>> markets are rewarding people with vaccination and normalization. >> the market is going to struggle at some point this year. >> there are a lot of people who can't go back to work. >> there is still a lot of scarring in the labor market. >> it will indicate the shape of the recove. y. >> this is "bloomberg surveillance" with tom keene, and lisa abramowicz.

tom: it is a most interesting jobs day. the nuance is equities off a better drift of news on the pandemic. we began our simulcast with optimism as we ended yesterday. jon ferro, there is no question even with the senate vote and there late, late nights of an optimistic tone on this friday. jonathan: the number drops in 29 minutes' time. regardless of the number the stimulus package will push through in washington dc. we need to think about the implications once we reopen. it has been shut in large part around the world. when we reopen what does the economy look like with this much stimulus being pushed down the sideline and a fed that will sit out? tom: we will have a guess that really pushes against the wall of optimism through the last five days. you talk about the fed and the choice they have. i would say that it's a massive

assumption that the fed does not act forever. jonathan: on the asset purchase program they might. on rates they put it clearly what the threshold is, tom. tom: when the threshold changes, i change. jonathan: when the people outside of powell, to the periphery, some of the fed presidents may start making noise. heard from the atlanta fed talking about the potential probability of may be reducing the asset purchasing. that is where the volatility might come from. tom: john, i want to dive in to the asset of the day. all of his work with bloomberg. larry summers writes 10 essays, two of them are the summers we knew decades ago. this is one of them. what did lawrence summers say?

jonathan: i think it is a clinic. it is compare and contrast between the stimulus package in 2009 and the one being rolled out now.the compare and contrast looking at the output gap then, now, and the size of the package, the message is clear. this package is huge.we need and if it is too big. lisa asked the question earlier on, does it suck the oxygen out of the room to do more after this, the infrastructure spending we actually need to see? tom: the other issue here is the application of the stimulus to the haves and the have-nots, or do we drive into to the people in need? lisa: how do you tailor it to the people that need it most? she said we are seeing the checks that came in december get spent by families in january that we could have seen negative growth or a decline in the first quarter had it not been for that rescue financing.there

is a real question here. also a real question of 2009 is the template for what we want to be seeing, or if we need to get it accelerating a little faster. this is uncharted territory. tom: dow futures up 126. one final thought, the basic idea from summers's we are going to get this done. what is the risk for the banks of this legislation? jonathan: it could be inflationary. the yield curve is up steeper. the banks rallied over the past week. a lot of that is off the back of this improving market from the banks perspective. tom: jp morgan up 30 plus percent. a big postelection move.

servetus subramanian from bank of america, and also the head of equity and quantitative strategy. i love how you put the limits on where we are in enthusiasm. we are buttressed up. how close are we? servetus: one of the ways that we gauge wall street sentiment is looking at where other strategists are in terms of bullishness. the average recommended allocation for stocks that wall street is recommending you put into your portfolio is higher than it has been in 10 years and is closer to a sell signal than it has been since 2007. what we are seeing our levels of dangerous optimism building around the s&p 500. not so much europe or emerging markets, but we are seeing

bullishness concentrated in tech and the s&p. those are signs that you want to pull your deals on the s&p and look at other areas for the bang for your buck. jonathan: year in, 3800 socgen. bank of america, 3800. do you have a lot of people saying, when are you upping the price target? savita: tremendous pressure to get more bullish. the pushback is how can you be so bearish? your economists are looking for such a strong recovery in gdp. the thing to point out is the s&p is not the economy. the s&p is more tethered to business spending then consumer spending. the s&p 500 is higher in rather than lower end.

what is interesting is investors basically want to have their cake and eat it too. the s&p went out for many years against a miserable economic backdrop. today we are calling for a monstrous economic recovery off of the worst recession we've ever seen and people still think that the s&p will be where you want to put your money. i think that is a false conclusion. there's got to be a change in leadership over the next 12 months if we've got a new administration in washington, d.c. if we are moving from absolute paralysis recession to the super strong very quick recovery, how can you continue to bet on tech, on large-cap growth amid what feels like really binary changes in the marketplace? lisa: there is a difference

between a change in leadership and an actual selloff. there is a question of what could be a trigger versus just and underperformance of big tech versus some of the other areas. savita: that is a wonderful point. this is why we are neutral on the s&p. we are not bearish, but we are seeing if you want to make money there is more of a risk of downside in the s&p than upside at this point. based on sentiment, valuations, based on positioning. the idea is we are not going to see a full-fledged bear market in the s&p 500 driven by an economic recession, but i think you're not going to get as much from big tech stocks than you have gotten the last 10 years. that's our point. in terms of the selloff what is important to watch is rate and inflation. you alluded to this earlier.

i think what's really dangerous is we have been in a fairly benign inflationary rates environment for many years. now, all of a sudden, our rates team raised their forecast of 175 on the 10 year by year end. all of a sudden the whole proposition of there is no alternative for income and yield, that argument becomes more and more moot as we get yield in other asset classes. jonathan: the end of last week about this topic. a final question if i can, i understand the call in the bond market. what is the call option for that to play out in the equity market? i want to tether myself to that story, that risk? energy, financials, where do i go? savita: financials is my number one favorite sector because the quality of balance sheet, dividends payout. banks can essentially return a

turn of capital going forward. dividend growth, i think that is the way to play the rate story. energy i think is more of an inflationary play.it is potentially riskier because of the work i do, but we are overweight energy as well. jonathan: can you tell erica we would like to have her on the show? we would love for that to happen. the head of u.s. equity and strategy. equities future of 15. we lost .4%. tom: it comes in 20 minutes time. used to say what is the data that matters. i have been looking at the last 48 hours and wondering what wage growth will be. we really don't know this q we've seen and who has lost jobs. -- the skew we've seen and who has lost jobs. i wonder if wage growth is believable. it doesn't work. jonathan: it has gone out the

window. the prime example for me is income and look at the unemployment rate. the correlation has broken down. lisa: income has gone up because the people who lost their job have been lower income workers so it skews the average. it will be interesting how income increases. i've been struck by food inflation. food prices are at the highest globally in years. chicken wings are really expensive for the super bowl. it is tongue and cheek because it is the super bowl, but this has a material effect on households. jonathan: anything to get us to the super bowl. anything to bring us to the super bowl. [laughter] lisa: you are going to blame me for that? tom: party at leases? is that what we are hearing? -- at lisa's? is that what i'm hearing? tom: lisa has this massive cast? how do you do guac with a cast?

lisa: your elbow. jonathan: your elbow? do you not just use your other hand? lisa: i'm not very good with my other hand. tom: john, boundaries. [laughter] ♪ you can turn me on with just a touch, baby ♪ jonathan: you were talking about boundaries, sir. this is bloomberg. ♪ >> lawmakers adopting a budget blueprint for president biden. the vote was 51-50 with vice president harris breaking her first time. the house will likely vote to adopt the senate's language that would allow democrats to approve the stimulus without republican

support. the house has voted to strip georgia republican marjorie taylor greene of her to committee seats for embracing conspiracy theories and violence against democrats. 11 republicans voted with the democratic majority. earlier greene said that she disavowed her previous views. u.k. will require travelers from coronavirus hotspots to quarantine. arrivals will have to isolate in 10 days in government-improved accommodation. authorities are seeking hotels near airports. the sunday super bowl in tampa presents an experiment. the national football league is hoping to avoid any large-scale outbreaks at the game. attendance is capped at 25,000, a record low for football's biggest event. the league has given tickets to 7500 vaccinated health care workers. local news 24 hours a day on air and on bloomberg quicktake

powered by more than 2700 journalists and analysts into hundred 70 countries. i am ritika gupta. ♪

>> we're talking about something that relative to the gdp gap is

six times as large as what we did in 2008. if that is what we are going to do, we need to make sure we've got a contingency plan in case we get a perfect combination of good news. jonathan: former treasury secretary larry summers. catch him in the washington post this morning in an op-ed piece, a clinic on what he thinks could happen. it raises questions on the size of the package that the democrats and the new government are trying to push through. from new york city, good morning. we are 12 minutes away from a payrolls report in the united states of america. we have an equity market at all-time highs. we advanced about .4%. the bond market, bond yields, are coming with it. tom: let's talk to the right

guest at the right time. lawrence summers clearly making a tone. glassman was in the crucible with robert gordon. he has a measured fuel for the limits of the american economy. jp morgan is out with a huge number. or hundred thousand-ish on jobs. jim glassman, you are optimistic on this report. why? jim: we were surprised this last time. these monthly numbers are very volatile. we don't expect anything good until we can lift restrictions on hospitality and get kids back in schools. that's coming in the next several months. tom: i want to get to the contingency plan. i know you want to talk about lawrence summers right now. why do you take issue that we do not have a contingency plan? jim: we have a contingency plan

that has been visible. number one, to the extent the help goes to the unemployed people, it triggers off automatically when we lived restrictions and they can go back to their jobs. all of that money we are spending through the unemployment system will trigger off. what do we all buy? if we drive consumption, a lot of what we are buying is made overseas. we have all kinds of safety valves in our system. it helps our trading partners. this is why when you look at what happened to china last year, you wouldn't know there is a pandemic because china's economy grew 6.5%. that tells you how connected we are. we don't live on an island. we live in a world economy. if people have too much stimulus, too much money to spend, people will buy things produced by our trading partners. the global system needs a lot of help. i don't think there is much risk

of overdoing this. lisa: i want to make sure i'm understanding what you're saying. china's official numbers have been questioned. there is a question that you raised implicit in your comments that any stimulus in the u.s., especially in the form of checks to families that can get spent on goods, will go to international partners, our trading partners. jim: if we cannot produce it, it goes to our trading partners. it is a pay it forward story. if it helps our trading partners, we are all in the same soup. if it helps our trading partners, it will help us down the road. i think the system has more flexibility. tom: this is so important. a key distinction of modern economics. the open versus closed economy distinction is the heart of the matter. jonathan: i know this is not where you are going, but i will take a more literal interpretation. the sequencing of how we opened has shifted and these economies

could remain closed. international travel may not reopen for a long time. how are we thinking about those issues for the next two years, for the next three? jim: i think you will be surprised how quickly we get this behind us once we feel we are protecting our parents and grandparents. this is a medical problem. we have a medical answer. the minute that we feel safe we will be so eager to get back to what we're doing. to see your friends, take your family on a vacation. if you are a business traveler, you cannot manage your supply chains virtually. i talk a lot with folks about this. it's impossible. i think once we feel safe you will be surprised how quickly we go back to that. air travel -- it will take a while -- but i think you will be surprised. jonathan: let me give you a scenario. there is an english gentleman with a flight from jfk to milan.

at the end of august. does he get that flight without needing to quarantine on the others? -- other side? jim: if the vaccines work, and we are watching it play out big time in the u.s., as more vaccines are coming into the pipeline, if that medical answer gets a grip on this, i think you will find you will be able to do it without quarantining. this is not the new normal. the new normal is what does it look like when we have this nightmare behind us? tom: what do we do with the 9 million to 10 million still unemployed? what is the immediate income replacement for their rents and their landlord's mortgage payments? what do we do that in february, not march? jim: that is what this physical measure is designed to do. we did a good job last year. the reason there's a disconnect

between unemployment and income is the income transfer temporarily helped people. the thing to remember, the 10 million people, the jobs that disappeared, a big chunk of these are tied to the school system. 3 million jobs related to private and public education. 4 to 5 million in hospitality. the key is to give them a lifeline until we lived restrictions on going to restaurants, bars, and ballgames. the reason we are becoming more hopeful is we see the third wave of the vaccine -- of the infection is fading, and we have vaccines building. there is a reason to be hopeful in the next three to six months we will get our hands around this. we just need a lifeline for these folks temporarily until we get there. jonathan: great to catch up, sir. the commercial banking head

economist at j.p. morgan chase. payrolls report comes in five minutes. 105 is the consensus estimate in our survey. the spread is wide, wide, wide. the previous rate, -140. we are looking for a snap back in five minutes. tom: labor participation of the middle age group. not ancient, like me. i think it is 25-54. i need to see a lift in the core labor participation statistic. jonathan: your market, record highs on the s&p 500. we advance intentionally a fifth-straight day in gains around 18 points. in the bond market, treasury lower. yields higher. 10-year, 117. yields are up, the curve is steeper, equities are advancing, and the dollar is a little

weaker against the euro. of 1/10 of 1%. the payroll report is moments away. the estimate, 105. print just around the corner. heard on bloomberg radio and seen on bloomberg t so you're a small business, or a big one. you were thriving, but then... oh. ah. okay. plan, pivot. how do you bounce back? you don't, you bounce forward, with serious and reliable internet. powered by the largest gig speed network in america. but is it secure? sure it's secure. and even if the power goes down, your connection doesn't. so how do i do this? you don't do this. we do this, together. bounce forward, with comcast business. wanna lose weight and be healthier? it's time for aerotrainer. a more effective total body fitness solution. (announcer) aerotrainer's ergodynamic design and four patented air chambers create maximum muscle activation for better results in less time.

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jonathan: your payrolls report is seconds away. your equity market is at record highs. the s&p 500, we advance .4%. it is 8:30 eastern with the number just out. mike: the payroll employment up at 549,000, which is a surprise to a market that expected 105,000. the unemployment rate falls by .4% to 6.3% in january. you had fed officials this week saying we would get back to a more full unemployment number much more quickly than people were thinking. that seems to be the case with what we've seen here. the number of unemployment decreased at one point in million in the household survey. that made a big difference in

the unemployment rate. it looks like people just going back to work. jobs restored, as we say. the number of people getting jobs in various categories -- let me find that. local government, up 49,000. state government, 36,000. in education, you just heard jim glassman talking about how education was a big component of this, and it looks like that's one reason we saw gains. the leisure and hospitality section, these are the people who lost so many jobs, felled by another 61,000. the december number was down, so an enormous number of job losses in that category. retail lost 38,000 jobs. this is the area people thought we might have a big gain because of people who get hired for

holidays and laid off in january. it doesn't seem to have happened. 120 thousand people added to payrolls on retailers for december, and in this case they lost 30 8000 transportation and warehousing, all of the people added to fedex and ups, they lost 17,000 jobs. manufacturing down 10,000. construction down 3000. a lot of the areas that we had seen recent strength have seen some declines as we held the line. a couple of other quick numbers, average hourly earnings up .2%. that is distorted by who is losing their job. average weekly hours is 35. the labor force participation rate is down to 61.4%. that offsets a little of the jobless rate drop. tom: the two year yield comes in a little bit. jonathan: i see an equity market

that is doing ok. dollar down a little weaker down .2 percent, but i see tension in the bond market, a tug-of-war at the long end of the curve because there are two opposing forces. one is significant downward provisions that will put the confirmation on d.c. on a stimulus package that needs to go through quickly. but confirms of the hole we need to climb out of. the pace we are doing now is not good enough. a little tension in the bond market. tom: 1.549 in the 10 year. you're doing a great job. it is so much harder to do this report now then when we had the older procedure pre-trump. i want to go to the money question. the white house will talk of 6.3%. what viewers and listeners see, how is it possible the unemployment rate could move down to 6.3%? michael: we saw the labor force participation rate drop and the

number of people in the labor force falling back. tom: is it hopelessness? are they dropping out because they've given up? michael: they have given up in the short run. if you are a restaurant server you would know in january there wouldn't be jobs so you wouldn't look, but that doesn't mean you will be a long-term dropout from the labor force because as covid restrictions lift you could hope that some of the restaurants start to reopen. let me point out one thing. i just did a little math on the non-seasonably adjusted numbers. we lost 133,000 jobs in terms of non-seasonably adjusted. so the seasonals added to the number of jobs in terms of seasonably adjusted. we lost more jobs on a non-seasonably adjusted basis than probably anyone anticipated. lisa: how does this change the narrative in washington? michael: i don't think it

changes it a whole lot. you will get joe biden coming out at 11:30 today and saying this proves the need to get aid to the people who are not working and help the school district so they can reopen and more people can get jobs. it is -- the debate now moves to the larry summers camp. whether you want to believe larry or not, his op-ed, but it will be how you put this together, how you target it so you get the most aid to the most people for the least amount of money and politically get it passed. that will be an interesting task for them to talk about in the national economic council, treasury, and places like that. tom: thank you. more on that through the day. i looked at the number on jon ferro that i always look at, 27-week unemployment.the headline for me as a number that is maybe outside the pandemic, it hasn't come back. it spiked up, not like in 2007,

2008, 2009, but it won't improve. what else do you see in the markets? jonathan: the dollar fading. up about .3%. the long and fading too. up by almost a basis point on the session. this number dropped 16 minutes ago. i still think there are a couple of things to reconcile. i wouldn't make too much of a read across the last five minutes off the back of this payrolls report. the package and d.c. is massive. tom: right now jeffrey rosenberg is joining us from black rock. the portfolio manager. how is the blackrock call nuanced that a company of noise and what we see in this jobs report, how is the yield call morphed for blackrock?

jeffrey: the changes that the focus is less on what the fed will do and monetary policy and more on the fiscal policy. when you look at this report, there is a little bit of good news, a little bit of bad news. i don't think it really changes the overall narrative from fiscal policy. market expectations for fiscal policy. it appears we are going to go to the bigger plan. with that you have this return to a pretty significant bear sleeping in the curve. that is a reflection of the impact, the expected impact, of these significant fiscal policy. i will use the plural, because the focus is on the first 1, 1 .8 trillion dollars, one point 9 trillion dollars to address covid. it will be followed by a second one, further economic fiscal interventions. that is really the focus here. that is what is changing the outlook. steepening of the curb,

increasing expectations, modestly higher interest rates. jonathan: front end of the yield curve, that is going nowhere for a long time and less the fed changes course. all the flexibility at the long end. out to 10, 30 is where you get the flexibility to shift higher in yields. how self-limiting could a selloff be? jeff: it is about the pace of the increase in terms of it being self-limiting. it is a degree of increase in long-term interest rates that starts to have a meaningful impact to expectations in the real economy. where does that show up? the transmission to the housing market. the big story in the real economy and the big beneficiary of the interest rate structure has been housing. if you had a significant disruption in terms of the steepening of the curve that is when it become self-limiting because the market worries it's gone too far, that the fed would

ramp up intervention. the second area is financial conditions. a too aggressive move on the back end of the curve steepening, paper tantrum concerns, that disrupts financial intermediation and the stock market. it probably triggers first verbal intervention and a larger intervention if the disruption is larger.that is the way it is self-limiting. the gradual bear steepening that doesn't disrupt those two areas can be absorbed. lisa: the longer term yield going up, is it because the supply of treasuries the u.s. will be selling will be going up to pay for the fiscal stimulus, or because inflation is expected to tick up with all the money circulating in the economy? jeff: it is a little bit of both peer the supply demand imbalance gets met. the question is

at what price. the key is that the fed is the major purchaser. the expectations are they will maintain that. through this year. there's a lot of question and debate about the pace of papering and halting the purchases.but we have seen from fed officials is there's no hurry to talk about tamping down any discussion of that. that fed support helps to offset the increase in expected supply. the long-term inflation expectations are taking up. we have seen that in terms of breakeven inflation. there's a moderate increase in return to some term premium on the backend of the curve, but a moderate increase relative to historical levels. tom: with blackrock this morning, futures up 16. jonathan: this bond market is fading, though. i'm going to get to the other studio to catch up with the administration. looking forward to that

conversation with the council of economic advisers member this morning. tom: they are in practice as they get used to the f arro grilling. i looked at the 27-week unemployment chart, which is quite, pre-pandemic. do we see in the data the truth of the american labor market? when everything is said and done is it ambiguous what we see, because we don't see the angst of 2008, 2011? or maybe we don't see a better america right now? michael: this has happened in a short time. the previous peak took place over a longer time. the number of people moving into long-term unemployment continues to go up, showing us what claims numbers telling us, people who lost their jobs are not coming back very quickly. stimulus can help with that, but really to come back to what we always say, and should be

tattooed on our foreheads, it is the virus decides when companies are able to reopen and people can go back to work. we lost almost 400,000 people from the labor force. there were a lot of shutdowns and we did have some storms during the month. between those two things, you have people who either couldn't get to work or didn't have a job. a lot of those jobs may come back when we start open up again. a number of states are starting to do that. lisa: i was struck by what we were talking about with non-seasonably adjusted, seasonably adjusted, and how much the scenario has been shifted because of the shift to online shopping away from brick-and-mortar retail. do we have a sense of how much the economy is transforming in a permanent way? and if people can find jobs and other avenues to replace those going away? michael: the second thing they teach you in economics class is that this time is different.

it's a terrible thing to say, but it appears a shift is underway. we all bought groceries and stuff online because we don't want to go out shopping. will that change as we go back and the economy opens up more? i assume people will want to go to stores and try stuff on if they can. part of it is a social thing, being out. i'm not sure the degree to which we've shifted online will stay, but the convenience and cost aspect will probably keep us moving in that direction, basically accelerating a trend already underway. tom: what a nuanced and interesting jobs report. the market giving us the angst that the pullback has come back nicely. the yield 1.1497. maybe not what we saw at 9:20, but pretty good. i went out with the rolodex and said who did not sleep last

night? that would be looking into festivities of the senate and a path towards a new type of stimulus. explain to our audience the distance that the democrats are from filibuster. henrietta: technically speaking they are very far from the filibuster, but practically they are up on it and getting closer every day as we go through what i expect will be a very generous interpretation of something called the byrd rule which prohibits policy agendas to be passing with a 51 vote. at 5:00 this morning the democrats unlocked reconciliation authority, which will allow them to get the stimulus out sometime in the next four weeks, maybe five, to provide as much as $1.9 trillion in stimulus to the u.s. economy with only democratic votes. tom: does the senator from west virginia apply the marginal byrd rule?

can republicans, the minority, adjust the byrd rule to steer reconciliation in their direction? henrietta: the most important person will be elizabeth mcdonough, the one who tells the democrats how much they can get away with. in practical purposes, senator manchin is someone who is going to be able to say maybe you can twist the arm of the parliamentarian but i'm not going to vote for it. that would apply to things like getting the direct payment to individuals, out to people who he thinks are in an upper income threshold, or moving the minimum wage to $15 an hour. last night there was a vote that was rejected, or supported, from the republican side saying we are not going to increase the minimum wage and hurt small businesses during a pandemic. there was democratic support to that, which points to a picture of even if budget committee chairman bernie sanders and his

chief of staff, who is extraordinarily experienced in the reconciliation process, if joe mentioned will not vote for it, or warner, or kelly, there is nothing that the byrd rule or tweaking the byrd rule can overcome what they will not do. the restrictions on policy are still very much in place by the moderates and democratic conference. lisa: so basically biden's hope for a bipartisan washington seems to be for as time goes on, rapidly fading. there's a question on if people's hopes for a second round of stimulus after this one, that perhaps they have gotten ahead of themselves given the lack of willingness to work together to push things through. do you think that it is less likely we will get some sort of infrastructure spending if democrats push this through unilaterally? henrietta: i think it's really difficult. one thing factoring in is the democrats will move to an infrastructure package and

offset it with tax increases on corporations and individuals. there is no planet where you have the votes for that. the difficulty of getting another budget through, holding another all-nighter on vote-o-rama on infrastructure spending will be more complicated than this package. we have 100% odds this bill will go through whether republicans voted in favor of another stimulus bill or not. they have a structure package will be even harder. some democrats would say, we want to do a third bill after that for fiscal year 2023. it is really hard to thread the needle for that component as you get into the 2020 midterm elections which will start march of next year. each subsequent pass forward on a partisan basis gets more difficult. what we are seeing from this president is they are extraordinarily rigorous in their messaging. there is no question that we are

in covid relief week. i would be eager to see what infrastructure week looks like under this president. lisa: you were talking about taxation. can you talk about the reconciliation process and if congress has to pay for go to reconciliation rather than a bipartisan measure? henrietta: great question. a major source of confusion on the street. what happened is the democrats authorized one point $9 trillion in deficit increases over a 10-year budget window. that means over 10 years democrats or republicans can authorize $1.9 trillion in deficit increases they don't have to pay for. do not. there are no taxes in this bill. indeed there was a vote offered by a couple of republicans that said you will not raise taxes on small businesses during a pandemic and it passed 100-0. this bill will not be offset by

tax increases at level. no taxes will be increased as a result of this bill. tom: some of the detail. fiscal and many conversations. futures up 18. down a little off the shock of a difficult one-month statistic with grimmer revisions. we bounce back not up 20, but 18. gina martin adams is with us now of bloomberg intelligence to review the equity market. we are halfway through earnings season, what are we going to learn next week on earnings, and is that the heart of this rally? gina: i think it has been an interesting earnings season because the first half was characterized by companies' remarkable feats of

expectations. when we came in a 10% drop for existing constituents of the s&p 500. we are tracking a 1% decline by the end of next week i expect that number to be positive. strong resilience on the part of companies. that translated over the course of the last week and will translate over the next few weeks into upper revision to forward forecast. i think that was a key moment for the stock market which in the early parts of the earnings season had been in the consolidation phase, not rewarding expectations, but over the last week we've seen a remarkable turnaround in performance for the stock market at large act towards cyclical's, back towards risk. i think that's because we started to see analysts forecasts estimates for 2021 growth improve. even with the beat to revenues and eps, analysts' forecasts are moving up for the year, which is remarkable considering the extent of the beat, and that is what the market will key on and

the next few weeks. lisa: how much of that upward revision to expectations for this year's profit has been baked into valuations? gina: it is interesting. all of these appear to have been baked into valuations. what is not apparently expected is what is happening on 2021. that is why we are seeing stocks move higher, a growing confidence that analysts' estimates for 24% growth in eps in 2021 may be too late as companies -- too light as companies guide us to better than expected realities and better than expected lowered earnings growth. i think there has been a lot of chatter about inflation. we went through and looked at inflation mentions in company transcripts and found interesting information. companies are mentioning inflation risk, they are starting to mention it, but mentioning it one third as much

as they did in 2019. what i think is going to happen over 2021 is we are going to find analysts' expectations for margins are quite low. they are improving expectations for revenue growth feeding through to the bottom line. i would anticipate if we don't get a ton of inflation pressure emerging, companies will produce better than expected margin growth, which will increase the ultimate earnings growth prospect for 2021 more than analysts had anticipated. lisa: a lot of people talk about inflation, the potential for higher yields and how that could eat into valuation. you are saying on the other cited the equation companies are seeing inflation that is not going up that much in their margins could be bigger than currently big in. -- currently baked in. at what point do inflation expectations created trigger for valuations despite the beats and increased forecast? gina: we have to say at least a tripling based upon where we've been in the past and when

inflation has started to creep into becoming a problem for the s&p 500. the last time we saw that was in the middle of 2018. recalling the 20 18 forecast as it peaked and started to come lowers when the market started to enter distress. what you look for is a margin forecast peak. just based on company transcripts mention of inflation, loan, the rolling pace of inflation, lack of wage inflation we saw on the jobs report this morning, all of that in summary suggests to me there is very limited risk to margins coming from inflation until we get to a much faster pace of growth. tom: thank you for the appearances, leading our coverage of bloomberg intelligence on the equity markets and in the stock market, gina martin adams. the level is 38 83. the s&p 4000 is down 31,000.90. nasdaq, 14,000, maybe not yet.

but a nice lift to the markets. one of the things that has not come into the vix, the vix really ought to be at 19 or 17. it's not. lisa: policy uncertainty. the policy of washington, d.c. and how much that could affect markets. honestly. if congress passes a 1.9 trillion dollar stimulus, what does that due to the rates market, two inflation expectations at the highest level since 2018? tom: i read the summers's a as a clinic. whether you agree or disagree the idea of the dynamics we will see forward as well. lisa, we have to turn to the super bowl. are you going to tampa? sorry, are you going to tampa? lisa: you should be sorry. i am taking your private jet. tom: this is news you can use.

spring training, soriano was phenomenal. you look across yankees spring training to the stadium and the distance and this is set back from the ocean in tampa. i am saying this from f -- for farro. it is important that john understand thatbern's steakhouse is the only reason to go to tampa and is 4.3 miles away from the stadium. lisa: i think it is going to be interesting to see some normalcy come back to the world in 2021, as it starts to perhaps get back to something familiar. tom: we are getting there. whatever your politics, it has been an amazing three point five weeks off the inauguration. jon ferro, speaking of the white house, heather will join from the council of economic

advisers. a first look from the biden administration from bloomberg on this jobs day. stay with us on bloomberg radio and bloomberg television. good morning. ♪

jonathan: from new york city, for our audience worldwide, morning. the countdown to the open starts right now. equity futures positive. the advance .4% on the s&p 500. we begin with the big issue, a downside surprise on the payroll so -- payroll. let's bring in the bloomberg team. michael mckee and abigail doolittle. a downside surprise and ugly revisions. >> this is a wolf in sheep's clothing number. it comes in at 6.3%. that is a big drop. .4% on the month. 400,000 people left the labor force. that is why we saw the unemployment go down. a lot of jobs, a restaurants closed because of covid during the month of january. there were no jobs to go to. the other number on the headline side is the number of jobs