close the key question -- >> the key question is whether

the key line will -- inflation. >> inflation is driven by energy sectors. oil prices are going to be at $120 a barrel or higher. >> i do not think the u.s. falls into a recession, china is going to be enormously stimulative in the second half of this year. >> this is "bloomberg surveillance." lisa: good morning. thank you for being with us. this is a huge moment we are leading up to in a half an hour. economically and politically. tom: what i would note, markets on the move. we saw the adjustment yesterday of ecb, continued eager euro moments ago, -- weaker euro

moments ago. lisa: the move is up in the short term with inflation, down when it comes to growth. how much does a strong -- growth concerns are going to be on the front burner the remainder of the year? tom: i think we will get there. deutsche bank showed the ambiguity that we see of a buy part report, we got top line emotional, 8% like inflation, maybe 9%. then, we've got this core number, a number of people, including goldman sachs, saying, you know what, maybe we get the first sign of ebbing co-inflation. that: plug city feeds into the mystery of american growth. lisa: that raises the issue of margin compression, how much of what we saw from target, other retailers, our outlier issues

dealing with the composition of sales, versus an endemic issue? matt: the concern in the market that moved down, early comes down to inflation eating away at profit, margin compression. it sounds so much smarter. i am not sure how much the ecb feeds into the 2% drop on the s&p yesterday. i didn't get any surprises from the ecb, they seem to be slow to act in pushing the ball forward in a way they have been all along. it will be interesting to see how the fed and how president biden reacts to the inflation numbers we get today. lisa: as growth concerns dominate the conversation, i am looking at the s&p cooling off, even as we see people going back into big tech. i find this fascinating, this

haven until it wasn't anymore when rate concerns were on the table. we are looking at growth concerns. around the margins, some people are warming to the idea that a cash flow behemoth like apple, amazon, will continue to generate cash. tom: suzuki, richard bernstein, made clear that tech is -- out there, maybe well performed. i will remind everyone, what a negri close we had yesterday. why don't you start the data check? lisa: after yesterday's downturn, we are not seeing that much action flat on the s&p futures, 4014. euro is interesting, the ecb signaled their right hiking cycle, they were open to 50 basis points to a rate hike. euro weakness, 1.0575.

10 year lower on the day, the session may have turned higher. 3.04%, we are continuing to see that. how much further can it go, especially with these growth concerns. that is one of the big issues. tom: in 26 minutes, this is not some up, some down on the cpi report. there will be nuance from michael mckee and michael durda. lisa: parsing out the data, the firing squad, we are heading in a less than -- in less than an hour. what is the balance -- this is a balance of risks right now. heading into this report. it is hotter than expected, or

cooler than expected? >> i think it is important to realize we have got a lot of emotion in this market. leading up to this yesterday, that is probably the biggest story of the day, it is less about the fundamental data then it is about the emotion. it does feel like we are walking the plank, or facing the firing squad. all in one number. these numbers give reports to be hugely volatile, we are putting a lot of weight in this in terms of what happens for this close on friday. i still think, to me, when i look, oil is still going up. oil and gas at the pump. that could feed in particularly to the top line cpi numbers. most the rest of the numbers, commodities, including food, agricultural commodities, are flat to down. industrial commodities are down.

used truck and car prices are down. freight rates are down. evidence of a peak. matt: a lot of wage earners are having to choose between food and gas, even rich people. we have seen surveys that say, if you make $250,000 a year or more, you are still 36% of your -- you are living paycheck to paycheck. this is difficult for corporate profits, people who rely on consumers spending disposable income. jim: no doubt about that. it is tough. i notice it at the pump. we are almost close to five dollars a gallon, you definitely notice when he philip. it affects you. we are slowing the economy. we are growing 12.2% real gdp, a year ago, probably down under

2.5% on a year on year basis, that is considerably slower growth. that is a good thing. i think what we have got is a midcycle slow down, but i do not think we have a recession going on. if we do not have a recession, i think the fundamentals will hang in there. thankfully, we've got some of the best balance sheets we have had in decades. i think that is a good defense. tom: there could be all sorts of mysteries in this inflation report in 23 minutes. it would be no greater than the mystery that mr. call of the new york -- yankees to give up five homeruns runs, the yankees would beat the minnesota twins, which sounds impossible. let's say we get the same impossibility, which is a constructive core cpi number, a good tone, a lower statistic. what will the stock market do? jim: i think you raise a good

point. investors are going to be more focused on that core number. evidence of the underlying core, cores tend to lead the topline numbers. they tend to be more volatile than the underlying core. when you put that together with what wage inflation has been doing, growing 4% or less last several months, i think if we get a good core number, we could, we could calm this down today. if the core number is hot, i think by the door is the route. that is the key number, i agree with you. tom: three homers, boom, boom, boom. five homers total. the twins couldn't take out the dreaded yankees -- the dreaded twins couldn't take out the dreaded yankees. jim: if we get a bear market in

the stock market on friday after a bear market for my twins the last three days, it just isn't fair. tom: i'm going to be more optimistic. jim paulsen, from leuthold weeden. 21 minutes from this inflation report. i have got to admit, i have never seen a focus on it. you have to ask why. to your point, lisa, it is the ancient fear of demand instruction, whether it is direct in a household, or indirect within a greater economy. lisa: the why is simple. everyone is feeling this. this is unheard of. we have not seen inflation like this, it is not coming down quickly, if at all. people are talking about peak inflation, are we seeing that right now, or do we have more to go? that was what mohammed was pointing to yesterday, this is the issue for people. they are feeling it.

it is emotional. tom: we can reach back into the ether of the past and notice in matt miller's driveway, i can see it coming with 9% inflation, the gloom of the moment. seven dollar a gallon gas. not alert driving a vw diesel, -- matt miller driving a vw diesel, a viable option. matt: i am happy to drive any diesel. i prefer ford's power stroke, with over 1000 tons of torque. tom: why is diesel more extensive than gasoline? matt: the people who have diesel have to drive diesels. the gas station can charge whatever they want, the truckers must pay that. tom: i do not know. should we let him on the show? he knows so much about the automobiles. lisa: i like the distinction

between diesel and gas. like credit and debit. tom: one of the changes from the 1970's. stay with us. in the next 15 minutes, a key inflation report. on bloomberg radio, bloomberg television, good morning. ♪ ritika: the biden administration is trying to advert another inflation logjam at the nation's busiest seaport. the president will visit the port of los angeles today. the white house is watching talks from new union contracts for 20,000 west coast. workers -- dot workers. u.s. defense secretary lloyd austen his chinese counterpart on the sidelines of a major agency security forming today. both countries requesting

allegiance for stability. the u.s. is hoping to use the form to establish guardrail defense, competition from getting out of hand the meeting comes as the war in ukraine consumes washington attention. shanghai will briefly lock down nearly all of the city's 25 million residents this weekend four masked testing as covid-19 cases emerge. this is causing new disruptions, days after the city exited a two month shutdown. health officials are testing the transmission of the virus to keep the china zero policy. a bidding war for the right to stream indian cricket matches, the company tied to competition for one of the world's most popular sporting complex. -- the rights have been estimated to fetch $7.7 billion.

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>> i do not think the u.s. falls into a recession, i think china is probably going to be enormously stimulative in the second half of this year. tom: chief investment officer

putting it out there on the framework which is confusing after ecd, in 11 minutes, we get a cpi report. right now, on the interest rate space, ira jersey joins us, chief interest rate strategist of bloomberg intelligence. which matters, the short end yields up, because the fed worry, or the long end, yield lower, because the fed worry. which matters more? ira: for the overall economy, the long end of the curve. when you have interest rates hovering 3%, it is short-term interest rates continue to rise, they rise faster. one of our calls has been, we think the federal serve is going to go a little more than the market is currently pricing. when you think about where

corporations fund themselves, mortgage interest rates, even though mortgage rates have been rising significantly, they are not likely to raise more if long-term rates cover percent, plus or minus a couple of basis points. it is that long end for the economy, it matters more. lisa: is it significant, after the strong auction yesterday, we see 10 year yields higher, despite the fact people are expecting the fed to be aggressive? ira: i think the entire curve is down to bare flat. if the federal serve goes to 4% instead of three point -- 3.5%, i think that 10 year yield is going to retest the high. if they get back to 3.25, if we get much higher than, how much higher than that can we get? i do not think much. in an environment where you have real growth slowing, real demand

instruction, when we look at this data, you have service prices going up, food prices going down, you wind up with an environment where long-term interest rates will have a cap. is that cap 3.5? that is something that is a matter of debate right now. we think we have seen most of the move in longer-term interest rates. this is a massive move. this is going to be the worst year for treasury returns ever. the question is, how much worse will it get at this point? lisa: do you think the way the market is set up currently, do you think people are positioned more for an upside surprise, given where we are with inflation, or a downside surprise, where we see it cool off more than expected? ira: i think people were squaring positions earlier this week, that is one reason you have people getting out of those trades and turn into a full

flatten or earlier in the week. it seems to me the market is reasonably flat. i think the preponderance of risk is for there to be -- we have trades and inflation swaps this morning that are suggesting we could see a 8.7% number for june, the june numbers we get a month from now. it could show 8.7% year on year cpi, that would be another record. bloomberg economics has been well in front of this, suggesting we haven't seen the begun of inflation. you have to think that if nothing else, we see -- our call is for the two year, 10 year curve to invert. we are on our way there, 50 basis points away. matt: could it invert before the end of the day? what is the consensus on trading

desks? do they expect a recession? are they pricing that in? ira: that is one of the reasons you get this inverted yield curve. what happens is, you price for reasonable growth the next year, and after that, you have pricing and the federal reserves cut interest rates. the challenging thing for traders now, particularly for nominal, everyday treasuries, is, how quickly does inflation decline? inflation will decline naturally, but as it does, we see 5% inflation at the end of the year, and 3% inflation at the end of 2023? it is hard to be long treasuries. if you get long treasuries, it is either because you have to or because of your mandate, or you are getting longer because it is a trade. hey, we have gotten cheap

impaired to other markets, we have to get long. the other reason, to go back to lisa's point, one of the reasons we see people buying treasuries on days like yesterday is, just because it is an asset allocation trade. risk is off, people migrate nationally -- naturally, five to 10 year treasuries to rebound the portfolio. i do not think that will persist in a significant fashion, given the inflationary environment right now. tom: as we go into this report six in its way, i want to bring on the screen, on bloomberg radio, it is a unit for graphic of the lumpiness of inflation. i think this has been underreported. ben was out today with a observation on the stickiness of inflation, but the idea -- there it is. energy up 11% month over month.

energy commodities, up 18%. food up, maybe not all that much. this is not homogenous. you have to tear it apart. lisa: the distinction people are making between goods and services. do we see a disinflation of goods, a move to services? how much can we see that if we see the input cost, energy being cheap, being so high? what do you do in terms of a deceleration in the service budget? is that a good thing, given the consumer makes up 70% of the u.s. economy? do you want to see deceleration in the areas that are supposed to be recovering now? tom: you've got 7000 square feet in the burbs of new york. he has got the ac going to 62 degrees. you are talking about utility bills. matt: i just bought a house at the top of the market. the s&p, housing price index

used to move up 20%. we have seen 120% jump in that index for the first time in history. i am hurting, personally. tom: do you see housing breaking, that is part of this report in five minutes. matt: it is one of the most important questions. what happens to the u.s. housing markets as mortgage rates jump? tom: 30 year bonds, 3.15%. michael mckee will consider oer owners equivalent rent in this important inflation report. stay with us. michael darda, next. ♪

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lisa: moments away from the biggest data points of the week, u.s. cpi consumer inflation for the month of may and we will get those numbers, this is "bloomberg surveillance" on bloomberg television, and radio. jonathan very much out and matt

is an. michael mckee with that data. michael: this will not be good news down at 1600 pennsylvania avenue, the cpi comes up 1% for the month of may which is higher than .3% and much higher than the .7% that had been forecast. it comes up .6% of the same as it was the prior month, but higher than what had been anticipated. year-over-year basis, where you look at where inflation is, week -- we thought it peaked, but it had not. 8.6% for the month of may, matching the all-time high in this cycle at the core rate up 6%, a little bit lower than last month. that is what we have been expecting given the fact that the energy complex is driving so much of what is going on.

let us take a quick look at that. gasoline up 4.1% in the month of may and that is one of the things that had dropped on a year-over-year basis. gasoline 48 .7% higher than may 2020. -- may 2021. food up 1.2 percent, and that keeps the year-over-year rate at 10.1%. use cars and trucks, the bogeyman since the pandemic began, up i .7%. they are up by 5% year-over-year and a little bit lower than it has been. overall, very strong changes in the roots of the number for shelter, up 5.5% on the year. all of the categories have been pushing us higher and are still doing so. lisa: we are seeing big moves on the front end of the yield curve. surging clearly to the highest

level on an intraday basis going back to november 2018. close to 2.9% and we are seeing the selloff accelerate on the equity market with all of this downside surprise that you will want to see. it is a new peak inflation, we expected to see it last month and it was not in the month before we saw an acceleration. that selloff increasing and right now the nasdaq at getting absolutely slams. down one point 4%, exceeding the declines we saw on the s&p. tom: i really want to states that this is an extraordinary report which refutes any idea of ebbing inflation. it will take time to go into the markets. the dow down 300 points under 32,000. the smp on its way to 2900. but now under for thousands down 43 points. critically the vix, 27.31 and

you wonder after the afternoon, do we revisit a 30 vix today. michael mckee you were massaging this data, but what i fear that is so important is the linkage of core up with headline up. how big of a surprise is that? michael: a lot of people looked at the energy complex and said we would get an upside surprise and that was the lien. the fact that we are seeing a selloff in futures is something of a surprise because people were expecting this. the question is how much can you divorce food and energy from the overall inflation picture? on an economic basis we are expecting core to level off and we saw a rise in airfares up 18.6% the month before, 12.6% this month. that is one area and most people

will focus on gasoline and food, and certainly down at the white house that is what they will focus on. tom: it is unfair to ask if you had the ability to focus on the real estate components? michael: i was looking at owners equivalent rent and it was up during the month by .6%, and that is the highest in about three or four months. we are seeing rent work its way into the cpi, and it is about one third of the cpi. it does not show up as much as -- in the pce, but the fed officials who have to come up with the new forecast are revising up. mattl everyone -- matt: everyone is talking about the buildup in target and walmart. are you seeing that come in during this report? matt: we are not seeing the same kind of changes because of the main fact that this report tends

to emphasize some areas that the fed does not. we are seeing a little bit of discount, i do not have the number right in front of me for apparel, but i can find that for you pretty quickly. the big issue of course is what is it going to do? when you fill up a tank and john, you know this, when it cause you 80 or $90, you will not buy the t-shirt. tom: thank you so much, greatly appreciated. this is a report that pushes against any optimism encore cpi, the core number goes from six .2% down a percent but not the 5.9% surveyed, and the headlines flat out goes the other way. this is a report that shows what president biden will speak. ed ludlow is with the president in california.

dow futures, negative 300. spx, -15. 18 beats down to 16 and the 10-year yield, three point 05% and maybe a little more quiet than what we see in equities. a good time to speak with michael dart up, i -- darta, i want to look at the nominal basis, forget about fed talk and real inflation, how do we withstand a nominal inflation rate of 8.6%? michael d.: well, i think this is exactly what you end up getting when you run the nominal economy hot with double digit growth rates on average tending to hit the bottom of the business cycle in 2020. any look at historical experience will tell you that. unfortunately for households if we look at the main data, the

proxy for nominal -- nominal income out of the jobs report which is wage growth and hours growth and employment growth sums together is at about 10%. all of that is being eaten up by inflation with the report. lisa: there is where i wanted to go with real average hourly on an hourly and weekly basis. on a weekly basis it is the most negative it has been going back to 2006. -3.9 percent in terms of how far behind wage inflation is falling behind the stuff we actually buy every day. what does this do to growth outlook? michael d.: unfortunately we are dealing with a stagflationary environment for the month of may. we have had some intensifying shocks and food and energy prices, but hopefully some point that will reverse but as mike

mckee would say, this has been an inflationary process that has been broadening and deepening out so you have pressure on rental inflation which is a significant portion of the cpi. if we look at services inflation excluding energy, 60% of the cpi running at more than double the average of the last business cycle. it might be a bit of a fools area and to assume that crude oil prices back off all of a sudden a magic wand is waived and the inflation problem goes away. lisa: we thought we had seen peak inflation but we have now a higher print and it is a new post 1981 high. it is 8.6 the high watermark or will we see higher? michael d.: i think we are close to peak inflation over a year-over-year basis, but none of that will matter for the path of fed tightening and the bond and equity market valuations, because inflation still stays

very high then that is not an environment where the fed just moves to the sidelines and moves to some kind of huge reevaluation and expensive equities determining the cap of the s&p 500. there are some macro commentators making bizarre arguments from my perspective that are not focused sufficiently on the nominal background, which is way too strong and aggregate demand is way too strong so the fed has more work to do. and the fact that if inflation eases but is settling in at rates that are several times the target acceptable inflation over time, and that will still be a problem for the bond market and federal reserve. matt: mohammed was on yesterday and said if you think we will have a recession, sure inflation will come down and i am

paraphrasing, but that is not what you want to see. that is not how transitory inflation said be -- should be affected. is that the way we will see a? michael d.: well, i think unfortunately, eventually that is where we might end up, but a critical discussion is timing. i do not think we are in a recession now and i do not see a recession this year. i think the recession will come after the fed gets itself into a restrictive monetary policy which will take time. predict the backward looking numbers that we just got, shocking as they are. the fed -- the fed fund rate by five year inspected inflation is still below 200 basis points. and that is below the trough of the last business cycle when you have very slow growth and very weak realized inflation.

this fed is still behind the curve and that is going to create a situation where they strives inflation on the services of the rents and wages. tom: frankly, the most in porton -- the most important inflation data of the day is 10:00 a.m. when the michigan statistic comes out. what are the ramification of the economic zeitgeist if we get the five-year michigan look to break out above 3%, to break out of the inflation level of 2006? michael d.: i think the fomc would take note of that. those measures are a bit stickier than the bond market measures, but they are elevated marginally relative to the average of their last cycle. if we see any kind of what looks like a break out, that would cause a lot of consternation on the fomc that can tie headline

inflation numbers bleeding into longer-term expectations, and i think the fed would be alarmed by that. tom: thank you so much for the insight. michael darda, mkm partners. futures -34. dow futures down -200, but the vix 26.92. the 10-year yield, 3% with a little bit of growth feel to it right now, but lisa, quickly, the flattening of the year -- the yield curve was single-handedly driving the curve flat. lisa: perhaps that is the reason but we are looking at this expectation baked into the market that the federal reserve will raise rates 50 basis points the month after and the month after that, three consecutive meetings, how much they have to do that in response to issues that people are facing right now that are not positive for their cost of living.

this is not runaway inflation in a good way and it is crimping into the buying power of the average consumer and that is the issue. tom: and now global wall street this friday morning, michael mckee and boston. explain why people like you look at the ann arbor statistics at 10:00 a.m. and why the five-year view outside of five-year -- is so important. michael: inflation expectations are because they believe that expectations drive actions, so if you think prices will keep rising then you will react to that by asking for more money from your employer or by spending more money now to avoid inflation later. they want to make sure that longer expectation stay stable and the michigan syria's is one of the older ones and this is the one that they watch. the thing you have to remember is that consumers are lousy judges of inflation. they add several percentage

points to what they are experiencing, so it will be interesting to see how this happens. usually discount the michigan number a little bit, so if people are starting to think that this will continue to happen that will be a worry for the fed and something that would drive their public relations if not pushing them to do more in terms of raising rates. matt: if consumers are worried that inflation will continue, does that bring demand forward. do i buy something now because i am worried that the price will be higher in six months? michael: that kind of gets back to the earlier question about the t-shirt and i looked and apparel was up this month by .7%, which is a surprise given the inventory. if you are buying gasoline and food, those things you have to buy, so you will buy those on a regular basis. if you spend all of your money on gasoline you might pull forward other port's because you feel like you do not have

anything left. if you are worried that it will continually go up and you need something that is when you go shopping earlier than you might otherwise have. tom: thank you so much from boston, he is recovering from the los angeles angels finally winning a game. if you are joining us truly shocking inflation which confirms the fears across america. this was scheduled before the inflation report and the importance of it, david is always looking at price change across america, but far more we have tried to get david haro on of harris associates to speak of e.u. banking, it has been an absolute shot, the shock and david i have to start with credit squeeze and the view 15 years -- credit suisse and i have to start 15 years ago before the financial crisis of 2006. it has been an abject value flop

and winner. if you run out of patience with failure in zurich? david: not at this stage yet because there have been wholesale changes at the bank from management down, and we need to see what the new people who are involved with the bank, both from the executive management committee and board of directors can turn to -- do to turn this around. there is inherent value within the business, and i think these people should be given a chance to try and create this value and sustain this value. the bank trades at 30 or 40% of value, so the object should be stabilization and then growth after stabilization. if they cannot do it, someone else has to. tom: do they have a swiss putt, are they not making tough decisions because they know that zurich will be ubs and credit

suisse? david: i would hope not and i am a believer at pre--- of premarket capital and there should not be protection. if they cannot do it and someone comes into mac and acquisitions all parts of the business i think that should be allowed to happen. there is talk that if somebody else bid, that would give ubs a chance to do a deal combination but i would certainly hope that that is not the case? matt: is europe ready for big cross-border bank m&a? david: i think you cannot have cross-border bank m&a in europe on a wide scale until some of the rules and laws are changed. at some point this might happen, you still have markets which make it not conducive to cross-border. there is a possibility for some isolated levels on basis, but i

think at this stage you still need regulatory evening out that would make it more conducive to cross-border m&a. on the other hand a company like credit suisse has a huge private wealth management business, which is bigger than the global market investment banking business, and for any global bank that wants exposure in this lucrative area, you would think credit suisse would be an attractive asset. matt: i have to ask you about china because every morning it seems like futures are driven by the idea that china may get a little lighter on tech companies, yesterday there was a report that and could revive -- ant could revive its and -- its po, and that you own a stake in tencent, what is your view? david: it appears that we have hit peak regulatory initiatives

for the last year or so. they have been increasing a regulatory scrutiny in the chinese tech sector. the whole sector has been kind of had. -- we also own some alibaba and both of these sectors have been hit. even with this additional regulatory scrutiny, keep in mind what has happened is these businesses around the globe has grown much faster than the regulators' ability to regulate, and china has taken a first step, but we have seen what appears to be statements from the government that were getting to the end of the regulatory initiatives and we saw in the case of tencent, a lot of games that were approved, this was one of the things they were concerned about, withholding game approvals for various reasons. we are starting to see regulatory relief or at least movements by the government that

the worst is behind the sector. meanwhile, these are really well-run, world-class tech companies that trade at low double-digit multiples. tom: thank you so much. we have so much going on in inflation. we wanted to get that in on the absolute debacle we have seen at credit suisse which we might have news about over the weekend, stay tuned with us for reporting off of the london and zurich desk. futures is -300 and 200, and they now give way which is no surprise, -350 six with a big 27.24. i want to emphasize massive curve flattening from 18 basis points, down 10 basis points. .10%. these are small moves, but very germane to watch in the fed game, and we have a strength assuming that the fed will move faster. that off of the headline, eight

.6% on american inflation. jonathan is having a difficult friday instacart -- in credit suisse and is their chief u.s. equity strategist. i get -- i have to get out in front of your research, you amend your targets? john: we will not amend our target. our call all along is that the inflation is going to be stickier at a higher level, and we have been recommending company is that benefit from higher inflations, so there are two ways of thinking about this. the report is bad for the market in general but there are some companies that hold up better or worse in a high inflation environment and that is where we are focusing. jonathon: what is so important is the behavior, and i do not want to harken back to the fall so that i am, but let us look at the deck of cards, worst bond market since time began, price down and yield up, inflation

numbers, the fed parlor game until the end of the year. what do you and the credit suisse securities research team feel corporations will do. in my estimation, they have to rapidly act, even into june and july and make the plans that they thought they would make, october, am i right? jonathon: i do not think you are right, i think it -- i think that companies in a very high nominal gdp environment which is what we have, the underlying economy for recession concerns is to the side. revenues are strong, and so bigger companies in this environment have tended to do a bit of a better job of being able to maintain costs, but profits are high. the thing that is getting smacked around are the stock multiples, not the earnings which are important to think about. matt: what kind of multiple do

you think is right, especially as the fed has a terminal raise of 3.5%. jonathon: i think the fed is going to and this will lead the dialogue, this conversation that we have been having over the last couple of week, can the fed pause in september and the answer is no. the fed probably has to move beyond 3.5%, but we still have a very powerful earnings environment. the revisions and analyst adjustment to the earnings was all of the discussion we have been having about weak earnings. they are going up almost every day. matt: how much should investors be paying for forward earnings? jonathon: if you look at a corporate bond yield which is what your discount rate is, it is still something like 5% which is a low number. we think that stocks are

attractively valued at these levels and we would be going in. the level of concern in the market is that we think it is much higher than the underlying bedrock. tom: this is kathryn from cibc toronto, and i think this really sums it up. cibc calls this inflation report red hot and they go, matt miller, to the heart of the matter, which michael mckee alluded to which is shelter is the most gain since 2004. we have been highlighting this today from senator manchin's charleston west virginia to senator miller's suburb north of new york, matt miller this is nothing somebody already knows. matt: if you look at the s&p corelogic, we should really ask bob to shorten that. if you look at the 20 city index, and then you max it out we are at a level that towers

over what we saw in 2004 and 2005. in terms of the level it is unbelievable the amount of appreciation. lisa: john furner-- tom: jonathon is without peer -- is with us, you talk about nominal gdp but at 8.6% headline, is there a point where the inflation price change part of nominal absolutely overwhelms actual economic growth? jonathon: that is the ultimate question, like i said before, the earnings are fine, the stock multiple is in five multiple points in a decline this year. today's news taken by itself should push the multiple down and futures are down something by like 1.5% on this news and that is exactly what you would expect to happen, but the market

has already adjusted enormously for this inflation environment. so i think that the market has taken all of the bad news into account already which is one of the reasons i am not as concerned, not because this is a good report but because markets are already discounted and most importantly a red-hot report and a red-hot economy does not equal recession and this is a red-hot economy, not a recessionary economy. tom:tom: we greatly appreciate that. nominal, and i sound like larry kudlow from 30 years ago, nominal analysis matters if the fed tries to tackle this. the greatest observation i have seen this morning of all of the research before and after this red-hot report as catherine chart -- calls it is the basic idea that the scale of move that will be needed by powell is like

volker -- volcker in 1980. we have to think about a blue scale and then pushing against the animal spirits. matt: jonathan has been a very optimistic person as long as i have known him. i will say that one of the most interesting things that i learned today is talking to ed ludlow, those longshoremen are going to strike for higher wages. yesterday mohammed was saying if you think we are in a red-hot economy and i am paraphrasing, watch out for wage increases and if they get that it will keep driving up the inflation spiral. lisa: to end the -- tom: to end the doubt -- the hour equities deteriorating, i love doing the dow futures. s&p 500 -60 and the nasdaq, let

me get the percentage move because ferro had to be medicated over the dow quote. -1.8%. the vic is at a 28 level. matt: this is after a 2% drop yesterday. we already had -- markets were anticipating that and i do not believe that the selloff yesterday was off of christine lagarde and the ecb in the united states of america, they were watching this report. lisa: let me parse through the data -- tom: let me parse through the data, please stay with bloomberg on radio and television. the yield curve screams further fed action. the two year yield is up 11 basis points, .11% and the 30 year bond yield is down four basis points. that is 16 basis points swing between the two year and the 30 year of this historic report. the nation considers 8.6%

inflation. the president will speak at 1:45. this is bloomberg. ♪ >> markets plunging after a surprisingly hot inflation read. from our new york viewers i am lisa abramowicz, 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. lisa: we begin with the big issue, more fuel for the