>> the selloff is room as it seems has been orderly. >> mainstream seems to be doing better. >> real wages are declining. real household income is going down. >> the consumer is very stressed right now >> -- now. >> retail sales plus corporate earnings equals the u.s. continues to outperform.

jonathan: live from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance, live on tv and radio." futures positive .9% on the s&p. the nasdaq 100 up. counting down to a big central bank decision. jonathan: you have the -- tom: you have the ecb and then we have the federal reserve with 75 or 100 basis points. i saw an article on luxury sales and earnings the dow up 254 point this morning. jonathan: good news for wall street. no more fed speak. it looks like 75 burned more --

a wall street journal -- it looks like 75 points barring a wall street journal article. tom: oil maybe with a little elevation shows some of the better feeling about earnings. jonathan: goldman and bank of america on deck. kailey: coming off of a monster rally for the bank. citi was up some 13%. the loss -- the question will be on the loan losses. and for goldman, what do the investment banking fees mean and does the outlook improve in the back half of the year? jonathan: rate hikes we have learned are good for profits but not good for bank stocks so far this year. kailey: it has been a catch 22 for the banks. banks are going higher and you also have a deeply inverted

curve and concern abound -- about recession. jonathan: recession on, recession off seems to be the trade. does that get you excited for the weekend? tom: it doesn't, and i had the privilege of speaking with lawrence summers on wall street week on friday. i thought larry was brilliant about the foolishness of gaming all of this. the word recession as a forecaster guesstimate of a number of moving parts. you just have to get one of them wrong to be wrong. jonathan: the labor market at the epicenter. futures up .9% on the s&p. the nasdaq 100 up. strong and to the week with a strong tilt into the financials. the banks finishing really strongly on friday's session. yields up by five basis points

on a 10 year. euro-dollar, what a week ahead for europe. kailey: it is going to be interesting and exacerbated by the turmoil in italy. how does the ecb keep control of the periphery if you have that kind of crisis? that is later this week. there are a number of things we are looking at. bank earnings, bank earnings. can make continue the momentum we saw? what are the credit provisions looking like and baking revenue for goldman? at 10:00 i'm at the national association of homebuilders housing index -- at 10:00, the national association oval way to lose -- the national association of homebuilders housing index. consumers wary about high prizing putting a damper on sales. at 4:00 p.m. eastern, flows for

the month of may. there is a lag to the capital data, six-week lag, but it could help explain the movement of dollar and the treasury of buying from china could be interesting. we expect the china holding of u.s. debt could fall below $1 trillion for the first time since 2010. jonathan: the u.s. national average gasoline price has been down every single day since june 13. asked week, commodities continue to get hammered. -- and last week, commodities continued to get hammered. tom: we still have inflation and it appears to be persistent and drives the high nominal gdp. to me, the ultimate mystery to get to pelfrey, is what is the revenue line going to be? we don't have a clue.

jonathan: patrick pelfrey joins us now. patrick, let's start here. the house view is much more constructive on earnings on wall street and beyond than the rest. can you just go through it? why is that your view? patrick: the question is, what happens with nominal gdp and we measure corporate profits on a year-to-year basis. this year nominal gdp expected to be around 8% for 2022. that is a big number. that is supporting the revenue trends. right now, revenue expectations .2 growth at 10% and that will support revenue growth with the remainder of the year. it ultimately helps propel the bottom line. that is how we get to strong revenue. the question is what happens to margins. any companies benefit from

margins as they leverage. across the benchmark in general, we see good margin leverage. tom: what is the surprise of six weeks, eight weeks in earnings? what is the guesstimate you have on how we will all be surprised august 15? patrick: as we look toward the end of earnings season, we are seeing growth around 5%. we expect it to come in at a healthy level. what is important is there are groups that are problematic, financials is an area where last year's reserve releases were cycling. it is difficult for the group and if you took out financials, you could see a backup around 13% 14% these are numbers most investors salivate over in normal times. kailey: you are talking about earnings and prices have come

down. our valuations at a point where they are attractive enough where we will see reentry and where would that be? patrick: we started the year around 21.5. as inflation came in and the expectation of fed increases, we expected to be removed here right now we have a pe incrementally above averages. there is plenty of opportunity and those other ones seeing growth. etf's are growing faster than what you see with the depreciation. a lot of the valuation story has been corrected. the question is whether we will head into a recession. jonathan: when you look around and say, we are wrong? patrick: we are wrong in terms of the forecast for eps. we took our call down.

i think the reflection of our call coming in was the widening credit spread, the natural volatility priced in and the valuation rating. the question becomes, as we move that the back half of the year, what do we get back? we think credits will come in and the macro uncertainty will fade and that will dry us -- drive us higher. tom: is there a distinguishing between profit and will that be into 2023? patrick: what we see when we take a look at the regrouping of stocks i profit making or margins, you are seeing companies with better margins swinging into favor over the past six to eight weeks that story was value lead for the first six months of the year.

cheaper companies did better. the focus now is on margins of quality, incrementally on growth and that is where we encourage investors to look. a lot of that is taking place in cyclical. it can be staples, health care. at the quality companies. jonathan: patrick and the team looking for 4300 year and. wonderful for you to catch up. patrick palfrey of credit suisse. at 730 eastern time -- 7:30 eastern time, we should hear from goldman. the boj is the story this week. tom: it is out there and over the weekend it is in the research. the wonderful seth carter at morgan stanley with the japanese team makes a very subtle shift. they will continue yield curve control out into next year, into

q2 of next year. that is a huge deal from an incredibly informed house. jonathan: what i enjoyed is highlighting the differences between rate policy over the next 12 months. the boj owns 2% of the gtp market and sink upside risk to that. tom: the political economics, we don't emphasize enough the politics and off of the a terrible assassination of abe and lack of optionality and degrees of freedom with drive you -- with draghi. jonathan: i did not catch up with mr. draghi. tom: i thought you were having a cocktail. jonathan: i would love to catch up on the italian market and the ecb as well. we will see how much of a market

we will have in italy. tom: you should have seen the photos that kaylee had -- kailey had. jonathan: is there something i don't know? tom: she did a remote their. like catherine have -- remote there. like katherine hepburn did. jonathan: good morning to you. this is bloomberg. ♪ >> keeping you up-to-date. a u.s. energy envoy optimistic. oil output increases after biden's visit. it is said there will be a few more steps in the coming weeks saudi official say any decision to pump more would be made within opec-plus. the international monetary fund said it will cut its global economic outlook substantially

in the next update. that came after g20 finance ministers and central bank governors ended the meeting without agreeing. the imf downgraded outlook for growth after russia invaded ukraine. in the u.k., a cancellation of the final debate of the party candidates. two of the five came out of the debate after it turned personal and accusing of socialism. a vote today to a limited one of the candidates. a new report blast the police response to the elementary school shooting in uvalde, texas. it set almost 400 law enforcement officials rushed to the scene but poor decision-making resulted in an hour of chaos before the gunman was killed. 19 students and two teachers were killed and the attack.

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>> i'm doing all i can to

increase the supply for the united states of america. >> there is a potential shortage. let's work on increasing crude oil production with our opec partners and opec-plus partners. >> we want to see more supply. that helps to depressurized and keep costs down. jonathan: good morning. counting down to the central bank decision with features positive one full percentage point. on the nasdaq, up 1.2. crude in focus, the bpi -- w ti up. further steps expected in the coming weeks on crude output from opec later in august. tom: we will have to see from here. the fist bumping really took front and center. what we need to do is understand that in lieu of scarlet fu to

understand what is really going on with ben affleck and j. lo, we have to go to annmarie hordern. she joins us exhausted from the trip this morning. i know you have to have a subscription to the club to get the scoop of what is going on with the wedding. but the wedding is about joe manchin. who is giving him love in washington and the real j lovers club? annmarie: he is not getting much love. the fact that he is saying no at least ahead of august for a bigger package that would mean tax hikes and provisions to fight climate change does mean that senator mitch mcconnell is likely going to have the republicans sign up which would be a big deal.

that is a bill that everyone in washington is coalescing around because it means you can come back china and has 52 billion dollars for the semiconductor industry. when it comes to his own party, what a welcome home from his party from his tough trip to the middle east. he is now seeing his economic policy pushback. jonathan: walk me through what we can expect in the coming weeks and months. annmarie: there was no agreement, especially from oil on a meeting. you do here u.s. official saying in the coming weeks. that points you to august 3 when the next pass -- the next opec-plus meeting will be. when i talked to a top saudi diplomat, they say they need to see the supply and demand dynamic. for saudi arabia, this is a delicate moment. if they are going to pop -- pump more oil, they have to get work groups on board. this does set a difficult stage

they want prices to come down as soon as possible, and we are under performance away from the midterm elections. if there is an agreement in august, you will see that close to november if it will have any impact on prices. kailey: what has the reception been like at home to biden's trip and the fist bump tom alluded to? annmarie: the optics had taken over the entire trip, and it has not been good you had sanity -- senator bernie sanders saying no u.s. president should be going to saudi arabia for this type of government. president biden tried to ostracize this individual and then you have him giving a fist bump and having a direct meeting with him. president biden sat across from the crown prince which legitimized him as the leader of country, something the administration didn't want to do. the huge coup for the saudi's in

geopolitics and whether or not the president gets what he wants done, we won't know for a few weeks. tom: is a coup for the gop? would they have done anything different? annmarie: president trump went to saudi arabia on his first trip and got the full fanfare. he did the sworn dance which is typical -- sward dance which is typical. it was toned down at the request of u.s. officials they did not want this, and circumstance and they try to tone it down and make it look like a working meeting. your optimism and goals when you are campaigning does not meet the moment when you are in the white house. jonathan: amh back and manages start about j. lo and been

athletic. we appreciate it -- and ben affleck. we appreciate it. it wasn't president trump with that he would make this president promised to deal with the king and crown prince. the press secretary at the time said the president would be dealing with the counterpart and it is something that secretary blinken should be dealing with. a lot have changed. tom: a lot has changed with the oil prices. what is important with the oil family is how far we are from the robert lacey books i read 30 years ago. we just removed, not a special relationship with saudi arabia but the history out of world war i and world war ii. jonathan: the good news for this administration and the american people is that gas prices have been coming down.

we have talked about it coming down every day since the middle of june. we saw that factor into expectations as well. that came down in what has been happening with gas prices. and we could get a 75 basis point hike from the fed. recession risk climes and inflation comes down and we have a different story. tom: this is like getting the kids started on their summer reading. it proves difficult. you mentioned last week that it is passed down from 9% to what and then what and the than what and when is the then what is the big mystery. jonathan: for me, it was never about 75 or 100 basis points at the july meeting it was whether you look at that last week and thought there were reasons to believe this is sticky and upside risk to fed funds in the second half of the year or you

just looked at it and said, this is the worst of it. energy and commodity prices are coming in. annmarie: -- kailey: that is what we saw at the rally at the end of the week. it is not they do about what they do in july but has our assessment of what the terminal rate is likely to change and how quickly thereafter do we see cuts coming in? you have several forecasting larger hikes this week looking at cuts out in 2023. jonathan: citigroup thinks we need to get to 4% by year end. futures up more than 1% on the s&p 500. yield higher by four basis points. from new york city, this is bloomberg. ♪

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jonathan: good morning. moment away from bank of america earnings. an hour from now you will hear from goldman. futures up by 1%. on the nasdaq, up 1.2%.

bramo would want to tell you where the bond market is. the fed decision next week, yields higher by four basis points. on a two-year come up by a couple of basis points. just wrap things up, a peak week ahead for the ecb, between a rock and a hard place. dollar-yen facing weakness, down by .3%. euro-dollar down by .8%. this decision for the ecb this week, i do not envy them. i am not sure there is a policymaking -- policymaker that envies the current position. tom: how does madame lagarde save face for all? is it called the fragmentation? jonathan: the

anti-fragmentation. tom: you are gone. you had a four-day trip. the draghi thing is important. how does his turmoil affect lagarde? jonathan: if you get a change in the italian government and it shifts one side to the other, whatever it is, as spreads widen is it for unwarranted reasons and the ecb considers that there world to come back in. i don't know about that and they are in a tough place. tom: we are going to dive into a half-hour of mystery. usually comes out within a minute with each other even the earnings. bank of america, somewhere between now and then they will come out with earnings. kailey leinz will dive into the analysis. someone who knows ken lewis is

ken leon from cfra. the four major banks and the great financial crisis. it is absolutely stunning the degree brian moynihan had to pick up. it is 2.1% per year for bank of america. that was the debris he picked up and picked it up and cut costs. is he at a point or he will cut costs again? can: first -- ken: you are right. if we do see further weakness in the capital markets, i think by december, the bank will have to look at whether they have too many people in terms of investment banking. i don't think we will hear that today but for the back part of the year. tom: we know the calendar on

this and you frame up february bonuses in the distant dark of the fourth week of september. it is all of that going to be moved forward this weekend -- this year? kenneth: i think able do the work in august to see if we continue to see investment banking fees down 60% for the year as we saw for the first half of the year, then obviously you don't need a large machine in terms of equity underwriting in particular ipo's. jonathan: we know rate harks are good for not income. at this stage of the cycle, what about bank stocks? kenneth: they are still good. widening spreads and higher net income. but the best case for banks is not only the higher rates but higher volumes.

what we saw from last week and today for bank of america is easing consumer loan activity. we are not in the dark days yet, and that would be where there is a significant rise in provision for loan losses. the bank credit risk committees can only book they see today. it is a real indicator but not forward indicator. is that -- jonathan: is that enough? kenneth: citigroup up 13% last friday and any glimpse of positive news, even if the trend seems to be still uncertain or negative will move stocks because they are trading at ridiculously low, 52-week lows. especially bank of america. today's story with bank of america is that this is a premier bank and certainly

should show better metrics than citigroup or wells fargo. kailey: do you expect bank of america will follow citigroup? kenneth: they are going to have to. we didn't get enough press with the fed. the capital buffer has to be widened for bank of america. i suspect they will softly talk about holding off buybacks for now and maybe look at it in three months. they are going to have to do that. there wasn't a blockbuster year for the fed stress test. the business for many is growing higher and the yields for the stocks are 3.5%, 4%. kailey: if they need higher capital buffers, based on the results we have already seen come what is your thoughts on the health of the economy and consumer, because executives think it is still sunny for now

but the hurricane winds are out there somewhere for jamie dimon. kenneth: on the stress test, it is alice in wonderland. we are talking about 10% to 14% unemployment rate. it is a dance the fed does with the banks because of the financial crisis. so reality today, the banking industry is going to have lower loan activity in the second half of the year versus the first half and then we have to play the recession scenario for 2023. but if they start building reserves in the second half of this year, that could be good fodder for push-ups in 2023. that's exactly what happened in 2021 versus 2020. tom: kenneth leon is with us as we await the earnings from bank of america. sometimes a mystery. i will guess eight minutes and

goldman sachs will be later today. mr. leon will join us. welcome to all of you on bloomberg radio and television, and especially global wall street. there are two stunning ways to compare jp morgan and bank of america. one is on book value, where there is a premium to jp morgan. i don't think moynihan has had enough credit for pulling bank of america up above to 1.09. the other rate of return over 20 years, bank of america has been at 2% per year versus jp morgan's relative excellence at 11% per year. what is the differentiator for the senior management of bank of america as they compete? kenneth: it is really investment and digital banking and making the right calls in terms of

expanding your consumer business. i don't think it is the capital markets and i think it is more history and emotional buying that tickly morgan is a better bank. -- that particularly morgan is a better bank. when you look at bank of america, especially the last three or four years, i have upgraded their platform. they are well ahead of the wells fargos, but i don't see a reason for such a wide difference between of america and jp morgan, which is why we have a buy on bank of america and a hold on jp morgan. it is hard to continue to exceed expectations when you are so optimized as jp morgan has been. jonathan: ken leon there of cfra.

have a look at credit suisse and do the same with --. it is not good in europe. tom: they are not apples and oranges but they are not apples and apples. they may be mcintosh and the ones i hate, maybe the red delicious ones, i hate those apples. on credit suisse, this is it stored nary -- extraordinary, i spoke with greg fleming with the rockefeller foundation and wall street week, and he was scathing about the banks stumbled and have become zombie banks. is credit suisse a zombie bank? moynihan and his team and what they inherited, it is amazing how bank of america has gotten back to book. jonathan: on the mainland, they waited 11 years for a rate hike, eight years to get away from negative interest rates. tom: to me it is all cultural.

jonathan: we are getting that but doing it into weakening. tom: what is the differentiator at barclays? what is differentiator of the mess that ab and amaral became. with digital banking, jp morgan of 11% on mobile customers. jonathan: they have to spend to make that transition. tom: spending is everything. they will go by way of putnam if they don't get it done. when i was a kid, the exchange was open saturday and grandpa would take me down and they had the paper tape and the old geezer with the tape going through his hand and the

spittoons and the whole thing. the dow jones industrial average was the only thing they quoted. jonathan: that makes sense. i hundred years later, we call it the s&p. -- 100 years later, we call it the s&p. tom: and they still call it the dow. jonathan: this is bloomberg. >> russia's defense minister has ordered part of forces to focus on destroying ukraine's long rage missile and artillery systems -- long-range missile and artillery systems. russian troops have in trying to destroy weapons. the u.s. and allies have set shims to ukraine. winding down operations in russia. a company halted business after

russia invaded ukraine p they expect costs at $190 -- $190 million. elections after prime minister mario drowned the -- mario draghi called out the possibility of remaining in the governing coalition. draghi said he would resign. in china, the number of daily new coronavirus cases is staying above 500. fewer cases reported on sunday as it rolled out mass testing in nine districts. the u.k. is bracing for a heat wave this week. london may hit a record. that is hotter than all of the u.k..

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jonathan: bank of america numbers in line. investment revenue coming in at $1.13 billion. in line everywhere else including on trading revenue. >> the question is, is in line enough in a quarter like this? you are seeing the profession for loan losses better than expected, which is a feature sign of the health of the consumer. you have efficiency a little higher than expected and we are

expecting bank of america but 67% efficiency revenue compares to 59% at jp morgan. when you ask him about what the difference is, is bank of america is a little less efficient than jp morgan. bank of america before the earnings with the big run-up, seeing stocks react negatively today for results that are pretty much in line with expectations everywhere else. tom: i give them the highest marks for a beautiful powerpoint. i give them great credit for the courage to go back to the great financial crisis. this is not the bank from before where consumer loans go from 67% down to 44%. this is not the bank we perceive, is it? sonali: it is not the bank of

2008. the question is, how do they become the bank of the next five or six years. what investors are concerned about is the next 24 months. the question of investment is so important. you have bank of america inking 21% of the share of m&a volume at a time when m&a is down. that makes them a contender. the question of whether they will pull back on investors in a tough market is a tough question. i anticipate you will see brian moynihan talk about the need to invest through tough cycles, because investors are going to want them to have some prudence. tom: we didn't do any of the macro blather on what the fed will do we talked about the inside stuff shown in the charts. we had moynihan as a total bank nerd. jonathan: did you call him that?

how many times have we seen resilient in a bank statement from these guys? kailey: brian moynihan is no exception in a statement saying the u.s. consumer clients remain resilient and continued strong balances and spending levels. didn't look at the credit loss provisions, lighter than expected. the estimate was close to 605 million. sonali: not only are the provisions less, so are the charge-offs are you are not seeing loans go bad. you are seeing a beat in the interest income. that is the most important line for bank of america. not just higher in the income but the net interest yield taking higher in a way you would want to see it in the face of higher interest rates and also an inverted curve. is it enough for investors at a time when they are still worried about a recession and some other declining businesses when the other half the corporate side

also under pressure. jonathan: stay we will catch up. we will get other numbers later. down 1.7 percent in the aftermath of those results. tom: what is interesting is what the expense path forward. don't you agree, larry fink was out about not hiring freeze but tightening. jonathan: that is where it starts, hiring intentions. how quickly it moves remains to be seen. tom: can leon is with us. what are you seeing? is there a story we are missing? kenneth: the story is they can't really see into the second half of the year. the banks are conservative on

provisions. it is a strong statement we will have a soft landing or a vallow -- very shallow recession or we will see more significant increase. i looked at provisions for loan losses over the last six quarters and it has come down starting in the first quarter of this year off of the sugar high they had off of the loan reversals. i don't think we are getting the story for the banks for the second quarter in what lies ahead in the second half of this year and certainly session in 2023 here we are not getting that story. kailey: maybe a murkier forward outlook. is that why we are seeing shares down 2%? kenneth: it is, because if you call all of the bank analysts, bank of america would be your favorite with rising rates and

lower loan activity. as we heard, it is more modest volumes. it is not one where we are going to see it move the needle one way or the other. many times, as tom mentioned, we get brian moynihan on the call on beautiful execution on large businesses and consumer and commercial banking. i think we might see some pickup. but the second quarter is not looking into the crystal ball of what lie ahead for the next six to 12 months because credit risk committees are looking at the real environment or what happened in the last three months. jonathan: awesome to get your reaction in real time. he will be back with us later this morning following goldman numbers. even solomon -- david solomon of goldman up next. tom: each story is different and

has a different clarity as we immediately look at the data. with goldman sachs, wonderful effort, 10 days, maybe two weeks ago. i am absolutely fascinated how goldman sachs positions the retail bank experiment. jonathan: are you not in markets? i wonder if the cash position would have come over. tom: i wonder if it is, this is what we are going to do. jonathan: you expect that this morning? tom: i don't know if it is this morning or a year and thing but i am fascinated about a well-intentioned effort to go into retail and that we are patient. jonathan: you are very diplomatic this morning. tom: i feel diplomatic. jonathan: you don't sound that patient most of the time. futures up .9% on the s&p.

a decent and to the week -- end to the week last week. consumer inflation expectations and the university of michigan sentiment survey came in off the back of what is happening with gasoline prices and that set up or a 75 basis point hike and not 100 basis points. tom: and the curve in gets my attention. their real yield on friday, they did note how it has come in from a .62 a positive. jonathan: did you do the show on friday? tom: i was doing my frankford ecb practice lunch. jonathan: how did that work out? tom: three hours. jonathan: very european. this is bloomberg. ♪

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>> this selloff, brutal as it seems, has been the orderly. >> main street needs to be doing a little bit better, though i have seen some signs of stress. >> real household income is going down. >> we feel like the consumer is very stressed right now.