>> the conditions are changing where you just -- u.s. data is

deteriorating. >> market pricing rate cuts by the fed next year make absolutely no sense. >> a fairly narrow window between the final rate hike and the first rate cut. >> ultimately it has to be a hard landing. the runway is just too short. >> this is bloomberg surveillance with tom keene, jonathan ferro, lisa abramowicz. tom: welcome to the gloom our. what a set of gloom at the opening of the program. the caution out there, it is extraordinary what we are hearing. jonathan: there is a worry we are going into recession, that we have to cut estimates more than we have seen. question from rbc about whether the june low was the ultimate low for the selloff. tom: equities are up this morning but it's about fed speak.

14 speakers yesterday, 12 today. what are they saying about september? jonathan: we have more work to do seems to be the bottom line. we heard that from mary daly yesterday. it unlocked a big move on the front end of the curve. right now we are super focused on the opec speak. started about 15 minutes ago, according to a delegate. they are going to boost output by 100,000 barrels a day. that will come down like a lead balloon in washington. tom: brent crude breaching out, 101.70. jonathan: we have gone from losses to gains. tom: lisa, with a bond volatility, we are talking about what have we seen in ig and high-yield?

lisa: one thing that is fascinating, companies have enjoyed the rally, have been selling bonds at the fastest pace that anyone would have expected. investment great have already sold all of the bonds for the entire month of august in two days. is that how people feel based on this put back from fed officials? we have more work to do. we are nowhere close to where we need to be to fight inflation. tom: i want to get back to the general gloom that is out there. caution into a jobs report. do we presume job report will be negative? jonathan: we are looking for a number of 250k. the question is will we see the

weakness spill out into other places of the market when the consumer is struggling with high prices? energy has come down over the last few months. gasoline has declined every day since june. we need help, but we are not getting it from opec. agreeing on a small increase in september oil production, just 100,000 barrels a day. this after a meeting between the president of the united states and the crown prince. the administration was hoping that we would see some signs up opec doing more. i don't think that is a sign at all. tom: we are going to print 102. jonathan: futures up half a percent on the s&p. on the nasdaq, up about half a percent also. tons more fed speak today. i some services coming up at

10:00. the pmi from s&p global. let see if we get any confirmation from the ism later. crewed, 1.5%. i'm interested to see what the communique looks like this morning. the president going to the middle east, criticized for doing so, and they follow up with just 100,000 barrels. tom: getting out to 105, 110. we are getting there rapidly. jonathan: if you are setting supply right now, you are asking yourself what will the demand picture look like into next year, especially with the slow down in china and here in the united states. we don't know how much spare capacity these countries have.

that is something that we dig down on with guests. tom: i don't think anybody knows. i know the netherlands, natural gas over there reaching out to new highs going back to the beginning of the war in ukraine. right now on the equity markets sam stovall joins us. meta saying they will issue a bond. this gets down to stovall 101. it is a dividend increase the same as increasing share buybacks? sam: not really. if you are an incoming oriented investor, you want the dividend because you can spend that. the share buyback could help propel the price later on, but you cannot really spend the price unless you bring done your principal. depending on whom you ask, i would say young people like you

and me, would probably like the dividend. jonathan: what shouldn't i do with my energy winters of 2022? they have been hammered. what do i do with them now? sam: i would say hold onto them for a couple of reasons. i just mentioned dividend's, which are strong. if you look at relative p/e's, the energy sector is trading at a 60% discount to their 20 year average versus the s&p 500. this is a group that will continue to do fairly well in terms of earnings in our opinion , will continue to pay nice dividend yield. from a trading perspective we have come up a very high level, but i think the potential for growth is still there. lisa: what is the backdrop for that call? the expectation that the economy hangs in there, the economy doesn't cool as much as

expected, or is this about a lack of supply enough to keep prices elevated? sam: i will be wishy-washy and say both. when you look to the demand aspect, the market itself is possibly going through a bear market rally, possibly starting a new bull market rally. expectations are maybe this recession will not be as deep as many are predicting. if we break above that 4200 level on the s&p and stay above there for a while, that would be a confirmation from a technical perspective that we are heading more for that a bear market rally. we could see an increase in demand. in terms of supply, there continues to be challenges from supply disruptions. when the demand does not fall as much as expected and supply continues to remain challenged,

that offers some support. lisa: i was looking at the reaction in the bond market as we saw oil prices go higher on the back of this smaller than expected output increase from opec-plus. how much are we trading around inflation driven by commodities? how confident are you that we could see a revival in the economic momentum at the same time that prices for oil stay elevated, leaving your energy bets to be outperformer's? sam: it depends on how you define elevated. expectations are we will average around $96 for the remainder of this year. the feeling is that is a lot better than what we had been experiencing earlier. also when you are looking at the materials group, the other category seeing a sharp decline in terms of share price, that anticipates a softening in demand for particular areas, as

well as the price for them. because we are anticipating that we will see a gradual decline in year on year percent change in cpi averaging 7.2% by the fourth quarter of this year, continuing to decline into 2023, i think people will start to feel better about that. that would end up bringing people out. i was at the restaurant the other week and i had a hard time finding parking. anecdotally, i'm having a hard time finding recession. jonathan: we have to talk about the latest in the commodity market. it intraday chart of crude captures this perfectly. considering only a 100,000 barrel a day increase. going from negative to positive just like that. not a major move, but not a major move from opec either.

100,000 barrels a day is the smallest increase for opec-plus in its history. tom: i want to fold that into what sam stovall just said. how much of our audience is folding in 7.2% inflation in six months? if you have oil here, can you get inflation down to that stovall level? jonathan: we know that people's ideas of future price growth is shaped by energy. we also know that when you go to pay your rent and you are negotiating what that looks like each year, that story is getting harder and harder for people to meet. that will be sticky, and that is the call into year-end. even if energy comes in, this fit has more work to do. lisa: it is not just rats, medical spence is -- expenses

that people are seeing with inflation. i want to hear the communication from opec-plus as to why they made such a small move. is it because of a lack of demand or constrained supply? jonathan: it cannot be there targets. according to the team at bloomberg, we are not sure if we get a press conference from opec after the decision. it will be interesting to see what the white house has to say. we will catch up with isaac boltansky. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. nancy pelosi ended her trip to taiwan after watching the u.s. would not abandon it. she reaffirmed her support for the democratically elected government in taipei. beijing announced military drills to protest her visit. china also announced limited trade sanctions on taiwan. opec-plus members have agreed on

an increase in production but it is the smallest in history. 100,000 barrels a day. this came after president biden took a political gamble traveling to saudi arabia asking for more .global news 24 hours a it was the first referendum since the supreme court said -- and voter turnout was high. for other states will hold similar votes in november. in the u.k., liz truss extended her lead over rishi sunak, suggesting she is on track to surpass boris johnson as prime minister. it is a timely boost for the campaign. earlier tuesday she had to make an embarrassing u-turn on a plan to tie pay to the cost of living. cvs health had growth up its pharmacy and retail divisions

.global news 24 hours a day, global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

>> markets should not look for any kind of major move on tariffs.

the biden people have been signaling that. anything other than completely lifting tariffs doesn't provide any inflationary impact. markets should look for that either. jonathan: always good to catch up with terry haynes. from new york city, tom keene, lisa abramovitz, i'm jonathan ferro. the nasdaq 100 up .6%. yields higher by three basis points on the 10-year yield. data out later. ism services, pmi for the week, payrolls on friday. a focus on crude in the last hour. up 1.7% at $96 a barrel. opec agreeing on a very small increase in september, just 100,000 barrels a day, there smallest increase ever. this comes after president biden went to the middle east to meet with the crown prince. tom: i would suggest on brent

crude, 99 to 101, so what. if we get a 105 prints on the global price, what does that say to the white house? jonathan: remember that fist bump? what was it worth? 100,000 barrels a day? i don't think that is what they were looking for. tom: i think the first time we met we fist bumped. we are going to get a briefing on this. isaac boltansky is the perfect person to speak to david director of policy research. he writes very informed notes on the synthesis of legislative and political politics. the president meeting with the leadership of china. what does mr. biden need on the

photo op past and forward when we see this from opec-plus? isaac: it is hard to overstate how disappointing this is for the administration. it is the geopolitical equivalent of a slap in the face. the biden administration made a huge miscalculation. their bet was they could go to saudi arabia, have that picture with the crown prince, which carries a bit of political complexity to it, but that that would help make an increase in production easier for opec. this $100,000 -- this 100,000 is not worth it, or any of the baggage that came along. tom: what do the people of capitol hill think about a change in the gallon of gas? they are not looking at every

nickel move, but what are they looking at? isaac: for a lot of these economic data points, it is almost a political rorschach test. depending on where you are on the ideological spectrum you could use any of these data points in your press releases, on the campaign trail. the reality is folks are feeling it at the pump, in their rent, at the grocery store. i think that will pull through to the election. even though we had some crosscurrents with the primaries, decisions last night, that tell us a little bit of the story, to me, the reason i have so much confident that the house will flip is because of the inflation story. that gives me confidence that the republicans will take the house. lisa: how much can president biden come out and get angry about this, saying this is a repudiation of the good graces

he showed? how much can he show disappointment in this verse is at least this is something? how can he pivot from what you call a slap in the face from the saudi arabian kingdom? isaac: what we have seen from the administration is the president will still speak positively about this, will focus on attempting to cajole opec-plus on the next decision. but i think we will hear some pretty sharp commentary from cabinet members on this. i don't know what the underlying justification is. the administration was desperately hoping to get more than 100,000 barrels a day to alleviate the pressure at the pump before the midterms. jonathan: the good news is gas prices have been heading down every day since june. we always appreciate your time.

isaac boltansky of btig. an important point, weakened focus on the political fallout from the white house, and i look forward to what they have to say after that meeting in riyadh. we also have to speak about the spare capacity that exists to opec. how much spare capacity is there actually across these bigger nations at the moment? does that speak to their reluctance to do more? lisa: annmarie was talking about this, how opec-plus members have not been able to meet those figures. they have not been able to produce as much as they say they will. how much of it is an issue that we are not getting the oil out of the ground? we cannot do it faster? then you have this conundrum of demand coming down at the same time that you have supplies being constrained. prices remain elevated even in

the face of some slowdown in activity. jonathan: i don't think this is as simple as what is happening with russia and europe. experts telling us that they pretend there is a problem with the turbine but ultimately it is a political decision. for the kingdom, when you look at oil markets, they are leaning toward the subject of these is suggesting. they don't have the spare capacity that people hope is the re. tom: maybe we can all get in the studio for a fist bump. what isaac said about inflation falls right into the discussion, we are looking for a crude elevation. inflation is the topic. jonathan: the good news about inflation cpi, energy has come down so much. i get that. we come down to the 8's.

tom: what are we doing on rent? jonathan: i month over month call. seems pretty sticky to me and others. it will be something that lives with us through the rest of the year. a big reason why people think this fat will go further. tom: we know they will go further but how much of it? jonathan: what did larry summers say about chairman powell? he was pretty blunt. how are we at neutral if inflation is where it is? indefensible is what he said. we are getting the pushback in the fed as well. futures are up, crude. this is bloomberg. ♪

jonathan: futures positive up .6%. up .6% on the nasdaq. yields higher by three or four basis points. fed speaker after fed speaker pushing back after whatever you thought chairman powell said last week.

yields creeping higher by 18 basis points. notice a turnaround in crude, up 2%. given the volatility we have had in the market, opec-plus coming out with the 100,000 barrel a day increase at a time when this president went to see the crown prince come suggesting that we need more. tom: brent crude, 102. we have not seen a pullback in the bid. the chart on the intraday basis out of vienna is still up. 102 is not 105. 105 is a level of embarrassment that the white house will have to face. it is compounded by this pelosi trip and the rest of it. balance, i'm sure we'll touch on those themes today.

we are here with kathy -- kathy bostjancic. let me set the groundwork for what lisa and john want to talk about. where are we on the guesstimate of q3 gdp now that july is closed? any handle on it or is it too early? kathy: happy to be with you. third-quarter gdp will be poor because we had those negative prints for q1 and q2, so-called technical recession. we don't look for the large inventory drag that you had in q2 and q1. that will make things look better. we are looking for roughly 1.5% annualized growth for q3. but we don't have any hard data points to corroborate that.

particularly consumer spending is always at the heart of gdp. tom: link that into oil. we were at 124. we got some news on oil this morning. how sensitive is consumer spending to oil in the modern day versus in the 1970's? kathy: the consumer is still very sensitive to energy prices, particularly gasoline. oil will be a big input to gasoline prices, but prices have really weighed on consumer sentiment and confidence, also pocketbooks. the fact that prices are down 70% or so, that is big news -- 17% or so, that is big news. that will help ease things a

little bit for the consumer. keep in mind what the federal reserve wants. officials still sounding hawkish. they want the economy to slow down. they don't want it to crash, recession, but they do want things to slow down. lisa: how much is the federal reserve to tracking oil prices? you were talking about how people have lifted spirits if gas prices come down, they may spend more. how much will the fed use that to back away versus, say, you cannot count on this and it could change on a dime? kathy: that's a good point. we see volatility across many asset classes, and things could change. i think what they will be looking at, the fact that the headline number can influence inflation expectations.

whether it is market expectations, but more important businesses and consumer. as long as gas prices trend lower, that is good news for expectations and actual print. core inflation will matter. service prices have been rising. that will continue to be an issue from the federal reserve. they were not take their eye off the ball. lisa: today is either opec-plus wednesday or ism services wednesday, depending on what you think. tomorrow is the bank of england. jobs report on friday. what kind of data are you watching? i keep on asking guests the same question, what do you do matters to determine their policy? kathy: every little bit matters. it is a part of the jigsaw puzzle, the broader portrait of the macroeconomy.

i would say this week i would be looking for the payroll number. many of us are saying that we are in a technical recession but not in a true recession because labor markets are so strong, which provides income, the wherewithal to keep spending, even if they are getting hit with high prices. if you see cracks in the labor market, that is a different story. tom: right now, i am drowning in gloom. the worry out there, the handwringing, is it the collapse of the great financial crisis? no. how bad is it out there? kathy: it is not anything like the great recession or the covid recession we just went through. at worst, it would be a moderate

recession come in our opinion. if we do fall into recession it could be quite shallow. we do not think unemployment needs to go sharply higher. we are already seeing inflation trending lower. we think eventually rental prices will come down. tom: sam stovall was just modeling 9 down to 7% or something like that. do you detect a pause on the way down or is there a force to it that gets us back to the 2% that fed speakers talk of? kathy: we have a family or -- similar forecast, around 7% by year-end. but the comparisons get much easier next year, and that's the key. you don't need outright price declines, just the month over month change has to slow.

and we need to see service price inflation start to cool. but you don't need outright declines in price levels. that's important to keep in mind. lisa: how much does the policy mix in washington, d.c. change the picture for you, whether it is the policy internationally with china or domestic wills be proposed? kathy: right now, the size of the build back better bill is rather small compared to but we just went through with fiscal policy, over 10 years. incrementally it could be positive for the economy overall, especially if it boosts innovation, technology. not a big game changer for us. right now there is not a reason for fiscal policy to pick up a lot and boost the economy, because we want to seek things cool down. in terms of geopolitical, that's

a wildcard. we didn't know what would happen with russia and ukraine. we don't know what will play out with china and taiwan. it makes us nervous, makes the market nervous, we will have to see how that plays out, but that is always a wildcard. jonathan: can i be academic for the moment? the question i will ask, due to vacancies and unemployment, when the initial vacancy rate is this high -- that seems to be the debate. kathy: traditionally when vacancy rates decline, you see a large increase in the on employment rate, but we think this time is different. even though the economy is slowing down we still have a tight labor market. there are still more jobs out

there than workers. i think it's possible to cool the labor market and the economy without seeing a real large increase in the on appointment rate. we may get some, but are we going to 2%, 4% higher? we don't think that is necessary to bring inflation down. there is a way to thread the needle, even if we have a mild recession. jonathan: always great to catch up with you, kathy bostjancic. that is the soft landing/hard landing debate. tom: it goes back to meltzer. is it a homogenous amerco or two parts with a wide body of people that are just flat out lesser employed or unemployable? if you do that, you get the outcome that employment goes up, but does it go up to fearful levels?

jonathan: larry summers is fired up about that. governor waller on the other side of it. lisa: saying you are underestimating the tightness of this labor market. a lack of understanding of why the participation rate is as low as it is. we heard a number of different academics try to understand much the labor market has shifted post-covid. the reasons why are unclear. until you understand that the participation rate will stay here, that will be an uncertainty in terms of tightness. jonathan: in the last hour opec-plus agreed on just 100,000 barrels a day. one hour ago, julian lee put out this comment. he said a 100,000 barrel day increase would raise saudi output by 26,000 barrels a day. the saudi target by that much. that is not even an up to fill

one suez max tanker a month. how d.c. response to this will be fascinating. we will bring you headlines. catching up with erik knutzen from neuberger berman. maybe we have not seen the lows of the year yet. that does it for me on this show. i will be on bloomberg tv in the next hour. this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. nancy pelosi has reaffirmed the u.s. come into taiwan. the house speaker ended her visit today after pledging the u.s. would not abandon its commitment to the democratically elected government. china reacted by announcing a series of military exercises. beijing also imposed trade sanctions on taiwan.

in turkey, inflation was almost 80% in july, and could be months away from peeking. the rise in consumer prices has already forced economist to rewrite forecasts multiple times this year. levels on the rhine river i getting close to where it would have to close. that would put the transport of large amounts of goods at risk. that would raise the price of operating coal-fired power plants. meta is considering its first ever bond sale. there will be a series of fixed income investor calls today which may lead to an unsecured debt offering. moderna posted second-quarter results that were stronger-than-expected. the drugmaker says it will buy

back $3 billion in stock. they are hoping to expand the reach of their shots in june. regulators cleared their vaccine for children under six years old. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg.

>> i think the big issue we have in the market is, that that is -- they will have to pivot. it is kind of this tension between what they're actually saying and the market trying to think one step ahead of that. tom: this morning, dollar and dollar dynamics, price change which is affecting all of us.

right now, joseph stiglitz joins us. we go to something dear to his heart my from gary, indiana, different bouts of inflation fear and inflation scare. your basic message is, everyone calm down. why is this inflation not like the 1970's? joseph: first of all, it is mostly a supply-side inflation. think about some of the things that are really driving it. take the price of oil. it is way up. we have a war in ukraine. we understand that. over the long run, and it is not that long, the price of energy will come down. the backstop, as we call it, we know we can produce an

unlimited amount of renewable energy that the equivalent of about $50 a barrel. that number keeps coming down. that is the number that energy will be at. we will go through disinflation. i cannot tell you when it will happen. tom: fair. going back to 1947, eisenhower disinflation, the two bouts of disinflation we had in the 1950's, once inflation begins to diss inflated, do you think it keeps going or do we stay at a certain point? is there a momentum to a disinflation? joseph: people used to think there was momentum on inflation and then momentum on disinflation.

but the forces for that momentum are much weaker today than they were 50 years ago. 50 years ago, unions were strong. when prices went up, they demanded higher wages. higher wages met higher prices. unions are weak. we are back to what you might call normal competitive forces. what we saw in the years before the pandemic, overall, supply was extraordinarily robust, prices were kept down. i think we will be returning to that kind of world. lisa: what is the fed's role in this? there is a belief that this is a different moment. people point not just to oil and commodity prices but this fissure between the u.s. and china and re-shoring up some supplies which is re-shoring, and the conflicts that are

inflationary by nature with russia and ukraine. how much are you looking at a fed who has to raise rates substantially to get ahead of inflation that may disinflate down the line but not quick enough to create some real threats to the economy? joseph: first of all, almost all of those forces that you cite are long-term or relatively small. yes, we will be re-shoring. we have low-cost suppliers alternative to china. vietnam, latin america has a lot of capacity. costs are going to go up, and there will be a readjustment, but it will take a number of years. and it will not be that big. we ought to be prepared for it. what i worry of is on the other side, that the fed works too fast and too much.

it takes about 18 months for the full effects of monetary policy to be felt. in that span of 18 months, if the war in russia comes to an end, prices will come down, a strongest inflationary force, food prices are starting to come down, and over the last 50 years, public policy has been telling farmers, don't produce. don't make so much food. if we just reverse that policy, prices of agricultural goods will come down. again, we have a backstop here that makes me hard to believe that we would just sit by and let prices be so hot while we continue to subsidize our farmers. lisa: it seems like you think the potential error is worse,

the fed going too fast rather than to slowly, which is what a lot of people are saying including some fed members. what would it take to change your mind as far as the data, incoming numbers on the economy? joseph: i would look for a particular acceleration of inflation. right now, wages are not keeping up with prices. really the opposite of what you would expect in a very tight labor market. if i saw a real wages going up dramatically, saw inflation start to take off at a higher rate. right now, the rate of inflation is going up but at a lower rate. those are signs that would lead me to take stronger action. tom: we are going to stay with you on bloomberg radio. i look forward to speaking with you with paul sweeney. oil now breaking up.

we have not seen any erosion to the bid coming off of the opec announcement. is it a big deal? no, but it is headline making, becoming tangible. brent crude, 102.33. lisa: there is a question of why? this comes on the heels of opec-plus saying they will increase output by a mere 100,000 barrels. the lowest increase in history. it comes after a plea from president biden. how much does this indicate a lack of ability to produce more by opec members, much does this indicate a disbelief that the demand will be there? that is key in understanding the price dynamic here considering that is the push-pull of the market right now. tom: there is a tradition once the primaries are squared away. i know ms. cheney of wyoming has

an important primary coming up in two weeks. all of a sudden, it is september, and all of a sudden, a gallon of gas matters. lisa: it had been mattering, coming down steadily. if it stabilizes, how does that factor into things? tom: yields are higher on the 10 year bond. 2.80%. new curve inversion, -33 basis points. nice lived in equities. futures up 29. stay with us. an interesting day. this is bloomberg. ♪

jonathan: the s&p five .6%. the countdown to the open starts right now. >> everything you need to get started for the -- get ready for the start of trading. this is bloomberg the open with jonathan ferro. jonathan: we begin with big issue. fed officials pushing back.