responsive to credit conditions than they are to the s&p 500. >> it is a lack of edge. jonathan: what a mental day. from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." alongside tom keene and lisa abramowitz. i'm jonathan ferro. a wild swing of yesterday. tom: the vix, going into a today a fed meeting. to the points made in the opening, do they care about the equity markets? i am not so sure they care about the equity markets. jonathan: we will find out tomorrow.

the bulls are bullish and the bears are bearish. there is no smoking gun here that says something in terms of long-term fundamentals have changed. tom: isn't it fun. ben lail or right since 2018, -- ben lailor has been right since 2018. jonathan: if you missed yesterday, we finished positive peer nothing happened. lisa: the idea of a 4% swing is massive. the last time we saw this was back in 2008. before that, the dot-com bubble pair how much did indicate not a positive sentiment that kicks in at the end of the day, but turmoil that could continue. jonathan: let's get you up to speed. down around about one full percentage point on the s&p.

equity features down 47. the nasdaq down to 24. -1.5%. yields are higher. yields high by a basis point. crude back on the front, wti up .8%. lisa: you say the bulls are still bullish and the bears are still bearish, i am more interested in the bears, but partly because they are the ones looking to capitulate. if the bulls are bullish, they like the valuations that are than they have. here is the data i am looking at. the home price index in terms of how much momentum there is behind some of the price gains. to be see that deceleration continue? how much does that speak to a transitory nature of inflation, because this does feed into rent

prices with a lagging indicator. 10:00 a.m. we get consumer confidence for the month of january. i am less interested in the headline numbers and the trend in the economic data. we have seen a softening with the surprises. at what point is this omicron and at what point is it something else and at what point do we see a turn as we start to move around and populate in a normal way once again? microsoft reporting its earnings. i want to highlight the divergence year today. microsoft down 12%. if you take a look at the range, netflix absolutely crushed, 36% down. apple performed a little better, less than 9% of a decline. how much do we start to talk about more idiosyncratic stories? jonathan: you're trying to get tom going, aren't you?

lisa: just a little. jonathan: this from jp morgan, recent bearishness and equity online with activity momentum easing bottlenecks and what we expect to be a strong earnings season. tom: i don't have a strong opinion on this, but people centered that to what is growth going to do. the idea of slowing growth, slowing demand or the mandate that the fed must slow demand to get inflation down. these are the dynamics leading to this new volatility. jonathan: don't you think it is best of the south side? it is so boring when it is just a bull market. tom: julian emanuel writing about the idea of what does the fed have to do and what is the summary of all this and the

summary is to watch economic growth. jonathan: chris harvey of wells fargo joins us now, the head of equity strategy. the high volume cathartic puke we were waiting for. what is there? chris: that is my scientific term. typically what we see at the end of a selloff is we see volume increase, money move from the weaker hands to the stronger hands are that is what we saw yesterday. yesterday there were three things we wanted to see and got. fixed at close to 39 -- the vix at close to 39, we don't think it is sustainable. you have small caps outperform large. that is typically what you see when you have any -- and aggressive hedge fund to grossing. -- hedge fund de-grossing.

tom: what about the catharsis and we seem to be doing this in a three hour span. i don't i that. if you go back to 1942 in a slower time, catharsis took a couple days or even a week. is the new catharsis minutes? chris: everything happens faster these days. could we have more of a selloff? we could but yesterday was one half of a selloff. every time i looked down we were gapping lower. we did hear about hedge fund liquidation. we did hear about the pitch elation on the retail site -- capitulation on the retail side. everything is quicker nowadays. tom: do you step in and by this morning? what do you suggest someone do with not ample cash but someone

managing retail or institutional portfolios? jonathan: it 1-1 this morning. this is what people have been waiting for for the last three years. lisa: what are you buying? chris: i don't know what ubs is doing, but at wells fargo -- start off the rails fast -- we think you should be buying here yesterday made day wanted to get a note out and i could do it quick enough and we were looking for a 10% pullback in the mentality not to breath. we checked the boxes. we got good information on the vix, small caps, as well as the cathartic puke. we want people to buy the higher reopening trade. the covid wave is coming down in

fundamentals are improving. we are seeing a good opportunity to get more aggressive. we think the economy is fine and the fed is doing a good jive and the possibility of stagflation has diminished greatly. lisa: is their high-frequency date out you are looking at that edifies this view that we are moving past the omicron wave and the solid growth people believed in three weeks ago? chris: we look them on a state-by-state and a country basis in what you expected to see was a sharp run-up and a pretty quick decay. we are seeing that. as far as high-frequency economic data, one of the things we said coming into the year is we thought the consumer needed to normalize and we are seeing that. you saw disruption with people not being able to go to work on

the retail side. we will get through that. now more importantly what we are looking at is consumer balance sheets, which are quite strong, and that is a good sign. we will have a hiccup and some back and forth, but at the end of the day, we have a lot of pent-up demand on the leisure and travel side and the service side and that is where we think people are going to spend their money and that is where the real opportunity is during where the opportunity is. jonathan: do you think we should leave this off of the podcast? great to catch up. monday was the sixth day 1988 that the nasdaq erased a 4% declined close higher. the index all medium decline of five -- 5.5% and a drop of 7.9%

three months down the lied -- down the line. usually it was around times not so pretty. tom: what i would suggest to the research, is serious study in this. i will give credit to vanderbilt years ago and decades ago, it is not getting out of the mess that is hard to do. the hard part is when you get out, yesterday afternoon, 1:00 p.m. you look after your -- you look at your screen and the answer is, it is not the calls that are hard to the hard one is to say, let's buy today, let's get in. that is what i would focus on is the appetite to get back in. jonathan: down 1.4% on the nasdaq 100 the s&p down .9%. we saw a preview of this yesterday and it turned around quickly in the second half of

the session. someone messaged and said doing nothing is a strategy. lisa: i would argue most people are doing nothing. you have not seen massive outflows and the commensurate activity of withdrawing cash. instead this is trading and a lack of edge and conviction paired at what point is there capitulation -- conviction. at one point is there capitulation? it is not bearish, it is honest. tom: it is just lisa. jonathan: i have a ton of great messages. my favorite tkism, "and i don't have a strong opinion on this." futures down on the s&p. on tv and radio, this is bloomberg. ♪ ritika: the kremlin warns the

u.s. decision to put 8500 troops on alert in eastern europe, the biden administration singh if the troops are sent overseas they would help forces in the region. more than 100,000 russian troops have been deployed new the border with ukraine. moscow denies it is planning an invasion. robbins for boris johnson over allegations of rule breaking parties -- problems for boris johnson over allegations of rule breaking parties during lockdowns and investigations are starting. a government report on the parties may be published this week. that would add to the pressure on johnson. marred by scanners -- scandals and legal matters in the fourth quarter. credit suisse has been reeling from the collapse of capital

management. bloomberg has learned that nvidia planning a purchase. they may go connote progress in winning approval for the chip deal. southbank stepping up -- softbank stepping out for an ipo. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> what we have seen over the last few decades is less a petition in more concentration. that held the economy back. jonathan: the president focused on the domestic issues, everyone else focused on international ones. your equity market is down and down hard again, point 9% on the s&p 500. futures on the nasdaq down 1.3 6%, after the monster turnaround. -4.9% at the lows. positive .5% at the close. crude, $84 a barrel, up .8%. tom: can we agree that across

equity bonds, currencies, commodities, the correlation of ukraine is not as tight as it was 24 hours ago. jonathan: i don't know how much of yesterday's move was ukraine. tom: i am talking about the tensions yesterday more locked in. jonathan: underperformance spoke to some of those tensions. you saw the underperformance through europe through the sex and -- through the session. tom: it was comfortable yesterday. a lot of people saying what is the single thing i am watching, euro swiss backing up fractionally stronger. that is the tone of the tension of the moment. we recalibrated in washington and we do that with emily watkins joining us. one of the most interesting things i have seen in the last 24 hours, you show the flag, the

former supreme commander always talking about nothing has changed and we will show the flag as he rested when he went to san diego. how do we show the flag in estonia and show the flag where friends may be doesn't want us to show the flag so much what is the message? emily: today the message from president biden is they are going to show the flag but not deploying but having at the ready 8500 troops. they are not officially deploy foot joining nato forces in eastern europe. the white house says this change from the stance they expect could invade and they want to meet ready but there is an escalation of the stance previously paired this is much more active having presence on the ground. tom: how does the secretary of defense fit into the new plan?

we had previously where everything was run out of the 1600 pennsylvania avenue. who is running it? emily: you have the secretary of state office are still talking to european allies and ukraine as well as the white house. this is something that has gotten the complete attention of washington within the last week, beginning the week before, that all the efforts are very much focused on ukraine and russia and being able to respond appropriately to this. lisa: when you talk about a united front, i have been struck with how many stories that have come out with a leader saying how united nato nations are. how true is it and how much are they trying to give that? emily: they are trying to give that impression pages are president biden say he got off

of the call with european allies and leaders saying they are unified and on the same page. if you look closer, the argument breaks down. you are seeing countries like germany saying they will not have the same amount of support sending weapons to ukraine for assistance. you are hearing different things from european leaders on how big a threat they feel this bill up on the ukrainian border is and how imminent the threat is. the big picture, everyone is trying for unity and understands unity is important. but if you look closely at the details, it is clear not everyone is on the same page. lisa: let's talk about yesterday afternoon. president biden held a press conference trying to talk to the mastic -- the domestic issues and we are all talking about russia and ukraine. what can they do to shift the focus or are we watching a

losing battle? emily: they have to do multiple things at one point. while yesterday was focused on inflation, if you listen to some of the questions and the white house briefing, it is clear that most of washington's focus is on ukraine and the buildup on the border and what that will mean going forward. inflation is a problem and has continued to be an issue you saw biden go back to the stance of trying to bring more competition into the market and breakup major corporations. it is a matter of seeing how things go. there have been a lot of theses out there. but going forward, it is going to be a problem for president biden and the democrats going into the elections. jonathan: is the country really

focused on russia-ukraine at the moment out of d.c. come away from the journalists talk about the politics of any given day? emily: it is always the biggest question in washington, our people focused on outside of the bubble? if you look at the polling data, usually people are not focused on international things. americans are not completely oblivious to what is happening abroad. you saw that in afghanistan last year, the botched pullout from the u.s. led to a decreased opinion of president biden. you are at this point where president biden has the opportunity on the international stage to either show u.s. leadership or potentially lead to another situation that will negatively impact the public's perception of him and his ability to be president. jonathan: emily wilkins, thank you very much. high inflation is not an asset

going into the midterms later this year. i won't ask about that. lisa: i love the subtlety and what we are not going to talk about. jonathan: we have been caught on hot might -- mics before. lisa: i will say picking up on emily's point about not wanting the public's attention to get consumed with the botched move with respect to the military, how much is the afghanistan he situation -- afghanistan situation weighing in. jonathan: another lift to the brent target, $90 from the energy aspect. tom: the key thing to me is the -- based on demand.

ge is something we have to cover at some point. jonathan: your equity markets turned around big time yesterday, and this morning rolled over again. the nasdaq 100 down 1.4%. the s&p down .9%. this is bloomberg. ♪

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jonathan: the bullish and the -- the bulls are bullish and the bears are bearish. equity market negative another 1%. pick your poison. mike wilson of morgan stanley saying winter is here. one saying they bearish is overdone. we go into tomorrow. the federal today meeting starts today and concludes tomorrow. that will be at the front end of the curve. two-year yields of almost five basis points on the session. push back on higher expectation of rate hikes and balance sheet reduction.

tense up to basis points to one point 7885 -- 1.7885. -- tens up two basis points to 1.7885. energy aspects, something like 19 in the back half of the year. everybody inching higher to the year-end price targets. tom: you wonder where the low-price oil will capitulate and bring it up. it comes to global demand on the pacific rim. i think it was stunning 90 days ago to see ge announced a three company breakup. far more stunning this morning to see general electric really

put meat on the discussion. they have two divisions and two companies. getting it done and including ge aviation and another one titled renewable energy powered and digital, where it is not happening. an industrial analysts -- -- claudia sahm , and analyst joins us now. how does the central bank deal with industrial failure, industrial breakup, global competition and at the same time deal with the technological boom seen in the excellence of ge aviation? what is an economist to do? claudia: good morning. these are one of the many questions the federal reserve is puzzling over.

i would put a lot more on consumer demand but we know demand has been strong and we have heard multiple times about the production particularly the further demand we have. whether it is covid or problems in the production sector, this is not good news. if you step back and look at the big picture, industrial production looks a lot better now than it did even months ago. this is not saying much but we need anything moving in the right direction. if -- tom: if companies are clearing out, can we assume it is sustainable? claudia: having worked on consumer demand over a decade at the federal reserve, the biggest thing driving demand is income in people's pockets.

we have seen from letting the child tax credit expired, having people out even five days are not to make that work and they are knocking goodbye durable purchases that they can put off a while. we have seen a lot and will seat when we had the january numbers it is more than a fed increase it going to do in terms of pulling demand out. lisa: there is a conflation between fiscal and monetary policy and people look to monetary policy for things that have been done years and years ago. at this point, given that you have called for the fed to be patient they are not kind, at what point you see the inflation mandate becoming pressing and important for them to address at a time when it seems unclear what more they can do on the employment front.

claudia: i know the narrative is gloom and doom, but we have to step back. we had unemployment moved from below 4% last year. we had inflation but consumer spending, business investment, you name it. this is not stagflation. fiscal and monetary policy really pushed that. that is so important. it is appropriate and we have seen this messaging from jay powell and we are closer on maximum employment. it -- the thing that is not where we wanted to is inflation. i don't think they have change how they are waiting the two, but we are on the finish of unemployment and that is a big deal. lisa: partition rate has not gotten back up -- participation rates have not gotten back up and people are starting to worry about spiral.

how are you thinking about that? claudia: the two things that push up our supply and demand. consumers aren't out demanding and on the ground -- and omicron has taken some of the wind out. if the demand is not there from consumers it isn't there from employers either. i think we get to the numbers with the good numbers, we will see pretty big numbers in december. unfortunately for the fed and markets, the information that we really need fort where demand is going is january and we do not have those. tom: a lot of good analysis in the fed meeting, and one is decades of experience of linking in the dollar to other markets as well. mr. jukes suggested that the fed can slow demand. can any central bank slow demand

? claudia: absolutely. i think the fiscal support income out of peoples pockets, covid is wreaking havoc. let make a straightforward effect on demand. the fed does have an effect on the borrowing costs of consumers. the 10 year treasury is not moving in a way that is helping them, in a world without the fed moving, the fed can make it more expensive, particularly durable goods that they often have to bar to make it happen, the fed can bring demand -- have to borrow to make it happen, the fed can bring demand to cool it off. jay powell said this is to get us out of the pandemic but listening to joe biden last week, this is not going to happen. tom: and unfair question that goes to -- an unfair question

that goes to mathematics that i don't want to get into, but all sorts of lovely curves, does this get us back to an inflation rate and where is your image on where the new inflation rate is? is it 2%, is it adam posen's 3% new inflation rate or a number that is higher but not frightening? where does inflation settle at? claudia: first of all, every single one of my forecasts about where inflation is headed, and this has been true the entire pandemic, is when the pandemic moves into an endemic and we have is under control, then when that happens we are talking another six months of cutting us back to something close to 2%. the longer this goes on and the more backup we have and things of gone haywire. the fundamentals in the u.s. economy are not notably worse,

and that is a lot of the response last year, is we have this other factor that until the pandemic is under control we are going to see well above 2%. jonathan: claudia sahm , thank you for joining us. going forward from here, the runway for cpi, these are the estimates from the analysts. 4.8% cpi in 2022, in 2023, 2.4. i raised the question yesterday because it is important, has the chairman getting the -- given up on transitory even though he has given up on the word. i don't think so. tom: i agree. whatever the function is, we used it yesterday and what it means for a phenomenal gdp to come in.

the glide path gives you extended out in an imaginary state to 2024, get you to a successful fed policy and that is what they are betting on and it is like transitory perhaps is still in play. jonathan: you can have your own debate on and we need to get our hands around what the chairman thinks about the situation. when you listen to the call of the committee, they still believe that inflation faints into the middle of the year. does it fade enough to back of the four interest hikes. lisa: the reason they back from transitory because some of the aspects of transitory have fed into consumer expectations, wages, fed into some of what we have seen. it has a self fulfilling prophecy. then you have the zero covid policies in china that will continue some of the delays. how long does it take before it

becomes damaging and the path of getting to the lower rate of inflation comes catastrophic for certain pockets of the economy? jonathan: for some people we are already there and it is already embedded into long-term expectations. for some people they think it is too late for the federal reserve to engineering -- engineer a soft landing. lisa: it is a path. is it something that can be perfect goldilocks threading the needle? jonathan: the fed is still doing cutie. nasdaq futures down 1.8%. tom: i don't even want to go there. it has to be at 3:00 p.m. jonathan: futures negative. from new york city with tom keene and lisa abramowitz. this is bloomberg. ♪ with the first word news i'm , ritika gupta.

president biden had what he said was a great call on european leaders. he tweeted they discussed joint efforts to deter further russian aggression. the uss as many as 8500 troops could be sent to eastern europe to assist nato forces. another missile test from north korea, appear to have fired two missiles toward the east coast pair that tested more missiles this month than at any time since august 2019. it warned they may use long -- long missiles to deliver them. setting a squeeze from higher bills and taxes, it says british workers will need double-digit pay hikes. a warning that there is a reasonable chance that -- is the

u.s. is in the klein while china has been rising and he spoke in a wide-ranging interview. to the walt disney fortune, consumers can skip visits to theme parks if they want help worker rights. one spoke after she screamed her documentary at the sundance film festival. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪ ♪

>> one of the challenges we have is finding that new normal where

people really feel comfortable, because we run the risk that you say, we are going to be fine doing a, b, c and half the people think it is too restrictive and have it is not restrictive enough and nobody is happy. jonathan: nobody is happy. joshua sharfstein, johns hopkins bloomberg school of public health. here we go again. and the nasdaq 100, down point -- 1.9%. the turnaround yesterday just absolutely humongous. positive half of 1%. yields high on tens. crude advanced again at .5%. news from pfizer, a reporter writing that pfizer is doing a study of covid-19 vaccines that target the omicron variant in

adults as well as those who have not received another shot. pfizer down by 1%. tom: if you are confused, we are confused. it is about this pandemic and from sea to shining sea, all 50 states seem to have 50 different approaches. dr. amesh adalja joins us now. define and damage -- define an endemic for new york or someone living with three masts on and afraid to go to a restaurant and another state where there are no masks. what is an endemic and the two different states from coast to coast? dr. adalja: it means with the people. it means this is an infectious disease part of everyday life, the sort of trade-off you pay to live in civilized society with

social interaction. we see ups and downs, a baseline number of cases, hospitalizations and deaths but we do not see hospitals going into crisis. that is the remaining pin that needs to be put in place, that we need to get hospitals in place. dealing with an and deming disease, each person's risk tolerance will dictate -- with an endemic disease, each person's risk tolerance will dictate. tom: do we need masks if we are fully vast canadian -- fully vaccinated? do we need to work from home if we are fully vaccinated? dr. adalja: my answer to that is no, because you are then protected what matters. there are some people who want to be protected against mild z's, try do not is possible with

covid-19 -- against mild disease , which i do not think is possible with covid-19. there are people who will want to wear masks that have a high level of protection but eventually it will infect them if it has social interaction. people have different risk tolerance and society is not deciding which way they want to go. that is why organizations have people still working from home with restrictions. universities are probably the worst example of this, where they can't find an offramp to dealing with this the way they deal with other respiratory viruses, and that is how the policy is going from the administration. lisa: given the endemic nature people are talking about, how important is it that pfizer and biontech come out with a vaccine targeting the omicron variant? dr. adalja: we are still using a

vaccine from the wuhan variant. it becomes less and less tenable to keep using the same version of virus. it is true the vaccine protects against serious disease, hospitalization, and death, that if people are worried about infections and getting cases down, than a targeted vaccine makes sense. it will only come after the brunt of omicron passes over the united states and world. it could be the case this type of updating would be useful if new variance emerge -- variants emerge. we have to think about better vaccines, more universal vaccines and targeting variants if we are going to have a sustainable approach and get people confident. lisa: to that point, how much we will encouraged or discouraged on how they were able to alter the existing vaccines to attack

the specific variant? dr. adalja: i was impressed. you can update the vaccine very quickly. what happens is in the clinical trials, that is what slows it down because it takes a while to figure out how efficacious it is and safety profiles. it is really not about the science anymore when it comes to developing a vaccine, it is about the clinical trials and making sure people are confident enough time was taken that they will be willing to get the vaccine. mrna vaccines shrink that down from months to days. jonathan: thank you, thank you sir very much. we need to get our hands around the ability that the banks around the major cities will have a push to get people back to work, particularly in london.

new york has a bigger issue, and it is crime and making sure people feel safe to go back to the city and go to midtown and to go to some of those banks. when you speak to people in the financial district it is something they are worried about. lisa: the new mayor of new york city, this has been his platform in new york. how much can you give a sense we are returning to the old new york when it still feels a new york city battered by the pandemic. this is going to be a big issue, especially with the revenue whole, as a number of people have moved out. jonathan: it will be a big push. tom: it is already there, including the mayor holding a press conference yesterday. the immediate thing for me is the idea of how do we get back to that endemic normal. the metric i am using, and i look at the newspaper every day,

deaths right now are maybe 2000 a day. what is the flu equivalent of that? if the doctor says we have to bring this down, what is normal? i have a number in my head and it doesn't matter what i think. jonathan: looking forward to catching up throwing the week. futures down 59 on the s&p, -1.3%. nasdaq 100 down by 1.9%. it goes back to the fear of yesterday. tom: i want to report the nuances. we are not as locked in about ukraine as we were yesterday. the metric of the vix over the last five days is up three points right now and above the 30 level. to me, that is the point of tension. jonathan: i thought we did the

vix in percentages and the doll in points. i thought that was the rule. makes it feel worse than it actually is. tom: i use point. lisa: dear lord. jonathan: dow futures down. ♪

♪ >> there is a lot on for the market to digest. >> the fed is more likely to be responsive to credit conditions than they are to the s&p 500. >> i think the outlook for the balance of the year is a bit more constructive. alongside tom keene and lisa abramowicz, i'm jonathan ferro. -->> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market down by 1.3% on the s&p. on the nasdaq, we are down by almost 2%. tom: a different character to yesterday before the fun and festivities of dow 1000. part of it is getting earnings.