>> the u.s. position is not a phase --. >> financial condition that affect the economy. >> a fundamental assessment beyond our model -- the recession. >> this is bloomberg surveillance with jonathan ferro, tom keene and lisa abramowicz. tom: john, we are supposed to get the cpi friday. we look at corporation adapting and adjusting, target adapts again. jonathan: it is more than just target. you see it from target, walmart, others as well. margin pressure. is it just the retailers or will others follow? tom: let's say they clear out

their problems right now, let's be optimistic about that, then what? into autumn of 2023? tom: they think things get better. the problem is for a lot of people in this market, this is the second time in three weeks the target has done this. are they right about the second half? tom: financially dovish. mark cabana talking about --. the way interest rates are moving in europe. jonathan: the ecb and the federal reserve both have a dovish tail. if you have gotten your from mars and look around on earth and saw inflation, you would say

it is very dovish. lisa: this is what is really fitting into target. at what point are we looking at a rate hike in the first half of the year translating into a consumer with less resilience? that still remains the outstanding question. tom: writing brilliantly in the wall street journal today on a compare and contrast. rates go up in the united states 6% and the eu only up 3%. i don't buy the fed and the ecb have the same problem. given what we see from target or the targets of germany. jonathan: the market here is stronger than the labor market there. look at core inflation. core inflation in europe is much slower than core inflation in the united states. the united states has a much

water pressure. tom: see about the inflation opinions with the equity market here in a moment. i don't know where to begin on the data. why don't i begin with target down 9%? jonathan: on the s&p 500 -- on the nasdaq, down --. up 10 or 11 this morning. the basis point 3.027%. the commodity market, crews negative. looking for 140 in the quarter --. tom: did ed marx capitulate yesterday? jonathan: a little bit. i wouldn't call it capitulation. tom: then i don't know where that goes. global wall street, i am sorry,

this is a more -- stories and what i am hearing from our guests. an immovable force for the mechanics of the pacific rim. right now, the movable force in the equity, chief investment of the csra. sam: the tone is one of confusion. it just like your conversations with jonathan. from an economic perspective, our forecast shows we are not going to be falling into a recession anytime soon. history tends to disagree. since world war ii since we have seen, -- right above -- rise above 6% -- we have always fallen into recession and been accompanied by bear market. tom: all we do in our star

system -- what corporate markets do -- of a recession. don't they act faster than what we expect? sam: management does tend to act pretty quickly. take a look at what the guidance has banned from companies to analysts. just looking at second-quarter earnings revisions as compared to where we were on march 31. you are seeing consumer discretionary having second-quarter revision downward i more than 16%. in a sense, you are finding these companies are very quick to get out there. problems are likely to be -- reflect those revised numbers. when the reports come in, this will probably end up being a quarter where they come in a slight bit better than forecasted. we are seeing 51 of the last 50

two quarters. lisa: you are saying what the companies are telling us accurate really -- accurately reflects -- could lead to buying opportunities? sam: by assuming a floor is being put into place, i think is a bit premature. what these big companies are doing is acknowledging there is weakness ahead. some companies are saying, we are not even going to offer guidance. i think what is happening is you are continuing to see that floor be revised downward. i don't think it adds up being a very solid floor. lisa: mike wilson pointed to this as one of the reasons of more of a tell off to -- on the s&p in the next year. one provisions come up downward, people will reset. do you disagree? sam: no, i don't. when you look back at -- and pe

revisions, about 33% reduction in p/e ratios. that will blend the s&p 500 based on 2022 earnings estimates down --. if you look to a couple of technical indicators, the head and shoulders pattern, that target -- that flattens around that target as well. tom: sam, are we in bull market rally in mid --? or is a bottom new form of market? sam: we are in rally of a bear market. right now we just got back to average pe on a forward 12 month earnings. typically we traded a discount. a significant discount when all is said and done. too many people in my opinion

believe the fed will be able to engineer a soft landing in 1994. when you see the fed funds rate below headlines cpi at the beginning of the right height cycle, usually, it is the reverse where fed fund is higher than inflation. the fed has a lot of catch-up to play. lisa: given the fact that people are looking at very different outcomes in a downturn of what happens when -- yield how are you looking at duration given the second half of the month? sam: when we are dealing with interest rates, interest rates are the key to intrinsic values. our estimate is, yes, we trade above the 3% level through the end of this year and that will

continue to put pressure on stocks. it is usually the growth areas in particular, consumer discretionary, communication technology, that feel the greatest portion of pe technology given the environment. not surprisingly, that is why we see the inflation, energy as well as materials and also taking a look at utilities as being one of the strong performers right now. jonathan: on a final point there, on the -- market -- we stabilize. maybe that is not unusual because so many people have come. i was just looking at the forecast on the terminal for the next yield of the 10 year, 324, 324 -- as well.

we are looking for that 324 range. lisa: is it necessarily that people are going to have outlook or the there is to be -- the fed is not providing a stimulus. talking about inflation again, that trend, inflationary that really pushed back against growth but allows inflation to remain higher. tom: slowing international growth and may be china doesn't pop like it is supposed to pop, money flows of the united states. price up, yield now. jonathan: who's problem is that this time around? tom: japan. every pro i talked to, japan is the elephant in the room because they are playing by a different rules. they are playing by different rulebooks by everyone in the room. jonathan: on a serious note,

what can -- seriously do? tom: they are going to have to do what they have done to spend the decade. jonathan: -- number 1.9%. from new york, this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world. i am ritika the. -- goop duck -- gupta. the u.s. has warned kim jong-un -- the united nations there are

signs it could set off its first atomic device since -- firing missiles at a record pace. knocking down more merchandise. elon musk is threatening to walk away. the deal is proceeding. -- the terms of --.

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>> the key metric right now that tells you households aren't really that worried about recession? saving rate is low. if people were worried about their income prospect, they wouldn't be spending so much out of their income. jonathan: chief economist

dreyfus and mello. tom: acceleration, it is not the number, it is how rapidly we are getting there. we talked target. we know that he teaches at columbia as well. the chloe ankle strap sandal is usually's $17. you can go in for a kid and buy it at $13 59 san.

if they lowered that puppy to $11.99, will they sustain the traffic that you say is required? >> tom, what we have here is the consumer reposition very quickly. these markdowns taking place are critical. target is doing that now. the consumer shift is faster than they expected in terms of the consumer going up, buying suitcases instead of swimsuits. that has been under pressure, too. markdowns will occur in the market this quarter. back-to-school should be pretty good. there is lots of savings on the sideline, but the consumer on the lower -- is unprepared -- is

under pressure. jonathan: has this trend for the consumer changed? or is it both? what is it? oliver: the consumer. is faster than the retailers could plan for. in the case of home products in big and bulky, that is a very long -- kind of category. target and walmart executed so well throughout the condemned -- throughout the pandemic, restocking with customer service, this change was unexpected. we think the consumer focus on value, planet fitness, grocery, and products, -- health and beauty. and digital platforms. jonathan: let's talk about

target a little bit more. we touched on this a little bit earlier this morning. arguably an investor -- they are still looking for a market for the second half of the year. with a 2% -- looking to 2% in the second half of the year. oliver: target has a situation where their outlook today -- what will happen is these markdowns and markdown result -- reserves will drive down the top line. compared to what is happening with the consumer. this should be -- what is doable and achievable. in terms of what they are seeing now. looking forward to the fixture

of unemployment. unemployment still low at 3.6%. that is something we are going to monitor. a wreath -- a risk factor to retail at large. target has unique vulnerability. grocery is about 20%. it is about 50% at walmart. a little bit more stability for walmart. lisa: this challenge the model coming out of the pandemic where a lot of companies, particularly retail were building up inventory to avoid getting caught up in the supply chain --. oliver: curbside pickup, integration of -- those will be powerful tools for the long-term. also targeting walmart in the marketplaces. a lot of positives that came out of building for the long term. tom: we love to talk to you

about luxury all the way down to target. we don't make light of it, it is really important. could you explain to me why -- $90? explain that. oliver: the magic of retail it is magic and logic. a lot of emotional components that go into the goods. retail is about willingness to pay more when it comes to apparel. we also see free commerce and this move to sustainability. i would encourage you to look at resale. tom: what i know, john, which is so true, they both shrink in the wash. jonathan: what happens from the other half wants to wear your

sweatshirt and deliberately shrinks it in the dryer? that is what happens. oliver, thank you, sir. jonathan: we are not washing today. she is happy. good for her. lisa: [laughter] wow. jonathan: i am hoping one day they take a listen and replace the switcher. -- the sweatshirt. i think in the moment, a lot of people try to take a macro signal from one retailer. it is so much more complex than just that. if there is a change in the strength to the consumer or a change in the basket? a bit of both at the moment. a change in the basket. which is why i keep bringing up the airline sumer.

the healthy american consumer, it is pretty decent now. you asked a retailer, different story. tom: what we are trying to do, we don't want to go into general -- we want to go into -- to bring in these challenges quickly. jonathan: what happens to the stock? lisa: how can you get confidence? twice in three weeks, downward of projections forecast. jonathan: really hard. the market was three weeks ago when target first came out with --. it doesn't cost as much as a sweatshirt. this is bloomberg. ♪

jonathan: live from new york city this morning. good morning to you on tv and radio. this is bloomberg berg -- this is "bloomberg surveillance". we are down by more than 1%.

3.0122% -- lower by a lot as well. still down by more than .7%. tom: we are going to do this year. the cheapo dialogue. i want to focus on the cpi report. is inflation the same, david page, in middle england as it is in america? david: pressure coming in for utility bills for petro or gasoline costs, that is where it

differs -- is differently. tight labor markets in both. tom: economists talk about core inflation. we are living nominal. when are we going to stop doing that and looking at a percent inflation? david: it is what is driving incomes. it is the squeeze we are seeing on consumers. they are worried about petro prices and gasoline prices. at the moment, it is not

happening. that headline lisa: is the focus. how concerned are you when you take a look -- you have something very similar to what we are looking at now. the beat -- the peak calculated by the study that came out yesterday, and my thing 80 with 1% versus 2.6 percent of the kpi on the current level. do you view that in comparison that gives you a sense of how much work they have to do and whether we are going to head back to an era of circumstance? david: very clearly the reason from a lot of the economists,

oil prices may go higher. you have got the potential for the gas prices coming through in the fourth quarter and supply chain issues. you probably won't worry too much about that. those issues will fade back. what the fed has to worry about is so high. from that perspective, what they need to do is slow the economy and gently raise unemployment. it is a huge challenge. over the summer, markets get to where they are going to be, it is difficult for the fed to keep the numbers -- the margins exactly where they want them. lisa: part of this is how quickly the fed wants to get inflation down. are they going to be ok with 4% over the next year or 5% or will

that be a little too slow of a decline for comfort? 4%, 3%? or do they have to get closer to 2% over the next year? david: it will be a very sharp adjustment to get it back to that level. to get inflation back on track by 2024, they have to get comfortable with their forecast. that probably doesn't mean that you get anything like that in 2023. probably getting down to just over 4% next year. a slow process when you look up words. we are always looking at inflation falling back quickly. it is going to take a little while to get back to target. tom: where is the opportunity

here? any ratio you want to look at, is the value opportunity in the united kingdom, --? david: just because of the risk of the energy shock. we don't know what is going to happen with -- ukraine. we start thinking about a little bit third -- a little bit further. tom: would you need a weak dollar to own -- optimistically? david: the risk start when these risks emerge, in terms of china covid again, with omicron in a number of cases, -- if we see risks in multiple parts of the world, that is what will tend to dollar pickup.

at the moment is down -- increase that pathway recession in the u.s.. we are hearing a lot about a window recession. coming through. anything at this stage commits us to an outright recession. how it manages expectations in the next couple of meetings. the fed that starts much sooner than the market is thinking. the fed will have to stop. it is primarily because you think financial conditions -- lisa: do you think a recession is being priced in?

david: listening to your show in the morning, there is a lot of talk about recession. lisa: [laughter] what people say is -- what people say and what they do are two different things. the wall street analogies and perhaps some television shows and perhaps reality is not what people are thinking with the pricing of assets on the ground. david: everybody recognizes it is doable. it doesn't take too much to think when we hear chair powell speaking, i think he is -- the markets are expecting. i am not convinced that is the message the fed wants to leave with. tom: david page and jon ferro doing it up. they are not even talking about

--. does belco be a national hero go up a legal or does he go back and go back for five minutes? jonathan: that will be in one year transition. david: his career is a mystery. go to a team where you are going to play.

jonathan: david page investment management. the three of us were said in a radio studio in february 2020 and came in and looked -- so depressing this morning. things are going to be so much better than you think they are. lisa: i also think, tom, sometimes you will say to me, you guys are so bearish. i am not so bearish. sometimes i am just asking questions. sometimes i am trying to find out where the holes are. jonathan: when you act about -- when you ask about the kinds of risk -- the potential for upside risk, that is bearish. maybe.

lisa: [laughter] jonathan: the nasdaq down by 1.36%. if you experienced this three weeks ago, it looks familiar, that is because it is happening again. three weeks, twice. target is down. down hard in the free market. 7.4% now. this is more than just target stock. we touched on this briefly moments ago. it is tremendously difficult. when you look at the signal, let's talk about the strength of the consumer. tom: one of our guests mentioned

a growth recession which hammers certain that stiles higher than others. jonathan: the oppression of the world bank in the next hour. very upset about these recession forecasts. right now it is not around the corner. down three basis points in the 10 year, 3%. this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world. i am ritika gupta. threatening his leadership. his days may be numbered. time to get back to helping people.

coronavirus restrictions to chief executive carrie lam. tourists in japan may be sent home if they don't follow rules. japan is set to allow --. as of business in asia. there will also be new jobs in india, south korea. significant overhauls for the mac book air and more than a decade. it features a new design, new colors --.

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>> i think the white house's message is pretty good. they are clear inflation is high and it is hurting. they are clear the primary responsibility for bringing inflation down is the fed. they are clear it is not going to be coming down indefinitely. i appreciate that secretary yellen said she made a mistake. i think we should have more confidence in her. tom: jason furman who visited us. if you would like more of this,

in the wall street journal today, jason furman does what he is famous for, which is lining up the ducks with immense precision, confidence and intellect as he compares inflation in the united states with the things in europe that are going on. really can't say enough about it. part of the indicator what they are doing your part of the week, kriti gupta. kriti: you look at what the implications are in the stock market. having a strong correlation with commodity. strategic haven for decades and decades. we are looking at that currency pair. going back to 2020, you see the tradition three look a lot like the stock market. until you come to november 2021 which is really that peak that you saw in stock market for you

had this big bear market that followed. look at what the australian dollar is doing. going up, up, up while the stock market went down. in the last couple weeks, when you have this reversal, is this reversal you are now seeing in the stock market and the currency market, how much of that is coming from the signal? -- always hiking rates unexpected italy. tom: -- it was absolutely original. instead of the friday inflation report, which is above the headline, maybe a little treatment -- looking at the micro data of inflation. gary, what do you see? >> it is interesting everybody

is so focused on what the fed is doing to fight inflation. the vast majority of what we see is still the hangover affect of this shift from a primarily service based economy to a more goods based economy during the pandemic. we are still untangling the masted that created and that has nothing to do with where the fed brings rates. that is going to work its way through the pipeline and it is going to take a while before that finish is resolving. it is taking longer than expected. tom: inflation at 6%, what is the makeup of that core inflation? barry: energy, which was already elevated for the invasion of ukraine, which sent those prices even higher. we are going to be dealing with

this for at least in part as that war continues. when you look at how the economy shifted during the lockdown, you had a surge in demand for goods, and then we reopened and now there is a surge in demand for services. airline tickets, vacations, try to get a hotel room in new york city, we went from one extreme, which was a 20% increase in demand for goods, which really tied up all of our supply chains and made a lot of pre-existing issues much worse, now we are seeing the reverse of that. there is only so much feet on each airplane, the response is, we are going to raise rates. that was before the price of energy went up. now we are seeing an energy surge on top of it. the same situation dealing with goods during the lockdown, we

are now seeing in services as we reopened. lisa: why have markets gotten so -- to walmart, amazon, adjusted to the shift? barry: it is always challenging to get the timing right. who didn't expect to see companies from netflix, amazon, walmart, target etc. and we can throw in wind will home depot and lowe's suffer the same effect? it is easy to look in hindsight and say, of course we should have seen the demand fall for these companies as we begin to reopen. a lot of these companies began to fall in anticipation of that. i can't tell you one home depot and lowe's are going to peak, but i would guess it is going to be before we see the top and in real estate.

it is the timing that is so challenging. a lot of companies, it just didn't get it perfectly. lisa: we are not in a recession now. everyone agrees, almost everyone i should say. are we going to see -- given some companies the ability for a shift? barry: it depends on a fantastic earnings growth. a lot of people will blame low rates by the fed causing the spike in revenues to profit. you have to give a lot of companies credit for really -- it is only one of many factors. a lot of companies did a lot of

things right when we were in an uptrend. tom: barry ritholtz, masters in business hose. my focus today, the weakness going back to the depths of the 08 crisis, the depreciation of 40% has just broken through to new lows. new weaknesses we have seen since. lisa: they are still deeply negative in real nominal levels. inflation picking up the way that it is. talking of dollar strengths. the trade balance, this is interesting. we saw an unprecedented reduction in the trade if a sit

in april. the reason being, imports from china were down dramatically because of the closures, some of some other restrictions on the ground. this shows how quickly moving the economy is. tom: when china opens, how will that adjust the trade down? it is highly unusual after the shock of what we saw the last go around. lisa: it was negative. tom: it is required -- deeply negative. lisa: [laughter] tom: thank you professor for watching. stay with us during the day. a focus on target and radio and tv. this is bloomberg. ♪

>> everything you need to get set for the start of u.s. trading, this is "the open" with jonathan ferro. jonathan: live from new york city, we begin with a