let's do a quick check of the markets. lots of pain. at one point the nasdaq was down a whopping 5%. this comes as you see yields bursting through. that's an almost 16 basis point moving one day. that is the volatility of mixed growth stocks not that attractive. the dollar index higher and higher, testing key levels of 2016, 2020 and perhaps bursting through. crude a little bit of a lower move but down .4% in line with the broader chris got picture. here to break it down is gina martin adams. walk us through what you -- what

is driving the trade right now. gina: i think it is a little bit of both. a lot of what we are seeing reflects happened yesterday. we have a rough market today after an extraordinary gain yesterday. the longer-term scheme of things, lower lows and lower highs. the trend is breaking down. why? interest rates, even with the commentary yesterday, interest rates are going higher. expectations did not change. we expect to see the treasury yield above 3% two years from now. the equity market has the price for that. at the same time inflation is very strong. we will find out next week if we finally passed our peak. investors are concerned inflation is trading a downtrend and growth expectations. over the last couple of weeks we have seen estimate revisions for s&p 500 companies shifting to

the negative it had been a tailwind for stocks through march. it turned sour in april and really soured towards in of the month. kriti: i'm glad you brought of earnings. sometimes they get shoved into the back corner. i'm curious about the earnings picture. you have earnings coming up from ebay, wayfair, shopify. you have starbucks, airbnb, the airlines were growth is strong. how much of this is a regional picture? the rest of the world perhaps not so much. gina: that's a great point. part of it is the regional picture. part is also where they are shopping picture, because in the 2020-2021 peak of the pandemic experience in the united states we did see investors flock to the at home plate. valuations for that group got to be enormously high relative to the rest of the market.

now we are experiencing downward revision in that space. at the same time investors completely avoided anything that required the consumer to leave their house. that group is saying traffic is pretty great right now. that is where the opportunity has emerged in the equity market. that rotation is vicious inside the u.s. equity market. the growth outlook for the rest of the world has deteriorated over the last couple of months. we have seen obviously europe reflecting very rapid commodity cost increases being the closest market to what's happening in the ukraine with russia. we have seen a shutdown in china dragging on the asian numbers. the u.s. is the only game left in addition to latin america which is also doing quite well. kriti: i have to ask you about the valuations picture. no one has carried in the last couple of years given the trading. now we are looking at valuations. take us back to 2019 and 2020

one a lot of concerns were similar to what we are hearing now. decelerating growth. very lucky growth as vacations. what is the take on valuation? gina: valuations have de-rated to some degree. we have valuations for the index that are back below pre-pandemic five-year average. valuations for the index have normalized along with interest rates. the problem we have seen in the s&p 500 is we have an enormous valuation premium for the mega cap stocks and the tech stocks. generally commanding an enormous valuation premium. when you think about broad terms, what is the net income share of this group relative to its market cap share of the index? the difference is still 400 basis points. we are paying too much even for the net income share of this group reflecting that pandemic environment. we are coming off that now.

kriti: we will see how quickly we can reverse. gina, thank you so much. i a pleasure to have you. after the biggest rate hike in decades fed chair powell assured americans policymakers will do what it takes to curve inflation by setting a path forward. joining us now is steve matthews who was in the room yesterday with the fed chair. really witnessing history when it comes to what we are seeing. the first 50 basis point rate hike and 22 years. as we are starting to map out the aggressive rate hike regime what is going to take for the fed to reverse course? steve: well, it was interesting. there was kind of a mixed message from powell yesterday. on the one hand he said in the markets leapt ahead was we are not going to see a 75 basis point increase. we are going to see smaller increases.

he said 50 basis points in the next couple of meetings. after that he left it open ended. he was asked about whether the fed would be restrictive, meaning going about what they see as a neutral rate around 2.5%. he said if we need to we will go above neutral. i think he is saying it is data dependent. the data obviously, 8.5% inflation right now. it was a peak rate of inflation. until that starts to come down they will continue pedal to the metal. kriti: i have to ask about the rate hike in tandem with the balance sheet reduction. this is something you started back -- you said starts on june 1. the monetary policy largely works of expectation. is he going to carry the rate hike regime?

steve: he said the balance sheet change should be about the equivalent of one rate hike, which would be presumably a quarter-point. the idea from the fed's standpoint is this will run in the background. they are going to bring it up over three months to the level where it is reducing about $1 trillion in assets each year. but it will be running in the background. they are not going to be changing it each month. the idea is this will be contributing to downward pressure on rates. certainly at the longer end. the idea is it is not going to be there principle tool, the fed funds rate. kriti: steve matthews, thank you so much for joining us. the fed was not the only central

bank and the headline in the last 24 hours. bank of england boosting interest rates to the highest level since 2009. joining us is chief european economist jamie rush. thank you for joining us. what is striking about what the d.o.b. did is the increased -- boe did is increased and released not so rosy growth forecasts at the same time. how is it squaring the two? jamie: that's exactly right. it's a dovish hike. they really pushed back on market pricing for rates going forward. they see mutual rates of 1% to 1.5% in the market wants 2.5% as a terminal rate for the u.k. they think it is too much tightening too fast. that is then used to communicate

that to markets. this is how it works in the u.k. the bank takes the expectation for rates and says that means -- what it means for the economy. that is their verdict. they did not say anything about an immediate decision. it was more of a comment on broad parameters of monetary policy. kriti: as we talked about the boe we are looking at a cable rate of 123. the likelihood of that dropping to 120 is larger than euro-dollar parity. one of the headlines was not just about the vote when it comes to the committee members. it was about two that sought guidance of a rate hike that was not appropriate. can you expand on those two that are saying maybe this is too much too fast? jamie: that is in keeping with their own forecasts.

we are expecting the impact of the board ukraine is going to get bigger -- the war in ukraine is going to get bigger. it will take some of the heat out of the labor market for about half a year. it is actually not bad to keep on this path with the interest rates. i think that is the concern the two numbers were expressing. until we see the data to the extent we are expecting we will press ahead. kriti: jamie rush, thank you so much as always for your time. time for bloomberg's first word. mark: the coronavirus death toll probably climbed almost 15 million people in the first two years. one out of every 500 people worldwide. that's according to the world health organization. the new estimate far higher than

the official numbers for 2020 and 2021 includes deaths directly due to covid infection and those indirectly caused by the pandemic disruptions. the deadly toll in the u.s. is twice the figures of individual governments reports showing 6.2 million covid deaths. the top infectious disease doctor is criticizing china's covid zero. dr. anthony fauci says lockdowns like the one still underway in shanghai will not work in the long run. he tells a german talk chinese government should be using it's time to boost vaccination rates among the elderly and getting more infected -- effective shouts than the one that is delivering. china is not backing away from its hard-line approach to the pandemic. international donors gathered in warsaw to drum up more humanitarian aid for ukraine as it seeks to evacuate civilians. european union pledged an

additional aid package to help displaced people. blood in her zelenskyy also launched a look -- volodymyr zelenskyy also lost a global fundraising site. -- to allow for further evacuations. corporations could find a more expensive to pay their employees' travel cost for abortion services if one key senator gets his way. marco rubio is proposing a bill that would prevent companies from writing off those travel costs as business expenses. senator rubio says the tax code should be profamily and promote a culture of life. he's a potential republican presidential contender in 2024. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton.

this is bloomberg. ♪

kriti: this is bloomberg markets. a huge selloff today. after three days of gains ahead of this massive historic no other word to put it fed rate meeting, a 50 basis point hike that a lot of people were expecting. that is where you saw the optimism the markets, until today. a lot of optimism wiped out to where we are seeing the s&p 500 back in correction territory. the drawdown now down 13% from peak to trough. windows the selling really let up -- when does the selling let up? are the bears right for with the

market should be doing? joining us now is david wright. he says we are heading for the biggest bear market of his life. thank you for joining us as always. walk us through why this selloff isn't overdone? david: the market is a behavioral creature. all the logic about fundamentals takes you to a certain point if you try to pick stocks for a three to six month period. we have obviously two major bear markets the century where the s&p fell 50% and then 56%. i believe the signs are there again that we are in the second or third inning of another one of those multi-quarter bear markets. we got very complacent over the last two years, essentially

record complacency and record household ownership of stocks. we have already seen some of the large metrics reversing. i believe we are already pretty firmly in a big bear market. kriti: i have to ask simply -- you mentioned the valuations but is this the new normal when it comes to stocks? yes, stocks are soaring and there's a lot of enthusiasm, but we have seen this going back to the 1960's with the nifty 50. we sought in the 1980's with this reading driven growth story. is this all that new? david: not at all. i'm not saying it is. it happened in the nifty 50 ultimately. whenever everybody gets on one side of the boat in a big way, you are looking for the potential of a reversal in sentiment because it is a behavioral phenomenon.

i think the greater the complacency, the greater the risk. a lot of inexperienced investors are on the wrong side. sooner or later they will capitulate. a lot of institutions are on the wrong side because the portfolio managers are afraid of having money in cash and underperforming. we are seeing a lot of signs it is in. we have seen the russell and the nasdaq peak early. nasdaq peak back in november. s&p and dow are there until the first couple of days in january. this is all very typical of nature bear markets. nothing new. kriti: so why not buy the dip? david: you will lose money. i believe the market will go at least 15% below its peak. we have seen twice the century. there will be some really impressive rallies. if you're a good trader and you

have excellent discipline, we use stops on everything we hold. stops are clearly the best way to limit your downside. then go ahead. i don't think most households are going to be that disciplined. they are going to be scared at the right time to buy. they're going to be complacent again perhaps or confident the bear market is over at the wrong time. we will see some multi-month rallies that are very impressive. very few people can play those successfully. kriti: the united states has the growing demographic. if you're a long-term investor in the s&p 500, history has shown investing in the stock market is the way to go. why would you hop out of that her cash which is subject to those inflationary changes?

david: we hop out because we use stops, want to limit the downside and diversified folios. that is what we have been doing for 35 years. it isn't true that stocks are in for the long run. we had the lost decade already this century. how many retired people can afford to have the stock portion of their portfolio gained nothing for 10 years? plus, if they are taking money out, they never really get back. we are seeing the beginning of a really big bear market, but the flipside is they will be major opportunity at the bottom. we make our biggest quarters in our biggest years after major selloffs because we have the discipline to get back in. it's important to have the discipline to limit your downside number one. so you aren't really scared when the upturn comes. we will see some major rallies

after the bear market. kriti: i want to ask one more quick question here. cash and bonds seem to be the alternative to the stock market. in an inflationary environment why is that not a losing trade? david: bonds are losing trade, absolutely. commodities and things linked to commodities now are the way to go. there have been many times in history when it was really the best idea to keep your powder dry and not be losing money relative to inflation. bonds right now where very bad idea. we have seen bonds, high rate, domestic and foreign decline substantially over the last four months. you want to be out of those, including muni bond. they have declined a lot in value. the turn will come in the bond market before the stock market. keep your eyes out over the next month. kriti: thank you so much, we

will. david wright, and extreme bear when it comes to the stock market. we are continuing to see the losses down re-.3% in the s&p 500. still ahead after the rest of the market dropped. twitter shares rise as elon musk gets an extra 7.1 billion dollars in funding for his takeover of the social network. we will discuss the latest next. this is bloomberg. ♪

kriti: this is bloomberg markets. as we see a sea of red, one stock in the greenest twitter. elon musk secured $7 billion in new financing commitments. joining us now with the details as ed ludlow. this used to be a deal nobody wanted to touch and now you are

seeing $7.1 billion in the works. ed: it's interesting, changes in the structure of the deal. the margin loan is reduced from $12.5 billion to $6.25 billion. then as a who's who. larry ellison, saudi prince, andrews and horwitz the base contributes a $500 million. it raises questions about what those people want to do with the twitter platform and why did elon musk go to them as investors. kriti: i have to ask about reports that elon musk could be ceo of twitter. what does that do to tesla shares? ed: it's interesting. it's a big question right now. twitter insiders i spoke to agree the current c-suite will not survive. jack dorsey had come out and support of -- and the kind of

statement that was put up. he was quoted the deal was announced in jack dorsey tweeted about it. we have seen jack dorsey would push for him to remain in place. elon musk is going to install himself as ceo for a few months temporarily it seems. it is a long way to go before the deal closes. we have reports that the sec is looking at this initially, but busy elon. kriti: thank you so much as always for breaking it down. twitter shares higher by about 3%. the s&p 500 down by about 3%. you are seeing that key divergence. we will talk about this more next. stick with us. this is bloomberg. ♪

jon: welcome to bloomberg markets. really seeing a huge selloff. going back to september of 2020. the antitrust concerns ahead of the election. you are seeing bonds as well. 16 basis point move in the 10-year yield. highs barely crossing through the 3% level. it is really that strengthen the dollar we want to bring to your attention. 123. does it drop below 120? brent crude a little higher on the opec headlines. a risk off day when you look all in all. jon: across north america, here in canada we have been watching the benchmark exchange under a lot of pressure. like the textiles in new york, you have names like shopify they came up with quarterly reports that were disappointing.

investors are shying away from cannabis stocks or crypto related names, and even in the gold sector where some have been wondering what would happen with bullion because of that u.s. dollar rally. it seems investors are shying away from alexa b -- away from the likes of beear gold. kriti: there's a lot to digest with these macro issues. a highlight for today in the last 24 hours will be central banks. the fed reserve, the boe. let's get more analysis. ian lyngen joins us. and cameron crise and his joining us here to break it down. 75 basis points is off the table. that was supposed to be a good thing yesterday on the surface. today i massive selloff in the bond market as well. why? ian: i think we are in the mood were central banks are very

aggressively pulling away from the amount of stimulus they put into the system. we did see the reaction in the front end of the market on wednesday. that made sense. today's selloff is in the context of the fact the fed will start actively shrinking balance sheets. the biggest move was in the 10-year real yields 20 basis points higher at one point. that's a story about the lack of fed buying issuance from the treasury department. jon: let's bring in cameron as well. we watch the questions around containing inflation. whether we have reached peak inflation. you have been writing about we are getting towards peak dovishness? cameron: the initial reaction yesterday focused on jay powell's dismissing casually the notion of 75 basis points in

june. what he did not do was suggest there was a moderation of their desire to restrain demand to impact inflation. that is what should matter to markets on anything but the micro term. we are so used to thinking they are knocking hawkish by definition they will become more dovish. because you think of the policy cycle. in this case it might be a plateau. he might be a flatline thereafter with no relief in sight, at least in the near term. kriti: in a former life you are an fx trader and i have learned a lot from you when it comes to the fx base. the dollar is getting stronger. it is bouncing up against levels

seen in march of 2020 and 2016. if we continue the strong interest rate differentials we're starting to see weighing on the yen and euro and pound, how much further could the dollar have to go? cameron: currencies have this remarkable tendency is to overshoot. it can go further than you think is rational for sure or even possible in some cases. what it does suggest is whe it e eventually turns for the fed they will be a likelihood that the pivot, when it comes will be fast and hard, because the rise in the dollar does represent a tightening in monetary conditions. we are already seeing that to some extent in the economy.

the trade deficit released earlier this week, $109 billion in a single month, that's remarkable. exports were a massive detractor to first quarter gdp growth. it is hard to see that having -- ebbing soon. i think when the fed feels more comfortable with the inflation outlook or less comfortable with the growth outlook, the dollar will perhaps become more of a driver of the policy as it was in 2016. jon: staying with the currency trade, ian lyngen, the canadian dollar. the bank of canada has been aggressive with rate hikes. coming back to the idea of where the economy goes from here, the concept of being able to navigate to a soft landing. what is the general tone in the markets right now on that narrative? ian: i think at this stage the

market is dismissing the probability of a soft landing in wholesale terms. we're going to over tighten. the question is when do we actually see every session? when is the fed subsequently need to cut rates and a fine tuning get back from however far they are able to normalize policy rates? the debate when we think about making the rounds is not whether or not this is a 2024-2025 story. is it is a later this year or the beginning of next? the fed is aggressively putting the brakes on the economy. we are seeing that in a wide variety of sectors. we are starting to get concerned we have not seen weakness in the labor market yet but that will be the next proverbial shoe to drop. we will be interested to see how tomorrow's numbers print. kriti: has the fed been

successful in communicating what is coming next? ian: i think they have done a fantastic job of laying out what to expect. there was a little bit of debate whether or not we would see 75 versus 50. powell told us we are getting 50 basis points in june, 50 basis points in july, then downshift the 25 basis points if all their assumptions hold. one big assumption is the continued upside risk on the inflation front. we are worried about a divergence between headlining core inflation because of everything coming on for the geopolitical front with no continued upside pressure for headline inflation. what happens when the base affects kick in, core inflation star somebody rate and then inflation looks more like a tax on consumption than evidence of a strong economy? that will be the biggest risk in the third quarter and fourth quarter of this year. kriti: cam, has the fed been

successful? cameron: in the big picture they blew it. they waited way too long for policy normalizing. jerome powell has come as you could to saying they screwed up. in the context there was so much uncertainty in the rate of change of ideal policy. it is so rapid that ford guidance -- forward guidance is useless so it's kind of misleading. kriti: i real pleasure to speak to both of you. you for joining. in addition to the federal reserve you had opec and the boe. coming up, opec and its allies agree in a small monthly increase in production. a comes at a time a global markets are likely to get tighter. we talked to ellen wald from the atlantic council energy center. that is next on bloomberg. ♪

kriti: this is bloomberg markets. the european union is considering banning supplies from russia as opec and its allies ratify a small monthly increase in production. let's bring in a true expert, ellen wald at the event to counsel's -- atlantic council's global energy. let's start with this opec meeting. this is the third meeting since russia invaded ukraine that we have seen. two months ago i was talking to oil ministers and they said we will continue to address it. yet we see these 432,000 daily

barrel increase per month. i'm curious how much of that is a consequence less of supply and demand and more of the inability to meet their quotas. ellen: we are seeing two things. opec -- i think they understand. there isn't much they feel the y they can do to impact the price situation because the high prices are very much caused by the geopolitical situation and the anticipation of further bans on russian oil. on the news from the eu came out we saw wti hitting $109 a barrel. opec is not really able to impact that. they kind of used that as an excuse in some ways that is there justification for continuing along with the

policies they decided. it has the nice effect of not having to deal with the russia question. they can basically coast along without having to negotiate with russia over oil production. at the same time we are seeing their actual production stagnating. while they can increase production, they are technically allowed to increase production. there are over one million barrels below where they could be producing. there really begs the question can they impact the market that much? jon: let's further with your equities connect the dots. you have one narrative of european nations distancing themselves from russian energy supply, and then a global push towards some of those golf nations boosting gulf -- gulf

nations boosting oil into the market. can you elaborate on that? ellen: that's a key part. i would go so far as to say that opec is russia and its relationship with opec. the other countries involved are nice but it is really russia that makes the group back when they originally agreed to the opec group. it was russia and russia's willingness to get -- to go along with it and to get involved in it that brought opec as a group together. before that opec itself is not able to agree on anything. if they ever jettisoned russia or make a move towards jettisoning russia it would basically mean the end of the opec group and any future attempts to do any kind of coordinated market management. that's a really important issue for the gulf countries because

they know that he rush on board. kriti: let's talk about spare capacity. historically russia has been aligned with the uae with opec talks. the uae and saudi arabia are the only two countries right now who actually have enough spare capacity to perhaps make up for this perceived supply shortage. where do we go next when it comes to getting saudi arabia and the uae to pump more? ellen: you are right about that. last summer we saw the uae push to increase production more than saudi arabia wanted, we introduced a rift between the two were previously they had been on the same side. russia has always wanted more production. now we are seeing issues with russia. i think there production is probably down because of a lack of storage space for the oil. the numbers not really in yet.

opec likes to wait and see what the numbers show before acting. the uae has spare capacity. saudi arabia definitely has spare capacity. iraq probably has some as well but they are not really employing it. saudi arabia has increased but they are still well under their quota. everyone in the group is basically producing under quota. it is not clear what it will take to get them to produce at least at quota if not more. they believe this will not really impact the price situation that much because it is not a lack of supply. global supply. it is the geopolitical situation and the policies surrounding it. jon: before we wrap up i want to type back to the united states and the fact that obviously we saw the u.s. tap into those strategic reserves. looking at the price of oil, the effectiveness of that move, that is up for debate. something else being debated in

congress, the senate push to essentially go after opec for manipulating the oil market. we will see with that goes. we will see whether or not the president has ultimately weighed in on that. what do you think about those moves? ellen: the spr release has not had the intended effect. it has not brought we will prices down yet. i think perhaps if we do start to see the effects of this oil inventory or gasoline stocks and then we might see some price relief from it. right now it has not had the intended effect. it was supposed to extended through november. by the time the elections roll around we may see a bit of an effect from that. in terms of the opec -- no -opec legislation, that is

something politicians want to pass to make it look like they are doing something. the question of anybody trying to sue opec over this is another story entirely. jon: thank you very much. helpful as always. ellen wald at the atlantic council's global energy sector on the latest developments in the oil market. coming up, chris murphy is going to join us as we continue to watch this market selloff. a complete reversal of the buying we saw on north american equity markets yesterday. this is bloomberg. ♪

jon: let's get back to this market story on bloomberg markets. obviously we have seen a dramatic reversal in terms of the movements we saw yesterday. the upside now to the downside. the nasdaq down 5% at this hour.

let's bring in chris murphy from susquehanna financial group. ylena also joining us. what has been happening on the trading floor after the losses pileup is a move into this afternoon's trading? chris: yesterday's rebound was well overdue. you look at positioning, volatility, options indicators, sentiment, etc. we had a day where yesterday it was the biggest inflow in 14 months. all the rally was led by the momentum. that is something we should have expected. it is not the type of move that happens at the bottom. it is not the type of move that is showing. it is the symptom of the higher volatility market. we should be expecting the swings to not surprise us going

forward. kriti: elaina, one of the cases is the american consumer is strong. they whether everything. the wealth affect very much having or playing a role in continued buying. at what point does the s&p 500 selloff? >> this year we are perfectly fine. the powerful wealth affect from last year will push consumer spending to heights we have not seen since pre-covid. going into the next year i think something like a 15% decline in the stock market could probably put a serious dent into the wealth affect going forward. that would also require housing prices to slow down to something like 5% towards the end of the year. we are nowhere near that. i would say a 30% decline in stocks is what could wipe out

the wealth affect. jon: chris, gifford trying to gauge how much potential downside investors see right now, what kind of activity can you tell us about any options -- in the options market in derivatives market? chris: i would point out that we are not necessarily seeing -- of course we're seeing all different types of trading. if you look at the vix, when i walked up your it was around $31. that is not as high as it was before the fed on monday, not as high as a number of times earlier this year. investors are hedging but we hearing a lot about how deep everything is in the volumes are not that high. it feels a little more like a buyers strike as opposed to investors that have all these positions and are panicking, putting on big hedges for more downside. the biggest prize has been a more muted vix then we would

expect remove like this. kriti: it is interesting chris was talking about this muted discussion in the vix. it seems like a volatility was coming from the fed. are we at -- is peacock's news i think the past -- peak hawkish this thing of the past? yelena: if we have seen inflation, maybe the peak hawkishness is behind us. they will have to reassess what happens to inflation, where we are in terms of the labor market. in that sense tomorrow's payroll data is important. whether we we will see a slowing in hiring and improvement in the pace of

supply shortages. kriti: yelena and chris, thank you so much very fascinating conversation on the market dynamic. let's get a check in the markets. s&p 500 down 3.7%. the pain still really getting hit. yields higher. 3.09 on the 10-year. the dollar seems to be the story. weakness in the dollar, the yen and the cable rate. stick with us. lots more market coverage coming up. this is bloomberg. ♪

romaine: live from bloomberg world headquarters, this is a special edition of bloomberg markets: the close and what

could be a historic selloff. we were looking at the markets yesterday and talking about one of the biggest gains we saw a couple of years now. what will be in one of the biggest losses on the major indices. s&p down about 3.5%. qqq's down 5% on the day. that is not even the low of the day. we have been.all over the mountain we are seeing dollar strength affected. this is one of the few havens. the highest level we have seen in a couple of years. if you look at the -- which focuses on the euro, we at the lowest point and i was 20 years. there's a 30-year yield. after the so-called dovish we had yesterday, a lot of people reassessed and realized things

are ha