>> throughout this earnings season there is zero tolerance for anything that even smells of weakness. >> those mega cap tax have unbelievable return on equity but these things can revert really quickly. >> investors will continue this unwind trade. i do think there's frothiness in parts of the ecosystem. >> the earnings season has been really solid and that speaks for other sectors to participate as well. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: it doesn't feel like we had a weekend for about a month but let's attempt to anyway. from new york city this morning,

good morning for our audience worldwide, bloomberg surveillance starts now. coming into friday heading towards another week of losses on the s&p 500 a third week of losses. on the russell looking at a third week of gains. the futures port on the s&p 500 about three quarters of 1% on the s&p. roma nasdaq 100 we are positive by the same. the small caps up by 1.5%, this stat of the month from jim reed at deutsche bank. the mag seven down nearly 30% since the record high with the russell and the small caps outperforming fire remarkable 24 percentage points over the period. lisa: it highlights the question underpinning what we've seen over the past three weeks which is is this a gloomy selloff on the heels of a growth scare or is this a really healthy growing pain related to a sort of positive transition to some of the more leveraged stocks to the

economy. that ultimately is the thanks underpinning what we've seen. >> we will be talking about that mess through the morning. pce a little bit later on this morning. you got the sense from a lot of people the claims the difference between having time and running out of time and there's a belief based on claims coming in better , gdp further than expected that we have a little bit more time. companies are saying something very different. big airlines warning about airfare sprayed automakers like stellantis are struggling with sales. through the top and bottom into the consumer the world's largest food company cutting its outlook even the luxury players are coming out saying i think we've got a bit of a problem. >> the problem for market participants is understanding if this is a problem with margins or with consumers that still have money but are being more discretionary with where they spend it and actually incapacity to spend. it's two different things because you have hermes.

it sort of selective spots doing just fine all everything else kind of struggles. you look going forward and it seems like were moving to a point where september is a lock in. next week is out of the picture but ultimately there's a difference between preventative rate cuts and reactive cuts. in the market is coalescing around the idea of preventative rate cuts in september which could be less of a negative in reactive cuts to true deep weakness. >> low-end, high-end and then you've got bergen back sprain >> maybe that's part of the gestation. >> 50 people who can afford them. equity futures look something like this we are further by three quarters of 1% on the s&p 500 this is your bounce back from a volatile session yesterday in the bond market the 10-year and in foreign-exchange the euro just about 10850 positive >>'s 1/10 of 1%. coming up we will catch up with

ben on the great rotation. trump and harris debate the next debate and david malpass ahead of treasury refunding next week. we begin with our top story the green rotation gathering some momentum. the nasdaq starting down a third week of losses with the russell looking to make it three weeks of gains. ben writing this is the long-awaited bullish rotation and markets not the standard broad correction, this is key to the sustainability of the bull market. let's get there. first of all as we stared down a third week of losses. tell me what you look at to distinguish between something bad and something good when you see price action like this. >> the tectonic plates of this bull market are shifting. that's unleashing some tremors but that's a rotation not a selloff. the equal weight s&p is up over

the last few weeks even as you mentioned big tech is in this fairly significant correction. i think this is emblematic of what's coming. markets are looking at the assets which are more sensitive to the economic soft landing in interest rate cuts. small caps is the canary in the coal mine. it's why -- it's also a reminder of how little bit of money can go a long way. in all these assets in the rest of the world with all these other sectors. which we forgot about over the last few years as this one leg it big tech bull markets sucked up all the attention. jonathan: let's dissect to this mess over the last couple of days. what's driving this, what's amplifying it, what's globalizing. can you go through that point by point? ben: big tech had this massive rally, everybody is pulled up on

ai. any sort of disappointment and maybe we got that from google just amplifies the thanks which is already out there and people looking to pull those triggers pulled those triggers. i don't think it means tech is a bad story. tech was doing well before ai, maybe things got a little bit frothy. this is 30% of the s&p 500, concentration is very big and that unleashes some sort of volatility but at the same time we have data which we saw yesterday showing validates the soft landing. a fed which is getting ready to cut in september. this is pouring gasoline on looking at those assets which are most sensitive to that scenario and it's not big tech, it's everyone else. thirdly the u.s. has gone supersized that any strong bull reverberates around all assets

and that's the cost we've taken in many parts of the world. over the last couple of weeks. that will fade and i think and i think many of these assets whether emerging markets or europe are in this same bucket as small caps which will do very well in this new environment and a little bit of money will go a long way. lisa: i love a lot of people come onto the show and have different appearances in terms of outlooks and you start talking about time frames. it turns out they all have the same view it's just depending on where your timeframe is. where's your timeframe for this great rotation and wonderful outcome given the fact over the short term there are a host of different analysts including julian emanuel who see this continuing on a technical basis, if we don't get massive beats from big tech next week. ben: ultimately the fundamentals matter. the fundamentals support this rotation.

tech is not growing earnings or big tech is not growing 70% anymore pretty it's still great, 40 to 50 it is consecutive slowdown. at the same time everybody else is no longer in an earnings recession, those are consecutively recovering and we have visibility on getting back to double digit by the end of the year. this rotation is fundamental. it will happen -- i hope it happens reasonably slowly. what we are seeing now is big tech has gone so supersized that when it stumbles it skews volatility everywhere. i'm a little bit scared of the very short term but i think this rebalancing of the economy and of the stock market will hopefully be a moderate but plays out over time. we've been waiting for this for a long time. >> you're talking about how small a company should benefit in this environment.

how do you understand ford? how do you understand stellantis. and southwest. all these different companies that are coming out saying things are getting worse than we thought they would be and we cannot pass on our price increases. >> absolutely. there are going to be plenty of video secrecy is out there. 500 stocks but the overall as we saw yesterday the consumer continues to be in pretty good shape. this is not a demand story. this is a story where demand is ok, where profit margins are getting a little bit of relief because inflation has come down. we've seen profit margins in the s&p 500 rising and i would argue outside of the mag seven earnings expectations are quite low and i think that's why we want to find out next week 40% to the s&p reports for the mag seven report but i think this is

going to be the best earnings season in 2.5 years. let's not lose sight of that. jonathan: let's take out tech and look at the consumer names. particular the story lisa mentioned. amanda is ok, but i think what we hear from all the airlines and what we see from the automakers as well. they do not have the pricing power anymore. that starts to happen, we know it starts to happen with margins and what happens elsewhere. where you get that confidence around that consumption story when what we are hearing from the companies is pricing power anymore. ben: i think this will gradually play out. my little bit concerned with the small-cap and how much we priced in the last two weeks, i am a bit. this will take a little bit of time. the economy will probably incrementally keep slowing but we need the interest rate cuts to come through. the consumer and the economy, in the u.s.. this is a big international

component to this. the global cycle is quite different from the u.s. cycle. europe, em is near the bottom or started to recover. that earnings cycle is maybe a little bit further ahead and almost cyclical. this is going to be the end of the earnings recession in europe and i think by the end of the year we could be seeing 20 or 30% earnings growth in europe given the cyclicality of earnings. the same goes for parts of small caps. >> were talking about time frames it's important because people have said for the remainder of this year there is some visibility, a sense of different economic policies, a sense of some of the dynamics heading into november. after that it gets harder. what gives you conviction that regardless of who wins the u.s. election and the policies that result from that, you still could have the environment you are seeing that could be supportive of smaller companies

even though there's different policy proposals out there. ben: i'm not sure small-cap would be the first place i would go. that is the canary in the coal mine. it's giving a clear signal of what people are looking at but i'm not that bullish to think the u.s. economy will turn on a dime. i would be looking at financials and industrials. looking at europe and em. maybe before i go to small-cap. but again i think the u.s. economy is in a good place. we are about to get insurance interest rate cuts from the fed which i think will go a long way to giving us incremental visibility on that. and maybe controversially i think the election is a volatility event, may be less of a fundamental event. fiscal policy for example i don't see huge differences between the candidates. i think the base case we end up with a gridlocked congress.

having the risk as we overdo the politics a bit. >> good to catch up, appreciate it. one persons rotation is another person's growth scare. bank of america putting it like this. you look at the yield curve and commodities and they said senators -- sinister. >> it's difficult and the big economies have been moving in different kind of pacing and that's part of the problem. i like how language matters. for bears its profit margins are getting squeezed. for bulls its profit margins are getting some relief. it highlights how you look at things. >> a very different way of framing things. some people enjoying their weekends, others not so much pride let's get to dani burger. ani: vice president harris --dani: vice president harris secured enough pledged delegates to clinch the nomination and capped a whirlwind week but saw

democrats coalesce around her as president biden decided to end his candidacy. biden quickly endorsed harris but barack obama had been holding back. a person telling bloomberg he first wanted to get the party time to unite behind a candidate. hooper, a lift indoor -- winning a lawsuit. the top court unanimously ruling the companies can continue to cal asked if i california drivers as independent contractors preyed it clears what investors have guarded -- regarded as a major regulatory hurdle. companies have long argued they are not considered employees entitled to minimal wage and overtime protections. despite the ruling, further legal and legislative fights are expected ahead. as the olympics kick off in later today, french authorities are contending with what they are calling malicious acts targeting the nation's high-speed rail systems. fires were set at several infrastructure hubs along the

rail system. officials say people were seen fleeing the sites. they say it services to london and brussels have been impacted. several trains were delayed or canceled. the national rail company says it will have to repair its network cable by cable and that's your bloomberg brief. jonathan: that is super sad. dani will be back in about 30 minutes time. debating the next debate. >> i'm ready to debate donald trump. i've agreed to the previously agreed upon september 10 debate. the voters deserve to see the split screen that exists in this race on a debate stage. jonathan: we will discuss that split screen up next. good morning. ♪

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jonathan: already looking ahead to a big week. this time friday we will be talking about payrolls. two days before that we've a federal reserve position and some of the biggest companies on the planet reporting earnings. equity futures look like this positive by three quarters of 1% on the s&p 500. a little bit of stability in the bond market, the 10 year. under surveillance this morning debating the next debate. >> many of you have been asking

me about the debate and i will tell you i'm ready to debate donald trump. i've agreed to the previous agreed upon september 10 debate per we agreed to that previously now it appears he is backpedaling. but i'm ready and i think the voters deserve to see the split screen that exists in this race on the debate stage and so i'm ready, let's go. >> donald trump's campaign refusing to commit to a debate with vice president harris until she officially becomes the democratic nominee. a campaign spokesperson saying it would be inappropriate to schedule things because democrats could still change their minds. harris responding on social media saying what happens any -- to anytime anyplace. tobin a bit of news this morning already. the elusive endorsement gets delivered by the obama's to harris. a bit of a honeymoon period over the last couple of days. i wonder how much longer that last.

>> i think it depends in large part on how vice president harris performs on the campaign trail. part of the reason democrats have been so energized and unified is the relief under the biden catastrophe over the last month but another part of it is she's looked good on the trail. the early paid -- media has looked good. and a string of solid performances from her. she keeps delivering good performances i think democrats are very ready to remain enthusiastic. there is sort of a palpable eagerness to have some been to root for. obviously hurt campaign did not go flawlessly stable -- say the least. it's possibly things things go less uniformly positively and people start to see crack's. lisa: the new york times poll that came out was interesting not just -- not because it showed there was more of a tie between, let harris and --

kamala harris and donald trump with president biden. but this part it's a nearly 90% of voters said they approved of mr. biden's decision to exit the race. when have you ever seen 90% of voters agree on something so pivotal as the sitting president stepping down from a race. >> it's about as higher numbers you can get in polls. it's really hard to come up with something that gets a higher number than 90. i think it just goes to show again how much palpable relief there is it being out from under this. there were differences of venue on the democrat side about how to handle this, how much pressure to put on biden. there were people including thing in the congressional black caucus standing with biden through much of the pressure campaign but now that he has left i think there's very little second-guessing with that. there are some people who were

hoping to have another candidate somehow, find some way to run a mini primary and figure out if you can get one of these promising democratic governors at the top of the ticket instead of the runner-up slot. but that was never really an option and with all those people immediately bowing out they are backing the horse that's available to cheer for. lisa: a lot of people scratching their heads at the j.d. vance pick. given the fact that he is very closely to trump when it comes to some of his policies. within the democratic party how much momentum is there for picking a vice presidential candidate that is more centrist even and perhaps kamala harris. tobin: the question is about the hopeful she will go with. i think common sense and the reporting of who's being vetted in the same direction which is she is looking for someone who

has some moderate record and some outside the beltway sort of vibes to them in terms of being able to round out the ticket again. could be governors, could be senator kelly in arizona who i think reads a little less by virtue of physics. as an astronaut. they are looking in the obvious place for the kind of person on the ticket. >> it's been interesting to see the media and democrats in the last couple of days almost re-model perceptions of harris's role in the administration to separate her from the border by pointing out repeatedly might've called her the borders are but she was never the borders are. this was about root causes. i wonder if you can pick and choose whether is the vice president you can say i was involved in this and i had nothing to do with that. how much distance will there be between her and the biden legacy?

tobin: obviously she will face a tax for everything that happened in the biden administration. oh things in which he had some level of direct role this sort of disputed portfolio of what exactly was the responsibility in terms of addressing the root causes. but even more broadly think she had nothing to do it she will face criticism for. i've no reason to think the trumpet administration for example will stop criticizing afghanistan and pinning that on her as a member of the biden harrison administration even though no one believes she was the decision-maker on that. that being said, it does seem to be the case in some of the early polling from democratic pollsters that there is less baggage with her than there was with biden. on inflation for example which had been one of the persistent vulnerabilities for president biden in addition to his age. a little bit less association of the retrospective bitterness and the run-up in price levels.

for harris rather than biden. a lot of it comes down to her. how effectively can she keep it away from some of these attacks on the biden record and her past positions. where republicans are criticizing her for the position taking she did in 2019 around anti-tracking, decriminalizing border crossings and different things she signed on to ring the primary when a lot of democrats were racing to see who could get farthest left. flip-flopping is a thing that happens in politics. i think it does mitigate some of the things she said in the past. jonathan: they are the ultimate shape shifters, i expect no different from either side. i keep going back to what libby said yesterday. wait until september. wait for the dnc, let all this betting, just wait a while and then we get a better gauge of where things stand. lisa: it's a reason i thought of

approval avoid shocking. the fact that everyone did not want the race we were having and they are so happy if you wonder how low the bar was for anyone to come in who is under the age of 70 two really re-galvanize this race. jonathan: all the polls over the last year or so. coming up next the yen rally risk is breaking as investors await rate decisions from the fed and the boj. that's next, this is bloomberg. ♪

jonathan: live from new york welcome to the program. positive by three quarters of 1% on the s&p 500 pouncing back by almost 1% on the nasdaq 100 and once again massive outperformance on the russell 2000, small caps up by 1.65%. as of yesterday the close poised for a third week of losses on the s&p and poised for a week of gains. in the bond market yield curve looks like this, the two-year, 10 year doing nothing. can we take a break for once. it was just a feeling the data yesterday gave us a real break that we could go into the federal reserve on wednesday next week without this urgency to cut interest rates because

the labor market is breaking. i wonder whether friday's payrolls number endorses that view. >> at a certain point it seems like people are rallying around the idea these can be insurance cuts or preventative cuts of something that's more pernicious and yesterdays prints seem to highlight that that seems to be the case. the question is just how much the fed commits itself into bill dudley's point what we are not seeing because there's a lot of down provisions in the labor market data and that is one thing people are pointing to. >> it's what is your assessment of the labor market and what do you infer from that as to how much time you think you have to remain on hold with the federal reserve. when we spoke to bill yesterday his view was the labor market is more fragile than the fed thinks and they have less time than maybe they think they do. this is what's interesting about next friday. how does this market respond if we get a bad payrolls number. if we get unemployment through the so-called -- is the federal reserve comfortable with all of

that. they might say it's a one-off. they some commentary of the last couple of days i can imagine people saying this is it they have to make a move its growth scare, we are heading to recession, then you have an even messier market and we are this close to something like that happening. lisa: there's also this question of has the -- how does the market respond and we've kind of gotten a sneak peek it just the surface of how deep that response could potentially be. we are looking at markets at the hope and prayer the fed cuts rates proactively. if they cut reactively we have a sneak peek of how much we can see that selloff. michael saying even financials are the lead downward if we do get a true growth scare and see some of these revisions particularly on the negative side of the labor market. jonathan: one bad payrolls report from that. the trend over the last two years has been surprised to the upside so let's see.

let's turn to foreign exchange. the range of dollar-yen in yesterday's session the lower the session 15194. the higher -- the high of the session. right now we are back to 15430. we saw massive swings on stocks like nvidia but we also saw big swings cross asset and currency pairs like dollar-yen in yesterday's session. we are still heading towards a fourth week of decline on the currency pair. a big week for the japanese next week. >> for the bank of japan to decide if they're not to cut rates. over the past couple of days the ultimate question is how vulnerable is this market to an inactive bank of japan meeting. if they do not raise rates next week how much does this again weaken right back to where it was before this rally began. unclear what's driving it. the bank of japan could quash that by simply doing nothing.

>> our top stories starting with vice president harris pushing the israeli prime minister to accept a cease-fire deal with hamas highlighting concerns over the civilian death toll in gaza. netanyahu met with president biden and will be visiting donald trump at mar-a-lago later on today. your foreign leader and you now to meet with the sitting president, separately from the vice president and you've got to meet with the former president who might be the next president as well. what does this policy look like after january? >> it's part of the reason peter is worried about some geopolitical issue springing up now because it feels a little bit not that there's a vacuum of leadership but it's unclear who has the strongest grip over policy going forward talking about beyond january of next year. it is interesting to see how harris is trying to create daylight between her policy and bidens policy coming out with some harsher words for netanyahu

and you have donald trump who is a huge supporter of bibi netanyahu. and this acceleration of a divergence in u.s. politics by netanyahu is something people expected he could exploit. >> you've got ukraine in a hot war, he is in a hot war. and could be a different relationship with the united states in november. the lack of continuity in foreign policy in america. lisa: it starts to raise questions of what could happen, you start talking about ukraine and for a lot of your zelenskyy. earlier saying i know you don't want to talk about things publicly but let us know if you will be playing with our future. i want to know what the policies are from prospective nominees because a lot could change. jonathan: let's get to the latest in china. apple losing ground. markert just a market tractor sing iphone shipment's dropped

in the last quarter pushing topple -- apple out of the top five as local sources have been surging ahead, even deep discounts failing to help boost sales of apple at a time when the sell side getting built up on the idea that when the new iphone drops in september you will get this massive upgrade cycle off the back of it. lisa: how many international companies will start to x out china and propose growth models that have nothing to do with that nation because there have been a number of reports that a number of the executives, big heads of multinational companies don't know how welcome they are. and the rhetoric is not convincing because policy has not been. with apple you could say the price is probably part of the issue and you could say phones have been banned by a lot of governments and agencies. a big push to national companies. all of them of exceeded apple for the first time. it creates a difficult environment to have any predict

ability. jonathan: that environment will always be cultivated by the central government, but also this term of consumption, how consumers have gravitated. you mentioned peter chatain, how welcome are they not just by the government but also by the consumers on the mainland. lisa: how much our company still expanding in china. never we ask about china, they always really hedge, almost invariably. the qualcomm ceo a little different. we like china it's important for our business but most executives say we are cognizant of the risks, it is an important market. we want to make sure that we are being within everybody's guidelines. what they are doing is totally different than moving -- they are moving away, they are very aware of the potential. jonathan: it's the physical reaction that gets me.

they don't know what to do with their hands anymore so the soft landing. it's the physical reaction. you saw them react physically to it. they know it's a topic they've been briefed on by public relations. don't go there. lisa: nothing good can come of it. jonathan: want to turn to foreign exchange, investors looking ahead to a double dose of central bank decisions. the fed and boj strong on wednesday. the yen rally facing a moment of truth as a currency holds onto an advanced about 5% against the dollar. a stretch of cibc writing this. should the bank desist from tightening as we assume. we would be mindful of dollar-yen retracing half the recent correction. we are reminded of a correction back to 156.90. jeremy we have seen massive

swings in dollar yen the last couple of days what do you think has been going on. is this about fundamentals looking to the possible rate hike or is it something more than that? jeremy: there are a couple of things in play in the context of this move. we've seen access yen short positions. some of those have been partly compromised but i think also at the same time we see increasing speculation of late regarding the prospects of a boj hike into next week's meeting so in the context of yesterday's mood when we traded below 152. we were trading in the region of nine basis points higher in terms of pricing for next week. amplification in terms of boj assumptions. they've really amplified the uncertainty of course when it comes to risk very much under threat in recent sessions. there certainly a couple of factors in play. we expect once again the bank to

overpromise and under deliver. maintaining a dovish tone. anticipated dollar-yen does risk moving higher. lisa: you said there were a couple of factors at play pray how much is a fundamental question about the bank of japan and how much of that is the hedge funds that blew up? jeremy: we have seen significant repricing or lease attempts to reprice the boj view for next week. that's one of the factors but there is a case to be made when we see episodes of market uncertainty that it is often the case those positions which are proving to be profitable are also unwound as a consequence of uncertainties in the market. i wouldn't necessarily describe a particular sort of on either those factors but combination in prudential proving to be a powerful cocktail of what our relatively liquid markets.

that does amplify that intraday volatility. lisa: how much is this yen story and how much is it a dollar story. is it a question about people getting more confident the fed will hike or cut rates at least in september in the face of data that stephanie cooling. jeremy: undoubtedly we have been anticipating a september fed rate cut for some time. we had been expecting the valid -- to validate. and it's probably proving to be the case. it's proving to be somewhat hotter than expected. relative to last, i think the inflationary dynamics that there is a need or necessity for the fed starts policies and september meetings. this increased confidence in that regard. it may be the case whilst we see u.s. economic exceptionalism relative to the rest of the world in the first half of the

year, that exceptionalism and the argument around that will dissipate as we move forward. i think that does validate the presumption that the impetus of the dollar i think will gradually reduce, albeit there are crosscurrents in relation to the u.s. political dynamics. jonathan: looking for a swing and the other direction. looking ahead to the boj and federal reserve next week. taking this conversation in the right direction. when you have big consensus trade like this one, for this long other things build on top of it so when you snap back in with speed and it's a matter from 160 down to 150, a thing start to crack. identifying where those are and where they are coming from is important. lisa: there is no evidence to suggest that, there seems like perhaps a few trades. the got blown out of same time.

that's what a lot of people up talking about. hard to attribute some sort of fundamental reason behind that. jonathan: dollar-yen with a 157 handle and a 151 handle this week. let's get you an update this morning. here's dani burger. dani: mercedes is the latest automaker. it trimmed the upper range, it now expects returns between 10 and 11% in previously set the high-end could be 12%. automakers are under pressure from demand in china and a drop in purchases in europe with governments cutting back on financial incentives. her sadie shares fell before paring some of those losses given the earnings were somewhat expected. in jp morgan launching a new internal ai chatbot in one of wall street's largest use cases for the technology. in a memo viewed by bloomberg jp morgan told its employees to use

its own version of chatgpt as a writer, i.t. generator. the ft reporting the chatbot could do the work of a research analyst. they have been expecting over the last -- experiment and all the last few years with hopes it lives up to its cost-cutting potential. saying the technology could displace more jobs in banking than any other industry. former first lady melania trump is publishing a memoir this fall. the self-titled book is described by her office as a powerful and inspiring story of a woman who was carved her own path, overcome adversity and to find personal excellence. a signed copy will be available for $75 in the collection addition will go for $150. jonathan: up next, the big policy questions on the horizon. >> the trajectory for debt and deficits is quite dire. regardless of who gets elected. that something the next

administration will have to address. jonathan: the former world bank president from new york this is bloomberg. ♪

jonathan: if you are tuning in, welcome to the program. equity futures bouncing back, pretty volatile session and a volatile week. equity futures up by three quarters of 1% in the bond market yields about unchanged. under surveillance this morning big policy questions on the horizon. >> the trajectory for debt and deficits is quite dire. regardless of who gets elected. that something the administration have to address. it makes it tricky for the fed to cut rates in an environment where debt and deficits and long and yields could rise in the market and the bond vigilantes

start to push back on the narrative this coming up being put forth by the administration's. jonathan: a big week ahead and here's the latest. treasuries holding steady after recent gains as optimism grows of the fed's first rate cut. bond trained looking at the funding announcement from the treasury department alongside us in the studio the former world bank president. good morning to you. i want to start with this quote. it comes from hudson bay capital. two people in sure you know well. by adjusting the maturity profile that's debt issuance, treasury is dynamically managing financial conditions and through them the economy. essentially taking over the core functions of the federal reserve and they dubbed this novel tool activist treasury issuance. can we just reflect on all this? what are they telling us? >> i love new acronyms. activism, treasury has to decide

every quarter whether to issue t-bills or bonds and which bonds to issue. they do that in conjunction with wall street and the problem, and a written a lot about this in the wall street journal is that puts an overlap between them and the federal reserve so that is a challenge right there. as you decide where the issuance is going it affects the shape of the yield curve and when you do that you are affecting stock prices so you have this giant direction for capital based on whether treasury is borrowing short or long. right now for years they've been borrowing too much on the short end and not enough in the 10 year window. >> why does that deliver meaningful consequences. you think about the shape of the yield curve. it's the same amount of debt being issued at the front end of the yield curve and less of the long end. meaningful concert was an

increase or decrease the level of debt. >> when qe started that was the buying a lot of bonds in 2010 and 11. that flattened the yield curve so you had the fed buying longer maturities, basically the fed buying duration so when the market here is that it's positive for equities but not positive for small businesses around the country. they borrow on the short end. treasury is the bigfoot coming in borrowing right at the spot where the small business was for inventory, construction so if you could change the shape of the yield curve to be more upslope or upslope at all right now you would liberate a lot of floating rate loans for people that need them day by day in order to get their business is growing. lisa: some would say this is smart policy because ultimately the treasury department you want to lock in borrowing costs at 5%

for the next 10 years and a short-term kind of lease on rates at the highest levels in decades. why don't you see it that way? david: i think that's a bet made by the treasury so we already saw a giant that made by the fed on duration and they've lost billions, i think it will end up being $1 trillion from that mistake where they were buying long bonds with short-term interest rates. think silicon valley bank as a hedge fund. they should be more neutral of the economy. we have them coming into election cycle and they are holding down the long into the curve. which props of the equity market. think of where the capital is going right now. treasuries borrowing short.

it has a lot of long-duration capital for can go into equities or go into long-term bonds. so you have this phenomenon for years of corporations issuing bonds and buying back their stocks. you dividend recapitalizations going on now. this is all a phenomenon on the shape of the yield curve which is being controlled in an antigrowth way by treasury and the fed. lisa: talking ahead of a: 30 a.m. on wednesday. where they announce what kind of maturities and the amounts they will be selling of government debt. it comes a time where heavy treasury supply it comes at a time when you potentially are rumored towards the administration. if you are in a situation to dictate in order to say increase

maturities on u.s. government debt while not sort of causing this massive selloff in the long end. >> i think you have to be neutral from treasury and the fed that you're not trying to manipulate the yield curve. historically remember the operation twist which was a big failure in previous decade and century. so the government has tried to do this and it ends up hurting people in the country so all you have to do i don't think it's that hard is say what your goals are that you are trying to not have a short-term funding be the most efficient. treasuries making a bet right now but they will be able to refund a lower yield later on. how do they know that and wouldn't it be more confidence inspiring if they allowed the market to help them do that. they are asking the world to keep giving -- the u.s. -- the

treasury borrowed in 2023 $23 trillion in its coincidence in 2023. and so that's a giant amount of debt for the market to digest so say it to the market we are working towards a low yield curve that's upslope. that's can maximize business confidence and be very positive for growth. they are saying instead we will keep borrowing short-term as lisa is pointing out it might be cheaper if yields fall. it might cost them a lot. right know it has not been a good bet. jonathan: just to jump in it's meant to be predictable debt issuance under the treasury. that's meant to be the core principle. do you think we've moved away from that. is this a permanent fixture. david: it depends on the political cycle where you borrow on the yield curve and if you're trying to prop up markets in the

short term or the long term. that also affects and is very important the actual capital flows in the economy. there's been this heavy bias towards big companies and the government. so that same point you are making about where the treasury is issuing means the government feels comfortable with this giant fiscal debt because you are not borrowing at the long end of the curve. we need to go to a more neutral balanced environment with a more independent fed that's not really facilitating this process through its own, is it coincidence the fed moved to qt -- to facing out qt right now in this part of the curve. they should be allowing that long bond portfolio to run off. that would be confidence inspiring for markets. jonathan: good to catch up with you. i feel we've only scratched the surface.

thanks for giving us your insight. on a key issue. it is having so much attention over the last week or so. lisa: there is a real question what is the consequent of higher long-term yields. if you allow them to be determined by market prices and there was this implication may be u.s. government officials will take the deficit more seriously if the market were determining levels. may be more of a gut check that would push people to a bit more action on the policy side. jonathan: well said. coming up next, david is putting on his headset -- coming up next, the tory a, we will catch up with giorgio for lonnie, the ac milan ceo. all of that and more in the second hour of bloomberg surveillance. ♪

at morgan stanley, old school hard work meets bold new thinking. to help you see untapped possibilities and relentlessly work with you to make them real.

the moment i met him i knew he was my soulmate. and relentlessly wo"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.

♪ >> the fed doesn't want to appear panicked, particularly when the underlying data do not suggest the broader economy is falling out of -- >> we are getting carried away with negative surprises. we are still seeing broadly stable data. >> if the labor market starts to show signs of weakness we have to go faster. >> the data is consistent with a cutting cycle. >> ray cuts are coming. at this point there is not a strong case for waiting. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern.

jonathan: the second hour of bloomberg surveillance begins right now and with a snapshot of your equity market. it is has been all over the place over the last week. monday was the best day of gains since june. forgot about that. wednesday happened which was like the worst day of losses so far this year. we added to it yet even though 15 minutes before the close we might fineish -- finish in top territory. lisa: the economic data has had ups and downs. hasn't necessarily been particularly consistent. frankly neither have corporate earnings. yesterday we were talking about ford having its worst day going back to 2008. american airlines flashing their full-year forecast. 3m today. colgate raising its organic growth. it's an incost sin tent and difficult picture. jonathan: people use that word,

idiosyncratic, it frustrates us both. obviously this is e.v. at the moment. they are at the wrong time, at the wrong place. then you look at another company, make another excuse, gucci can't execute. i think that's the difference for me. what is it about execution and what is it about the u.s. consumer right now? where's the real struggle? people are not executing? or are they struggling because the consumer is weakening? lisa: great question. to me the answer lies in what does it mean to execute? is it the right types of strategies or the most cost efficient strategy. cost culting? bristol myers talked about that. mcdonald's talked about how the $5 meal is bringing people back in the fold. they extended that because people are cost conscious. when you talk about efficiency, cost cutting, job cuts. how deep does that go? that ultimately, people are getting--getting sick of this weakening or weak? we just aren't sure.

right now people are still coalescing around weakening and it's healthy. jonathan: it's weakening without a doubt. pick out two names. two of the biggest food and beverage manufacturers on the planet, pepsi, nestle. pepsi in the u.s. there is a consumer more challenged. nestle, value seeking behavior among consumers. you can't avoid this. you can't call it i hado sin tactic. that's the costumer -- consumer pushing back. lisa: take nestle, cocoa and coffee. both of them have gotten more expensive. this is commodity prices increasing on their input costs they can't pass to consumers. cameron dawson talked about this yesterday. you see margin compression or relief at a time when inflation is coming down. that it might be good for the consumer but it tends to be bad for corporate profit margins. is this a company specific

problem and not an economic problem? no one's able to get their head around that. jonathan: when there are enough companies having the same problem you have an economic issue. lisa: and cutting jobs. that's what we are seeing. and the backward looking revisions what people are watching, how much do we not understand the real time data because it will get changed so much. jonathan: you get the feeling from the market perspective things are so finally balanced you are one bad day from this changing. one bad payroll support away from changing this story for some of the biggest companies on the planet. lisa: i think a lot of people aren't necessarily conditioned for this environment. we have seen huge swings. 2008 crash. we saw the pandemic. everything went at once. this has been a story of many different industries that are moving at their own paces. we see services inflation coming down. goods inflation coming back up. already having seen that trough. and all of a sudden getting more expensive because cocoa beans are more expensive. because the movies companies are

saying maybe we need to cater to a higher end consumer to be more profitable. jonathan: we can talk about that later. i was thinking about american trying to pivot. southwest trying to pivot. based on what we have heard x.m.s. in a luxury state of play. lisa: assigned seats in southeast. have you flown southeast? jonathan: i haven't. i have done ryan air. lisa: same thing. jonathan: sort of lining when -- sort of like when ryan air peaked in late 1990's. early 2000 you run across the tarmac trying to get a seat. lisa: would you? jonathan: yeah. then try to save some for the family to make sure no one sat gee bee side you. lisa: did you elbow someone away? jonathan: i could never do that. that would befall. i'm sure that happened. pretty brutal. happy that michael o'leary changed things. that wasn't a nice experience. equity features on the s&p 500, positive by .7. in the bond market yields 4.24.

i want to stay on the commodity market. 77.92. down about a half of 1% in crude. i mentioned michael harnet from banc of america. one person's selloff and growth scare is another person's rotation and broadening out. it's important to separate those two camps right now. you can give each camp some fuel. this is what michael was talking about. look at one and say credit spreads are ok. the economy is fine. so is the market. this is a broadening out. when you look at commodities and what's happening with the yield curve, particularly the front end, you can make the argument that growth scare is starting to emerge. lisa: look at copper prices. aside from the yield curve forward contracts, near-term versus long-term, look how much copper price vs. come down? why? is that because of a normalization after an incredible boom. or maybe that commodity boom, that building infrastructure kind of development isn't happening as quickly as they

previously thought? jonathan: we'll get thoughts on commodities for you in just a moment. here's a state plaif for this hour. the next 55 minutes or so we'll catch up with victoria fernandez of crossmark on a great rotation. sucharita kodali of for restier as the u.s. consume -- forrester as the community. and giorgio furlani. the s&p 500 losses for the sixth time in seven sessions. victoria fernandez writing this, we are invested in the market with a weakening labor market, higher credit card, and seasonallallity shifts, we could see a selfless second half of the year. victoria joins us. the consumer, we talked about that. there are a few companies out there saying things are weakening. others say ok. what are you focused on? victoria: i think this is the problem that we are seeing. we don't have a consistent message come interesting the earnings season telling us one way or the other so the market can make a definitive decision

where it wants to go fompletd that's what's causing some of this volatility that we are seeing in the market, especially like yesterday up all day and down at the end. in our eyes it all comes down to the labor market. you and lisa were talking about this earlier. the labor market is key for us. not necessarily the payroll's number. i look more at the jolts number. the job openings. i want to see how long it's taking someone to find a job once they leave somewhere. temporary work, we know that is a precursor to what we are going to see in the labor market as a whole. i think that u3, u6 number has muddied the waters with the immigration issue. focus on jolt. get an idea of that labor market. it flows through to everything else we are seeing. it flows through to wages. then you have the consumer pull back. we know the consumer is driving this economy. you get consumers pulling back, revenues pull back, margin compression, layoffs go up. it is a cycle. i talked about this with clients

in kansas city yesterday. follow that cycle. it tells us things are going to slow down in the second half. we need to be ready. jonathan: victoria, here's the question i would have for someone like you who likes financial, why would i want the banks going into what you just described? victoria: i think we have to look at it from a technical side as well as a fundamental side. i know you asked me a couple months ago why are we sticking with financial? look at the run-up that we have seen. it comes down to the fact that when you are going to have volatility in a market, we have the vix up to 18, up 20% this week, you need companies that have strong balance sheets, good cash flows. that can handle this storm. if we are getting a resteepenning of the yield curve, which we typically get before we go into a recession or bull -- pullback, that would be beneficial for some of these financial companies. we are talking the larger banks. we know russell 2000 has done better because some of the

regional banks. we would say stick with the larger banks with the good balance sheets. they still have people using their credit cards and paying those off even though delinquencies have risen, consumers are going to rely on those credit cards as well. i think you have a couple reasons as to why in a market where a lot of elements are going down, financials still have over half of their securities in that sector over their 50-day moving average. lisa: victoria, you talk about diversification across sectors and asset classes and how important that is. what does it mean to be diversified right now at a time when we have seen odd correlations and a lot of the traditional sort of 60-40 aspects of portfolios haven't been reliable? victoria: you're right, lisa. we were just looking at correlations and consumer discretionary this past week and how that has fallen out of bed. you have to be specific when you are going in and looking at names. really doing that home work.

looking under the hood on the fundamentals. for us diversification doesn't just mean within the equities sector. we have been talking about financials. we have been talking about health care. we have been talking about some of the staple names that have pulled back in the first part of the year as areas to go into, but we also think you need to put some money to work in that fixed income world, lock in some of those higher rates for the next 18 months to two years to help buffer some of the volatility in the equity market. there are other elements. income in your portfolio with call options. that's one of the most liked strategies that we have at crossmark where we are seeing a lot of flows come in. you can also have allocations to things like absolute return strategies. there is a lot of elements where you can go in, build your portfolio out to really kind of buffer some of this volatility. it's not just within the equity sector. lisa: next week's massive. the big tech earnings from

microsoft, apple, and meta. and the payrolls report on friday. went the fed meeting as well as the treasury and financing or funding agreement which actually announcement -- announcement which could be important for duration. what do you think is going to be the biggest market moving event among those? victoria: i think it's really hard to pick from those. i will tell you i'm going to be watching the quarterly refunding announcement. when we looked earlier this year, some of the biggest spikes that we have seen in yields have come on the quarterly refunding. the deficit is a huge issue. and people are very concerned about what's happening there. and that gives us a clue into what our interest expense will look like and issuance going forward could lead to downgrades for us from some of the rating agencies. to me that is extremely important. we know that some of these tech names, valuations are coming down a little bit. so i don't think we would be completely surprised if we see earnings just hit expectations, maybe not go further and

guidance come down. i think we know the fed is using this meeting as a setup for september. to me actually that quarterly refunding i think could be key. jonathan: do you share this view that the treasury is deliberately manipulating the shape of the yield curve by issuing more at the front end of the curve? victoria: i was listening to your conversation with david. i'm not sure if they are trying to deliberately change the shape of the yield curve, but i do think they are trying to go in and figure out a way to reduce interest expense going forward. if they can issue more t bills in doing that, which we have seen in previous refunding announcements, then i think that benefits them. i'm not sure if it's an intentional yield curve movement. i do think it's intentional to try to reduce interest expense again leading to the idea that we could get downgraded if that continues to go higher. jonathan: appreciate your view. victoria fernandez at crossmark.

lisa went through a wage of stories next week. payroll estimate, seek neak, 175. lisa: how low is the bar for the market to change its narrative or how high? this will be the key question. it's not just the actual number. i still think there are visions becoming increasingly important as they consistently downgrade from the month before. jonathan: household versus establishment still playing that game. unemployment, we are looking that to stay at 4.1%. give an update on stories elsewhere with your boomberg brief to danny burger. dani: meta is planning to buy a stake. they want to see them push into augmented reality for smart glasses. the c.e.o. made comments thursday after weeks of speculation about the u.s. tech giants' plans. he added if meta decides to invest it would have to buy shares on the market.

declined to elaborate on the size or timing. a top candidate to succeed koag c.e.o. at the end of the year has emerged. stephanie pope, who runs boeing's commercial airline unit, made the rounds at the international air show as the plane makers' highest ranking official. pope was promoted to chief operating officer last year making her the hare apparent -- heir apparent. vice president kamala harris has officially joined tiktok. sin she began her campaign, tiktok and other social media last forms have seen a rise in members. more than 95% of left leaning tiktok posts about harris currently have a positive sentiment towards her. according to a social media analytics firm. harris has 1.3 million followers. president trump who has been on tiktok since june has 9.2 million followers.

jonathan: thank you. nobody's dealing with that platform any time soofnlt on fundraising, love this story. we'll touch on it more later. some numbers. there is a crypto currency industry event taking place in nashville tomorrow. there will be a private fundraising effort for donald trump included. asking price is, get ready, if you live outside of america, and you are not familiar with the fundraising efforts, this will blow your mind. the asking price of $844,600 for a seat at a round table. if you want the opportunity for a photo with the pretion dengs danate -- presidential cannate $60,000 per person. lisa, if you want for $100,000 a photo for two people and your other half, $100,000. lisa: some people would say why would anyone do this? then we hear about elon musk gives some of his decisions to donate to donald trump would put him in a better position should

donald trump be president even if his policies seem like they are against his business. there is this sense the more you have some familiar yirt with the potential -- familiar greater with the potential footer president the better. jonathan: if you have that kind of money. one bitcoin. up next, the consumer pulling back. >> there is a weakening in the u.s. consumer. consumers are spending but not as much as they used to. it's a slow down story versus a recession. jonathan: that conversation up next. live from new york city this morning, good morning.

>> today the fed decides. >> we are talking about the data not being as accurate during this time of year. an election that's haywire.

♪ 1kwr0eu7 counting down to the opening bell. attempting to get you to the weekend. equity futures look like this, about two hours away from that open. up by three quarters of 1% on the s pen a500. bond market yields, 10 year not doing much. 4.2367. on surveillance this morning, the consumer falling back. >> there is a weakening in the u.s. consumerment consumers are spending, right, but they are not spending as much as they used to. if you look at credit card spending, if it was up 8% to 7% year over year, it's now 3%. it's a slow down story versus recession. jonathan: things are cooling not

cooled. how many different versions of that have we heard. here's the latest consumers pulling back from post pandemic revenge spending. it is starting to hit the top and bottom lines of companies from food producers to airlines and luxury retailers. sucharita kodali writing there. nike, target, and others aren't doing particularly well. i don't know that that is economy related rather execution related. shes -- she joins us for more. that's an important distinction. there is an execution issue, then the consumption issue. which one is which right now for many of these companies? sucharita: well, in the case of some companies like nike is a good example where the category may be doing ok, their competitor for instance at this point in time, addidas, seems to be having more traction, that suggests the consumer isn't pulling back from the category all together. and that issue is more related

to perhaps their assortment and some of their innovation levels. from an overall consumption level, what we are seeing is that the numbers are softer than they were during the pandemic, but we have to also keep in mind that the pandemic, the economy experienced some of the highest levels of spending that we had ever seen. and that was even inflation add jutsed -- adjusted. then we had inflation coming on the heels of the pandemic, but the consumer was still spending more. now finally what we are seeing is a leveling and the consumer spending not more than the inflation level. that's where we are seeing some softness in some of these discretionary categories. jonathan: essentially you are saying don't confuse the process of normalization with something bad, something sinister s that fair? sucharita: i think that that is

a fair assessment. the truth is that it's not like we have seen spending fall off a cliff. and that's important. we had record levels of consumption fueled by stimulus payments as well as the market doing very well. so the consumer was in a really good place over the last few years. and it would have to be something pretty catastrophic for spending to fall off a cliff at this point. lisa: can you give us a sense of history and where this week might be. you pointed to wal-mart, cost could he, and -- costco and amazon doing well. yes they are executing well and economies of scale that allow them to execute well. how much does this indicate a shift in consumer spending that gives a hint of what's to come? maybe not falling off a cliff but maybe a sense of where we are in the deterioration of the consumer appetite? sucharita: well, the think that is difficult when you look --

the thing that is difficult when you look at a wal-mart spend or costco spend, those are business that is do well regardless of the economy. they do particularly well when the economy is doing poorly. but they do well even when the economy is doing well because the consumer spending more and they are going to be beneficiaries of just mass merchandise spend. it's difficult to say right now looking at those companies whether that is because the consumer is feeling more nervous and cautious. certainly all of the consumer confidence figures are a little whacky. this is where we have the fine session thesis that the consumer is feeling worse than the macroeconomic indicators are suggesting. we have to remember that wages are still relatively high. unemployment is low. g.d.p. growth, we just had a g.d.p. numbers for -- so far yesterday. and those were really higher than what the expectations were.

the economy overall is doing well. these inflation numbers seem to be weighing down on consumer confidence. that's why you see some of this softening we are seeing. lisa: do we still see just as wide of a divergent against from upper income families and their spending versus low-income families? sucharita: that's definitely one of the theses out there some of the softening is that it's happening at the lower end for sure. the lower end consumer is the one that not only is going to be more likely to have to resume loan payments. they are the ones that are going to have the higher interest rates from credit card debt they have to cope with. and certainly the upper income consumer is the consumer that is more likely to be a beneficiary of some of the stronger stock market performance over the last year. but at the same time that upper income consumer isn't seemingly purchasing those luxury goods

every luxury brand, which is a public company has reported softening in sales. arguably that could be because of the china consumer less so than the u.s. consumer. jonathan: interesting. sucharita kodali of forrester. that's the important one, development for me. how much the spending, how it breaks dowfnlt. lisa: that's why we are seeing airlines not being able to win out with just some of the top tier seats. jonathan: coming up, a self-indulgent conversation with the a.c.milanc.e.o. russell and small companies. (♪♪) (♪♪)

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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.

jonathan: let's start with the price action, two hours from the opening bell. back by three quarters of 1% or rather higher by three quarters of 1%. the nasdaq higher by one full percentage point. the russell 2000 up by 1.5%. i mentioned a stack earlier this morning. the mag seven, down nearly 13% since a record high july 10. since then, the small-cap russell 2000 has outperformed by a remarkable 24 percentage points. the outperformance continues this morning. lisa: that is why, and i think you framed this perfectly earlier this morning, when you

said ultimately, is this the beginning of a true correction or a wonderful rotation that people have been looking for on the heels of economic strength? it is hard to understand. you can make a strong argument for either one. jonathan: taking a tally of people on this program, they are saying rotation. not many sing growth scale with the exception of the economists saying they need to cut interest rates at the federal reserve fast. lisa: the former new york fed president among them, coming out saying from the data he is seeing they are increasing risk of being too late. how does stock respond to downside surprises? it feels equipment and goldilocks long enough that if the fed is prompted to cut because of weakening data that will be a problem for risk assets. jonathan: just about unchanged on the two-year, 10 year, 30 year yield. the 10 year at 4.23. if you switch up the board and get to the foreign-exchange market, looking ahead to next week, the boj with dollar-yen at

154. we have had a 157 handle i believe on monday, and a 151 handle, which was the low of yesterday's session. that for a currency pair like dollar-you and is a pretty wide range. lisa: this used to be the safe place to go and it is trading like it was an emerging's currency. many wonder if it is the unwinding of popular trades we've seen in many different asset classes and how much is the belief the bank of japan will raise rates next week? how much could it be reversed if the bank of japan does not make a move in next week's meeting? jonathan: making that point, saying that this one could whip back in the other direction pretty viciously. a new time siena poll finding that donald trump is leading kamala harris 48% to 47% among likely voters. that is a marked improvement for democrats when compared to the post-debate poll in early july

that showed president biden behind by six percentage points. there has been a bump in the last few days. lisa: libby cantrell says that we should get a cocktail, go to the beach, come back in september and look at the polls. the aspect that nearly 90% of voters said that they approved mr. biden's decision to exit was shocking. when have you been able to get americans to agree, 90% of them, on anything? to me, this highlights how in some ways the bump is coming from relief. that there is a different race than everyone thought that there would be earlier. jonathan: i heard someone describe the situation. you do you know when a ceo leaves the company and the stock rallies and you feel bad for the old ceo. it has nothing to do with the new ceo, it is just the old co left and there is a relief rally? that is what the democrats are seeing now. the data, personal income

spending data due out in less than an hour. the laskey data point coming in to the federal reserve next wednesday. expecting both spending and income to grow at a solid clip. even his core pce inflation slows to near the 2% target, that drops today: 30 eastern time. the olympics are kicking off today in paris and train service in france are facing disruptions by what authorities have called a coordinated sabotage effort hours before the inauguration ceremony. the head of the national rail company says that many trains have to be canceled at about 800,000 passengers affected. this sounds like a nightmare in paris today. lisa: on so many levels. this is less of an attack on the olympic ceremonies and more on the french people who are all trying to go away from paris on vacation. there is a feeling that this is a time when people tend to go away.either way, it raises the specter of how do they maintain security

when this is supposed to be the first actually regular olympics. think about the athletes who were in tokyo being swabbed, being isolated in little rooms, this is supposed to be the comeback games. jonathan: i have no interest in going to paris when this is on. lisa: i would like to see judo and table tennis. jonathan: we could get some tickets and drop in and drop out. meeting manchester city in a preseason friendly at yankee stadium tomorrow afternoon is the latest push into the united states by the italian football giants, a market that they've seen growth in since being bought by a private equity firm in 2022. joining us is the ac milan ceo. we have seen these friendly's before. playing other teams from the premier league and elsewhere. it seems like we are getting close to playing a

regular-season game in the united states of america? how close are we to an event like that taking place? >> you are right. we do these tours in the summer regularly to play friendly's against other top teams. there are regulatory challenges in moving abroad into a different market. but we certainly think that if you want to develop a fan base and you really want to expand your business in the u.s., it should be a critical part. so, we will be working with the other regulatory bodies to allow us. jonathan: you mentioned the bodies that you need to work with. can you build on the obstacles for something like that to take place?have you had a meeting about this already? have you taken steps to push this forward? how close are we to something like this? giorgio: it will need to be discussed with waifa and fifa

and authorities in the u.s.. there have been attempts in the not so distant past to play games. la leagua tried to end it didn't work out. in the same way that american league have expanded globally by playing regular-season games, not just friendly's, outside of america, we need to do the same, just the other way around. lisa: we saw a mini world cup. we saw the euros and co. america taking place. everyone i knew on the weekends was watching some of the games as they really got into it. the enthusiasm in the united states for games that were held here was surprisingly not very strong. we didn't hear that much about games happening nearby. have you been disappointed by how some of these games have rolled out at a time when there certainly is more interest, but

maybe not in the way that there is an any of the other markets around the world? giorgio: i think that the ultimate test will be the world cup in 2026. [indiscernible] together with top games of european continental leagues. lisa: i think that we are having trouble with the sound. let's try to reestablish that and get you back so we can make sure that we understand everything. this has been part of the issue that people have been talking about. we have had these games in the u.s. preparing for the world cup at a time when copa america was not well advertised in a significant way. it raises the question how the u.s. posts the most important games for the majority of the world in a country that emphasizes other sports. jonathan: these clubs have been

trying to prove it to the united states for a long time. it is amazing the world's number one sport is football, but if you look at the most valuable franchises on the planet in sport, a lot of them in the top 10 are american sporting franchises like football and baseball. there is a lot of money here which is why they want to be here. if you look at the evolution of milan, they are investing in u.s. talent. not a single ac milan player was in the italian national team at the euros the summer. they have invested far more in the u.s. side they and they have an italian youth. we can get the opinion on that if we can reestablish the connection because i'm sure that he has strong thoughts, but that might be a criticism of some of the moves they made over the past few years. lisa: and of the top players is a united states player. how do you maintain the kind of enthusiasm that some people, even if they are growing up in england and have relatives in italy, can still have if you

don't have a homegrown base? jonathan: i am happy to say that we are still with the ac milan ceo, giorgio furlani. there is a technical connection, but i want to come back the comments we are having around the table. it feels like ac milan has become more american and maybe less italian. the fact that there was not a single ac milan player on the italian roster at the euro's this summer, is that a financial decision or a sporting decision? giorgio: very good question. we have definitely become more american. we are owned by an american firm, a leading investor in sports and entertainment, and we work closely with them. we have become more american on the field. i think you are saying that we have two american players. our decisions on who to field are entirely sporting. a decision on the base of what passport a player has, but about

how good the player is. obviously, some players by nature of being american, and we have two players, have a certain commercial appeal in the u.s., which is certainly helpful, but we don't drive sporting decisions by passport. lisa: we were talking about how the united states is an expensive market but there is a lot of money here which is why a lot of people want to come here. their dollar has a lot of eyeballs to come. there are a lot of dollars in the middle east and you will be facing off with man city. how open are you to tapping seemingly endless appetite in the middle east to own clubs in europe? giorgio: we tap in in a different way. on the commercial side. we opened an office in dubai. we are the first european football club to open an office

in dubai. we have had a long-standing 15 plus year relationship with emirates, the airline. we have other commercial partners in the region, including the cursor group. the way that we've gone about it is not by equity injections but by commercial partnerships. jonathan: i want to squeeze in one final question. as an ac milan lifelong fan, we both remember the ac milan, and have been disappointed with the performance of the team over the last 20 years and the trajectory we have been on. i remember when the club became a selling club and identify the summer when we sold ebra. it felt like that was when ac milan became a club that needed to sell players, it couldn't buy that talent anymore. this summer we have two big players, the leftfielder and the goalkeeper.

i want to understand if that is two talents that you need to monetize to fund the rest of the project or if ac milan is in a position where it can keep world-class talent? what is the state of play? giorgio: on the sporting side, our ambition is to fight for the title in italy every year. to be competitive. we do this while on the others running a business that is sustainable. to give you some facts, two years ago was the first year in which ac milan was profitable. the first in 17 years. last year was the second year. what that translates into is we are not forced to sell players because of capital shortage or cash flow issues. you don't need to sell anyone.

as a fan, i'm telling you you shouldn't be worried about that. jonathan: as a fan, that is good to hear. giorgio furlani, the ac milan ceo. let's turn to stories elsewhere with your bloomberg brief. dani: starting with earnings, jumping in the premarket trade by nearly 5%, raising the 2020 for-profit thanks to demand for new medicines. there had been questions about future growth of bristol. drugs face competition and pricing pressures but the biggest medicines beat sales expectations. the company said the cost-cutting initiative is starting to pay off. just over 100 days until the election. the september 10 debate is still on the schedule, but trump is not committing it. trump's campaign says that it would be inappropriate to commit to the debate until democrats formally nominate the new candidate. trump said that he wanted an organization other than abc news to moderate. democrats are poised to

virtually nominate harris and her yet to be named running mate by august 7. the vice president said that she is ready to debate donald trump and accused him of backpedaling from an agreement. the spacex falcon 9 is cleared for takeoff. the unproved rocket won approval to return to space. on july 11, a midflight failure -- a midflight failure had grounded the most frequently launched rocket. the company aims to launch as many as 148 flights within the falcon rocket family. spacex says that it is ready to return to flight as soon as tomorrow. jonathan: more from dani in 30 minutes. next, a turbulent summer travel season. >> we have seen the theme of transportation stocks missing, whether it is airlines, american airlines, it flies in the face of this recent rotation into small caps and risk-taking. jonathan: live from new york, you are watching "bloomberg surveillance." ♪

jonathan: equities look like this on the s&p 500, firm or by .8%. elsewhere, the outperformance on the small caps again this morning going into the opening bell. bond market yields just about unchanged. 4.2348. a turbulent summer travel season. >> we have seen the theme of transportation stocks missing, whether it is airlines, american airlines today, tesla recently, and even ups. companies with heavy cyclical exposure to the economy have been disappointing. to us, that flies in the face of this recent rotation into small caps and risk-taking. jonathan: it has been super difficult for the airlines.

american airlines slashing its profit outlook after overestimating demand for domestic travel. this follows last friday's global tech outage that led to thousands of canceled flights. joining us to discuss this industry, it is good to see you. where do you want to start? delta came out and said things are great and united said the same things. surely we have lowered the bar enough and the market is looking for this and american came out and said things are pretty bad for the stock creators? >> it keeps getting worse. they preannounced yesterday negatively on the olympics impact. it keeps getting worse, especially in the atlantic yields. there is more competition that has been holding up on the international side. american and southwest have had strategic missteps. american realigned its corporate strategy and went direct. it really missed out on revenue points. they are going back into that

adding sales force which they have cut over two years. southwest is southwest. they have strategic issues. they said they would add premium seats. instead of 175 seats come they will go to 160, which is like the delta and united average, extra rows of legroom, and change the onboarding strategy. jonathan: southwest, welcome to the 20 20's, four years the. what you make of these executions from american and southwest? sheila: they are realizing they are losing out on market share so something has to give.it is just how quickly can they do it? american i think and do it faster. i don't know where jeffries is booking. you know my american airlines flight to heathrow this week. southwest is really shifting its strategy with assigned seats. they make about $1 billion of revenue out of their $24 billion of revenue from early board booking. they could lose that revenue.

it is unclear how quickly southwest could take share back. lisa: this is off to script, but you talked about how the bookings for air france have gone down because of the olympics. they're not the first to say this. others also say that travel is going down because of the olympics. isn't it supposed to be the opposite? sheila: that is what i thought too. lisa: cities become host cities because it increases traffic? sheila: delta told us otherwise. they have a paris hub, so it is more impacted. apparently no one is going to paris this year. they called out 100 million in impact, air france called out a bigger impact. i think it's a one-time thing that we could look through, but i would also assume the opposite. lisa: there's some question, not just about execution and profitability of the airlines, but how do they maintain morale when there are snafus? are talking about delta and the issue around crowdstrike?

the fact that some of the employees felt like they didn't know who to call. united air is requiring a doctor's note to call out sick for pilots. that is being reviewed by federal officials. is that a problem at a time when execution depends on these people? sheila: listen to an airlines earnings call. they sound great. peak all-time revenues. you wouldn't know that anything is wrong with an airline by listening to an airline earnings call. they sound lovely. revenues are at all-time highs. lisa: there is a disconnect. sheila: you have to look at what profitability and cash levels look like. american and southwest are draining their cash balances. american can deliver and southwest keeps buying more airplanes. southwest has a great row, the flight attendant, and they have contracts they put into place. most of the airlines have contracts in place. american has another coming up

that will look to ratify the flight attendant contracts, so that will be a headwind into 2025. jonathan: you sound impressed with the way southwest is run. is that fair? sheila: i think running an airline is an extremely hard job because you book and ship right away, prices swing 10%. you could really mess up an airline very quickly. i don't envy those. jonathan: you have sympathy with them, but is there something about the way that they are running their business versus the way delta is that means they are running this poorly? sheila: i think focusing on premium it is a more steady base and you have the pricing question. any mistake in the domestic markets, if you put too much capacity, you make up for it on the international side where you have 20% operating margins. i think that is where they have cushion with delta and united. they are bigger, they have brand loyalty, they have a credit card, there are delta tech ops,

their maintenance business that if they spun off that would be worth 10 million to $50 million. that tells you what delta is worth. if you strip away skymiles and you put at it at a multiple and look at their tech ops, it would mean that delta as an airline is not worth anything. jonathan: they sound like credit card companies, why don't they just say that they are? sheila: i think they are pitching that. you saw that with united. it took out the leverage with their credit card business to unencumbered the asset. it was 11% so it was saving them a lot of interest to put away and retire that debt. lisa: zooming out, we were speaking with a guest earlier who sat on the margins you are seeing pushback but even higher in consumers -- maybe this has to do with china. you saw gucci really underperforming. are we seeing the same spending

patterns at the highest end of the cabin? which had been the mainstay for profitability for a lot of these companies? sheila: i think that is what everyone is worried about with airlines. they are giving them credit for the premium offerings. they reported book to bills of 1.0 but you didn't see an acceleration of orders. is that hitting the high end? you are seeing flight utilization for business jets of 20% from 2019, but year-over-year they were down 1%. is this a leveling out of the high end, which consumer brands would tell you it is. jonathan: you have been busy of the last week. think of the changes we've seen of the last week. american, another disappointment. southwest, a change in policy. delta, struggling to recover from the issues we were talking about a week ago. lisa: southwest, what took them so long? at a certain point i understand that it is the culture and i'm sure they are getting backlash from people saying that now you're going to join everyone

trying to bifurcate people according to how much they're willing to spend? southwest would say yes, because we need to make money and that is how people do it. jonathan: the most confusing one for me out of the states is jetblue. i don't understand jetblue. they have a serious branding problem. the customer service is absolutely phenomenal. you and i shared a transatlantic flight to london. flew business with work, thank you, and it was brilliant up there with the likes of delta and american. i don't feel like they market that well enough. lisa: they want to cater to families. look at their roots to florida and the islands. people put on hats and the families are excited. jonathan: but they sound budget when they are not. lisa: it is like big box stores trying to look cheap. jonathan: coming up, less on jetblue. less on ac milan, even. ♪

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>> throughout this earnings season there is zero tolerance for anything that even smells of weakness. >> the mega caps techs have unbelievable return on equity, but these things can revert very quickly. >> we have lofty expectations

and valuations. >> the concerns are valid. i think there is frothiness and parts of the ecosystem. >> the earnings season so far has been really solid. and that speaks for other sectors ready to participate as well. reporter: -- >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: let's turn to the price action. firmer by 910's of 1%. the nasdaq bouncing back by little more than one percentage point. that small caps flying once again, outperforming higher by 1.7%. the only question that matters around this table at the moment, what is the state of the u.s. consumer? citi saying, continued solid consumption will depend on the labor market. we are looking at it that payroll support next friday. they are looking for 150k on

payrolls but the unemployment rate to climb back up to 4.2%. lisa: potentially triggering the salm rule, one of the reasons he thinks there is removed urgency to cut rates. even though she herself had said that it is one benchmark and you shouldn't take it as gospel. even before the jobs report, we get personal income spending and a half hour. i feel like we have to bring back within liquidity and the idea of uncertainty around the economy, one bad print could trigger a disproportional response. i think that it's time to start reflecting on it. jonathan: what is the brew right now? lisa: a situation with earnings that are inconsistent across the board, some winning and some losing. maybe it is execution or consumers pushing back more. the unemployment rate is creeping higher, albeit at a

normalizing pace. claims are inconsistent but nudging up. then you have the situation where, if you look at financial conditions, they are tightening. based on the recent selloff this year, but still companies are able to borrow. capital markets are open and credit spreads are tight. this is a potentially confusing brew that could easily turn into a toxic brew with potentially certain negative prints. jonathan: we asked the question three different times with three different guests yesterday. when you point to credit spreads and say that they are tight, that says that things are ok and supports that this is a rally broadening away from big tech. when you see what is developing with rate markets at the front end of the curve, the rally off the prospect of may be getting bad data at some point in the future -- didn't get it yesterday, maybe on friday -- you wonder if it is a growth scare. that will be the debate into jackson hole, regardless of what the fed says next week. lisa: and here is the rub. we don't have the answer.

we are one bad data print away from big tech leading the index lower. when people talk about short term, a lot of people say that there could be momentum in some of the selloff, albeit it won't be a lasting situation. the key thing is, people don't have visibility. how do you have conviction? anything other than tactical at a time when there is little visibility? jonathan: we haven't talked about toxic brew for a long time. throwback. lisa: i don't think it is toxic, but it is a brew. jonathan: tk's joining us next wednesday afternoon, so watch out for that. reunited for one special federal reserve decision and then back together at jackson hole at the end of august. the s&p 500 is firmer by 0.8 to 0.9, cali 0.85 -- call it 0.85.

the euro is a little bit stronger, 1.0862. we will catch up with sam stovall as the equity bull market hits a wall. the republican senator bill hagerty as d.c. tries to predict trump 2.0. and moody's analytics on why too high for too long is starting to crack the u.s. economy. we begin with the tech-lead route pausing as investors await pc data just under 30 minutes time. last week's rotation continuing as investors confront disappointing earners. sam stovall has this to say. the lofty initial expectations for second-quarter growth has caused mega cap high flyers to failed to fill the elevated bar wondering if other mega cap disappointments should be anticipated. sam joins us for more. let's get to the calendar, go through next week. microsoft, amazon, meta, and apple. you think that we are set up for some disappointment?

sam: certainly next week, 40% of the cap weighting of the s&p 500 tech sector will be reporting earnings. even though expectations are that we've seen a better movement in earnings for the technology sector now at about 17%, up from 16% and change, i think that investors will definitely be paying a lot of attention to what's said and implied with these upcoming earnings. the chip companies typically do have some challenges when it comes to third-quarter areas. our feeling is, while there could be some stumbling we are maintaining our overweight recommendation on tech mainly because companies will soon be looking at 2026 estimates and pretty much ignoring what they are hearing now in 2024. jonathan: let's take one name, let's talk about alphabet and think about the way that the market responded to what

alphabet had to say. what are investors in the mood to award and what are investors in the mood to punish? that is something interesting we have to answer in anticipation of next week. it felt like investors were in the mood to punish excess investment out of alphabet, whatever you would call excess. i wonder how that might set us up for next week? sam: i think what that implies is, investors are really only looking short-term. the investments that alphabet was making is obviously for 2025, 2026, which is the cause for our optimism longer-term. in the near term, investors are basically saying that recently we had tech selling at a 78% premium to its average 20-year pce ratio. the market had a 38% premium and of the relative strength between the cap weighted tech and equal weighted tech sectors are back to where we were during the

dot-com bubble. i think that investors are saying that if there is any hint of disappointment i would rather sell first and ask questions later. lisa: another way of putting this together is, how low is the bar heading into next week for some of these earnings? we have seen a true correction down 13% since the july 10 record heights that we saw in the magnificent seven stocks. how much do you anticipate that any additional disappointment or even not superlative type results will provoke some pretty significant selling in addition to what we've already seen? sam: looking at history, i would say that we are due for a double-digit decline in the order of 10% to 13%, primarily because of the advance that we experienced in the first quarter and for the first half. as i mentioned, in terms of the valuations. however, i think that it will be contained to a correction, not

the beginning of a new bear market, and would probably represent a good buying opportunity as we approach the fourth quarter of this election year. let me also mention that when it comes to elections, there is the possibility of a red wave. whenever we have had waves in the past, we have had three republican waves since world war ii and seven democratic waves since world war ii, that has added a percentage and a half to the return of the first year of a new administration. lisa: a lot of people are saying that a red wave in this case would actually cause inflation to go up and could become a problem for the bond market. you see it as the opposite. that any dominance in congress would lead to greater returns in equity markets, correct? sam: that is what has historically happened, but it will depend on what the new administration puts forth. if we do see very high walls in

terms of tariffs and whatnot across the globe, yes, that will be very restrictive. it would hurt our exports. it would certainly have the sniff test of the tariff in the early 1930's that restricted global trade. i don't think that would be a very good thing. i believe that those who and up being in power would be very much aware of that. lisa: taking a step back, it seems like you are pretty constructive on the overall backdrop for the u.s. economy. it doesn't seem like you are expecting a major fall off the cliff type of moment. what would you have to see to change that view for some of the growth worries to become a true growth scare for you? sam: as i mentioned, the valuations were stretched in my opinion. 78% premium for tech. now it is down to about 64%. more slight downward rotation

for tech i think would be encouraging. i think if we get a softer than expected pce reading this morning, that could also help talk the market off the ledge. because we have been seeing an improvement in the rotation beneath the surface, our technical analysis arm has been showing an encouraging amount of supply/demand indicators that they monitor to say that while a short-term pullback could be in order they are looking at that as a good buying opportunity. jonathan: let's see what we get in 20 minutes. thank you. happy anniversary. i open to the email, thinking, what is he talking about? he said it was exactly one year ago that fed funds were brought to this cycle's terminal rate, 525 to 550. also the anniversary of the whatever it takes a in 2012.

going back a long time. 12 years. lisa: i wonder how long beyond this we are going to see a difference in the fed funds rate? a lot of people are expecting it won't be next week, but can you imagine if it was a full one year pathway? then it would be this -- jonathan: just perfect. lisa: it would have this arch. jonathan: i was reflecting on the bumblebee speech in 2012. the people in the room at the time didn't feel like it was a big deal. people at the time didn't feel like it was a big deal and in the days afterwards we put together, is he going to come together with a big plan that will turn around the story? i can't believe that time has gone by as quickly as it has. 12 years.your bloomberg brief with dani burger. dani: shares of 3m are up 6.6% in premarket trade. they reported second-quarter net sales that beat estimates and raised the full year profit

forecast. it is the first since bill brown took over as ceo. brown saying that accelerating sales growth is a priority and he wants to get there by increasing the pace of new product development. as the liv-ex are set to kick off in paris later today -- as the olympics are set to kick off in paris later today, there are malicious acts on the real systems. fires were set at several infrastructure hubs along the rail system. people were seen fleeing the sites in vans or euro star says that its services to london and brussels have been impacted with several delayed or canceled. the national real company says that it will have to repair its network, cable by cable. vice president harris has picked up another key democratic endorsement. barack and michelle obama. earlier this week she secured enough pledged delegates to clinch the nomination capping a whirlwind week estimate cuts coalesce around her e biden ends his cousin to see -- around her as

biden ins his candidacy. that is your brief. jonathan: next, the morning calls and we will catch up with bill haggerty on possible trump 2.0 policy initiatives. that conversation is next. this is bloomberg. ♪

jonathan: live from new york to the opening bell with equity futures posited by 0.8%, yields unchanged on the 10 year, the opening bell about one hour and 14 minutes away. let's get morning calls. evercore upgrading cbre to outperform with a 123 price target. noting that the real estate services firm appears to be turning a corner thanks to upbeat second-quarter earnings. the second call from philip securities downgrading tesla to

sell and lowering the price target to 130 five. further margin headwinds due to soft pricing and eu tariffs on china exports. the third and final call from guggenheim, lowering the price target on aaa to $54 maintaining a neutral rating. they lowered the fast casual chain, seeing softer margins upsetting modestly higher same-store sales. that just about positive by .7%. let's turn to the election. sunday marks 100 days until voters head to the polls. if reelected, former president donald trump is widely expected to appoint a capitol hill cabinet that could be full of congressmen including republican senator bill haggerty who is being floated as a potential pick for treasury secretary. senator, it is lovely to catch up with you. i understand you are attending the cryptocurrency conference in nashville, and we will touch on that.i want to gauge on where you sit on certain issues on foreign

exchange given our former conversation in the former president donald trump said this about the currency. he says the united states has a currency problem. i understand that we have a technical issue with the senator. can the senator hear me even if we can't see him and the shot is frozen? we can't hear him either. we have a technical issue and we will try to reestablish connection in a moment.i wanted to have a question around foreign-exchange. the first question would have been, if we have a currency problem, what can they do about it in treasury? lisa: especially when ultimately this is about the bank of japan holding rates incredibly low and the u.s. having a strong economy? potentially, how do you further the idea of a weaker dollar if you do pursue some of the policies that donald trump has talked about, including higher tariffs, including reducing certain immigration? jonathan: deutsche bank said that tariffs and their associated stronger implications for the dollar are significantly more likely to be the dominant

outcome than policies to pursue a weaker dollar. this is the issue at play, almost a contradiction. you identify a problem, ultimately you think the currency is too strong, but you propose policies that could strengthen it in the minds of a lot of people who come on this program. lisa: part of the problem to understand where the former president is thinking is if you have two contradictory policies, what is more important? is the idea of a weaker dollar and more export important, or is it the idea of putting up gates for products coming in from, say, china, and potentially reducing immigration? jonathan: we have reestablished the connection with the senator. senator haggerty, can you hear me? he does not hear me. i think that we will let this one go, because i don't think that we can establish a connection. senator haggerty on the latest from the cryptocurrency conference in nashville. we went through some of the prices to attend this fundraiser. i think it is worth going over

again. donald trump will be there and he is inviting supporters at a private fundraising event in nashville on july 27. it includes asking $844,600 for a seat at a roundtable. they can get a photo for $60,000 per person.$100,000 per couple . that is real money that they could be raising at a time when we have seen the figures coming out of the campaign for kamala harris, or act blue to be more precise, real numbers since sunday. lisa: it raises questions about this forum and the connection it has, crypto assets in particular. it is a hot topic for a long time, and then it took a backseat. the idea of where the role comes into play and where government oversight comes. to me, this is compelling. the idea of, are they looking for less regulation? what is the purpose of crypto assets going forward? i guess it is sort of an

interesting moment for that to be in the fore. jonathan: there was a kind and less kind interpretation. the kind interpretation was that they wanted regulation. they want things to become more protectable. they think that it could be beneficial to the broader economy. the less kind interpretation is that the cryptocurrency world has identified an administration that could introduce policies that destabilize the u.s. dollar and would be advantageous to the price of bitcoin. like all things to do with politics, pick your poison. is it the kind interpretation or the less kind interpretation? lisa: i will let everyone make their decision. when you zoom out there is a real question we have seen again and again, where there is not a clear candidate for president that is clearly business-friendly. it is unclear who the business friendly administration is.i think we have to keep asking that. i hope that we can at some point talk to senator bill haggerty. maybe not today, but get him

back on because he has been of the business world. i have a fundamental question of, especially at a time of protectionism on both sides of the aisle, especially at a time when you have a fraught national security moment, how do you become the party for business? what does that mean? sometimes it can be consistencies of policies. does it mean the idea of putting up gates or not? stellantis yesterday said that tariffs hurt their business, even if they reduce competition in the short run from china. a lot of questions about the traditional associations and the political parties and how they are changing. jonathan: when we say the party a business, my response would say what business? big tech? small business? around this table, talking about small business, they want to help small business. it isn't about being pro big tech. the party a business but not big

business anymore. that is the populist spin that has pushed them in that direction. lisa: i would how much it is small business versus large or certain industries that have projects that are positive or negative for certain bases. a lot of politicians are saying to pick a policy and stick with it. if you want to make plans come you have to be able to count on a landscape that is shifting with every administration every couple of years. i wonder how much that has changed the tenor of some of the conversations of bank and industrial ceos who go to the white house to speak with former president trump about what policies he would like to see. jonathan: in about seven minutes we get some economic data. personal income, pce, and at 10:00 a.m. eastern get the university of michigan sentiment numbers. that sets us up for the last slate of data into next week when we get a federal reserve decision. two days after that meeting, the payrolls report in the united states of america.

the estimate on our side is 175,000 is the median estimate. the previous number is about 2 06. let's turn to the price action and start with equity futures. the s&p 500, posited by .8%. on the nasdaq 100, up by 1.1%. russell small caps, monster outperformance once again this morning, higher by 1.4%. if you look at the price action, and i have gone over this data million times, it is worth going over again from jim reed at deutsche bank, 20 four percentage points of outperformance on the russell 2000 versus the mag7 since the record high on july 10. that is a mega outperformance. lisa: it comes after a mega underperformance earlier this year. this is why the main question for so many has been, is what we are seeing in markets good and shows a healing economy will let some of the other companies,

other than big tech, benefit? or does this begin a downward spiral that can cause a deeper correction? the answer has been unclear. jonathan: mike mckee is dropping by the studio. gdp was better, jobless claims lower, what are you looking for later this morning? mike: better. that is a good way to put it. a slight decline from the pce inflation numbers although this will be a three-digit issue today. there are questions about stronger than anticipated because of rounding efforts. 1/10 of a percent change. if it is 1.6 then it will round up to 2. that might worry some people. in general, we are expecting overall inflation to be down and spending to be reasonably good, because we saw that in the gdp report yesterday. lisa: was yesterday's gdp print as good as people thought on its face?

mike: it is better than some people are looking at because a lot was based on consumption. we are not necessarily pulling back. they are spending a little less, but it looks reasonably good. overall, not too bad. the good news today is that this is an 8:30 number and people can go to the beach relatively early. jonathan: that is good news unless you are hanging out. some of us are not hanging out. we will catch up with moody's and mike mckee will break this down next on the show. ♪

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jonathan: equity futures on the s&p positive by 0.8%. the nasdaq up by a little more than 1%. that's where it is this morning. the bond market shaping up as follows. the two year high by one basis point. in the bond market on the 10 year just about unchanged. with the economic data, mike mckee. mike: we have a little bit less than anticipated in terms of personal income and spending comes in s forecast. personal income up euro .2%. the numbers everyone wants to see, the pce price index comes

in spot on. 0.1 percent for the increase in june. the same as forecast. the pce year-over-year 2.5 percent. that is as forecasted down 1/10 from last month. then the core comes in 0.2% as forecast at 2.6% which is a little bit higher than the core forecast for the year-over-year which is 2.5. that is probably where that rounding error comes in a little bit. income spending, we are also revised a little bit lower. income was revised lower for the month of may and spending revised higher for the month of may. at this point you have reasonable incomes, good spending numbers and prices continuing to inch down. they are not going very fast as people are hoping for but maybe

this is enough to get the fit going. jonathan: if we take a look at the last 24 hours before economic data yesterday and the decent jobless claims relative to expectations we can go through these piece by piece. we had a man on this program a month or so ago who said there is a risk that the labor market weakens and we need to get ahead of that. bill dudley, the former new york fed president wrote an opinion column saying i have changed my view based on the labor market. need to get a move on. remember you saying yesterday when the jobless claims dropped, it was a most like the federal reserve, what do you want us to do? the numbers look ok. how does the stack up going into the meeting next week. mike: this does not change anything. the numbers are not strong enough to say we will not get rid of inflation because the economy is overheating. the income numbers show a decline.

we will have to look at what the overall composition of that is. i have the numbers here. wages and salaries up 0.3 come down from six in the month of may. a little bit better there in terms of what you are looking for in inflation. savings rate through .4 from 3.5. this is not a collapsing economy you need to immediately rescue. it is one that is slowing down. lisa: not much of a reaction in markets. yields just a touch lower. i am looking at this data and it points to this idea, slowing not slow. the stickiness in core pce, does that make anyone take pause? there is this question of can we write off the idea of insurgents in inflation if you have certain goods coming up just as services comes down? mike: so services inflation is

coming down and goods inflation has fallen quite a bit. everything is moving down slowly. we will be at a point sometime soon given jay powell and others at the fed have said we will have to start lowering rates before we get to the target. we are in range now. he has said 2.5. jonathan: you made the point that to some extent this market is already doing the work for them. all they need to do next week is validate where the prices fall. is that sverre -- is that fair? mike: i think that's the case. if they suggest strongly that we are going to see a september rate cut, then markets will price that in and they will get the effect of a rate cut in july. lisa: going into next week we have a lot. we have the fomc meeting. we have the treasury refunding announcement. we have tech earnings capped off with the jobs report on friday.

from the fed's perspective, how much are they watching those earnings given that the signals from corporate executives have been some of the most forward-looking indicators? mike: they will pay a lot of attention. they are always talking to the ceos in their districts and the board of governors is talking to people. they have a pretty good idea of what the executives are thinking. with the fed will be the same as investors. they will be looking at the forward-looking forecast for earnings at these companies. if anyone says anything about layoffs or anything like that right now earnings seem to be ok given situation. the forecast for 2025 is pretty good. the fed is not worried about recession at this point. i will say one thing. i don't want to dismiss the idea of a slowing economy because we do not get the jobs report until next friday. if that shows 4.2%, then we

trigger the rule and it scares investors and the horses and it may be scares the fed so we have to wait and see how that turns out. jonathan: citi thinks we will hit 4.2. i am far more interested in how the market responds to this. bill dudley the former new york fed president suggested they should be worried. i am wondering how the market sees that given the fact that people begin to price in what they believe will be with certainty in their minds a recession. lisa: what i find interesting is that for most of this year the volatility was the bond market. we saw massive fluctuations. over the past couple of weeks we have seen real moves in the bond market but the volatility has been in the stock market. how much will the stock market and risk assets respond to a downside surprise in that jobs report or a 4.2% unemployment rate much more than the bond market that is already pricing

in rate cutting? jonathan: much on the news yesterday by nvidia, the highs positive by 2%. a massive range on one of the biggest companies on the planet. talk about volatility. lisa: we have seen that index wide. . and that is different we have seen this in specific stocks not index wide as it has been over the. past couple of weeks jonathan: let's build on the conversation. equity futures one hour. . from now the nasdaq up by 1%. the rustle up by 1.4%. yields lower by two basis points. down about two on the 10 year. nothing too scary in the data this morning. to discuss, mark zandi of moody's analytics. do you think we have been too high for too long? how would you like to see the conversation change next wednesday. mark: at this point september is

when the fed wants to cut and when they will cut. they will reaffirm that with this meeting and the press conference. it is all about current market expectations. investors, i think there is a probability of a rate cut. today's data is consistent with that and i think that's the language we will hear next week from the fed to cement that expectation. jonathan: the fed believes we have time and we had this exchange with bill dudley. the former new york fed president saying maybe they are missed cackling how much time they have and taking comfort away from what is developing in the labor market. i want to understand what is on your dashboard. what is concerning you? what stands out? mark: i agree with bill. i think the fed should have been cutting earlier this year. the reason being that they have achieved their objectives.

their objective is full employment and low and stable inflation. the pce inflation is 2.5%. everything is heading in the right direction. if you do that with today's numbers, you are right on target. if you exclude the cost of homeownership which i think you should do, there is growing evidence that is not helpful in setting monetary policy, the pce is at 2% or below and has been there for more than a year. you have to ask yourself the question why. why a 5.5% funds rate target when you have achieved your objectives? the counter is well, nothing is going wrong. you have to wait until something goes wrong before you start cutting rates? isn't that too late with what is going on in the job market?

it strongly argues to me that the fed should be cutting rates. having said all of that, it looks like september. i will take it. lisa: one thing we were talking about with bill dudley was why now. what triggered the shift in view that it's time to cut rates given that the economy is still hanging in there? you are saying why wait because you see enough signs of weakening. you point to something else and that is the downward revisions in the labor market for prior months, and that concerns you. why is that important? mark: the plethora of labor market data suggests it is downshifting in a meaningful way. the downward revisions in previous reports is consistent with that. there is all the other evidence. i was worked was down. how ring -- hiring rates are down. temp jobs are down. the only thing hanging in there is layoffs. they are low and that is great.

we don't have a good theory as to why businesses are so reluctant to lay off. we have theories but they feel tenuous to me. as we saw in the tech sector a year ago, high-flying companies can turn around quickly and start laying off workers quickly. things can change very fast and when they change, it's too late. it is not only about the labor market. it is about the financial system. the financial system is under a lot of pressure. the difference between short and long rates is still inverted and that is a difficult place for banks. youth are in weakening credit quality, slower loan -- you throw in weakening credit quality and slower loan growth, it is really tough. as we saw with the crisis a year ago, it can happen quickly. why take that chance?

lisa: you talk about things changing fast. we are seeing a lot of volatility in certain stocks. people would say it is technical. we are seeing it in currency pairs and their speculation about what technical backdrop there is for this. is that because -- is that cause to build on this simply because there aren't the buffers there have been in the past? mark: my focus is more on the bond market. the liquidity in the market does not feel good. i have been watching the bond market for decades. not too long ago, when you saw the 10-year treasury yield move a couple of basis points, that is a big move. now it is moving 10, 20 basis points in a-day, an hour. there are some structural problems there. the big broker-dealers that make those markets are able to or

willing to expand their balance sheets to remain consistent with the growth and the amount of debt. we have all of the treasury debt coming into the market but because of capital rules and liquidity rules the banks have not expanded those balance sheets so the market feels fragile to me in terms of liquidity. we could get a lot of liquidity. it has happened in the past. jonathan: before you go, i have seen a lot of growth scares in financial markets over the years. i cannot think of a time when i have heard so much about the sand role as i have this time around. everyone is talking about it in financial markets. in the world of economics they have been talking about it for a while. investor after investor all talking about the same thing. next friday, do you think market participants will begin to behave like it is here, the recession has arrived? mark: no. i investors are with anyone

indicator -- i don't think investors are with any one indicator. points are higher because of labor supply. we have a lot of foreign members coming into the country to work causing unemployment to rise. it depends on why the rate is rising. is it labor supply or labor demand? i think it is more supply than demand. you have to take these things into consideration. i think investors are pretty smart. it is one other indicator with all the other indicators that i just articulated to suggest look, the labor market is feeling squishy. why take a chance? mission accomplished. you achieved your goal. let's get going. jonathan: we appreciate it. mark zandi on the federal reserve. next week is interesting. we have to sit here and say it is the most port jobs report since the last one until the next one. i think this jobs report takes on some additional importance. lisa: it is the most important

report since the last one until the next one. 100%. we do not have a clear sense of exactly where we are on the trajectory. jonathan: it is not like that july 4 payrolls report when everyone went to the beach and mike mckee was stuck here thinking get out. how important you think this is? mike: i think lisa summed it up well. the most important since the last one because we will have another one before the september meeting. because we are so close, as you pointed out, it will garner interest. unemployment has to be the first number i mentioned. jonathan: i agree. for a lot of people that is the indicator. appreciate it. let's get you up to speed on stories elsewhere. dani: the s.e.c. is suing andrew left accusing him of committing fraud through stock trade and research reports. the s.e.c. is alleging that they

generated $20 million in illegal profits. the regulator claims that he would make a recommendation alongside a price target and capitalize on the resulting movements but on price is far different than what he recommended. he had no immediate comment. canada beats new zealand 2-1 in the soccer tournament moving closer to a second straight gold medal. the match has been overshadowed by an ongoing spying scandal. the canadian olympic committee announced it sent the coach home after the team use drones to make unauthorized recordings of practices before the match. the canadian staff member flying the drone was arrested and given a eight month suspended prison sentence. kamala harris is picking up another key democratic interest meant, barack and michelle obama -- another key democratic endorsement, barack and michelle obama. >> you both are together.

it is good to hear you both. >> i cannot have this phone call without saying to my girl, i am proud of you. this is going to be historic. >> we called to say we could not be prouder to endorse you and to do everything we can to get you through this election and entered the oval office. >> oh my goodness. this means so much to me. i am looking forward to doing this with the two of you. doug and i both. being on the road. the words you have spoken and the friendship mean more than i can express. thank you both. it means so much. we will have some fun with this too. dani: kamala harris secured enough delegates to clinch the nomination as democrats coalesce around her as president biden decides to end his candidacy. he quickly endorsed harris but barack obama had been holding

back. a person familiar telling bloomberg he wanted to give the party time to unite behind the candidate. that is your brief. jonathan: thank you. have a good weekend. if it was me, if the president called, the former president, i would stop walking. super chill. perfectly stage. lisa: it was good. it worked. jonathan: perfectly stage. up next, setting you up for a big week ahead with a lot of tech earnings, federal reserve decision and a payrolls report. you are watching "bloomberg surveillance." are you keeping as much of your investment gains as possible? high taxes can erode returns quickly. at creative planning, your portfolio is managed in a tax-efficient manner. it's what you keep that really matters. book your free meeting today at creativeplanning.com.

jonathan: 40 minutes away from the opening bell.

equities up by 0.7% on the s&p. yields lower by two basis points. as they collectively take a deep breath. what a week on this equity market. lisa: we were talking a growth scare two days ago. it was basically entirely everything. you see the confirmation everywhere. then a fantastic rotation. check out high yield spreads. the narrative is changing every day. jonathan: as we count you down to the opening bell, let's get to it. tuesday, consumer confidence data. wednesday the adp report and doj rate decision with a fed decision as well followed by a chairman powell news conference. another round of jobless claims on thursday. on friday the july payrolls report. if you look at the calendar for the week ahead, given what we

know now, i would take the payrolls report over the fed. it sounds like the fed is not going to do anything. they stone what we know now -- based on what we know now, the fed may not know anything. lisa: she wants to see the treasury refunding announcement to see what return the u.s. treasuries are going to sell. jonathan: treasury refunding next week? lisa: do you know how may people have messaged me to say stay on the auction. do not let john bully you about options. jonathan: let me tell you how commercial breaks go. not that way around. teaming up and giving me grief. the mag-7 results oming in. we hear from microsoft, meta, amazon and apple. we could've waited for nvidia.

why do we need to wait until the end of august? mandeep: saving the best for last. that is the theme for the last few quarters. microsoft is important in terms of keeping this ai trade going because everyone realizes microsoft is at the forefront of both ramping up the side as well as the cloud deployment. ramping up the cap side as well as cloud deployment. you want to see that ai lifting in the jonathan: numbers. you framed it perfectly earlier this week. if you look at the reaction to earnings so far, you can start to gauge what investors are rewarding companies for and what they are punishing companies for and the example used was alphabet. can we start there? what did investors punish alphabet for and how are they

setting this up for next week? mandeep: in the case of alphabet they did have a timeline for when these increases will go away. they are clearly spending 70% of but there historical -- 70% above their historical capex. it is a long runway. i think meta is going to do the same. as an investor you don't mind companies spending. especially the companies spending more than $100 million. it is a good way to spend on new technology but you want to see the monetization and in the case of alphabet, the surge of revenue did accelerate but it was one percentage point acceleration. clearly they are not losing any share. you do want to see a more meaningful lift which is what everyone is hoping microsoft can show. lisa: we get microsoft, meta, apple, amazon. which will be potentially either

the biggest prize or that you are most curious about? mandeep: in the case of amazon, especially aws, everyone thinks they are behind the curve when it comes to generative ai because amazon is the largest cloud player and generates $100 billion in revenue and google cloud is $40 billion. the growth rate to be just so the rating. this quarter it is high teens. everyone else is growing around 30%. azure, google cloud. you want to see them surprise to the upside to ensure investors that they are not lagging behind. jonathan: what does apple look like in china? we have had the guide to suggest it is struggling in the mainland. apple came out last time around and said there is not a big problem. i'm just wondering if we will hear the same commentary. lisa: and whether they will talk about production and the treasury refunding announcement.

jonathan: of course they will. that will come up too. amazing timing with the bond market. lisa: i just want to point out something. all of these big tech companies have benefited from rates where they are because they have so much cash, they are keeping them in t-bills and they have been cashed in. it raises the question of what is interest rate sensitivity. jonathan: how do we get back to the deficit treasury assailants? anytime. thank you. mandeep singh of bloomberg intelligence. lisa, thank you. annmarie, thank you. any time. we will see you next week on monday. blackrock and kevin gordon of charles schwab. thank you for choosing bloomberg tv. if you can, please have a wonderful weekend. this was "bloomberg surveillance."

manus: futures are higher after brutal week of trading. i am matt miller. katie: "bloomberg intelligence" starts right now. coming up, mild pce data, the latest reading did little to alter bets that the fed will be able to cut rates. matt: the eco-data cap say turbine that week for love underwhelming earnings. apple to underline another crucial week ahead for big tech. sonali: the s.e.c. targets andrew left accusing the short seller of committing