>> i think the frothier areas of the market will continue to have headwinds. >> we are talking about inflation in materials, inflation in just ask. >> inflation hurts, unemployment hurts. >> where do the workers go, and are they ever coming back? >> we have this narrative of fire and ice, and we think it is going to be icier. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. it is jobs day. on radio, on television, we will

go beneath the headline data in 30 minutes. the oddest of odd labor reports. jonathan: could be a wild number. no one is paying much attention to it because of omicron. 125,000 is the estimate. then onto to cpi next week. as people expect it is going to have a 7% handle again. given where crude is right now, when does this stop? it feels like we are reaching a tipping point with this conversation. we have gone from inflation stock to potentially a rate shock, and may be in the near to medium term we will be talking about a growth shock. tom: adjustment over the weekend, including to what jon is going to talk to secretary walsh about in the 9:00 hour. i just did the math on $100 a barrel, $108 a barrel roughly, and that new price adjusted is in the vicinity of $119 and $120 a barrel. we are not that far away from it.

jonathan: even with the economy growing as quickly as it is growing, the economy keeps pointing to that. look at unemployment. look at growth. and then we all say ok, look at consumer sentiment. how do they feel? consumers in america don't feel that great because inflation has got a 7% handle, crude is at $92, and wages have not been keeping up. tom: what is interesting is the backdrop. jim glassman giving us some of the fabric of business across the jp morgan world. it goes to the heart of the matter for you, which is labor nonparticipation. lisa: that it is a tight market because be born coming -- are not coming back into the labor market. what is interesting is that all morning, we are going to be saying this labor report doesn't matter, the number doesn't matter, wages are going to be really hot, you're gone to see yields go up significantly, and all of a sudden people are going to say it matters. we are going to have to pick the narrative on the highly illiquid market that is very reactive

without a sense of a compass of where the fed is going. tom: what is the data on the screen that matters to the leader of the bank of england and the leader of the european central bank? jonathan: apparently, wages. wages seem to be the big issue at the moment. the bank of england governor was essentially asked whether he is saying that people in the u.k. shouldn't ask for a big pay rise , and the bank of england governor basically said yes. you can go back and listen to the interview. that is just remarkable stuff to hear from the governor of the bank of england, and that tells you the ecb is spooked. president lagarde. watching these news conferences with these central bankers so often, you get to know them and get to understand when they feel confident, have some conviction about the message, and when they are starting to crumble. listening to president lagarde yesterday, that message was crumbling fast. tom: it crumbled from the initial headlines, including the

t word transitory, out to something that we heard and the market heard differently. a lot of just once in euro -- a lot of adjustments in the euro statistics today. i need you dollars $.80 on brent crude. jonathan: futures a little bit higher on the s&p. big weighting on amazon. interestingly in the treasury market, yields coming in a basis point on tends to 1.82 percent. flip over to germany and you've got some interesting moves on the german curve, up five basis points at the front end to -30. just doing this in real time on a bloomberg terminal. flipping over to italy to btp's. we are up another 12 basis points on the italian two-year. we started this week in the one 20's. we are finishing in the one 70's -- the 120's.

we are finishing in the 170's. tom: we've got some good perspective on fixed income and the economics of the moment and the nation's labor economy. we will take an equity moment here with nadia lovell, senior u.s. equity strategist at ubs. i want to go to the reality of the supremacy of technology, whether we see it in amazon, apple, microsoft, or in the application of technology by ups earlier this week. how do you invest for a broad technology future and avoid the present minefields in the equity market? nadia: i think you have to look for those companies with sustainable growth and market opportunities. we have seen the tech numbers this earnings season be somewhat mixed. we have seen good numbers from those companies when the outlook

isn't good, while we have seen some misses from platform names where user growth remains a challenge. so we need to see where user growth is going to be stronger and shift away from those company's having issues around user growth. jonathan: talk to me more about pricing power. amazon putting price up for prime, the stock up 12%. who has pricing power at the moment, and where is that concentrated sector to sector? nadia: when you think about pricing power, we think that some areas of tech do have pricing power, of course. we also think that managing companies are benefiting from that as well. i think parts of industrial, we have not seen the follow-through yet of those price increases that industrials have taken. we even it upgraded industrials because we do expect that to flow through later this year. lisa: we are having a domestic

onset about whether this noise we have seen is noise, or whether it is important to take into consideration to include some sort of premium for that volatility. was your you as what is your view -- what is your view? nadia: i think it is important to reassess portfolios in a volatile market. a lot of investors have benefited from being in tech for the last two years, but i think the market narrative has really shifted and that reassessment process will take some time. but i do think that as we go through a volatile period, there's opportunity to move up the portfolio in quality, and that is really our message right now to clients, to use this opportunity to add up qualities, particularly in these tech names that have longer-term growth stories behind them. lisa: how fragile is liquidity right now? nadia: the swings we have seen

in the marketplace tells us that liquidity is somewhat fragile, and i think that will take markets some time to work through, but there's a lot of cash on the sidelines because people are trying to figure out where to put that incremental dollars when you have these wide swings on a daily basis. it becomes more difficult to navigate those changes. but when we look out in the months ahead, we do think that the market is going to grind higher, so we take advantage to leg into some of those longer-term stories. tom: i look at where we are and a lot of the tone this morning. the jobs report and all of that, some thing has got to give here. so far through this earnings season, do you see a sustainable upper single-digit trust where the equity market, whether it goes up or down, will sustain itself on to a better time? nadia: i think so.

the earnings season has been quite volatile, but when you look at things in aggregate, things have not been too bad. the average beat has been about 8% trade when you put that into a historical context, that is two times the average historical beat rates. we think that earnings will really drive the markets higher, so when we look from that standpoint over the next six months or so, we think the market will grind higher, but there will continue to be bouts of volatility. jonathan: 90 lobel of -- nadia lovell of ubs. wednesday, amazon was at 3100. right now in the premarket, exactly where ed was at the open on wednesday. in the premarket, it is up 11.6 percent. the decline yesterday, down by 7.8%, doesn't that scream a lack of competence at the moment? a ton of people just didn't want to hold that name going into earnings after the experience of facebook collapsing, the

experience of netflix as well. lisa: it is lack of conviction, a lack of confidence, and suddenly it was regained overnight. this is the shocking aspect. people piled in after the earnings report, and i really do question, are we seeing the fundamental shift enough to justify the shifts in valuation to the degree we have this week? jonathan: you are basically asking is that earnings report from amazon yesterday worth $100 billion. lisa: thank you, yes. jonathan: is it? lisa: i don't know. i guess we are seeing it fade a little ahead of the open, but how do you value the fact that they are trying to charge $20 more per year for a prime mentorship -- a prime membership? jonathan: i spoke to mark hayes of pimco. he said we are holding more cash because we think this is it. we will see more of this, more volatility, more dislocations. we want to be in a position to take advantage of them. tom: he saw my triple leveraged all-cash fund. jonathan: and he thought, great

idea over at pimco. [laughter] you're still very sensitive today. what is wrong? tom: i'm rattled by the jobs report. we are 20 minutes away. it is going to be absolutely fascinating. jonathan: i talk to you more than i talked to mark. how do i even know if mark is awake right now? don't get jealous. it's all right. no idea what is going on. wti, $92. brent pushing $93 earlier. this market is wild. futures up 0.1%. brent, $92.77. not much happening on treasuries. euro stronger as we start to think about rate hikes at the ecb. the year so far anything but boring. from new york city, this is bloomberg. ♪ ritika: with the first word

news, i'm ritika gupta. vladimir putin and xi jinping have closed ranks against the u.s. and its allies on key security issues. the two met in beijing. they declared there are no limits and no forbidden zones in the friendship between russia and china. xi backed the russian demand for security guarantees from the u.s. and nato. asha has endorsed china's policy on taiwan. emison -- amazon is giving back some of what the market took away from facebook. it would be the biggest single day gain in the u.s. stock market history. amazon reported cloud sales that beat estimates, plus raise the price of amazon prime subscriptions. hong kong is coming out with some new steps to fight the coronavirus. chief executive carrie lam's has heightened social distancing rules will be proposed. the vaccine mandate will eventually require three shots and rapid covid tests will be

handed out to all hong kong residents. in germany, a third straight day of record infections. europe's largest economy aborted almost 49,000 new cases today. the seven-day instance rate has been climbing steadily since the start of the year and also set a new mark. hertz has named former goldman sachs executive stephen schork as its new steve eggs -- new chief executive. hertz filed for bankruptcy less than two years ago. it went public again in november. global news 24 hours a day on air and on bloomberg quick take. i'm ritika gupta.

>> it looks to me that the u.s. economy is a long way away from full employment based upon employment population rate. there has been a temporary shock going on. jonathan: danny blanchflower there from the former bank of england mpc member. tom keene, lisa abramowicz, and jonathan ferro. futures up 0.1% on the s&p. nasdaq futures up 0.7%. yields down to basis points at 1.81% on tens. if you strip out the nasdaq, the s&p is barely in positive territory. take a look at europe at the moment. stocks are down hard and germany by 1.5%. look at what is happening in the italian bond market. just speaking to an investor on

the bloomberg terminal now, they are fixated on what is happening in european fixed income. crude is up 2% to $92. we would have a different feel from a lot of people waking up and seeing what is going on around. tom: it is the benchmark for the gloom crew. there's a little meter on the side of the 'bramo cam that keeps track of the vix. we've got ira jersey scheduled on fixed income dynamics. gina martin adams, i believe, scheduled to be with us. right now come on the fabric of this nation and its labor economy, james glassman joins us comedy had economist at jpmorgan chase commercial banking -- joins us, the head economist at j.p. morgan chase commercial banking. what are you learning in your context of business at jamie dimon's bank?

james: the number one issue for everybody is can't find workers, having to pay more for workers. very concerned about it. a lot of people think, is this the making of a new inflation problem, assuming we get these bottlenecks behind us? i think what people are missing is that in the pandemic era, everybody has learned how to do things differently. the result is they are much more efficient. if you are more efficient, it is releasing resources you can use however you want. so i hear the talk at the ground level, but when i step back and look at what is going on in the u.s., pay is rising twice as fast as it was. profit margins are also rising. that tells you we are in the middle of it. tom: decades of work on america's productivity and this new productivity. amazon and the others, are they simply on a pass to $20, $21 an hour? james: probably.

everyone has shifted. everybody has learned that online activity has given a lot of benefits, so amazon, this event is accelerating the shift away from brick-and-mortar to online, and they enjoy, when this kind of thing happens, amazon can't keep up with it, so i think the pandemic is just enhancing their ability to pay more to workers. this is why people are competing with amazon if you are a manufacturer and your operation happens to be neuritis to reach and center. you're competing with amazon for those workers, and that is helping to drive pay tire levels. -- pay to higher levels. lisa: it also might lead to a part dissipation rate that stays low if you're talking about automation and the productivity from basically eliminating some of the necessity of some jobs. what is your view on the participation rate in this new product to waive that you see? james: because of the demographics, it has been sliding over time, but the

pandemic through us off course. think what the pandemic it is a transitory thing. most of the folks who dropped out, a handful were over 65, but most of them were younger. when we were providing the support, the federal government support helped people get through it. but now that support is disappearing. so i think we are going to see more and more people coming back. we still have about 2 million people who are out there who have left. my guess is over the course of this year, the fact that companies are paying more for workers is an added incentive to get people back in. i think we will see a lot of this comeback. the problem for the fed is we are not at maximum employment, but there is uncertainty about how quickly this is going to be happening. i think the economy has made enough progress that they really got to get to the sidelines, and that is why we are where we are. jonathan: forgive me for jumping in. we've got to go. jim glassman of j.p. morgan

chase commercial banking, thank you. this from bnp paribas. the ecb left the door wide open for rate hikes. they expect 25 basis points in both september and december, it further camilla to 50 basis point hikes next year, taking the depot rate deposited 50 by the end of 2023. that is 100 basis points worth in around 18 months, over a period for them of less than that. when we came into 2022, looking for nothing from the ecb. we have reset and we are resetting in markets in europe in a big way. tom: i know we've got to go to the jobs report, but the seismic shift of moving from a negative interest rate regime out to something with a positive statistic on it, this is truly original for international finance. jonathan: are we pushing it too far, too quickly in europe? i don't know, but that market bringing down a bit on the equity side and the 15 khamsai -- and the fixed income side. lisa: you are seeing credit

spreads, the implication widening really significantly. basically, this is what happened during the taper tantrum of 2013 in the united states, where you solve rates selloff, but you also saw that extra cushion to compensate for risk increase at the same time. how long can this continue before the ecb back draft? jonathan: are you saying we are getting at tantrum out of europe this time around? lisa: well, we are not seeing it in the united states. we have seen a contained credit market in the u.s. in europe right now, there is a move that is particularly six significant -- particularly significant and is getting our attention. jonathan: we have had guest after guest get freezing cold water, ice cold, and poured it all over the payrolls report that comes out in five minutes, mike. are you one of those? michael: i was calling this perhaps one of the most interesting but inconsequential reports in years because there are many statistical issues with the january jobs numbers that people will look past it. we already know what the fed is

going to do. there really isn't all a lot of implication for this traders. jonathan: looking forward to your coverage. in the hot seat, ready to lead us through it, the number drops in four minutes away. tom: what matters? i'm sorry, it is about the wage dynamic we will see. i understand michael knows way better than this on me, but at 7.3% inflation next week, real incomes in america are not only negative, but big negative, and they have been negative now for a longer and longer time. that will be front and center with your conversation with the secretary of labor. jonathan: it is tough to spin. if the payroll support is a rough number, that is easy to spin. but 7% on inflation, crude $92, prices going higher, a difficult moment. lisa: it is now what are they going to do about it, what kind of proposal can they put forward to make their agenda. jonathan: we are performance away. your payrolls report in america

just four minutes away. we will whip through the price action with jeff rosenberg of blackrock. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market just about in positive territory on s&p. the payrolls report drops next.

jonathan: 10 seconds away from a highly unpredictable jobs report. futures up .1% on the s&p on the nasdaq up .8%. tends, 1.82. on 2, 1 .22. a selloff in the european debt market as we wait for the attention to shift from europe to a massive upside surprise in america. michael mckee. run me through this one. michael: i do not get this. 467,000, and that is a +, 400 67,000 jobs created or restored in january. there implement rate does go up to 4%. i would guess that is because more people came back -- the

unemployment rate goes up to 4%. an astounding number given the fact that 125 was the forecast and there were people expecting -400,000. i am looking through all of this. mind to pick out a number. tom: this is been the biggest miss in history. take your time. michael: i'm wondering what the folks at adp are thinking. the labor force participation rate stays at 62.2%, although that had been 61.9%. they may have revised that, although it does not say that immediately. the average hourly earnings on a month over month basis up .7%, that is a huge gain after the month before.

we were thinking that number would go up because a lot of people have lost their jobs over the low-wage industries. that pushes average hourly earnings to 5.7% on a year-over-year basis. we have private payrolls up 444,000. that was expected to be only 35,000. a rather amazing number. go ahead and tell us what the markets are doing. i will look at the breakdown. jonathan: i said to lisa abramowicz 500,000, but i also said negative. [laughter] the attitude towards this job number was if it is bad ignore it, and if it is good let's go. yields up on the two year. 1.27. 10's at 1.88. the curve is shifting higher. euro-dollar coming back in after

a pop earlier. we have a lift there on the u.s. dollar. full steam ahead to next week, the cpi in america expected to have a seven handle. tom: we are multitasking. why i am talking -- while i am talking john will study and lisa will study. the 10 year yield four basis points higher. the 210 spread has not moved. the bond market is moving in tandem to a new higher real regime. mike, do you have any wisdom? michael: i do not know if it is wisdom but i'm looking at the categories that expanded the most. it does seem, and i do not want to throw a lot of cold water on a good number, it does seem a lot of this may be related to seasonal. this is the month in which all

the people who in the past have been hired for the holidays get laid off. that does not seem to have happened this time. retail trade employment rose by 61,000. building material and garden supply stores up 6000. transportation and warehousing, everybody hired couriers because we were all ordering online, jobs went up 54,000 in january. employment in local government education, this is a month where we see people fall off the roles , rose by 29,000 in january. there is a seasonal component that did seem to add some, but that did not seem to add up to 467,000 jobs. manufacturing jobs were up only 13,000, which is down from 32,000 the month before. odd things in here as we expected, but not in the same way we expected them.

we have to mention this is the month in which they revised a lot of the data for benchmarking and it does show we have some changes in that area that people -- in terms of the overall labor force, it has gone up. the labor force is 163 million -- those numbers are not comparable because they had in. that does affect what happens with the unemployment rate on the participation rate. jonathan: this is the game and this is the response. neil dutta at renaissance macro. "revision search 709,000 over the last two months. january beat expectations. the fed is looking increasingly offsides relative to the dataflow. you cannot rollout of 50 basis points move at the march fomc.

" not my view. that is neil dutta. tom: will be a lot of heat taken that this is an arcane science and they do not know what they are doing. this is difficult to do. it is all original. i have a 1.1 million job formation statistic. that is absolutely extraordinary. i want you to bring in jeffrey rosenberg as the markets move but i want to rip up the script and leave michael mckee here to give us further study on the most stunning miss i've ever seen. jonathan: this is a monster upside surprise. 467,000 is the number. wages look fantastic. the two year, yields tighter by nine basis points, we approach 1.30. michael: i want to jump in with

one number. that 709,000 you were talking about, december was revised up from 199 to 5000. there is a note that suggests the seasonal factors have been updated to better distinguish what was covid and what was seasonal. it is not just that there was a huge gain this month, there was a huge gate last month as well. jonathan: let's get to jeff from blackrock. we were told to ignore this one. we are not ignoring it now. why? jeffrey: you cannot ignore this one. it has a lot of moving pieces. i think mike has it right in terms of the revisions is really important, you do not see the expected omicron impact. a lot of that could be due to the difficulty of seasonal adjustment. the other pieces of this report are also very strong in terms of the wage piece and the labor

force participation rate. taken in total, you talked about the market reaction and neil's comments. this is not the little bit of look past this one, but much more about what it tells us in terms of the revisions as well as what it is saying today. this is the market really screeching -- really screaming. that will continue to keep the pressure on the fed and that is why you're seeing a move in the front end. the market is pricing this acceleration in near-term tightening. i think that will remain the theme for a while. this report does a lot to continue to accelerate that theme of up fronting the pace of fed hikes. i do not know if that is necessary 50 but it is about how quickly they get it in this year . a very rapid change from expecting a quarterly pace canal every meeting -- pace to now

every meeting. the surprise is this is just telling us how overheated this labor market is. lisa: when you put this report together with the bank of england, the european central bank, the shift we have seen in markets as globally there is a feeling that general inflation is getting too hot. have you shifted your investment perspective at all? jeffrey: there is still this distinction between the u.s., the bank of england, and the ecb. we heard a lot about that yesterday from christine lagarde. overall in terms of the outlook -- the labor market will sit at the center of that debate. for europe that is still to be seen. what you're seeing in today's report for the u.s. as well as

the bank of england is the strength and the labor market is the risk of a more persistent inflationary outcome. that strong of a labor market is about the fears of wage price spiral. it shifts from the supply side covid disruption narrative to something much more difficult for policymakers to rein in, which is wage price spiral. tom: the 10 year inflation adjustment yield is the measurement of -0.54, this on a day when we really consider finding a positive rate regime across most if not all of europe. i will assume the path from here to a flatware positive 10 year real yield has nonlinearity in it. what will be the impact to the overall financial system and the overall economy if the 10 year real yield migrates towards

zero? jeffrey: the question in your question, is it a slow migration or is it a nonlinearity? the fed does not like nonlinearity because the market does not deal well with nonlinearity. that is too rapid of a tightening on financial conditions. the fed wants to tighten financial conditions but it does not want to over tighten. it is a very tough path for the fed to take. that is the argument against a 50 basis point shock because it is a bigger shock, it risks a narrative getting away from the fed that they are way behind the curve and inflation is accelerating out of control, whereas in their forecast, and the market consensus forecast is inflation will start to come down. you do not want to over tighten and overshot the market. the path towards real interest rates globally, and i think that is the message for the week, is

we will exit this error of persistent negative real interest rates. the challenge is can you exit that era without a bigger financial tightening, a bigger financial accident? clearly that is what policymakers are going to be aiming for. the guidance around that is going to be to try to tighten without over tightening. jonathan: as an investor, are you having fun? is this fun or is this brutal? jeffrey: it depends on your investment process and what you have for levers. if you have a diversified portfolio across directional, which is are we betting on interest rates going up or going down, that is a very difficult set of tools. the other thing that is happening is quite advantageous to a different toolkit, that is a toolkit that exploits differences there cross interest rates, differences in dispersion

in both micro and macro markets is actually starting to become a much better environment for those types of strategies. while it is difficult in terms of direction, as the fed and global central banks pullback from this era of incredible liquidity and policy accommodation that is compressed differences and reduces opportunity, you see opportunity rise in the cross-section. a little bit of glass half-empty, glass half full. jeffrey: for those of you living in the real world, you have not been. omicron did not happen. 460 7000 is the number for january. this is incredible to get your teeth through. we've been told repeatedly ignore the payrolls number, then yields exploding. i will discuss this with jeff colleague rick rieder of

blackrock. anastasia amoroso will join in, mike collins of pgim, too. later we will catch up with the white house. i imagine the interview secretary walsh bobby was going to do -- lisa: it is very different. jonathan: i believe he was about to tell me about the difference between the household survey and why this number was so bad. it will be a different one. lisa: it will be one about inflation. one about a labor market that looks increasingly tight. the european market is in shock still from the ecb pivot yesterday. why has the u.s. market not reacted? it looks like the reaction is today. jeff, do you think there is more to come in this recalibration come as you said we are moving towards a real -- a new regime where negative real rates are no longer? jeffrey: i think there is a lot

of room to go and a debate growing around how quickly the ecb has to move. there is still a lot more data dependence. you saw the first crack in european inflation data. that is what has changed the narrative and force the ecb off the somewhat conditional promises of no rate hikes. they have been bumped by the reality that inflation is rolling. they have a different underlying fundamental between wages than what we are seeing in the u.s.. that is partly why you saw less of reaction in the u.s. relative to a strong reaction. also in that cross-section, where was the biggest reaction? jonathan mentioned it earlier. the spectacular increases in italian yield. the cross-section of european central bank support is compressed. it has muted the fundamental

differences in where yields should trade across the european commonwealth. it has pullback, not only on the level of that interest rate support, you will see a lot more in the cross-section. that will be a challenge to the ecb but it is very much part of what we will seat reemerge as the ecb is forced to pull back on this tremendous era of policy accommodation. tom: jeffrey rosenberg, thank you so much. lisa abramowicz and tom keene. an extraordinary set of days. the ecb and bank of england with their shop, and today the mother of all shocks i have ever seen. gina martin adams scheduled to be with us on equities, ira jersey in moments. i want to go to mike mckee on wage inflation. i just did a fancy bloomberg's study. average hourly earnings 5.7%, i did a thing called a log

extrapolation and it is supposed to be 3.9%. we have a gap of what wage inflation is supposed to be versus where it is now. is that enough for the fed to really think about march or even a before march meeting? michael: i would have to say no at this point. at the risk of boring everybody. the reason being they will have to take apart these numbers. i've been looking at the revisions. we had that 709,000 jobs from the revisions to november and december. you go back and you look at what they have revised previously in 2021. the number for june is 405,000 less than it was all stop number for july 402,000 less than it was. the numbers are offsetting and perhaps what we are seeing when they bring down the jobs they added back in in the 709,000 plus the 467,000, you may have

different categories. it may be a category issue that has pushed up this on a one month basis. they will have to wait and see the next month before they get a better idea of the trend in wages. tom: my head is spinning on a friday. thank you so much. he will be giving us much more value on this through the morning. ira jersey with us on the bond market. when you look at the continuum and then the deep liquid money fund of this economy, on the shock of this labor economy, what you look at in your bond world to give you information? ira: the shape of the yield curve at this point, and will the yield curve continue to flatten more significantly than what forward yields are already pricing? right now you're getting that big flattening of the yield curve, which is a sign that on only will the federal reserve be hawkish, but maybe they will continue to be hawkish into 2023.

we were only pricing for the fed to hike six times. i think the market might have to reevaluate after some of these numbers. some of the information michael mckee just pointed out with the back revisions from prior years might not take all of the sting out of some of the data. when we look at things like aggregate labor income, the amount of jobs, hours worked, hourly earnings, that is still growing at a decent pace and suggests to me that we will continue to selloff in the bond market as inflation looks to be more sustained than we thought. tom: labor participation, actually the needle moved. lisa: which is surprising considering a lot of people expected workers to remain on the sidelines. i am looking at moves in the markets. real yields on 10 year treasuries moving to the highest level since midyear 2020.

we heard from patrick harker of the philly fed that if there was inflation that came in significantly higher, he would consider a 50 basis point rate hike in the march meeting. you think that is more on the table now that it has been? ira: i think the market is going to price for that possibility. i do not think ultimately the fed will do that. it is much more likely the fed hikes every meeting than they actually go 50 in any particular meeting. when you are leading zero, you do not want to slap the patient and hope they recover. i think it is going to be a real challenge for the fed to basically communicate that we will go regular but we will not go massively. we will not go 50 in march. could they go 50 in june? i think eventually they might do a 50. not as a first move. tom: the chart of the

inflation-adjusted 10 year yield has now broken out to a new lesser negative statistic. that in itself is extraordinary. up we go on radio. we have broken out near .5% negative on the 10 year yield. how does that change the short-term yield space? ira: you have seen this big uptick in 10 year tip yield and now we are right around what our model shows is fair value. we are pretty close to that. it is really that front end. what is going on in the two year real yield. those have come back even faster than the 10 year. i think that is a sign the market does things, that the federal reserve is going to hike. when they start hiking i think real yields will selloff

significantly and longer-term inflation expectations the market is pricing might stay exactly where they are. what that means is for nominal treasury yields to move you have to watch the tips market and they might start moving one-for-one, which is what is happening today. tom: ira jersey, thank you so much. the publication it will be something over the weekend. gina martin adams with us now on the equity side at bloomberg intelligence. gina, how do you stay in the market after the week we have seen? gina: you first take an observation that even after the week we have seen we are still not back to testing last week's lows. when we look at the grand scheme of things we are an environment where the fed is catching up to reality. growth is strong and we are seeing that in the earnings numbers. the vast majority of companies that are reporting earnings are beating expectations, notwithstanding what we saw the day before yesterday.

overall earnings are still growing, still growing at a faster than expected pace and importantly companies are revising the revenue expectations higher, so we are seeing analyst expectations improved as the economy is much stronger than anyone had anticipated and continues to be so. the problem is what is happening with inflation. i look at this as short-term weakness. we probably had that weakness extended as the fed played catch up to economic reality and trying to get inflation somewhat contained. in the meantime oil have a choppy market. the number out of the employment report this morning was the average hourly earnings. that is a very inflationary number. we are seeing that in margin forecast. until margin forecast stabilize you will not see reestablishment of strong uptrends. lisa: with the soup you just put out, it is a soup of the fed and

inflation and earnings and the fundamental backdrop, how much do people have to bake in a vault -- a volatility premium before seeing value in stocks that appear beaten up based on recent trends? gina: here is where we have friction. equity risk premium is abnormally large considering where we are in the economic cycle and how extended the bull market has been. it is not as large as it was in early 2020, but it is extremely large relative to history. for most of the last decade or so, we have stayed with an equity risk premium that is in the upper quintile of long-term history. the problem is how much does the bond market adjust? if the bond market continues adjusting that depletes the equity risk premium we have to see stronger earnings results to keep the equity risk premium somewhat higher. we have embedded some degree of risk premium. the problem is the bond market

is adjusting as well. we need to see earnings offset that adjustment. lisa: everyone has been 40 to the bond market as a source of risk right now for equities with the fundamentals looking good. what we saw from facebook and amazon, from all of the companies highlights this degree of volatility based on fundamentals that is as prep -- that is unprecedented. what you make of that? gina: the bigger story is all of those companies dramatically beat expectations except for meta. the bigger story there for me is just like the rest of the s&p 500, analysts are struggling to capture these moving parts of much stronger than expected growth but also much stronger than expected inflation. meta i view as something of an isolated event, specific to social media.

pretty adequately forecast when they change their name to meta, suggesting their business model is under some degree of duress, they will refocus efforts going forward. every other one of those companies dramatically beat expectations and that is the big story for s&p 500 earnings was companies were still trouncing forecast. the trouble is regarding inflation, and that is where we see some depression to the overall economic growth. tom: i want to cut in. the 10 year yield showing the gloom of the pandemic and this natural disaster with the -1.00. we are halfway back to zero. we have just breached -0.500. a lot of numbers. all you need to know is the tenure inflation-adjusted yield is moving up rapidly towards zero. is that good for the banks?

is the great missed call, a lot of people say the banks are over , is this year for james dimon, for brian moynihan? gina: it is the year for value from absolutely, it is the year for energy as well as financials. we have lead to little bit more on energy and oil prices are continuing to spike. we have seen strong demand to limited surprised for traditional as well as alternative energy products. i would suggest financials are very well positioned in an environment where growth is strong but inflations are also strong. the trick for financials is the planning yield curve. while we see yields moving higher, the yield curve is flattening and that could be a problem for financials. that said, it is not yet. we are seeing revenues better than expected for the financial space as well. they should be able to overwhelm that flattening yield curve.

the value does tender perform best in inflationary conditions like we had today and in periods in which the fed is increasing rates to catch up to inflation. tom: gina martin adams, thank you so much. get back to work. the publication by pro's like gina martin adams and ira jersey will be absolutely stunning. on the 210 spread, the difference in yield between the two year and the tenure, we are at 61 basis points, and that mark, as we just showed the 10 year yield equivalent is 57.08. we are not there yet to a flatter curve. lisa: you are saying that with the gap with other yield spaces, which is something people have been watching for potential curve inversion. three basis points separating those denominations. i want to go back to something

jeffrey rosenberg said. this goes to the chart you said. "we are moving to a regime were negative real yields will no longer be the normal." that is jeffrey rosenberg's view. "this seachange has unpredictable consequences on markets and to try to get your hands around them speech that noise." i would say an historic day but i'm not telling the truth. a historic 40 hours from london to frankfurt. thank you to manus cranny from london -- from frankfurt. all i can say today is stunning. stay with us on radio and television. this is bloomberg. ♪ jonathan: dear remember when everybody told you to ignore it? they got -- they're not ignoring it now. monster upside surprise on the payrolls report.

"the captains the open" -- the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: we begin with the big issue. a totally unpredictable payrolls report. >> the january number. >> payrolls numbers. >> do not see the expected omicron impact. >> is a just omicron, final pair back in hiring. >> the labor market is extremely tight. >> you adjusting the biggest sick out of your entire life. >> i do not think the number will be much. >> we will ignore if we can.