mark: welcome. i am mark crumpton with first word news. president biden and president xi jinping of china are laying the groundwork to meet face-to-face. during a phone call yesterday, they told their aides to set up a meeting. the plans, as house speaker nancy pelosi embarks on her asia trip today. she has confirmed plans to visit taiwan and china has warned against it. in the u.k., rishi sunak is conceding he is the underdog to be the next prime minister. while campaigning, the former

chancellor of the exchequer admitted his pledge not to cut personal taxes until inflation was under control was not universally popular. his rival, liz truss, has promised to cut taxes. the biden administration has approved the sale of weapons to germany, including f-35 fighter planes and crews missiles. the state department announcement made no mention of the war in ukraine but said the sale will support a nato ally that's an important force for stability in europe. former u.s. treasury secretary lawrence summers says he's concerned the fed is still engaged in wishful thinking about how much it will take to bring inflation down from four decade highs. summers spoke to bloomberg's david westin. >> jay powell said things that, to be blunt, were analytically indefensible.

the claimed twice in his press conference -- he claimed twice in his press conference that the fed was now at the neutral interest rate, calling it 2.5%. >> the fed's current target rate is now 2.25% to 2.5%. summers says a neutral setting would be higher because it has to take into account where inflation is. for the full interview, tune into wall street week with david westin at 6 p.m. wall street time. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. >> i am jon erlichman. welcome to bloomberg markets. >> i am kriti gupta.

green on the screen when it comes to the s&p. visit earnings, other data? perhaps a combination of both. the s&p up on a friday. a little bit of a risk off day but still up and on higher volume. good news there. at the same time you are seeing a weaker dollar. the nasdaq outperforming and a little bit of a bid to treasuries. a defensive rally but a rally nonetheless. >> to your point about a risk on friday, it has been a risk on month. the nasdaq 100 up 12% roughly, and that's continued in part because of the input of apple at amazon, the broader market getting -- of apple and amazon, the broader market getting support. we will hear from the ceo of intel because their concerns are front and center with chairs down more than 8%. >> speaking about the outlook, it is all about recession fears.

is it more talk than action? our guest earlier today on why those fears are overblown. >> in this earnings season, we had a lot of talk of recession, but no indication in results. we are not seeing broad-based layoffs. maybe slowing of hiring and consumers are still resilient even though we heard that low income households may face pressures. kriti: for more on today's economic data, we are joined by mike mckee, bloomberg's international economic policy correspondent. we got a ton of data today -- personal income, personal spending. wells fargo said, if there's a recession, no one told the consumer. do you agree? >> they are going farther than i would. the employment cost index of 1.3% for the quarter, 1/10 less than in the first quarter, which was a record.

it still cost a lot to get people hired. income was up .6%, which is hard to explain given the fact that spending was up 1.1%. we are spending more than we are making. but hold that thought because look at pc inflation -- at pce inflation, the fed's favorite indicator, 6.8%. the reason i said hold that thought is you take a look at what happens when you subtract inflation from the spending numbers. right now, it is a big difference, because the spending numbers on a real basis, inflation-adjusted, up just .1%, a full percentage point lower than the overall spending number. you can see the gap there and what inflation is doing to society. next week, we have a lot of numbers too, and numbers that will really affect people. ism, manufacturing and services, july autosales, jobless claims, and of course, you will remember, the payrolls report

friday. you bring the cheese and i will bring the wine and we will just -- [laughter] jon will bring the popcorn. jon: i hope you have the popcorn. you are nonstop and have been everywhere this week, mike. now we have this gap, so to speak, between the decision this week between the u.s. fed and, moving on the road, what do you think will be the most important economic point as we rolled through the rest of august and september? mike: clearly, the jobs numbers are going to be important. i think cpi will get the most attention. august 10 is the next cpi report and there's another one just before the september meeting. if i had to pick one thing, jon, it is going to be jackson hole, the fed meeting there, jackson powell speaking -- there, jay powell speaking. no doubt people will be paying attention. jon: mike mckee on the economic

scorecard. let's bring in some market perspective, troy gayeski, fs chief market strategist. we will share the popcorn with you too. the broader story of investors during this time of turmoil has made people's head spin. how are you navigating everything in front of us and the investing strategy alongside that? kriti: looks like we -- troy: it depends on the objectives. first of all, if you are satisfied with the mid to high single digit return, there has been an excellent performer your to date, up north of 3%, fairly resilient -- very resilient. that's been a big place for people to not only hide out during this bear market but continue to outperform plane fixed income. it is still down north of 8%

year to date. secondarily, there are multi-strategy approaches that have a blend of correlated and non-correlated trades. an example of a trade that's sensitive to the economy would belong dividend futures. dividends to be far stickier in recessions. there's only a few years we have been down in the last 40, during the pandemic and the global financial crisis. we think dividends will still grow, but the flipside is you have to have some defensive positions. one of our best-performing trades year-to-date has been short agency mortgages versus treasuries, because as the fed was moving to online their balance sheets, it was almost a certainty that that -- that the spread would widen. the challenge is protect capital, don't be a hero. understand that we are likely in a bear market. don't chase bear market rallies, and certainly don't take any

moves with certainty over where inflation is going and markets are going in the next two or three weeks. people try to predict that with precision but no one can. kriti: i want to ask about the defensive play you are talking about. we have at a rally on our hands, a lot of people saying perhaps the bottom is in when it comes to the stock market, but when you look, it is a defensive lead rally. you are seeing real estate and those sectors lead. i wonder if that's a reaction to a federal reserve that wasn't dovish but perhaps not as hawkish as previously. does that signal the return of a fed put? troy: not at all. one thing we agree with larry summers on is the fed has probably been too nonchalant for too long on inflationary pressures. obviously they have caught up substantially, but they are still guiding up to 100 basis points of hikes, which probably will not get us to where larry would like us, but tighter policy.

there moving toward aggressive balance -- they are moving toward aggressive balance sheet reduction, 3.6 times in terms of nominal gdp, 2.9 times in terms of existing money supply. from our perspective, that alone, at some point this year, should drive another major risk off, and it will be sometime before the true fed put can return, at least through the next recession, through multiple months of balance sheet drainage, and at least through 100 basis points more hikes. to us, this is a classic bear rally. it used to be a typical feature, you know, back in 2002 or even during the global financial crisis. what short-circuited people's minds of course is almost every dislocation since the gse, the fed -- the great financial crisis, the fed has stepped in. markets do not go up or down in a straight line and it is actually surprising it has

taken this long to have a more powerful bear market rally. jon: against the backdrop of what you are saying, we are knee-deep in earnings season. i want your thought, because it is a rally day. there are a number of earnings stories that impressed wall street, but on the road ahead, people have been wondering about what the profit margin picture will look like. troy: fortunately so far, earnings haven't been horrible. they have not been great, but they have been strong enough to continue a recent bullish narrative, which is counter to the extreme pessimism present in june and gives a little more juice to this rally. the thing we try to remind investors about is, right now, forward multiples, when you look at markets, are still pressing and substantial growth from a bottom-up and top-down standpoint. if we end up in recession, not 100%, but certainly a higher probability than earlier this year, a, earnings don't grow,

and, b, earnings contract, so the pressure we have had so far is really apparent. it is not real. we are trading at a higher multiple today if we had a typical 20% earnings retraction at recession. kriti: we will have to leave it there. sorry to interrupt you. troy gayeski, fs chief market strategist talking earnings and multiples. coming up, the energy crisis spawned by russia. the oil companies getting record earnings. that next. this is bloomberg. ♪

this is bloomberg markets. i am kriti gupta with jon erlichman. one company posting their best profit ever amid surging demand. chevron posted their best quarterly performance in their history, not to mention a 50% increase in buybacks. spectacular numbers from these big oil companies. how are energy reporter for bloomberg intelligence joins us. these numbers are enormous. how long does this last? >> at least until the next quarter. we are seeing a cool off in

refining margins. we are seeing an improvement. chevron and exxon saw a five-time improvement versus first-quarter numbers for the u.s. side, figure on the international side. we are starting to see the first cracks in asia, refining margins in singapore drop, hitting both exxon and chevron, but the numbers will still be high and we expect those buyback plans through 2023, which are huge increases versus 2002 anyone levels and even 2019 -- versus 2021 levels and even 2019. jon: let's talk about that in the context of where oil supply is. a tight picture. much of the world looking to north american producers. in canada, a lot of companies just reported. some of the messaging from companies like chevron seems to be they want their share of the pie. fernando: absolutely.

there is difficulty raising spending significantly from the levels they are at today. there's inflation, a lack of labor supply, and a lack of materials. we see those issues throughout the economy, not just in oil, and that limits the amount of growth you can get out of shale. in other regions, you have really cut spending since 2014. we have not seen a lot of exploration. canada has gone into -- the prices in canada are so high. we expect more of the same. these recession fears are putting the pressure on oil prices for now, but once you get over that, we expect oil prices will remain high for the next couple years because there is a supply issue and if there are more problems with russia, there's no one else to bail it out. jon: fernando, great insight is always. fernando valley of bloomberg intelligence on the energy earnings this friday. we want to round out the earnings story.

a big week for tech. apple overnight with third-quarter revenue nearly topping estimates, iphone sales holding up better than expected. amazon showing its e-commerce and cloud businesses can churn out revenue even as investors worry about inflation and the company attempts to stem expenses. let's talk to ed ludlow on the bloomberg ted -- bloomberg tech team. amazon is the best performer on the s&p today. this idea that these companies are so big, have so much money and put so much money to work that they have several levers they can pull, especially if the top line starts to cool. ed: you know, that is certainly the right summary. the sales side at least has given us -- has given a sigh of relief around inflation risks and amazon demonstrated with prime that there was some resistance to the inflation picture. online sales missed but net sales overall, particularly in

north america, beat. what is interesting is prime day sales on july 11 where this quarter, yet in the results they reported, they showed strength in prime subscription growth even though they raise prices in the u.k. and europe. you are right. andy jassy is refocusing this company's aws, where they beat, advertising beat as well, and you have this operational expense cutting, making it a leaner, meaner machine for whatever it does next. kriti: let's talk about the apple story, because together they make up over 10% of the s&p, both sector proxies in their way. they said demand is still there but they are dealing with macro headwinds. but do we -- what do we take away from this story? ed: it speaks to the strength and health of the higher end consumer. the concern with walmart was the

lower end consumer was switching from discretionary to essential spending. there was strengthen iphones, weakness in mac, which they attribute both to the supply and demand disruptions in china related to the covid shutdowns. there's also weakness in services growth. this is a company that suspended guidance, and historically, tim cook resisted the urge to give a macro view. he said in the past i am not an economist. you read that quote on the screen, that looks like guidance to me, that things improved in june, particularly in china around the holidays, and he says he expects revenue to accelerate in the september quarter. so it looks like they are showing some staying power in the face of inflation and a changing global economy. jon: all right, ed. a helpful breakdown on both the apple and amazon stories on a busy week. outside of those stories, we've

seen a big slide for intel stock this friday. the chipmaker slashing sales and profit forecast for the rest of the year due to a weaker economy and market share losses in the server industry. we will hear from ceo pat gelsinger on why he is optimistic on the road ahead. this is bloomberg. ♪

kriti: this is bloomberg markets. jon erlichman joins me alongside myself, kriti gupta. intel reported steeply lower second-quarter results, saying revenues this year would be as much as $11 billion less than projected, buffeted by a slacking economy. ceo pat gelsinger spoke to bloomberg earlier about the discipline numbers. pat: i think we deserve to be

down today, and with the earnings we report, the guidance we gave, it is a little bit of a reset, and i think we have disappointed ourselves and our shareholders and that respect -- shareholders in that respect. at the same time, we have laid out a multi year path to the future, and we are getting more and more proof points along the way, such as our technology and process. that area is one everyone has said is critical. intel seven, intel four had positive reviews. we are ahead of schedule on other models. and with our leadership process and capacity, intel will do fine this year. we had neither. we will get those back going forward. it is a journey. caroline: what difference will the chips act make? pat: it is a seminal act. this may be the most significant

industrial policy legislation since world war ii in the u.s. this is huge. we expect to be a beneficiary of that both in the near-term, with the manufacturing offsets -- we have an aggressive capital build for that, and the tax benefits will be helpful, but long-term, the research portions of the bill are huge for long-term leadership as well. this is good for the industry, good for the united states, and intel will be a beneficiary thereof and i'm proud to have played a part in getting it across the lawn. jon: you are talking to someone relatively new on the job, andy jassy taking over at amazon. he has pulled plans that he has bold plans -- he has bold plans. kriti: we put that into the context of chips broadly. there's this massive push to bring chip making capacity back to the u.s., but that is not

cheap from a production or a labor standpoint and we will have to price that cost in as the transition is being made, something we will have to keep our eyes on. bloomberg markets is next. this is bloomberg.. ♪

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mark: now keeping you up-to-date with news from around the world. here's the first word. i'm mark crumpton. ukrainian president volodymyr zelenskyy went to the odessa region today. ukrainian officials say they are close to restarting shipments of grain, although the timing will depend on a go ahead from the u.n., which helped broker the -- broker last week's deal with russia. the u.s. is poised to deliver a bumper wheat crop that could relieve global shortfalls. yields in the top producing u.s. state,