♪ caroline: from bloomberg world headquarters in new york and from here in london, i'm caroline hyde. joe: i'm joe weisenthal. romaine: i'm romaine bostick. a four-day rally has the indices at record highs. joe: the question is, "what'd you miss?" caroline: once again, talking about earnings after the bell,

snap and peloton, some stock showing movement but moves pale in comparison to speculation on volatility we have been seeing in mean stocks for 2021. the media may be dissipating, gamestop down for 2% today. but there are still 16 reddit-loved companies that are up double digits this year. we seem to be paying more attention to hard economic data again. and it is good timing therefore that we get the u.s. stocks report tomorrow, with indications the recovery is stronger than thought. so the outlook is affecting rate markets, you see the curve steepening, joe. let's not get boring and talk about fundamentals first. let's go back to market shares in penny stocks. joe: big question, what does that 530 curve meet for does coin? we will break it down. but for real, penny stocks, we

are going to talk about -- we don't talk about those. look at january, stocks that hit market caps are too conservative, two old school people want even more risk. romaine: at look at the penny stocks, the biggest volume mover across the table regardless of size is healthier choice. joe: a household name. for more, let's welcome bloomberg news cross asset reporter sarah ponczek. sarah: this is something we were paying attention to before gamestop stole the pot -- stole the spotlight. in january, we wrote stories about the zoom in penny stock trading. -- the boom in penny stock trading. december was when we saw more

than one million, and we saw greater volume off exchanges than on exchanges, which is very, very rare. even the games -- the gamestop saga that has gotten all the attention, you look at otc volume in january and it was very much alive and well. we saw over one trillion shares trade hands once again. and it was more volume than we saw even in december. that continues to grow. and even on a day like today where you see the chart of gamestop, it is absolutely stunning, the fall we have seen, -- we have seen, about $500 a share in the 50 dollars a share, but the penny stock carol baskin touted weeks ago, today at a new high.

32% or so to $1.50 per share. caroline: amazing carol baskin still wields a little power. but what about reddit, what about social media? is this directing the view on some of these companies or is it other than that? sarah: it seems as though it is a different entry -- different entity. wall street is very much focused on gamestop and holding the line and their diamond hand, as they would call it. what we have seen in gamestop is an unraveling of the phenomenal rise that we saw last week. we have seen it in amc and others as well like express, blackberry, but you mentioned a few moments ago that if you look at a year-to-date basis timing the market is very difficult to do, but some of these stocks are still left triple digits this year. share prices have doubled, name

stop included, which points to the fact maybe there is more to go even when it comes to these larger stocks. romaine: when you see these waves come and go, is there any real concern we should have that there would be any systemic risk here to the broader markets and legit stocks? sarah: as it relates to otc stocks, it doesn't seem from those that i have spoken with that there is any work that after trading in otc stocks could bleed over into systemic risk, especially if individual retail traders make a gamble, make a quick b cash make a quick bu -- make a quick buck because it is seen as unrelated to exchange traded stocks, and

it is not affecting trading in apple, for example. joe: you mentioned the carol baskin name. these companies are extremely prone, not just risky, but extremely prone to manipulation, people putting things on message boards that may not be true. like if people were anxious about gamestop. sarah: when you think about what we have seen, it is much easier to do so in a very liquid, otc penny stock that is under one dollar then it is even in gamestop, which is trading sub $20 but is more liquid. and if i look at the bloomberg function most, 25 stocks today surged 30% or more and at the top of the pack is the sticker mpew.

not all of these are penny stocks, but the majority are, and it shows you can see massive gains, but granted some don't even trade for half a penny. caroline: sarah ponczek, thank you so much, always has her eye on the boards in the big issues. coming up, we talk a big asset class, u.s. treasuries. the curve is steepening to levels not seen since 2015. stick with us. this is bloomberg. ♪

♪ romaine: we are going to shift focus away from penny stocks. let's talk about speculation and

rates. joe, curve steepening here, 30-year treasury getting pumped up to 1.95, 1.96. a lot of talk about the reflation trade not only in u.s., but around the globe. lack of announcement with regard to negative rates. joe: it is pretty striking. this is really gathering steam, this idea that the economy it is more robust than expected. certain signs of inflation are perhaps burrowing. ed we are seeing a pretty meaningful selloff on the long end. there you see the 530, highest since early 2016, the 30-year yield getting close to 2%. something is afoot. romaine: let's figure out what it is. caroline: it is still the tech economy, right? post-brexit, still manifestations. joe: it is post-brexit moving the biggest rate markets around the world. that is why we sent you to london to be in the center of

the action. for more, let's bring in bloomberg opinion columnist connor sang. what is awaiting any -- what is awakening the slumber of the big markets rate picture? >> good for growth and bad for the long end of the yield curve. the georgia elections boosted prospects that we would get a big economic stimulus and that appears to be progressing rapidly. you had vaccines slow going at first, now getting faster. we may have approvals from johnson & johnson and astrazeneca the next couple months, virus numbers are coming down, the housing market is starting to boom and mining prices are higher. on the front end of the curve you have the fed saying we are going to stay the course. that is leading to steepening. romaine: when you look at the steepening, connor, we know what is anchoring the short end of the curve. there is speculation in

continuing steepening that the fed has to do something to come off the floor. is that reflected in type data we are seeing come of those expectations? connor: everybody is that we will get a temper tantrum like we did in 2016 when expectations shot higher on the expectation the fed would have greater asset purchases at some point. but the fed really communicated that they not go to start on policy until they are sure the economy is where they wanted to be. to increase expectations for growth is ok, but if it is fears of the fed, they are going to stepien. caroline: is anybody worried particularly about inflation? conor: we will have 36 months on the back half of this year that will be critical from an inflation standpoint. as the economy reopens nuc airfares go up, hotel fares go up, maybe commodities go up as we get a recovery in demand, will the fed look through that and say this is a good

adjustment, we are working for reopening and stimulus and we have to let this thing go for a while. i think that is going to test the fed to see if they truly will let it go if we all get sucked in by data. joe: let me ask you more about that, because if it is easier for them to say it is going to be transitory, we are going to look for it, and like 2010 was the last time they were talking about transitory inflation out of a recovery, but sometimes this might be easier said than done and maybe there is a perception they are fighting the last war. in 2010, unemployment was 9%, our unemployment rate now is coming down rapidly. could this get hairier than people expect, this is not an obvious call and they are going to feel real pressure and things are going to get anxious? conor: i think so. as much as the fed likes to say they watch the data, they are really watching the market in the short term. and last march when it was clear the pandemic would last, the

markets were tanking, that is what got the congress had the fed to react much quicker. markets are responding whether it is interest rates are market rates moving up, and they probably will feel pressure to do something if the date that doesn't come in as expected. romaine: with regards to data, we seem to be accelerating a little bit faster than expected. pushing through this $1.9 trillion stimulus plan, let's assume he does get that through congress. would that have any negative ramifications? would that make things too hot? conor: it is possible. but i think we are not just going to know. because of all the stimulus we have seen and that the economy reopening after a pandemic, which we haven't seen before, what is likely to do to the economy in a very short time? in 2010, we had a very slow

recovery and lots of time for the fed and policymakers to think about what was going on. if we go from because i'll lockdowns now to the world on fire in nine months, it is a very rapid adjustment that we are not used to. caroline: what do you think in terms of yields going higher? how much could they be capped by people wanting to buy into them eventually? every time we seem to test 1.2, we come screaming back again. does the fed need to voice much when we have such a desperate search for yields? conor: nominal yields are tough to think about because they are still so historically low. to me, the real interest rate is more interesting because on the breakeven side, we have a five-year breakeven inflation expectation of around 2.3 percent right now, which is historically high for breakevens over the past decade. how i could those go in a world

where we still believe the fed can anchor inflation at around 2%? and if we see real interest rates go up, that is where the economy could start to cool and will the fed deal with that? joe: remarkably, consensus going into 2021 was that the dollar would just continue to slide. it is actually up fairly substantially, particularly against developed dm currencies. could the dollar surprise everyone and maintain strength throughout the year even with that robust growth in the fed holding rates near zero? conor: outside the u.k., to give caroline credit, the u.s. is one of the best countries in the world when it comes to the pandemic vaccine rollout. the u.s. could outperform and ease pressure on the dollar. i think that is what we have seen in the past two weeks. caroline: it all comes back to the pound. [laughter]

bloomberg opinion columnist conor sen. up next, southbay research founder andrew zatlin is going to join us next. this is bloomberg. ♪

♪ caroline: we just talked about rate and how steepening is improving the economic outlook. we will get a read tomorrow. joe: there is no better day than jobs data, and there may be some reasons for optimism. and hopefully, we see an ongoing recovery. the data lately has been better than expected. nonfarm payrolls, unexpecte --

unemployment rate expected to stay stable 6.7%. the big picture, the winter slowdown not as bad as expected so far. romaine: we will see if we get the rebound everybody is expecting. joe: joining us to talk more about the jobs report, i want to bring in andrew zatlin, founder of southbay research. andrew, you think the number is going to come in much better than economists expect? you have your own proprietary data, what are you seeing? andrew: a lot of tailwinds and only one headwind. labor data is going to come in and confirm things are a lot better than expectations were. it is groundhog day. it is january and i think we are going to have the head pop up and predict a sunny 2021. in november and december, we hit a speed bump. we had a covid speedbump. we are way past that.

the private sector is signaling in later data and elsewhere that it is normalization. we are even going beyond reflation. romaine: when we talk about the negative number we got for december, what explains that? and do you not think there will be carryover from that trendline into january? andrew: i am expecting the following, that that was jobs being pulled in. january is the biggest layoff of seasonal hiring that we will see all your. 25% of layoffs are in education, schools out, and then another 25% of the 25% is restaurants and bars, laying off because people are no longer going out. that is what we saw happen last month. those laid-off workers accelerated, they were pulled in, and that is important to look at. basically, there are fewer jobs fired this month. if you look at q3, q4, there has

been hiring as we go into the holiday season, and typically those jobs get shut down in january. fewer people were hired, fewer people are going to be fired so we have a lot of good tailwinds. some folks think what is going to happen in december is going to repeat, but that is not what really happened in december. it was covid saying, reduce the staff, and it was already a skeleton crew to begin with. caroline: what happened in december was that all the job losses were falling on a minute's shoulders. does your data dig in to inequality we are seeing in terms of the rebound, edward you see that picture going for january? andrew: unfortunately, data i look at does not look at race, does not look at gender. there are some overlaps though. where we are seeing the biggest pain will continue to be the restaurant and our sector, the

leisure-hospitality. bit even there, we are going -- but even there, we are going to start unwinding some of these covid restrictions. whether the weight -- one other point is that it is good to have covid restrictions to shelter-in-place during the winter. people are already staying home as it is, so it has less of an impact. as we go into margin weather improves, people are going to be less willing to stay indoors. that is going to contribute to business activity and a desire, especially with the rolling out better, there is going to be more opportunities for business activity, leisure-hospitality, and that is going to lead the hiring, especially in those sensitive areas. joe: andrew, the most important thing going into tomorrow's report, the first thing on everyone and's mind is, what does it mean for the pound? [laughter] in all seriousness, we have been

talking about inflation and reflation and you hinted at beyond reflation. is this going to surprise us to the upside, pricing pressure we are seeing? andrew: the market is completely discounting what we are going to be seeing. the inflation rate is going to be a lot more sudden and sharper upward. for a couple reasons. typically when we exit a recession, the supply chain is able to meet increasing demand. that is absolutely not possible right now and that is wh we are that that is why we are seeing things like semiconductor chokepoints, shipping chokepoints. covid is restricting capacity. so we know demand is huge, we are seeing consumer sending -- consumer spending and private-sector spending going through the roof, but we are not seeing equilibrium reestablished in the supply chain. when demand is high, that is the definition of inflation, you're going to see prices being it up.

romaine: great point. to expand on that, once we come out of covid and start leaving the house again, does demand then also go up, so that even though capacity for manufacturing components and other goods may go up as well, we get to equilibrium soon? andrew: i don't think 2021 will see equilibrium. one of my favorites is semiconductor consumption. but right now, if you want to buy semiconductor chips, the world's largest manufacturer, they build qualcomm, they are built out through the third quarter of this year. they cannot meet demand. that will increase supply, but you get the point. right now, it is a bidding war. if you are gm and can't get a semiconductor chip, are you going to say i can't sell my $50,000 car or are you going to say, i will pay more to get that chip. same thing with shipping. jb, america's largest trucking

company, before covid, 70% of everything was shipped i truck. -- shipped by truck. so money goods are going by truck, jb can't meet demand. -- jb hunt can't meet demand. in their latest report, the said they are going to start pushing costs down. you have the stimulus, all these things coming together, chokepoints in the supply chain. this is not a typical recession. there is a lot of money on the sidelines. this is the first session where it is kind of artificial. we know there is an ending coming. in past recessions, maybe we are, maybe we aren't. no, everyone is expecting spring to be third base rounding home. we are not talking about a typical recovery, we are talking about a turbocharged recovery.

caroline: andrew zatlin, founder of southbay research, beautiful art by your doctor, thank you. joe: bloomberg technology is up next in the u.s.. romaine: daybreak australia is up next in asia. have a great evening. this is bloomberg. ♪

emily: i am emily chang in san francisco. this is "bloomberg: technology." my exclusive interview with microsoft ceo satya nadella. how my -- the pandemic has changed what it means to go to work. he will introduce the product he says is microsoft's