central bank is in jackson hole discussing fundamental changes in monetary policy as chairman power take center stage for his debut. getting too greedy. trade with china, mexico, and canada as more tariffs loom. and tech struggles. which struggles within profit margins. welcome to daybreak on this friday, i'm david westin right here with julie hyman. julie: happy to be here. happy friday. alix steel will be back on monday. i wanted to look at the week that was in markets. had a very tight trading range in the s&p 500. of the looking at some intraday moves that we are seeing on the major averages. the s&p little changed on the week as well. gaining about .25%. the first weekly gain in two

months amid tighter supply from the north sea to the mideast. up 1.28% today and up about 4% on the week. the dollar down about a quarter percent. strengthening commodities and weakening in the u.s. dollar. and tight trading range is for equity. david: type for the bloomberg first take, and we are joined by -- we start with meetings in jackson hole and we try to put together a montage of where the fed presidents are. in general, kaplan saying that we're getting close to that rate. i don't want to come close to an inverted yield curve. the markets are doing pretty well. beingso charles evans

relatively robust. i'm not sure how much we will learn from these meetings, but we will be looking for any thing we can find. lisa: we will go more macro. unlikely that these seem to be pretty polished and pretty brief. i think what they talk about is the terminal rate. go inthings should equilibrium. they will be talking about the balance sheet and why wages haven't grown more quickly, which we really haven't seen despite the low unemployment rate. and that is what people will be trying to parse out. it will not necessarily be market moving but a lot of econ people will find it fascinating. [laughter] not bethe president may

too happy with the market but they have founded entirely on offensive. >> there was a report out to kind of crunch the data. it was relatively muted. the comments a few years back. it will find where the fed is going. the pace of rate hikes for the rest of the year is kind of set in stone for this market. and more than a 60% probability that will get that hike by december. there was a column or he pointed out the president is not just upset about rising rates,

but if you look under the surface, there is increasing concerns about corporate debt. lisa: some people have pointed to where that, others are looking at real estate. other are looking at the earners at the top and the bottom. these are all valid points and areas that you will see jackson hole addressed. this is where they can weigh in. do they care about emerging markets. julie: the sideline conversations and the interviews where we might get commentary.

you will hear from one of these fed officials. we look at the economy. the terror of discussions did not really go anywhere. and we have been told that this will be significant. specific to certain points of the market here. see that little bit of a bounce in the industrial. this is one of the areas where people have been watching. some lateness. nothing was coming out of the nafta talks.

david: let's talk about nafta. we didn't get it. signals seem to be coming that we are on the way to a deal. people are starting to price in. mexico does not like them. they are trying to get a better deal. as president trump faces a growing amount of pushback. there is a higher likelihood that he will continue to double hot on some of these

topics, the red meat for his base and won't give in ahead of the midterms. this is one concern that he could harden his line on a lot , making it difficult to send resolutions now. look at all the great things i did for us. >> it is possible, but the candidate hasn't been involved in this yet. they will bring canada back to the table and hash it all out. the progress isn't there. we did get results from one company, and not terribly impressive. down in the

premarket and it is the earnings forecast that a short of estimates here. printers.l >> it is the least sexiest tech company out there but it is the largest -- world's largest maker of personal computers. it is still kind of a juggernaut but it's in a business that has incredibly thin margins. it is just not there. computers, printers, ink. >> cloud computing, etc.. printers, dying. personal computers, dying. this year, hewlett-packard is up nearly 19% whereas hp is up 13%.

>> since the split. >> do you know at the p/e ratio hp?n eight. julie: thank you so much for making hp sexy. you can browse recent features talk about it. the calgary pipeline company is brian -- buying the public energy partners which is also a pipeline company for $3.3 billion worth of stock.

they set of calgary in canada. about .7 percent down. u.s. equities run with the bulls but will equities continue to hold? we will talk about that with bob doll, chief equity strategist. this is bloomberg. ♪

kaylee: this is bloomberg a bake. -- daybreak. buy a emerging agreed to stock valued at $3.3 billion. pipelineand operate

systems in the southeastern u.s.. t-mobile's warning customers about a hack that may have compromised personal data. the third largest wireless carrier shut down the beach on monday. t-mobile says no financial data or social security numbers were involved. an italian newspaper reports president trump told italy's prime minister the u.s. is willing to help the country by buying government bonds next year. they told italian officials about the offer after returning from washington last month. there were no details on the plan. and that is your bloomberg business flash. u.s. growth looks robust. but there are can you -- concerns about investor sentiment. here is bob, the asset management chief equity strategist and senior portfolio manager. welcome back.

happy friday. there are pluses and minuses. put it all together. where are you. just to give you a mealymouthed answer, it is called earnings. it is powerful. 20 to 25d produce percent growth. and in capital letters, trade and sanctions. things.long list of robust thing.

>> if we go from plus 25 to minus two, all bets are off. we're going from plus 25 to plus 18, that is great news. i'm not worried. >> how is that issue going to be? we are making progress on mexico and that could put pressure on canada. the china is a big deal, right? we have been hearing from economists that have downplayed the effect of tariffs saying that it will be isolated to certain sectors. when does it start to blow up to something bigger? >> for now, they are right, but where does it go? markets hate uncertainty and there's massive uncertainty around this. conversely, trade would have the market lower. as long as traders on the front page, it's hard for the stock market to have significant upside. might hatemarkets uncertainty but it can't hate it

that much because we haven't surpassed the record for the s&p but we are darn close. it is not as though markets are falling here. to be a limiting factor more than a detriment. >> that is all that it is. the market can still run slowly higher. i don't think with as great earnings, we have downside because of trade but the absence of the upside that we might have enjoyed if we hadn't been there. david: should we be encouraged or concerned that there is concern?g theet the rest -- forget rest of the world for a moment. eventually, the u.s. will slow down and we need the rest of the world.

julie: if you're talking about a rage bound market, what is the best way to make money. they have some side. we have seen it come down and pop back up. is that one way to play it. >> we have been in a beta world for a lot of years. while the market has done better, i would make the case that we are more in an alpha world. it is what you own and don't own in an asset class. you have a good question. and whichs do you own ones are you avoiding? that benefitnies from the economy growing.

does that benefit from rising rates. and they are more cyclical oriented. that is how i am positioning my portfolio. what about the end of the business cycle? is it too soon to position on that? >> a think it is too soon. the yield curve was flattening out. does that mean the end of the cycle? should i get defensive? it has been generally the wrong thing to do. the end is not in sight. not inverted credit spreads. julie: what about outside of >> real estate is

probably a good place to be. we have had exploiting. real estate is still a good class. talk more about that. stay with us. decided torump has help italy by buying government bonds. how would that work? we will talk about it next. this is bloomberg. ♪

david: president trump reportedly has offered to help italy by biting -- buying bonds. but the market is skeptical. richard jones joining us from berlin. saying, what?

how possible is this? >> from a mechanism standpoint, the department of the treasury is responsible for dollar policies. the president district the treasury to start selling dollars and buying euros and bonds.uld be buying the and how he sees others manipulating their currency. they could push back against the strengthened at the same time, invest those euros that you would buy into the market. david: this is the first time a president has tried to shore up another government by buying bonds? 23 yearsted trading

ago and i never remember the united states acting laterally. they do tend to do things a little bit differently. you can't entirely rule it out. not totally implausible. julie: bob doll is still here. turkey about risk points is an issue. how big of a problem will that be for europe? bob: they have to get to this time with another weak sister. at the construction problem of the eurozone. it creates crisis points.

it is a problem for europe, no question about it. david: through every country, they keep coming back. is there an opportunity there because the market may be discounting because there is so much uncertainty repeatedly? into theseou get problems to buy for trade is fine. but look at the long-term. the equity markets have underperformed. i mean for a long time. it is part of the secular slow growth issue. >> the selection you're doing in the u.s. and the criteria, are you applying those two europe?

>> my the european multinationals, they are better -- generallyted speaking than the domestic companies. david: from a different direction, there are issues with integration within europe and it puts a dampener on what is going on. it is more than one economy in europe. is it possible you could cherry pick and do pretty well? in germany, it is suppressed. >> it don't want to buy the whole thing, you want to pick and choose to find a higher quality and the germany long-term. eu, are still part of the the same currency italy does. they can't ignore these problems. what about the country that may soon not be part of the eu? is that because of the political

>>k, you avoid it wholesale? i think it still makes sense in this environment. what does it look like? this is a key elements. bob will be staying with us and chairman jay powell be making his jackson hole debut. we have more from the annual gathering. this is bloomberg. ♪

julie: this is bloomberg daybreak. alix steel is off today. we'll start with movers this morning. hp shares are lower in the premarket.

ross stores also falling after it came out. pointing out that maybe expectations were running high after positive numbers from pj xp. those are trading higher after earnings beat estimates. other movers that we're watching this morning. this is after a report that they and resurfacing here. a lot of grain on the screen. not up huge, just about a quarter percent.

the shanghai composite has been back and forth. kailey leinz is here with first word news. taking aent trump is different turn in tone to jeff sessions. he said the justice department will not be improperly influenced by politics and president trump said that sessions in should look into all the corruption on the other side and gave a list of wrongdoing by democrats. look for trade between the u.s. and china to escalate. china has raised the possibility that there may be no more negotiations until after the november midterm elections.

a new round of tariffs could be early next month. there is 20 inches of rain, causing blocked roads. they piled sandbags to prepare for flooding. powered by more than 2700 journalists and analysts. bloomberg. david: jackson hole today to monetary policy. .hank you for getting up ?hat do you expect to hear

>> they are going to be talking about becoming either more aggressive or less so given the threats to the economy like tariffs and emerging markets. spoken tosts i have do not think jay powell will go very far in that direction. it is a slow month. trading is somewhat limited. he could have an outside effect on markets which he doesn't want to do. maybe endorsing something. on track for september. but not really make any waves. paper ise title of the similar to one that an economist

offered in 1998. could we glean something about a >> not sure we will get that from jay powell but maybe we will get it from some of the other participants or when we speak to people on the sidelines. people should go to bloomberg.com and read it. in 1998, we had very low unemployment. stock wrote a paper analyzing what it means for monetary policy and concluded that you don't slow down as some fed doves suggest. you maybe take a more aggressive stance because you don't know what's to happen and it is better for the fed to be ahead of inflation than to jump up and

surprise you. chairman howell follow that lead, he would be more hawkish. in the minutes with that at this week, there's talk about what we do if there is a downturn. but about negative interest rates and things like that? how do you put those things together? >> the fed did not follow james stock's advice and a lot of people blame that for sowing the seeds of the 2008 financial crisis. many suggested maybe the stock was right. minutes, we saw a staff briefing that suggested we will get to zero interest rates. and the tools may be more limited. what do you do if they are not working anymore. michael mckee.

and we will be back with mike in the next hour for his interview with james bullard. fed president coming up at eastern time. julie: and getting wonky on some of the challenges. how much is the market tightening at this point? >> i think the market has it right. to raise continue rates. the samell watch all statistics the rest of us do. i would not call fed the enemy of the stock market but it is no longer a best friend. we have to watch it carefully.

is modestly rising interest rate. >> with that encourage them to keep going? at all the same statistics. and they are likely to slowly to put it onntinue rate increases. they never get it ahead of the curve until it is too late. the feds are no smarter than the rest of us and they have to call it. i understand that the 20 basis point, should we pay attention or not?

>> i have mostly green flags on the field. i throw a yellow flag amongst all these other green flags. i just have to pay more effect -- attention to what the fed is doing. is a good environment for stocks. the normalization process. they are not yet punitive. julie: one of the things that investors are watching his nonfinancial corporate debt. and if there are companies that are overleveraged or maybe on delicate footing, it will present a problem.

>> i agree, but not yet. i do not think that we are there yet. not worried yet. what what point do you get worried? >> not at where they are and not at 10 year treasuries. if rates were to accelerate to the upside, the issue has to be moved to the front burner. don't on the stove but make it policy. your point earlier about picking stocks, at what point do you look at balance sheets and discerning between companies that are highly leveraged and not? >> they are not generating positive free cash flow. if i can use it to reinvest in my business, i care a little

less about how much debt you have. worker,e higher capacity, and raise the dividend and buy back stock. we are in the semi sweet spot. the buyback has been a big support for the market. in terms of capital deployment, we haven't seen much. will that in firmware the market goes? >> call percent if you want to stretch it. capex is picking up. creating incentive for that, it is finally unreached -- unleashed.

corporate america can buy back their stock and do cap picks at the same time david:. etc. cost, wages, and input cost. that will affect earnings. is a reason that they will decelerate and not go negative. we estimate in the first half of this year, about one third of the earnings growth comes from the tax bill. one third from amazing revenue growth. it will improve someday but it's going on a lot more years than most of us thought. that wage told me rates were going up, what planet are you on. it is not sustainable long-term.

in construction, you hear about a lack of skilled workers. you think at some point, the market will accommodate that by raising wages. analysts thatvery we talked to at our firm says the company -- by the way, i'm trouble finding workers. my guess is that the end of the year, it has a three handle. thank you so much for being with us. and we will bring you our top guests and include the fed president of st. louis, cleveland, dallas, and atlanta. this is bloomberg. ♪

kaylee: this is bloomberg daybreak. coming up in the next hour, james bullard, fed president live from jackson hole. ♪ kaylee: now to your bloomberg business flash. a project tonched include flying cars that includes boeing and airbus.

bloomberg has led the government led group will gather for the first of their monthly meetings. uber has set a goal of starting an air taxi service by 2023. from cantor fitzgerald, they could lose a gambling license in las vegas. cg technology has accepted illegal on sign -- illegal online bets from outside nevada. they agree to pay a fine and find a new technology provider. they will try to work out a new deal. predicts is your group will have best results since the financial crisis. increased 33% in the first half of 2018 from a year ago. city has spent years rebuilding. we turn out to business week beat where we cover three stories from this week's issue of bloomberg businessweek. harley's new patches. the future of harley davidson malic very different from its

patriotic past. france's intercontinental ceo, the incoming chief has a very french issues to navigate. can the canadian restore the brand? and lab grown diamonds are forever, too. penelope cruz will hit the red carpet and know exactly where her diamond came from. newd: jason kelly is the bloomberg bureau chief and coanchor to take you through these stories every single week. should we start with air france? i love the title. then: it really captures -- tease really captures it. they are very french problems. the thing to remember about air france is his very of the culture of france and the french government. the french government owns a big steak and has a big say in how this company goes.

you have this french dutch thing going on and you have a canadian coming into the next. >> part of the challenge is that , to sort ofslow address the low budget situation in europe to make necessary changes. you nailed it. the discount carriers in europe have really been the undoing of the traditional airline model. especially for the big vintage and traditional carriers. behind evenllen some of their partners like delta and others that are getting around them. take a specific instance. if i don't win this labor contract boat, i will quit. in, ae new guy comes

canadian and not a frenchman. jason: the outgoing ceo is like the david cameron of airlines. it is an amazing parallel. it there is a brexit parallel there. it has to do with this european entirelyhat is upside down. david: great cover, by the way. jason: buy this magazine for the cover because it is the gift that keeps on giving. testsns the traditional -- invests --the traditional vests on its head. david: my dad rides a harley. this from the guy that eats avocado toast in the morning. jason: as you both know, it went

from being this adored american icon in the eyes of the president to be an almost an enemy of the state for daring to do some manufacturing overseas. in the meantime, harley davidson has all these problems of its own because people are not buying their bikes anymore. the numbers are astonishing. post financial crisis. jason: baby boomers love their harleys. millennials not so into harleys. they have a where they try to appeal to a new generation. julie: they have to tread the line of being this iconic american brand and appealing to american consumers while looking to growth markets overseas that want lighter, faster bikes. so devolving will not alienating. harley-davidson brand is truly an american icon. there is a great quote in the story where it talks about how you people get harley tattoos.

and nobody gets a honda tattoo. david does but that's a different story. julie: gm tattoo, perhaps. david: corvette. julie: let's move on to diamonds. this seems like a no-brainer to me with the whole blood it diamond issue. why not get your diamonds in a lab if they are of the same caliber? they are. jason: they are. interestingly, diamonds are in large part about perception. one of the things that the lab needed was some big names behind it. penelope and leo dicaprio. you remember, he was in the movie "blood diamond" that exposed a lot of that. a is an investor and spokesman in a lot of ways for this new lab grown diamond culture. diamonds in the lab for some time.

the value is the scarcity. if you can make as many as you , does it drive the price down? julie: it does. they are cheaper. david: and there are -- jason: and there are economic issues that major the industry on its head. debeers are getting into this business and pricing out a lot of the smaller companies. you have grumpy entrepreneurs that have brought this forward rs pressing them out of the market. thanks to bloomberg's jason kelly. you want to make sure to catch week.on bloomberg is this every weekend and on bloomberg

radio every weekday from 2 p.m. to 5 p.m. eastern time. coming up, the leadership change down under. australia has its sixth prime minister in 11 years. this is bloomberg. ♪

david: ok, julie. this is what we are watching right there. australia has had six prime minister's and 11 years and got a new one this morning who has taken over. he got voted out by his own party. just left -- kevin riley wright had it two times. in, out, in again. -- juliak over and took over and unseated him. turnbull was unseated. that right of center populous. julie: and what we have seen pop and interesting that

you see it occurring in australia. is farn though australia away, we will see what the implications could end up being as we see these pockets of populism. do you see it becoming a more significant global force? not goingic wage is up, immigration concerns, and things are not that dissimilar. and environmental concerns that came up the other day as well and their connection to paris. david: james bullard, st. louis fed president live from jackson hole. we will be talking with president bullard. this is bloomberg. ♪ xfinity mobile is a new wireless network

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included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ david: fed extravaganza. we talk with st. louis fed chair james bullard on his views on

fed hikes and how close we are to taking away that accommodative label on monetary policy. getting to maybe. much talk about trade deals with china and mexico and canada, but no deal yet as more tariffs loom. and killing more than we. the perm aside roundup. billion dollars in potential legal exposure. welcome to "bloomberg daybreak." i'm david westin with julie hyman. alix steel is off today. david: good to be with you -- julie: good to be with you, filling in for alix. let's look back at the week with major assets. the s&p 500 up a quarter percent on the week, so tepid performance from the s&p. and flirting with record levels a couple of times. but never quite getting there on a closing basis.

we also saw positive performance for european stocks. bouncing back from three weeks of decline. really notable week for crude oil process -- crude oil prices, up for the first time in eight weeks. and also, seeing the longest run of weekly losses since 2015 anded by lower stockpiles the lower u.s. dollar, down week, so an the flipping of the script of what we have seen recently. unlike what we have seen, the dollar down and crude oil up along with many of the other commodities, which have been bouncing from their lows of the session. i wanted to check on european banks because it is an interesting story out. the report out that unicredit had hired an advisor for a possible merger. the deal was rumored two years

ago. seems like it happened a lot of the european banks, david. consolidations, we always talk about it, but we never see it. julie: that is a good point, and a stocks are not trading like they had been, but they are perking up a little bit and european trading, so something to continue to watch as we get to the end of earnings season in the u.s. he will turn to michael mckee -- we will turn to michael mckee live in jackson hole. he has been there all morning long and will bring a lot of interviews, as well as james bullard who is president of the st. louis fed. michael: good morning. we would like to welcome everyone who is listening to us on radio and watching us. we want to welcome james bullard. james: thank you for having me. you have to pretend you

like it. there is a lot of focus on the chairman's speech. the minutes suggest that the fed is locked in for september, so even if you disagree with that rate pass, is there a reason to think he will say anything market-moving today? james: the chair will be very careful, but he will do a good job. he is always very serious. michael: you don't get the impression there is a change a foot for the open market committee and the rate path they are on? michael: the markets are putting a high probability on september and you can pull the other members on the committee like him. there seems to be sentiment in that direction. michael: do you expect forward guidance to drop out and that rates are accommodative and will stay that way? james: that is an interesting issue and he will have to wrestle with that one. from my point of view, i would rather not be calling rates

accommodative right now. i think the whole structure of rates is lower, and therefore, we are at a neutral or close to neutral right now. michael: an interesting story on bloomberg news, 20 years ago, 1998, unemployment very low and inflation was low. papermous economist did a that suggested in those situations where you don't really know why something is happening, it is it better for the fed to be aggressive than two take a step back because you don't know what inflation might show up? you are in the step back camp. ? why are they right james: that is an older paper and there was aboutture about this whether you should be more aggressive or less aggressive when you are such an -- when you are uncertain about the phillips curve. there are arguments on the other

side, so that was one paper and a sea of papers on that. i would say makes more sense to be gradualist on that. michael: why do you say that? you would like to do was just take on board the idea that inflation has been very low and bury stable -- and very stable and quite sluggish. he just doesn't seem like you have to do too much, but if you have to, you could move pretty fast if you needed to. i just don't see the argument for being preemptive in this situation in a world where the phillips curve really hasn't been a factor in the last 20 years. michael: the fed in 1998 to not take -- just to show you how flat we are talking about, this is a ratio of 10 to one. gapneed 100 basis point of between unemployment and a natural rate of unemployment to get 10 basis points on the inflation rate. man, that is really, really, --

james: in the next two years, i don't see it. it if youmarkets see see measures of inflation expectations. they are taking all of this into account. they are taking into account this goal policy, rapid growth in the economy, low unemployment rate. they don't see that much inflation, especially if you translate from a cpi basis to a pet basis. they probably won't hit the inflation target over the next five to 10 years. michael: in 1998, they did not take his advice. and a lot of people suggested that maybe that was one of the causes of the 2008 financial crisis that rates were too low for too long. james: ok. financial stability is an issue. 1998 would've been the currency crisis.

ultimately, not affecting the u.s. economy. that is a lesson from that because he drove u.s. rates lower and it helped the boom in the u.s. the.com bubble -- curve wasbble and the inverted. and then rates were raised. and then you could argue that it was a mistake in the time. michael: you and other members of the committee said they were not intentionally invert the yield curve. but are you smart enough, do you have enough insight into the markets to know whether you would do that? think onre is what i this issue. in 2006ound in 2000 and and it was inflated wrong. the time, i want to take signal seriously, even though when you look at macro economic models, it doesn't fit into the models the way we would like.

but i think you have to take it seriously as a signal. and what i think about this, there is no reason to challenge the yield curve at this time. there is no reason. in other circumstances, if inflation was heading higher, then i might say, well, we are taking some recession risks, but i'm willing to trade them out because inflation is getting out of control. we are not in a situation today his low. it is barely getting to target today, so we don't need to be preemptive on the yield curve. michael: one of the other arguments is the impact you have on emerging markets and this bill would affect on the u.s. economy. i know your mandate is the u.s. economy, but how much of a risk do you think that is? james: i mean, we have been going very slow with the rate increase, well telegraphed. i think these foreign economies have had ample opportunity and ample understanding of what was going on in the u.s. we do have some countries that have special situations and

special political situations of one kind or another. not enough reserves. so, i would take those as special cases, the countries that are having trouble, but i will keep an eye on it. michael: on the list that fed officials have been concerned about, the decline in home sales. but also median prices have been falling. is the fed killing the housing market by raising rates? james: well, housing is one of the most sensitive factors, so you would think he would have some impact there. if you talk to real estate people, they would say, well it is because of the limited , your singnd prices beating prices went down, but -- you are saying median prices went down, but they had been rising. housing prices have been

rising at a fairly good clip. michael: finally on the list, tariffs. many economists say there will be some affect. i wonder what companies in your district, what ceos are saying about the impact of tariffs so far and the impact on their investment. james: i get an earful on tariffs from many different angles, and there is a lot of concern about how these tariff wars will affect them and the products? soybeans, for instance, is a major product that is exported. i hope we can get to some resolution. i hope the strategy works. that this is negotiating tactic, but ultimately, it leads to freer trade and better trade arrangements with our trading partners. james: there has been uncertainty about tariffs and i was uncertainty about the impact of the tax reform law. last time we talked to you, you suggested that was leading companies to hold off on investment decisions because

they were not sure what the climate was going to be. has that changed or our company still on hold? james: they are concerned about the tariff issue because they feel like, well, if i put a and tariffsntry x go way up, i will have to move the plant to some other country. so they want to know what the rules are because -- so they want to know what the rules are before they invest. and they do one certainty before they do that. i don't know if they will ever get it. [laughter] hereel: one of the topics as we have talked about changing market structure is the decline in business dynamism in the u.s. do you have a good handle of why that is and how would is an eighth district? james: i have an idea about this, and i will test it out with the people at this conference. but i think the core idea is that in the 19 -- if you look at

the data since the 1980's, there are more people working for big companies. of employees working for big companies, depending on how you define that. so, if you think about what has happened since the 1980's, it was all about rolling up industries. they used to be very dispersed. -- they used to be a coffee shop on every street corner. they were independently-owned, and now you have starbucks. that theme has rolled through the corporate sector since the 1980's, and i think that is what has driven the idea that more people are working for bigger companies. the worry about that is that bigger companies are thought to not integrate -- our thoughts and not innovate as much. there are not enough small firms. and they tend to be more sluggish and not react enough to new market offense compared to

smaller firms. bullard, thank you for joining us on the cold morning. we will let you get warm in just a second and we will send it back to you. david: thank you so much. that was mike mckee speaking with the st. louis fed president. we will be back with mike later this morning who will be interviewing jason furman, harvard university kennedy school professor and former white house economic adviser chairman. that will, betty 30: -- that will, -- that will coming up at 8:30 this morning. two sentiment continue to support the bulls -- will sentiment continue to support the bulls. we will discuss. this is bloomberg. ♪

♪ >> this is "bloomberg daybreak."

transaction and energy business. purchase agreed to deal valued at $3.8 billion. owns pipeline systems. t-mobile u.s. is warning customers about a hack that may have compromised personal data such as phone numbers any no addresses. the cybersecurity team of the country's third wireless carriers shut down the breach on monday. t-mobile says no financial data or social security numbers were involved. asiantigroup predicts it equity business will post its best results of the financial crisis. revenue increased 33% from a year ago, the building is asia business. and that is your bloomberg business flash. julie? julie: the s&p 500 continues to run with the bulls getting a new record high on an intraday basis.

but our tariffs and tiny monetary policy putting us on the brink of recession? you can see rising probabilities for a recession which indicates we are closer now than we were a year ago. joining us is nela richardson, a senior strategist. that sounds dramatic the most estimates. maybe we are further out than the brink. it is good to see you. do you think that those predictions for economic growth will tip into a recession? when will that start to meet stock of the pressure on stocks, which are discounting mechanisms? nela: we don't think there is a recession on the brink at all. if you look at the second quarter, you see a lot of strength. 4% see gdp strength over growth in the second quarter. that is not all stimulus. that was business investment and consumer spending.

so fundamentals in the economy are very strong. when you get to the corporate side, it is even more strength. we saw corporate earnings upwards of 20% year-over-year. that was the second quarter in a row. not only did we see that, we saw strong sales growth. costsu know, you can cut and may profit that make money, but you can also sell more. and that is a very bullish indicator that we are far from a downturn in either the economy or the market. david: remarkable earnings season, no question. if you look at the slope on growth, it is coming down. let's put a chart up. i am not say it is going to go negative and starts drinking, but -- and start shrinking, but how concerned should we be about the change in the slope of corporate earnings growth? nela: we think this market still has a lot of gas in the tank, right? there will still be growth, it is just not going to be the kind of growth we have seen in the past.

it will be slower growth, slower returns. that is why this is an opportunity to look at your portfolio, position it in a way from something you maybe over invested in like large caps, and become more diversified a smaller caps off international equities, for example, amateur your portfolio is positioned to weather volatility and political risks or tariffs, or whatever may be coming down the road as far as higher interest rate. julie: there are potential interest rate out there. 500.e a chart for the s&p we have seen some outperformance, particularly in the last several weeks, we have seen an uptick. when you are thinking about defensively -- when you are thinking defensively right now, it seems like you have to do so in a nontraditional way, looking at small caps or areas that my be isolated from some of those risks.

nela: you have to start with your home base, and for us, that is being diversified and looking at high-quality companies that you know can weather delay downturn because eventually we know, and we do not know when, but we know the full market will not last -- we know the bull market will not last long. small-market insulate key risks for investors right now. one is tariffs. small stocks, small companies are less likely to be globally invested with global supply chains, so that is a good way to position yourself for the volatility that you know is ahead. david: nela richardson of edward jones will be staying with us. coming up, sounds of a cool housing market -- a cooling housing market. we will talk about that next. this is bloomberg. ♪

♪ july new home sales numbers were out yesterday showing a second month of decline.

is this a sign of a softening housing market? nela richardson knows housing. nela, give us your take on where the housing market is. is it softening? nela: it is softening. closedsoftening from a recession high. we are softening in terms of sales. a lot of that is inventory-related, but prices are still really strong, about 5% year-over-year. where we see the pickups in supply is not necessarily where the demand is. we are seeing pick up at the high end of the market with a new millennial homeowner coming into the starter home segment. that supply is affecting consumers in the market. david: how concerned are we about affordability? i will show you the chart. the third -- the white line is the 30 year mortgage rate and the blue is housing, fuel, utilities showing it taking up. up.icking

nela: we have not seen of a pickup in wages. that is the dilemma that has been affecting everyone. but we have seen house prices growing. we have seen health care grow, education ground. and so all of these together have net into an affordable the situation for buyers. julie: we have seen renter rates going up, especially for millennials. we have seen household formation shifting in the u.s. as well. there is the renter rate with the percentage of millennials. does this matter? is this a problem? it used to be the conception of the u.s. economy is that you have to have people buying homes. that is the cornerstone, right? but is that an outdated view, or a set still important? nela: it matters on two levels. has been an important indicator leading the economy

both into and out of recession. if you are worried about recession, you might look at the housing market and say, is the market slowing? and is is going to the degree in my pull the rest of the economy or be a leading indicator of what is to follow? the second as we know for any havetor to know what you on your side is time, so the longer you can build that equity over time. the concern is millennials are missing out on some of these cheap mortgage rates right now. david: would you advise james bullard to not challenge the yield curve? he said he was twice before when it happened and it did not turn out so well. would you advise him to not race those rates? nela: i really respect mr. bullard and i understand what he is saying about not raising rates. the pressure at the long end of the curve keeping rates down is the good news and the consumer story -- and the consumer story --in the consumer story. david: we did nothing to bring that about.

european central bank helped us with that long end. nela: whoever gets the credit, we are happy about it. [laughter] richardson of edwards also be staying with us. but we will bring you an interview with jason furman, a former white house economic chairman, and he was the chief advisor for obama. it will be good to hear from him once again. this is bloomberg. ♪

♪ >> i am julie hyman alix steel is off today. at futures this morning and the icing indication of a higher open building on the gains we have seen this week.

we will see if the s&p can close at a record. the european stock market also saying a bit of an increase. crude prices have a strong this week. and containing that rally today. in the dollar continuing its downturn. we have interesting movers in the premarket. david: we have durable goods orders in. it was projected to be down 1% and it is down 1.7%. airplanes really affect this. there was a projection of up 3% with capital goods and non-defense. airplanes weret a substantial component here. there was also a revision slightly downward last month just .1%. but durable goods orders down 1.7% instead of 1.0%. julie: it is said to be a volatile number. we have to watch the trend here in the numbers. i want to revisit these market

movers. as i mentioned, retail petering out in terms of earnings' season. foot locker coming out with numbers to be estimates. , their shares are trading sharply lower after the numbers went lower. and gap cannot get a break. old navy is still done relatively well, that is not helping the company. up 10.5% after its second-quarter numbers beat analyst's estimates. the outlier in terms of stock performance is not being a retailer. david: we are going back to jackson hole and bloomberg's mike mckee is live with jason professorrvard school

and former white house adviser. mike? michael: thank you very much. .e are here with jason furman thank you for getting up early in the cold to join us. you were in the obama administration. donald trump tweeted this morning the economy is in its best shape then it has been in decades. should he get credit? is it ok for him to brag about this? jason: if i had an economy this good, i would be bragging, too, so i don't begrudge president trump for doing that. thingsstock with where are, you have a good growth rate in a low unemployment rate is on the plus side and investments are picking up and that is on the plus side. but you still have weak wage growth. that is much on the minus side. but the most important thing is a economy -- but the most

important thing in the economy is productivity growth. it is hard to tell if we have seen an increase in that. without that, we are not going to sustain the economy we are seeing. michael: do you see any policies or trends and corporate america that will change the productivity puzzle? jason: with growth this year, there are two different theories, wanted on the supply side with more business investment. if that is true, that will last. the most compelling theory go is the demand side. we are seeing a big fiscal stimulus from tax cuts and spending increases. and when you see a fiscal stimulus like that, you get a temporary boost to growth, but it does not last. the second scenario is more likely, but time will tell. michael: tariffs are a big issue. tariffs will be a negative for the economy. does that sharpen the data? jason: i am not surprised.

so far, we have only seen tariffs on a limited -- we only seen tariffs on a limited set of products from limited countries, but we will potentially see more. we will potentially see more retaliation, so it could get more serious. the other thing is consumer spending. but business investments, there is some-and uncertainty that there is some heightened uncertainty. but i think that means less than what is going on in the economy and that is a fiscal stimulus. michael: we have the fiscal stimulus and the tariffs to whatever extent they are, so what is your forecast for the next couple of quarters into 2019 for the economy? jason: try not to make any forecasts and make them long-range enough so no one can really -- michael: in 2019 in general? jason: we have a lot of moment him and we could see growth -- we have a lot of momentum and

could see growth for another couple quarters in a row or so. but the underlying demography of the economy is an aging population with an increasing number of people retiring. productivity growth has still not picked up. heading down to a growth rate to 2% is what people should be expecting, and it makes me nervous that more people don't understand that. michael: you have been inside and you have seen it from both sides of the coin. how much credit should a president get and leave it to the question of, as we go forward, has donald trump done something that helps or hurts the economy? jason: the economy moves up and down for all sorts of reason. in 2017, the pickup of u.s. growth neared the growth in europe, japan, and elsewhere. it was not about the u.s., but about the global economy. fisher, we are pulling away from the pack given our late cycle

stimulus. much creditet too when times are bad and not enough when times are good. but there will be restricted immigration, trade, larger budget deficits and all three of those will slow the economy over the next five to 10 years. michael: let's talk about your longer-term, the theme of this conference, exploring greater concentration in corporate sectors. there is a debate about whether that is good or bad for the average person. you have written on this, and you tend to comb down -- come down on the bad side. that we havect seen more concentration and for some sectors, that is for good reasons. in retail, you may have companies that growing squeeze out the smaller ones. for now, consumers benefit from that. i think in some other sectors

like health care, it is because we have a lack of antitrust enforcement, and that has met lower salaries for nurses, higher prices for patients, less innovation. the tech sector is the trickiest because it has brought enormous benefits, but the concentration there is enormous also, trying to figure out the right balance will be a critical question going forward. michael: there are people who say that balance is a question because regulators don't have a good grasp on what all this means. so what should be done? jason: one thing that should be done is tougher antitrust enforcement. we have a merger coming before you. twice the ftc, emerging from six down to five, they studied the merger and decided whether to approve it. they don't look at a merger like that. they automatically let it go through. but we can look at regulations that benefit incumbents that they can have a more easily than insurers can, meaning less

regulation would help increase competition. michael: jason furman, thank you very much on this cold morning in jackson hole. we will send it back to you. david: thank you so much, mike talking with jason furman in jackson hole, wyoming. now, let's check outside the business world. sorry, first, we have to tease all of the interviews we have coming up. i almost forgot. we have live interviews from jackson hole including cleveland fed president loretta mester, robert kaplan, and raw feel bostick. julie: i want to check in with nela richardson from edward jones who is still with us here. disordered react to what we heard from jason furman. it is so interesting the idea of credit, isn't it, for economic growth? but leaving that aside for a moment, as we have been discussing, there are clouds on the horizon nonetheless. of the concerns that jason

highlighted, what is the biggest with right now? nela: the biggest risk, and this is always true when we reach this point of a cycle is that the fed will overshoot and raise interest rates faster than the economy can stand. and that will get this really weird mix of indicators where inflation, excuse me, interest rates are rising and growth is slowing. . we don't want to see that that is the biggest risk we see to the generally positive economic outlook. and then of course, tariffs. that is something that the market is responding to. we saw that $15 billion in goods of tariffs go into affect between china and the united states is weak, and we saw the market reaction. we saw more goods that can go on deck in september. corporations are seeing rising costs, but they are also pointing to supply chain

disruptions, trucker shortage, and increased wages that will increase costs overall. those costs will be passed on to consumers. the fed has a really difficult charge in seeing how much of this is tariffs and passing inflation on to consumers. david: is there a chance that these tariff wars could benefit the economy? if there is a deal with china, that could improve trade relations and actually really encourage more trade? nela: long-term. if these traits are productive and are mutually beneficial, then yes. the whole world benefits when there is active trade. that is the outcome i think everybody is betting on an hoping for. but, the question is, going past that outcome? that cap will be vogel volatility -- that path will be filled with volatility and

investors have to think about their own portfolios and whether they are capable of withstanding what we know to be volatility to come. julie: buckle up, in other words. nela richardson of edward jones, appreciate it. david: now it is time to check out the business world. we have first word news. >> president trump escalated his public feud with jeff sessions this morning. in a tweet, the president called that they willse not be improperly amplify politics. the president tweeted that sessions could look into all the corruption on the other side. mr. trump gave a list of wrongdoings by democrats. look for the trade were between the u.s. and china to escalate. there was no progress after two days of talks in washington. bloomberg has learned china has raised the possibility there might not be more negotiations until after the november midterm election. the latest round of tit-for-tat tariff took affect yesterday and

a new round of tariffs could be imposed early next month. the northon rewriting american free trade agreement will run into next week. the u.s. and mexico have not resolved all of their pending issues, and mexico says negotiations won't be complete until canada signs on. that country's prime minister has had talks within weeks. global news 24 hours a day on air and on tictoc a twitter powered by more than 27 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you so much. coming up, killing more than we. roundup faces lawsuits on the herbicides. more on that next. this is bloomberg. ♪

♪

julie: this is "bloomberg daybreak." coming up in the next hour on bloomberg markets, the cleveland fed president live from jackson hole. ♪ >> japan has lost a project to develop flying cars including uber any of us. bloomberg has learned the group will gather next week for the first monthly meetings. uber has set a goal of starting commercial operations of its air taxi service by 2023. frommall betting operation fitzgerald could lose it camping license in vegas. they emitted it except the legal online bets from outside nevada. the casino regulator has rejected an agreement to which the company agreed to pay a fine.

cg will try to work out any deal. and the maker of johnny walker scott is having talks with three major marijuana producers in canada. explored the possibility of an investment or collaboration to create new marijuana-infused beverages. earlier this month, another distiller, constellation invested $3.8 billion for a stake in the marijuana company kennedy growth. that is your bloomberg business flash. julie: excuse me. david: that is a story you know about. julie: i interviewed the ceo of canopy growth and their stocks have soared with the company increasing its prior stake. for thisis waiting october legalization in canada to take advantage of that and what may potentially be eventually legalization on a federal level in other places. david: it is clear these big spirits companies are getting

interested in it makes sense. we do have a federal statute that makes it illegal. and there are problems with breathalyzer tests. you do a breathalyzer test for cannabis? >> you would think they would develop something at some point to address that. and constellation shares fell on the deal and they have not recovered their losses, whereas canopy is flying high following that. it is an interesting story to track. david: we want to turn from cannabis to chemicals. it was the biggest takeover by a foreign companies when buyers pay for monsanto and asset sales, it was supposed to time between the two companies, but then there was a judgment against monsanto and a case claiming it's herbicide roundup causes cancer. with thousands more lawsuits waiting in the wings. to give us a read on what this means for the megamerger, we will welcome the beer analyst

for u.s. chemicals. and christopher correll us. welcome to both of you. let's start with you, christopher. what does this mean for this deal? the ceo says they believe in the deal and they are going forward. >> from an industrial sense, it makes sense to put those together. it creates a leader in the industry. from that standpoint, full speed ahead with the deal. there are litigation risks along with the deal that buyer factored in. and those will be large headline numbers and it will be a long drawn out, legal process on several fronts and that is what is coming ahead for the merger. julie: if a factor that in, and that is the question? employeesd survey his and said how many of you think this chemical and roundup causes

cancer and some of the employees raised their hand. did buyer -- did buyer dealt under estimate this? >> i think we all did. we have known about these cases for some time and i discounted them. what did everybody get wrong about this? blamed for has been everything from cancer to ebola. i don't think it causes ebola, but when you get accused over and over again, it is a boy that cries wolf kind of problem. verdict withilty massive damage. david: this is not just the peripheral part of this deal. monsanto's business is based

largely on roundup and seeds that resist roundup. >> around the business itself is a $3 billion business and is a smaller part of the overall profitability of the two companies. all of the seeds of monsanto are resistant to round up. it is one of the better rock tolls that farmers use in treating leads and managing their farms that in treating weeds and managing their farms. the next step would be the new roundup that is coming down the pipe. that is having issues in the field as well. from a dollars and sense perspective, round of this a small part of the portfolio, but a big part of the big value proposition the offer from her is. julie: how are you having to change or numbers now that this has happened? are they going to be more? there are a thousand plaintiffs in the west where filed suits related to this. david: and they said the chemical causes cancer.

that is what the court found, but byer would contest that. julie: how do you change or numbers to account for this? >> i personally don't change the numbers i don't cover buy -- i don't cover byer. i have to put a liability somewhere. i don't think liability is great as investors fear. an enormous liabilities or punitive damages to get overturned and they will reduce it down to something they will manage. julie: do they have to take it off the market? and if thes cancer monetary damages are not huge, isn't there -- is there regulatory risk? >> hypothetically, but the contention of the court was that monsanto new this could cause cancer in failed to warn users properly.

the more immediate outcome is that they have to put labels on it and they may have to require a license to apply it. so for the farmers, it doesn't make a difference. if you put a license on it, most applicators have a license. it doesn't make a difference. it might mean they have to pull it from gardening use. few people are willing to get a license for their gardens. julie: thank you so much. we have to leave it there. thank you to you both. coming up, the s&p 500 hit a record intraday high. can it pull off a record close? we will have more on what i am watching next. this is bloomberg. ♪

♪ julie: what i am watching today, data, only get -- what i am watching today, david, are we going to get a record close?

the s&p 500 is a snapshot of the market that we watch most closely and made an intraday high. david: i was at the terminal when that happened. julie: it could not close at that level. what has power the market this year as we know has been a cap technology. tech is the best performing groups year to date. we have other cyclicals do pretty well also. if we do get a record close, we know it will be low-volume. then, do we get stuck in that range that we were talking about earlier in the show? because of the limiting factor of tariffs, the supporting factor of earnings, sticks us there. david: and how broad is it? is it one or two sectors driving it? [no audio]

julie: more details on what those sanctions are going to be. just the latest on a list of sanctions. david: president putin said it is nonsense. coming up on bloomberg markets, live from jackson hole and reaction of the cohead of fixed income. all of that coming up. this is bloomberg. ♪ this is bloomberg. ♪

♪ jon: from new york city for our viewers worldwide, i am jonathan ferro. this is the countdown to the pen. ♪

jon: coming up, fed chair jay powell taking the stage and making his debut speech in wyoming. -- and a dispute president reportedly telling italy that america is willing to buy italian debt. market, 30 minutes away from the opening bell. treasuries, bonds, and fx looking like this breed futures positive 54 points on the dow, up by six on the s&p 500. euro-dollar, 115. .52. that is the story in the markets, central banks around the world gathering today in jackson hole, wyoming. the speech