and an imbalance of the messick supply and demand." shares of universal music group plunging in the amsterdam trade. down between 5%, the biggest drop since -- 25%, the biggest drop since their ipo. they reported subscription and streaming revenue that fell short of analyst estimates. it was a slowdown in streaming platforms and adding new subscribers that ultimately hit revenue. a dispute with tiktok and licensing changes for meta hurt them in the quarter.

the nba announced new long-term contracts for tv with walt disney, comcast and amazon, spurning warner bros.. they rejected warner's bid to offer amazon's offer of $1.8 billion a year. the new agreements are said to generate $76 billion in the next 11 years. that is your brief. jonathan: thank you. more from dani in about 30 minutes. automakers under pressure. >> we are working on reducing our costs intensely. it's an incredible focus by the team. it is the quality and cost reductions. that's our opportunity in the near term to prove the business. we will excel or that progress. jonathan: that is the view from ford. the view from stellantis is up next. ♪

jonathan: i do love a lisa promo. some of the best. lisa: a wire. jonathan: a long list of things there, lisa. don't sit back. we love it. equity futures pulling back .1%. under surveillance, automakers under pressure. >> we are working on producing -- reducing our costs intensely. that's an incredible focus by the team. it is quality and cost reductions. that's our opportunity to prove the business. the team is focused on it.

there will be additional cost reductions. we are on track to take $2 billion in material costs out. we will look to accelerate that progress. jonathan: here's the latest. auto earnings reflecting some big challenges for the industry with ford and stellantis delivering disappointing results. stellantis opting to bring back old models and make price cuts after a massive drop in sales during the first half of the year. joining us to discuss is the stellantis ceo carlos tavares. great to catch up with you. difficult morning. down about 8%. i want to talk about some of the brands. i'm not sure people realize how big the company is. give me a couple of seconds to go through this. you have got the luxury brands like maserati. you have alfa romeo. jeep, which is well known in the u.s. chrysler, dodge, ram. citroen, pugeot. this goes on and on.

i want to work out whether you are committed to all of that, that lineup, those brands, or whether some could be cut or spun off. carlos: there is -- first of all, you are right that the automakers are under pressure. the auto industry is in turmoil. as you look at the results everybody is going in the same direction. for the time being, as much as i'm aware of, where the only guy in town with a double-digit margin. we are under pressure. to your question about the brands, there is no taboo. there is absolutely no taboo. the brands are intangible assets that we respect. we believe they are here to be leveraged. we could celebrate this year, the 125th anniversary of fiat and opal that shows the brands

are stronger than the legal entities and the political regimes. they can cross, survive and get better. we respect the basis of the brands. there is no taboo. if they are not able to monetize the value that they represent then decisions will come. for the time being all of our brands, with no exception, are profitable. it is not by chance we are a 10% margin car company. the only one to be double-digit so far. it is because our brains are great. our products are very appealing. i will use the example of the ram pickup trucks. number one in the jd power quality survey. that means our customers appreciate what our creative people are bringing to the market. it is true the market is in a turmoil. it is true the transition we are going through is immensely

challenging. this is a bump. there will be other bombs. this will -- bumps. this will last for a few years. the most resilient, the most focused, the most customer-focused will survive. that also means cost reduction is not becoming. we have not been so popular but not everybody recognizes the customers want affordability. the customers want a safe, clean and affordability. lisa: there's a question about cutting costs internally to offset some of the increased expenses. shipments to north america fell 18% in the last quarter. i'm wondering whether some deeper cost-cutting is required to bring that up to speed at a

time when the ev transition is not happening as quickly as people planned for. carlos: exactly. what you are saying, it's not happening as quickly as the people planned for. with all respect i want to correct that. it is not happening as quickly as the political leadership expected. what we are seeing in the western world now is the consumers are not supporting as much as the political leadership was expecting. the consumers, they are very clear in what they expect from us. they expect safe, clean and affordable mobility. safe and clean they are. affordable is the challenge. they want basically to buy ev cars at the price of internal combustion engine cars. they don't want to pay more for the ev technology, which i can

totally understand. i want to tell them we are working super hard to achieve that. we already have evidence we are succeeding because we started to launch our first eve cars -- ev cars from 20,000 euros. we will bring to the u.s. market in a couple of years a jeep model below $25,000. yes, we hear what they say and we are working super hard to deliver that. political leadership through the regulations thought the consumers were able and willing to pay a higher price for ev's. they are telling us, the consumers, that they don't agree with that. we are trying to fix it. of course it is difficult. annmarie: in january you said

you would hold off on investment to the u.s. because he wanted to see how the election played out. are you basically saying it doesn't matter who gets elected because the consumers are rejecting the government push towards the ev models? carlos: that is not exactly what i'm saying. it's a little more complicated than that. i'm saying we have received loud and clear the message of affordability that the consumer is asking us to deliver on ev's. the sooner we get there, the faster we are going to ramp up. the investments in ev technology are already done. what needs to be done now is the investments in the capacity for the volumes. the investments in the capacity will be staged in function of the adoption by the consumers and the adoption by the consumers is going to be function of our ability to bring affordable vehicles to the

market, which we are now doing. i think it is going to have a few bumps on the road. that is nothing specific or nothing surprising. it is going to be a bumpy road. we will adapt the capacity investments to the adoption rate of the consumers, which is going to be the consequence of affordability. that is where we are. we are bringing a lot of proof points we are achieving that, starting with the european market now but it will come soon to the u.s. lisa: how difficult is it to compete with chinese auto manufacturers who have a leg up in providing affordable electric vehicles and are able to export some of those to europe? right now there are gates in the u.s.. are those gates positive or negative for you at a time when you are a global car business? carlos: that's a great question. as we are a global carmaker, it was pointed out we had the 14 plus one brent -- brand. we have 15 brands.

we are a global carmaker. as a racing team when each of recognize being global -- we need to recognize being global means we are not protected everywhere. we are not protected in latin america. we are not protected in africa and the middle east. as a racing team we need to confront ourselves with the harshest competition. right now the harshest competition is china. they have a 30% cost competitive edge against us. we are working hard to recover this 30% cost competitive handicap that we have. it is good for a company like ours to be competing with the harshest competition. that keeps us awake. that keeps us alive. we need to run fast and faster to compete. when we come to protected markets we have to realize there are a lot of side effects and

collateral damages to protected markets. that protection may be nice in the short term, may have enormous disadvantages in the middle. that is why we do not advocate custom duties. we have to fight against the best. we have to make ourselves better in quality, in appeal, and cost. this is the way we survived. we used to say the only thing that protects us his performance. we deeply believe in that. jonathan: does that make it harder to keep a production base in places like italy? carlos: it makes it harder in the western world indeed. in the western world we have more knowledge, more experience. we should use our education, our capability to work collectively to find breakers to

compete. it is possible. the 23,000 euro ec3 is made in europe. in the lowest-cost countries of europe, but it is europe. it is made inside of europe. jonathan: i asked because there are chinese producers looking for a manufacturing base in italy. you have some production bases there. are you interested in selling them? carlos: it's public information that all the european governments are dating the chinese carmakers to come to assemble their vehicles in their countries. all the european countries, italy, france, germany, spain, they are all dating the chinese. find. e. that's a fact. if you were to ask me, which is possibly your question that i

would be willing to sell one of my plans to the chinese, i would ask you back a question. what is the intention of the european union if we are encouraged to sell our plants to the chinese? what would be the purpose of inviting the automakers of europe, which represent 14 million jobs to hand over their plans to the chinese? does that make sense for the european citizen? of course it doesn't make any sense, which of course we know. all business is business. we will see what the future will bring. we are here for the fight. where here to demonstrate we have more appealing brands, more exciting cars at the right level of affordability with the right performance and the right safety. we are going to fight. this is a competition. we love competition. everything we do for europe is

because the market is much more open then u.s. markets in terms of competitiveness of technology. it will benefit are making friends. stellantis is a global carmaker at the technology is available for the 15 brands of the company. anything we do to give you -- compete with the chinese will benefit our u.s. brands to bring affordability and performance as soon as we can to this market. jonathan: you have been super generous with your time. the what you post your response to that, the conversation i would have the policymaker for the good of the european economy and the good of the european labor is a very different one to the ceo of an auto manufacturer. you are accountable to the shareholders and the stock is down 9% today. it's a difficult day for stellantis. would you sell a production base in italy to the chinese. i'm not asking is a public official who needs to worry about the size of the european

labor market. i'm asking you that as the ceo of stellantis. is that a good financial decision for you to make? carlos: it depends if i'm making profit out of the facility or not. jonathan: you are under capacity, aren't you? carlos: i will make sure we will keep the capacitor above 80% transition rate. as long as you are above 80% you can do a good job. jonathan: you are confident you will be for the next 12 months and beyond? carlos: this is one thing we have been discussing with the italian government. they keep asking us to have a one million car production and i keep answering i need one million customers. the point is not about the production. it's about the customers. it is quite clear if you have one million customers out there and you have to break down the one million customers among a certain number of carmakers, if you increase the number of

carmakers competing for the same one million customers it's easy to understand they will be less cars to be produced. that is going to open the road to a new context and in the new context we will see what decisions we need to make. it all boils down to something we know very well in the u.s. make the customer happy. period. it starts there. good quality, good appeal, good affordability and you will capture the share the market you deserve. if you don't compete with the harshest competition, forget it. you are going to disappear. there is no other way than to compete with the harshest competition. jonathan: i would be happy if there's a maserati in my drive. i will leave it there. i could talk all day with you. carlos tavares, stellantis ceo. a conversation about how difficult is for an auto manufacturer now, a global one, when you have to deal with the politics, the politicians

looking for one thing and the economic reality of where the consumer is at the moment. the tension and the push and pull. i think carlos did a good job of laying that out for us in an honest transparent way of how difficult things are right now. lisa: especially given he said the chinese auto manufacturers have a 30% advantage on them when it comes to a cost base of production at a time when a lot of government leaders are trying to figure how to get around this. his response is the levees, the charges people are talking about, the gates are not helpful and have corollary side effects that people will not like. annmarie: he's climbing two different hills. one is china and the others internal politics, whether it is western europe, the united states. the political hope of this ev transition happening quicker than it currently is and the consumers are rejecting it. they are rejecting it at the moment. jonathan: welcome to the program. let's start with the price action. equity futures on the s&p -5.1%.

but -- negative by .1%. it continues through the curve. we are down six or seven basis point on two's. dad about six on the ten-year to about 422. the difference is about 14 basis points. in foreign exchange, all eyes on the japanese yen. four consecutive days of yen strength. under surveillance some top stories. benjamin netanyahu making his pitch to congress defending israel's war against hamas and calling on the united states to fast-track military aid. he is set to meet with president biden and vice president harris later on today. the share of u.s. credit card balances pass to reach series high in the philadelphia fed cage going back to 2012. 2.6% of balances were 60 days past due in the first quarter.

that's up from 1.1% back in 2021. lisa: the problem with extrapolating out too much on the data is that it is pretty low at 2.6%. that said, the trend is remarkable. the fact that we have not seen this type of trend is something a lot of people are taking note of. is the reason why jobless claims today in our time are going to be so crucial. tomorrow, personal income and spending setting the tone. jonathan: let's go to the list of data. jobless claims, u.s. gdp, good stated due in less than an hour from now. gupreet garewal writing this. "while we recognize sound economic and corporate fundamentals we remain vigilant due to's strict valuations and clinical uncertainties. thank you for your patience in being with us. how much to go to the slowdown we are seeing emerge. some of the pushback we have heard from a former goldman

sachs colleague bill dudley, former u.s. fed president who said the fed needs to get a move on. we risk of recession here they don't cut interest rates. what is your stance on that? how are you thinking about the balance of risk around the fed's timing of the next move? gupreet: first of all great to be with you. i would say we agree the fed's data-dependent and if that's the case the data now does seem to be supportive of a rate cut. you have inflation cool down, the disinflation setback early in the year. we are seeing a cool down in the labor market. not necessarily collapsing. you are seeing relatively resilient spending. on the whole the data disappear consistent with normalization and pulling back the restrictive policy. if you look at formulations based on the output gap in inflation, they suggest the fed should have cut by now. this is not a textbook economy.

what may make sense in theory may not be delivered in practice. howard simpson is the fed is probably going to wait until the september meeting to deliver the first cut in the cycle. one of the reasons is they want to accumulate more confidence in the disinflation path. the second is they will have updated statements of economic projections, the updated dot plot. back in june they should pce inflation higher than where it is at the moment. we have the latest data coming up tomorrow. it showed only one cut projected on median relative to three back in march. updated projections explain the start of this maturation and gradual easing process. that will be the preferred choice. lisa: i hear a lot of words like normalization and the idea of adjusted restrictive policy. i'm not hearing recession or anything that suggests this is going to be a period of time in

a genetic downturn in the u.s. economy or the labor market or anything else. howdy decide when the market has gotten ahead of itself and pricing it rate cuts, not just this year but also next? gurpreet: on your first point, the data now is consistent with an adjustment cutting cycle. his son like a sudden slowdown in hiring her layoffs. you are seeing the gradual cooling. i caution, our colleagues highlighted it was rebalanced to where it was pre-pandemic. any weakening warrants close attention. chair powell told us they have noted the balance of risks to both sides of the mandate are in close focus. i would say now what we think is interesting is that you are going to have this gradual easing cycle that is been so for fixed income investors and yields will look attractive relative to what you are non-cash. that will be supportive for fixed income.

to your point about what is it me from here on out, there's a lot of uncertainty in 2025. there is definitely interesting opportunities opening up in the global opportunities set for interest rates. once the response to the pandemic and the inflation driven by the pandemic and energy shock was synchronized there is no one-size-fits-all approach to these easing cycles. that's creating interesting opportunities. lisa: must develop that idea. there is a feeling typically that one a central bank cuts rates, it's a good time to going to debt markets because they are supporting them. are you going into chinese bonds? it does not seem like people were enthusiastic with the rate cut over there. gurpreet: we look at he him and dm space tiffany e -- em space and dm space different link. ly. you are trying to address structural issues. in the em space we have more

confidence the central bank's easing in response to improved inflation progress. hungary is one space. we saw cut. in the developed markets face there is greater opportunities in places like canada. we saw the bank of canada become the first central bank this week to deliver consecutive rate cuts. there are also central banks on the others to the spectrum, the bank of japan. the bank of australia unlikely to cut anytime soon. interesting global opportunities that driven by countr y-specific factors. annmarie: what else can you do in that space to diversify? gurpreet: that's a great question. one thing we highlighted at the outlook is that we have strong fundamentals. the economy is relatively resilient. we are focused on with the picture is a corporate balance sheets as a result of the latest

earnings seasons. you have tight valuations. you have policy uncertainty. alongside diversified exposures, your rates exposures, credit sectors, other strategies to boost portfolios can include being overweight in the u.s. dollar. it tends to be a beneficiary when have these risk off. it's. another option -- risk off periods . a cost-effective way for a potential pick up and currency volatility around any associated policy uncertainty. diversification, active securities selection, plus strategies to boost portfolio resilience are all the best way for our clients' portfolios to be resilient to the uncertain environment. jonathan: supersmart. fantastic to get you on the program. gurpreet garewal of goldman sachs on the latest in the fixed income market. high yield spreads around 300 basis points. that is super tight. max kettner made the point earlier this morning. we were talking about the big

unwind in stocks. the big rallies of the front end of the curve of the bond market. big rallies in the japanese yen. you think about risk aversion. not seeing spreads gap wider at all. lisa: u.s. the question yesterday and is the key question. is this predictive of strength or basically an asset class that lost its predictive ability with respect to a credit cycle with effect economic weakening? private markets have offered this huge cushion so what is left of public markets tends to be higher. quality and people are looking at the all in yields in a way that is different and changes the spread characterization going forward. jonathan: if you think about the conversations we had more than 10 years ago on bloomberg tv -- amazing us -- we talked about how cyclical of index was. the big energy tilt. it has changed a lot in the last decade. lisa: it has shrunk dramatically. think back to 2014-2015, energy and shale were so stress tested that a lot of the names were

bankrupt. the ones that survived were stronger. the ones in that index tended to have been the survivors. that's the reason why you are seeing a gapping out in the lowest quality of names, but other than that you see some of the tightest rents going back years. jonathan: we have been told repeatedly it's a high-quality index. it changed over the last two years. let's get an update on stories elsewhere. dani burger. dani: ibm shares up more than 2% in the premarket. he reported a jump in bookings for its ai business. ibm says bookings for ai consulting and software since mid-2023 have exceeded $2 billion. second quarter sales increased 2%. almost $16 billion. that beat the average analyst estimate. boeing agreed to plead guilty to criminal conspiracy over two fatal crashes of it 737 max jetliner. details were made public in a federal court filing yesterday. in the agreement boeing faces a fine of $243 million.

it will serve three years on probation with an independent corporate monitor. boeing will also spend at least $455 million to bolster his co -- it's safety programs. they violated a deferred prosecution deal after a blowout on an alaskan air 737 max 9 jet. it was a chaotic finish to the opening match of the olympics men's soccer tournament. down 2-1, argentina appeared to score a genetic equalizer in the 15th minute of injury time. morocco fans stormed the pitch the protest the goal. the match appeared to end in a draw with the stadium empty. news broke that argentina's goal was ruled offsides. they returned to play the final three minutes, rocco held onto the win. jonathan: i think the new york times called this a circus. i think it's fair to say that's what it was. thank you. trump versus harris.

>> we have a new victim to defeat. lying kamala harris. >> keys extremist want to take us back. we are not going back. we are not going back. jonathan: from new york city, that's of next. -- that's up next. ♪ (♪♪)

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jonathan: equity futures on the s&p 500 negative by .2%. yields lower by six basis points. 422.32 on 10's. it is trump versus harris. >> we have a new victim to defeat. lyin'kamala harris. the most incompetent vice

president and a making history. >> i believe we face a choice between two different visions. for our nation. one focused on the future. the other focused on the past. these extremist want to take us back but we are not going back. we are not going back. jonathan: here's the latest. donald trump ramping attacks on kamala harris, criticizing her record as district attorney and her stance on abortion rights. harris taking aim at trump and the gop's ties to project 2025. while trump remains favored to win at this point, his chances and the odds of a republican sweep and congress are now lower than they were just last week. we now view the election is more dynamic with likely more twists ahead. i can imagine with a swiss might be. i have a pole in front of me that just dropped. it comes from emerson college.

in arizona, 49 percent support for trump, 44% for harris. georgia, 48% support for trump. 46% for harris. michigan, 46 for trump and 45% for harris. wisconsin, they are tied at 47% support. when we start to get poles like that in the coming days and weeks, how much weight you put on them in the early days and weeks of this contest? libby: not a lot right now. the polls will be more telling after the convention and in september. this is what we have been telling clients before the drama. wait until september. that is when statistically polling becomes more predictive. polling will never be completely careful in terms of who shows up to vote. it becomes more predictive as you get closer. it is so dynamic, because she is reintroducing herself to voters. that's good and bad.

she has a very progressive record that she ran on an 2020 that she will have to defend and clarify and what have you. i would not necessarily -- i would take the polling with a grain of salt. after the convention, wait until september. i tell clients that have a cocktail, go to the beach and enjoy your vacation and then come back to politics. that is when i think it will be more indicative. annmarie: it's hard to have a cocktail with u.s. politics. there is emphasis on who she will pick as a running mate. who do you think is best for her? not just to support her and expand her views, but the math when it comes to the electoral college? libby: is she very progressive, we don't know. she ran on a progressive platform. she was running for national office when she was in the senate. she has a progressive record. it is unknown, where she stands on many issues. you are right.

her running mate will be a really important, both because it is the first public decision she's going to make. often times picking your enemy is a reflection of the top of the ticket's judgment. as you talk about, is the electoral college strategy. arizona, she is lagging. mark kelly, the senator from arizona who is more moderate on border issues, a big liability for her, but could help shore up support. pennsylvania. of all the sick states you mentioned, pennsylvania is going to be the most critical state if a democrat is going to win. they have to win pennsylvania. they will have to win other states but if they lose pennsylvania democrats have lost this race. josh shapiro, the popular governor who has a more moderate stance on things like fracking -- annmarie: which she said she was

going to ban. libby: she talked about medicare for all, defunding the police, banning fracking. it's untenable for her to run on and win. she will have to start clarifying much of that. the other challenge issues vice president and the current sitting vice president and cannot necessarily distance yourself so much from biden as well. she has a lot of challenges and twist and turns ahead in terms of navigating the policy front. annmarie: he said the top of the ticket is the judgment of the candidate. what is that say about trump his pick of j.d. vance? libby: this decision to pick j.d. vance was really a moment in time. it was on the heels of the assassination attempt. it was when biden was still in the race. it was when folks had odds of trump winning at 75 percent, 80%. a republican sweep look more likely than not. he was not necessarily is concerned about expanding his voter base. he was not concerned about being

tight as it might end up being. we will see whether he -- how he feels about that j.d. vance but it's doubling down on maga and trumpism then doug burgum or marco rubio or nikki haley and other folks in the mix. lisa: you know michelle obama will not be the nominee. jonathan: i saw that in the notes. lisa: hold on a second. jonathan: i don't know who that was for. lisa: for us. i will not ask about michelle obama. i want to ask about the discussions you've been having with clients overseas outside of the u.s. how they are viewing this. how it affects their investment decisions. what questions they are asking to understand potential ramifications of this. libby: i'm still getting questions about michelle obama from our aging clients and jamie dimon. hope springs eternal i guess.

one is around fiscal. a lot of our clients overseas have a lot of dollar and treasury exposure. just trying to navigate that. as we have talked about, the punchline here is that the deficit is the biggest loser in november. regardless of who wins, the deficit will remain high. not only because it might be new spending and more tax cuts, but mostly because we talked about there will be entitlement reform. that is what you need to consolidate the budget. the other concern they have is around geopolitics. mixed views here. a lot of folks in asia think at least president trump we can negotiate with him, whereas may be biden or harris may have more of an ideological view. i'm not sure that's right. the direction of travel here around tariffs, rent export controls, even capital flows and

scrutiny around how u.s. investors invest in china is going to be pervasive regardless of who wins. in some ways my views or maybe fewer distinctions and folks think. that is really where the clients are focus. jonathan: the message from pimco's get a cocktail and enjoy the beach. lisa: how did that work out last week? libby: not well. i'm trying to be self soothing but is not working out well. jonathan: libby cantrill on the latest. coming up, we catch up with cameron dawson. the former new york fed president bill dudley. bill in the headlines in a big way in the last 24 hours with a big call to cut interest rates this month. bill is just around the corner, as is michelle girard. slightly softer. it's been a difficult week. from new york, this is bloomberg. ♪

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

>> we are at a point right now where we can all agree the economy is slowing. >> evidence that slowing in the macro data is feeding into

corporate earnings, less constructive results. >> policies are restrictive. why not have less restrictive policies? >> to the market but will matter the most is clarity. so long as there is clarity, the environment will be able to handle it. >> we have never had this intensity of debate between bulls and bears. >> this is "bloomberg surveillance." jonathan: but a 24 hours it has been and it continues. let's start the equity market with futures negative by a quarter to 1% following the biggest one-day loss going back to 2020 two. likewise on the nasdaq 100, down .3%. a bit of weakness. nothing dramatic. and the two-year yield is lower again this morning. let's talk about the why. we can talk about the data, it drops and 29 minutes, but do we need to talk about the commentary coming from bill dudley, who said he has changed

his mind and needs to reduce interest rates this month? bill joins us in 15 minutes. don't miss that conversation. it's hot on the heels of the conversation we had with mohamed el-erian many times on this program. he said failing to ease policy in july or september is an outcome that cannot be ruled out and would constitute another policy mistake for a fed seeking to restore credibility after fumbling the initial response to building price pressures. lisa: underpinning the commentary on the action we are seeing in the markets is how much is this fundamental? how much is this true weakening that goes beyond normalization in the economy versus positioning reset, technical, and a market that has seen a long streak of wins going back years and for 28 weeks has hit 38, which is something that hasn't been exceeded since 1989?

this is a tension point where we don't know how quickly the labor market is weakening. annmarie: the fed focus returning to the labor market, reflected in the dudley opinion piece, the fed should cut rates next week with jobless claims focusing on august, in terms of concerning trends with seasonal fluctuations. jonathan: i'm far more interested in that than gdp. to your point on price action, we can do this across asset or individual names. we discussed this a few times as a massive unwind of consensus positions in equities, bonds, and foreign exchange. everyone short the japanese yen, whipping in the other direction. within stocks, there are these company stories that start to add up. the consumer starting to push back. we saw it with delta. we saw it with united. america has been an -- a messy

story of execution meant -- mrs., but american airlines had a difficult time this morning. look at the oil manufacturers and the consumers in one place with production in another. for it is a big struggle. it is industry after industry over the last couple of days. >> basically cannot raise prices as quickly as the input rises. we heard that from nestlé. this is margin compression with consumers pushing back. it's the reason why not only today's jobless claims but tomorrow's consumer spending numbers will be important in giving us a sense of how persistent it will be with the fact that these airlines are down 26% so far this year. the fact that it is down more as it ratchets back profit forecasts shows that people are not pricing in a low enough bar for these consumer facing companies. >> is it time to produce that bad news this morning? coming up, we catch up with

cameron thorson as the s&p 500 has its worst day since 2000 22 and we speak to bill dudley about his call for the immediate rate cut reacting to gdp data and jobless claims. top story, the ai frenzy losing steam, a global tech selloff pushing the s&p 500 lower as investors reassess ai trade. cameron thorson saying there is still time for a turnaround writing -- is tech dead? nobody needed a breather. it went parabolic and overboard at the beginning of last year and it can correct, support, and remain in trade. cameron joins us with more, good to see you. what is this that we are seeing? every single guest, i want your opinion, is this rotation broadening? is it an unwinding of consensus trade or the growth scare starting to emerge?

>> it's very much a technical asset. we got overbought in tech and growth and the important point is that the last three months of that move had nothing to do with earnings moving higher. it was all valuation. it was sitting on really fragile round. you saw positioning get one sided and everyone was on the same side of the boat, with cta's in the 99th percentile and households being 1% away from peak positioning. you had this set up for high expectations with stretch positioning. this is just a digestion of that. the question is, do we have earnings deterioration because of what we are seeing in inflation data and growth data? if we see that, this is more protracted and deeper. if not, it's just short like we saw over the last year. >> amazon, microsoft, apple, meta, how low is the bar? >> based on valuation positioning, the bar is high and

we can see it throughout the earnings season, where there is absolutely zero tolerance for anything that even smells of weakness because positioning so scratched. this is good for taking the air out of these areas, simply because it allows you to potentially over the medium term extend the rally. we went truly parabolic in june and in the beginning of july. it was going to end. this is good and healthy to shake out weak hands. lisa: that said, it's one thing to look at weak companies and it's another to extrapolate the larger macroeconomic story and you can't avoid it when you hear the same thing from company after company about pricing pressure and consumers pushing back. how much of it is normalization versus true weakening? cameron: so important. the deterioration or falling of the cpi, which is good for fed, makes the earnings estimates

less likely. the lower it is the less topline expansion we will get. we are hearing across the board that companies are having issues with pricing power and are not able to pass on input caused increases to the input customer. it's very different from 2021 where we saw that being pushed onto the end customer in the blink of an eye. customers are now pushing back, meaning that 277 dollars per share that is now forecast for those earnings is far too high. >> given that, are people completing the idea of earnings and margins coming under pressure with an economy that's truly rolling over? cameron: that is the key distinction, deceleration not necessarily falling off a cliff. we saw it in the labor market as well, signs of breaking without an outright surge higher. you are still hearing talk of labor holding from the likes of

the nfib and conference board. people are still saying they are having trouble finding workers, suggesting that you are still in this normalization without outright weakness. slower growth but not necessarily growth that is falling off a cliff. the challenge is how does that compare with consensus for robust growth and acceleration in the next year? that is where they need at ahead. annmarie: you have an election call, what's your biggest probability for cause for concern in 2025? >> i think it's about sweeps, whether it goes republican or democrat. we have seen these probabilities around who gets elected swinging around, but sweeps is what the market is going to be the most concerned about, it will allow the most extreme portions of policy agendas to get pushed through. those are the parts of the policy that could be the most inflationary or exacerbate the high deficits. if you see stalemate, i think

that is the outcome that the market brings that is a sigh of relief. >> how do you prepare for that? or you can't until the sixth? >> it is hard to prepare, you have pulled forward a lot of performance with an expectation that certain areas will benefit and it doesn't necessarily translate into earnings, meaning you could see a run-up prior to the election that becomes a rumor by the time of the news. jonathan: you said that the uptrend can remain intact. what gives you that confidence? cameron: we still have room to pull back and we see that the economy isn't falling off a cliff. we reserve the right to change our mind. the market is not oversold yet, which is an important point. you can measure the market by looking at the rsi, not oversold internally. look at the percentage of names around the 50 day moving average , still at 58% for the s&p 500 and it usually goes down below

20% to a durable low. we think there is more to come, but you are still in a medium term that is resilient. back earlier this year when we had corrections. seeing the medium-term long-term view remains important. >> appreciate it, good to see you. this note just dropped from bayard, apple price target raised, new price target of 240, was 200, we believe that apple intelligence can provide a needed upgrade for eps growth more meaningfully. they had a difficult session yesterday with pushback from the south side, the upgrade. lisa: and here the ultimate question with that conversation we had this morning at kkr, it is a matter of timing, how quickly the ai technology and the other types of technological advancements can become profitable and people are

doubling down to say that this is a bigger revolution than the internet. jonathan: the big tell, it's when i upgrade. if it happens in september? this note is about people like me, who have got iphones that are years and years old and just sat on them. jonathan: you know, you -- lisa: you need to come in and say that i'm going to upgrade. jonathan: is that what your life is about, lisa? let's get you an upgrade. dani burger is the main character in the bloomberg green show. dani: [laughter] seeing a boost for summer travel shares, they are down 4.3%, with the airline changing its defining passenger experience, seats will be assigned as they ditch the free-for-all policy that has been in place for decades, change coming in as they work under pressure from activist management sandy airline his failed to modernize the business to appeal to customer demands.

for the first time in four years, royal caribbean is reintroducing dividends after it was round to a halt and record demand put it on firmer footing, putting out a dividend of $.40 per share with robust growth meeting it has reached -- met financial targets 18 months ahead of time. gen z showing support for kamala harris, 40,000 people registering to vote after president biden dropping the reelection bid with 83% of new election bids were between 18 to 34, the largest number of registrations over 48 hours this election cycle. that is your bloomberg green, back to the real main character. jonathan: hardly. isn't that the job? what does the main character do? lisa: this is disclosing too much but at home i was having a discussion with my son and he

sent to me -- yeah, you are main character. jonathan: is that where that comes from? [laughter] he talks about that, if you were the super hurl, what with the person doing the money -- movie? lisa: if you are not, who is going to be? annmarie: around this table the problem is everyone has main character energy. jonathan: what's going on here? i'm to go to break. [laughter] cameron wants to run. coming up, a conversation you don't want to miss, bill dudley on his big call for why the fed should cut right now. that's next.

(♪♪) (♪♪) sandals rhythm and blues caribbean sale is now on. visit sandals.com or call 1-800-sandals. jonathan: equities on the s&p pulling back by a quarter of 1% on the s&p 500 with a rally in the bond market continuing, down eight points on the 10 year. the rally at the front end

continues as well, down about six. the data drops in about 14 minutes. morning calls, first up, lowering the price target on chipotle, keeping a buy rating. the firm says that they appreciate attention to improving publicity around portion sizes through operational changes. the stock is up by a little more than 1%. the second quarter lowered its price target by maintaining an overweight rating with a significant second miss that was disappointing versus elevated expectations, down 13%. finally, citi downgrading lululemon to neutral with slower spending trends and micro second half, down 3% in early trading. looking ahead to next week, the former new york fed president bill dudley said this, officials

must cut and must do it now. the facts have changed, with the fed cutting preferably next week at the policy meeting, dawdling now, with unnecessarily increasing the risk. bill joins us with more. wonderful. to go on this journey on interest rates with you, i remember the beginning of the conversation it in the pandemic, you were together with the likes of larry summers, warning that there would be inflation pressures. you have changed your mind and in the piece there are several points you have made about why you changed your mind. on the third one, the labor market, bill, what's happening there that is guiding the call? bill: the labor market is slowing as you can see in the labor market household survey, which is what we see around payroll employment and less than

200,000. the labor market, the second part of the labor market story is the rise in the unemployment rate where we were at 4.1%. this kind of rise is essentially a warning sign. anytime it goes up by more than half of 1%, the u.s. has had a recession. right now they are moving the average of 4.3% for the increase. we are getting close to trading the rule. the chairman himself pointed out that the risks are two sides one sided. inflation is much more benign year-over-year. so, it is time to focus on the risk to the economy in the labor market, minimizing the risk of recession that always occurs when the unemployment rate goes up by 0.5%. jonathan: let's talk about

timing, then. chairman powell not even a month ago said that they had the ability to take their time in get it right because the u.s. economy is strong in the labor market is strong. based on your picks around timing, they might be too late to fend off recession. why are they miscalculating how much time they have you know they have acknowledged what's developing in the labor market? >> they put not very much rate -- weight on that rule. it's had a perfect record since world war ii but they think the reason the unemployment rate is going up is because the labor force is growing rapidly and it is not as disturbing as people being laid off. the problem with that story is that in the 1970's we had extremely rapid labor force growth. you want to stick with the rule until it is disproved. lisa: 20 have come on to talk about how much emphasis has been put on that rule and people have

backed away from using it as an indicator that is the end-all be-all. is there a new urgency for the sudden pivot one week -- one week before the fed meeting? >> if it doesn't cut in july and it waits until september it will not have a huge effect except on the fact that when the unemployment rate started to deteriorate, it reinforced a negative feedback loop about loss and a pullback in spending that leads to further cuts in unemployment and investment. so, the striking thing about the rule is not just the 0.5% threshold, it's the fact that every time you go through the threshold the unemployment rate has gone up a lot. almost 2%. it just tells you that once things start to unwind in a negative direction, it tends to keep going, which is why the risk is significant. lisa: your call got a lot of

attention in the large part because you are on the forefront of the idea that the fed would have to raise rates beyond what people thought at the time and that maybe even the neutral rate was going to be higher than what it was in the past. based on the weakening you are seeing, are you rethinking the concept that inflation will be structurally higher and that the fed will have a tougher time combating it in the future? bill: the dollar per let -- pressure on inflation will persist. 2.8% is not that far away from the objective and in my mind, that difference is not sufficient to take a big risk of recession. so, it is time for the fed to focus on the other side of the break mandate, the employment side. we always talk about the fact that it is to objective and i feel like the risks on the unemployment side are increasing to the point where you want to put more weight on that.

jonathan: are there things that you can say is a former fed official that you cannot say as a current fed official? you can speak freely with us, you can write a piece on bloomberg opinion. can you imagine the fallout if we had the current new york fed president work chairman of the federal reserve saying the things you are saying right now at the july fed meeting? can they even do that, even if they thought it? bill: the chairman had the same view as me, and if so he would talk to those officials on the consensus around july. one of the interesting quandaries of the fed is that right now they have telegraphed clearly that they are going to move in september, begging the question that if it is so obvious, what are you waiting for? lisa: at this point a lot of people are associating political reasons around why someone might want to come out to say that now is the right time to cut.

since the data has not gotten weaker that dramatically in the past couple of weeks and we have seen ongoing deterioration consistent with normalization, bill, how do you counter the accusations that this is being done ahead of a contested election where the economy can keep doing ok and typically the incumbent or incumbent party does better? bill: my experience, and i think this is borne out by the transcripts over many years, the fed doesn't tend to take politics into consideration at all around the cuts. i think that that is appropriate behavior by the fed. they need to be independent and don't know why they need to take the election cycle into consideration and i don't think the fed is doing that here. the reason that the fed is delaying his they were surprised last year when they saw inflation going down and it turned out we had a number of disappointing readings on inflation. they are also probably waiting

because paul broun said it was about full consensus and they needed to see unanimous vote in favor of easing and the hawks, maybe some people are more hawkish at the fomc and are more reluctant. the rate cuts are definitely coming, but i think that at this point there is a strong case for waiting. jonathan: bill, great to catch up with you, sir. this piece yesterday got a ton of attention. the former bloomberg opinion columnist and fed president on his call to state -- start cutting interest rates like yesterday. lisa: and he talked about that rule where the balance of the mandate seems like the labor market should take on a greater degree and i want to take it a step further, this idea of how much the fed doesn't want to seem like they are perceived as being political. how much of a push does not become for them to not cut rates even if they feel the economy might justify it? jonathan: can they want a smooth

glide path, they always do. they don't want to rattle people with sudden turns into big decisions coming out of nowhere. so, i think that the risk between now and september is the risk highlighted by mohamed el-erian, they have been so data point dependent, it wouldn't take much to speak to them. you get one cup clip in september and that's the ultimate risk. lisa: one bout of commodity inflation causes the cpi to look hot and suddenly it's really difficult. jonathan: so, the difference between a rate cuts and is not a rate cut is a couple months. is that of a deal? we talk about that in a moment. the data drops, next. ♪

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jonathan: 60 minutes away from the opening bell, seconds away from a ton of opening data. mike mckee is in the studio to break it down for you. the scores look like this on the s&p 500, down .25%, taking more weight off of the nasdaq after yesterday's big selloff and the bond market is rallying into the data. the two year, the 10 year, the 30 year across the board, six to eight basis points. the 10 year is down eight. with economic data let's get across to mike mckee. mike: good morning. upside surprise to gdp, consumer spending coming in at 2.3%.

certainly stronger than the 1.5 percent last time. i know that you've been dying to hear what has happened with jobless claims. 235,000. we got a crop of 10,000 and there was talk last week of the jump that we saw being because of hurricane beryl in houston and that may have been a case a little bit with the big changes are. durable goods orders are down 6.6%, however capital goods orders with non-defense x air was up, remember it was down by the .6% margin last month and the expectation was just for .2%. consumer spending a stronger-than-expected. gdp stronger-than-expected. bill dudley says they have got to cut rates. so i mean if you are at the fed you just throw up your hands and you say i don't know. jonathan: the pricing of everything this morning, equity futures looking something like

this, fading those losses on the s&p, fading a bit of the rally in the bond market. just a touch, still lower, still down on the day, but not as low as it was on the two-year and the 10 year, six basis points. jobless claims, jobless claims, jobless claims. all that labor market data is the difference between having time and running out of it. if you look at that in isolation this morning, the picture around claims is a bit better and the people who have time have more data behind them. lisa: the people that say they don't have time will say that things can happening as can happen quickly with a lot of weakening and it makes the data more complicated for the fed. especially when you look at the internals of the gdp print you are seeing upside surprise to the core pce price index over three months. we are looking at a pretty strong read at a time when jobless claims are falling out of the fed, even though there

are other broad signs in the soft data pointing to a dramatic weakening in certain sectors, the data doesn't show it. jonathan: just the early read on things, the gdp positive surprise, what's happening there? jonathan: at this point it looks like what we are seeing is strength in consumer and business spending as opposed to an inventory kind of thing, although that does appear to be bigger. one thing i wanted to point out is the price index for the quarter that the fed doesn't pay as much attention to, it comes in at 2.3% and it is significantly lower than what had been anticipated before, before, before the second quarter pce annual rate of 2.7%, giving people the idea that we are going to get a decent number tomorrow. annmarie: at a certain point it's about the balance of risk for the fed in terms of the

labor mandate and inflation mandate. is there enough confidence, given the upside surprise in this gdp print on the inflation metric that you are seeing jobless claims actually go down from last week? so the potential distortions that you were talking about, is there anything in the data to suggest that the inflation beast has been slain and that the ancillary question is still squarely on jobless claims? mike: i would go back to hammer films, as jonathan knows, all those hammer films in london, dracula is dead, coming back for another movie, that's what the fed is afraid of at this point. you cannot say it has been slain, but you can say that things are getting into the territory where they said they would cut rates. looking at the gdp numbers, you have to figure that it would probably take a july surprise off the table because the gdp is strong and of the pce numbers

are going down on a quarterly basis. 2.3% is the headline, 2.0 is the target. they are getting pretty close here. at this point, you have to figure that if they do anything, they will be setting us up for september. you talked about the yield curve earlier, markets have priced in a july cut, essentially. they don't need to cut to get the effect they are looking for. jonathan: just how dark are these conversations you are having with fed officials? seriously, scary stuff. mike mckee will stick with us. michelle, only 15 minutes ago we had a conversation with bill dudley, who made the case for cutting interest rates in july. you are making the case for cutting in december. we've got additional information. why does this picture validate your start? michelle: let me begin by saying that we backed off or pushed off the call for a fed rate cut

consistently over the last year. we expect the economy to cut sooner because the economy would be weaker. we had this forecast in for a while, although the data and the rhetoric have mounted to suggest it could come sooner. we have just got a lot of information this morning as the numbers suggest. i think that things really need to fall into line before we could confidently say we should move from december to december, having been burned many times before. i think that what mike said was exactly right, the numbers this morning take away the risk of a july surprise and it removes the urgency for the fed to have to act. next week the employment data will be important, claims numbers this morning are again complicating the picture for the fed. next week there's a forecast for 170,000 in a game of unemployment rates. that complicates the picture again a bit for the fed in terms

of just how urgent the fed really needs to act. again, i think, i think the data that we will see between now and september, we don't rule out september at all, but we just don't want to get whipsaw as we have been so many times by the market this year. if unemployment jonathan: if unemployment -- jonathan: if unemployment crept higher, i wonder how they might respond to all of this. how would you expect them to respond going into september? how would things change? michelle: the reasons for the uptick in the unemployment rate are not quite as worrisome. it doesn't suggest that the labor market has imploded, obviously, with labor's approach -- supply increasing. i don't think that the fed would want to appear panicked. they have set the train in motion in terms of setting the stage for a september rate cut

and even if we were to get a sharp upside surprise or, i should say, a negative surprise in terms of the economy, upside surprise in the unemployment rate, i don't think the knee-jerk reaction would be cutting rates in july. the fed does not want to appear panicked, but with that underlying data and it doesn't suggest that the broader economy is falling out of bed, i would suggest that they would keep on the same path and clearly the odds of a move in september would ratchet up dramatically in the rhetoric at the fed meeting, as well as the jackson hole conversation in august would certainly, i think, set the stage for action in september. annmarie: taking a step back, do you think the overall balance of data suggests that the risks for the fed are more squarely focused on the labor market with inflation being much less of a consideration? >> i don't know if i would go so

far as to saying that we have shifted from what the two concerns or mandates are, now towards employment or the economic situation over inflation. you have clearly seen the fed move from inflation to a more balanced approach in looking at both of their risks. i think that that is appropriate . you know, i think that also stepping back as you say and looking ahead, we have mentioned of the politics. clearly, the timing of the election on the near term basis factors into the market discussion at least about the timing of a rate cut. but when you think about the implications, perhaps, of a trump presidency and the potential for terrorists increasing inflation, you know, there are offsetting risks on the inflation side as well. yes, we have a downtrend in place. the growing confidence that the downtrend can continue. when it looks at it more

broadly, there are risks to the inflation outlook under certain political scenarios and that also has to factor in. again, i kind of, i think that where the fed is, they have looked at both risks as relatively balanced and that's appropriate. lisa: how much do you think the markets would sell off if they didn't cut rates? michelle: it would be a disappointment but it gets back into the messaging around it. if there is an expectation that the move has been delayed to september in the fed is still on the path, you know, clearly the market will be disappointed because it has priced in almost 70 points of rate cuts this year . so, if they don't move in july and september and you are only going to get one cup, the market has to reprice for far less easing this year. but as long as i think the markets are anticipating the

next direction in terms of the fed taking action, there is some underlying support there that would be sustainable. jonathan: sticking with december for now, michelle girard. appreciate it, thank you very much. on the two-year for a moment, the lower session yield was down nine points, now it's down about three. economic data better than expected, pushing back on the calls for the imminent rate cut to take place as soon as this meeting in july. mike, gdp, jobless goods, a lot of claims are in your. what stands out for you? mike: terms of headline numbers coming down, nondefensive aircraft, boeing, 127% decline. i wouldn't want to be in that business. talk about volatility. when you look at gdp numbers, consumption is 2.3%. nonresidential fixed investment is up 5.2%.

most of that was equipment. structures were a big deal last year. this quarter they were down 3.3%. we build the factories, now, turning the equipment in, it should start to have an effect on the overall economy going forward. finally with gdp, a big drop in net exports, subtracting .7% overall from gdp with inventory added to 8/10, they have offset each other at this point. jonathan: from td securities here in new york, good morning to you. what stands out for you? does this stand back on the calls for the imminent rate cut? >> i think so. july has been off the table for a few weeks. market pricing, we have had one or two basis points for the last few weeks and it's a function of september and december. i like to think about it in

ranges. one or 2, 2 or three at this point, the data leading up to this point in time has been calling for one or two and now it is a question of two or three. jonathan: this is a small difference in degrees, but walk us through it. what has changed for you, going from one to two to two to three? michelle: to the other point, are they actually focused on the labor markets, there has been a subtle messaging shift over the last couple of months about them actually starting to think about labor market weakening. it's not just about inflation going down, it has slowed dramatically and now it is a function of if the labor market is slowing down, maybe there's a weakness on both sides of the economy and we have to be careful about not over tightening quickly. i think that for them it is a function of look, we want to cut rates gradually, but if the labor market is showing signs of

weakness, we have to go faster. jonathan: that said, there's a feeling of not getting a clear picture from labor market data. it's been revised significantly and can look different a month later when we look back. how much of it is your sense that the fed is saying we will look past blips in the data that show solid this and lookn more -- solidess -- solidness, how low is the fed bar to point to a labor market is a reason to start making adjustments? michelle: i think it's much -- mike: i think -- i think it's much lower. the fact that the three month moving average went from 350 k to 177 in a single month, that's not the kind of volatility you typically get from a three month or six month moving average, for example. we have been flying well above the break-in pace.

now we have done well to the bottom of it in the question for the fed is -- if that persists, are we actually net tightening more than we should be? lisa: everyone who -- everyone who comes -- lisa: everyone who comes on the shows as we are not headed into a full-fledged recession, other than bill dudley. everyone seems to be on board with the idea that there is still strength in the economy, so at what point do you look into what has been priced in long-term over rate cuts that are over its skis. they might start the adjustment with three rate cuts now, but the idea is to prolong the business cycle so that they don't have to make bigger cuts later. gennadiy: which is why i think a third cut is on the table this year. we had september and december cuts. the more labor market softening we get, the more likely we are to get the november cut in play. i know that everyone talks about

the election as a potential stumbling block for the fed, but they cut in september, they can go into december if they have labor market weakness. the big question for them is 2025. the election is coming up with potential scenarios that could take us astray from the soft landing scenario and a big strike in inflation. what does the fed do then? markets are having trouble pricing that in. you know, those scenarios have gotten wider and wider and wider. annmarie: how worrisome is it that the fed might be cutting into an inflationary environment like we talked about, high tariffs that are inflationary? gennadiy: i look at it as baseline versus risk. assuming there was no election, what with the fed be doing otherwise? maybe cutting gradually if the labor market was slowing down. the question is, if we get the inflationary spike, does it keep them on hold or allow them to

migrate in the market? we think it would allow them to keep the fed hold, higher for longer, but not quite at the highs. a couple of cuts this year, if we stay there for the first part of next year and the fed reassesses, we got the inflationary spike coming through and then the growth shock impacting. the fed needs time to assess all that. annmarie: we talk about elections a lot on the show with tears in the tax fight in you're talking about a bigger fight, the debt ceiling standoff. what does the composition of the election mean for the debate in washington? gennadiy: mixed government. split government -- annmarie: isn't that good for the market? gennadiy: technically, yes, but in this instance i think it can create a big risk of a standoff. remember the 2000 11 standoff? know what was really a fiscal hawk right up until the point

where we got split government. that's when the talks came out of the woodwork and started to negotiate with us all. the point marked is only around july or september of next year. it's troublesome because common sense will be off in august. it's going to get close regardless. jonathan: we've come through a bunch of issues but one of the trades you are recommending? gennadiy: you want to belong on treasuries. we are so long on 10 year treasuries. still steepening as well. the trade has done quite well. i think you want to hold onto these trades. where i think there is risk is in the curve trade. we are not necessarily going into a straight line back to neutral for fed funds. if we stay at the higher for longer range, right, ending up at 5% for the first half of next

year as the fed reassesses the risk from tariffs and immigration, it can all leave rates higher. the long may not work out that well and you want them to start to reassess. unlike this year where everyone was steepening, next year will have more trades if you want to be on the right side of the equation. how many times has the word tactical -- jonathan: how many times as a word tactical come up in the last few weeks? lisa: thank you, think of the honesty, because realistically who can come on here other than steve eisman and say that he knows with certainty definitively what's going to happen in november? jonathan: it's been like the theme of the program. fly blind into 25. gennadiy, thank you. we inflate -- reinforcing the notion that the fed has time, and the mind of the fed there is no need to rush in the second quarter with july remaining a

set up meeting for september with a title being see you in september, which is what we heard from the politics over at pimco, so there you go. lisa: it's the collective scream of let us go on vacation. jonathan: please go on vacation. next week, right? end of next week? it for you. everyone's got a holiday, don't worry. all right. let's get you an update on the stories this morning. here's dani burger. dani: i wanted to recap some of the data that we got, initial jobless claims 235 thousand this week, attached below estimates. second-quarter gdp grows at an annualized pace well above the estimate of 2%. gdp numbers, as you said, easing concerns that the fed would need to rush to cut rates to avoid recession. let's check in on shares american, airlines are lower, cutting their earnings outlook for the full year, becoming the

latest airline to temper expectations as fare discounts and high costs pressure earnings in its the second time they have lowered expectations this year, saying that they did not perform to the initial expectations because of prior sales and distribution strategies with an imbalance of domestic supply and demand. kamala harris is about to receive some big name political support. nbc news reported that barack obama plans to endorse her soon and that obama and harris have been in close touch since she announced her candidacy on sunday. that is your brief. jonathan: thanks for that, appreciate it. up next, setting you up for the day ahead. from new york city, you are watching "bloomberg surveillance ." ♪

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jonathan: opening bell, 37 minutes away. things are improving following economic data with bond yields lower. three on two, just a break of 440 or so. foreign-exchange, lots of attention with a lot of eyes on the dollar-yen. nowhere near where it was. lower in the session today, 15194. so, the data earlier, better gdp with stronger dollar yields off of the session lows, jobless claims lower than expected, some of that urgency came from behind the call for the rate cut this month. let's get to the trading diary. president biden and benjamin netanyahu will be holding a bilateral meeting at 1 p.m.. kamala harris with a meeting of her own with netanyahu at 4:30.

running down the week on friday with another meeting, this time with donald trump at mar-a-lago. next week, we are already thinking about that, a ton of earnings are coming out. final four, where do we begin? lisa: the difficulty in understanding fundamental, that's where we see the unwind of popular traits. currently on the flipside, earnings haven't been great from consumer facing companies. right now my take away is that no one wants to go past the end of this year. no one wants to even wager what it might look like, so they are short-term trying to understand what it might mean if the data responds this way, game theory out one another, because doing the big picture, good luck. annmarie: and what policies are there for next year? it's very confusing, staring into the sun.

last night with the president finally addressing the nation we have put it to bed, he is going to serve out his term and it is a brand-new race. i think that next week is all about where kamala harris goes, who her vp pick is, but the data feels more important jonathan:. jonathan:looking ahead to payrolls in the federal reserve decision, next week is absolutely sacked. tomorrow is as well. first of all, the former world bank president, we will catch up with him about what has been developing in the bond market with issuance from the treasury. and a recent paper from nouriel roubini. we will get their thoughts on all of that. bill haggerty, look out for that. no idea who booked this, but the day's people as ceo joins the show as well going into the weekend. who booked to that? annmarie: playing on saturday. lisa: i'm passionate about ac

milan. [laughter] jonathan: you better be. lisa: right? how much do you know? let's go. ♪ the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet.

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>> gdp blowing away expectations. katie: bloomberg open interest starts right now. >> a reality check on wall street. i desk -- investors digesting earnings news. -- katie: the biggest ipo.