>> many of us have been saying me are in a technical recession but not prerecession because the labor market is so strong. >> i think the fed was very late to this.

i would argue that today we should be 100 basis points higher. >> it is clear that that is not done. >> this is bloomberg surveillance with tom keene, jonathan ferro, lisa abramowicz. tom: good morning, everyone. tom keene, jonathan ferro, lisa abramowicz. it is jobs day in america. important report in 29 minutes. wages, wages, wages. that is what matters this morning. jonathan: today is payrolls, next week is cpi. that should set us up for the meeting in september. you will get another payrolls and cpi report that, too. tom: no forward guidance into this report. that data is there at 8:30 and the fed will have to adjust. curve inversion of 37 basis points. jonathan: the fed has pushed

back in a way that we thought they would. yields have responded on the front end by 17 basis on the two-year. equity markets kept on rounding. we have ripped off that market low. close to 20% higher from june 16 on the nasdaq. tom: it does for to into the fixed income space. frankly, that has been as dynamic as equities. lisa: shockingly dynamic, considering this is the deepest market in the world, particularly at the front end, as more people are confident that the federal will come through with their rate hikes. the reaction in markets to a good print. if you see concert which group, much does that feed into the ellen zentner view of things, next year you get a rolloff of

inflationary input, and then positive waitrose to fuel the soft landing. tom: randall kroszner will be joining us later. important perspective from the farmer -- former fed governor. we are getting to nadia lovell now. green on the screen. jonathan: muted price action. the nasdaq up by 0.04%. we are hanging talk, going nowhere going into payrolls. 88 dollars a barrel now on wti. we are done .4% on the session. tom: smith college, you would never guess that there is a mcconnell observatory.

if you are at smith college, you have to go up on the roof, looked up at the stars. nadia lovell joins us from smith college, from ubs as well. what does the child support mean for your equity market? nadia: we think we could get something in the 200 range, 250 range. we also want to see labor participation move up because that means labor supply is increasing which could alleviate some pressures we are seeing on the wage side. in order for this rally to be sustained, you want to be in that sweet spot. two things also important, next week's cpi numbers. that will determine the path of the fed going forward. tom: when you were studying

physics, there was an order to all this. is there an order to the equity market, and this equity rally we have seen? do you feel like there is almost a frenzy going on? nadia: we had been expecting a rally in june and july given the negative sentiments. but the duration is a little bit surprising for us. some short covering, positioning, better-than-expected second-quarter reports. i think there is a fear of missing out here after a brutal first quarter. i think we can all agree, the fundamentals have not gotten any better. the multiple that the market is putting on deteriorated fundamentals, seems quite high for us. this rally could continue for a bit longer but we think the risk reward is attractive, why we are

maintaining our price target for the s&p at 3900. jonathan: what would you sell into, how would you play this story? nadia: tech companies rebounding and consumer discretionary. two companies account for about 50% of the market cap. we are seeing some cracks with the consumer, the lower end consumer. overall, consumer spending will slow and continue to shift away to goods and services. there are also other areas of the market, particularly energy, that's been under pressure recently, that people will look back to rotate into. lisa: you specified unprofitable tech.

what about the companies that have been on a tear? amazon up 30% since the end of june. same story in microsoft, apple, although to a lesser extent. hasn't gone too far especially now that rate hikes are being rebuilt into the structure? nadia: i think it has gone too far for our liking. admittedly, earnings came in better from some of the magic cap companies. you are seeing tech companies increase their layoffs. it is a challenging environment. inflation will lay on discretionary spending. but i think what we heard earlier, enterprise spending remains strong, so we would be selective in tech. those with higher affirmed

revenue, that will be more resilient in any sort of slow down, those less exposed to the consumer. lisa: when it comes to the energy opportunities you are looking at, much does that hinge on a recession that doesn't come, or a soft landing that doesn't dampen demand to such degree? nadia: when you look at past recessions, it doesn't change all that much. you are not seeing a meaningful contraction in oil demand. that is why we remain bullish. think about the second half of the year, massive pullback in oil prices. you will need to rebuild the spr. you also have sanctions on russian oil. those 3 million barrels a day will need to be replaced. we heard spare capacity remains quite limited. this will put upward pressure on prices. we continue to believe that

prices will get to $125 by years end and into next year, and that should be positive for commodities and the oil sector. jonathan: thank you, nadia lovell, ubs global wealth management. what she said about consumer discretionary is so important. we are off about 25% for the industry group. two names make up that industry group, 50% of it. one is amazon at 30%. tesla is 19%. for anyone that has looked at the performance of amazon off of the june low, june 14. we are almost 40% higher on that single name alone. tom: i am overcome by the child ish analysis of equity markets. jon and i go back and forth on the dow and the s&p 500. the dow is an artifact.

the bottom line is it does not evoke the 20 or 30 stocks doing all the heavy lifting. jonathan: amazon and tesla does a lot of heavy lifting. lisa: amazon has so much cash, they made a purchase. roomba, the vacuum cleaner that a lot of people have around the house. i find this fascinating. people have been wondering when they will make oppositions, but also raises issues of the tech dominance that is allowing them to do everything in your home and track it. jonathan: robot vacuum cleaner. how much are they? lisa: i don't know. i don't have one. tom: the accountant gets them for us. there were three or four of them. at first there were some real problems, the dots were scared

of it. right now, we love it. this is a company that tanks 70%, amazon is picking up off the bottom of what will appear to be a dreadful earnings report. the have sticking out the have-nots. jonathan: we are starting to see more corporate activity on the equity and debt side. lisa: it had been shut down during the selloff. now you are seeing it pick back up again. it can go from $200 to $1000. it can map your house out. tom: the $1000 roomba has a bucket on top with milk bone

biscuits and it. jonathan: have you seen the balenciaga trash back? drives me nuts. absolutely ridiculous. someone just tweeted the fed should hike 1500 basis points. futures up .1% on the s&p. payrolls around the corner. this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. more father from nancy pelosi's visit to taiwan. china has imposed unspecified sanctions on her and her family. beijing also cut up talks with the u.s. on drugs. it also conducted military drills over taiwan. there are signs that conditions in the u.s. labor market are

using. the july job support is out in a few minutes. it is forecast to show the u.s. greeted 250,000 jobs. last week applications for state unemployment insurance rose to near the highest level since november. democrats have agreed on a revised version of her tax and climate bill. they will drop a provision that would have never read -- narrowed a tax on corporations. a pivotal vote in the 50-50 senate, kristin cinema, says she will backed revised plan. amazon has agreed to by irobot. it's devices are also used in bomb disposal. 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.

>> paying their hat on the idea that people can find a job quick. job openings are not a thing that we are supposed to be hanging our hat on. they lag in earnest in the midst of a recession. jonathan: from new york city this morning, good morning. tom keene, jonathan ferro, lisa abramowicz. futures up a little more than 0.1% on the s&p. crude, 88. not much price action going into payrolls. tom: vix under 22 shows the

extent of how we have moved. right now we dive into the job support. mike mckee and jeffrey rosenberg will join. but we start with randall kroszner from brown university, now at the booth school at the university of chicago. the professor basically invented price theory, the dynamics of price within any system. do we understand the price theory of wages? do we understand how wages are actually determined? randall: we have some knowledge of that but i don't think our knowledge is perfect. one of the key things the fed is focusing on, that wage dynamic, how much is being determined by people's expectations about inflation, what determines those

expectations, what anchors them, those are key issues. tom: is the fed flying blind right now given the shots of the system coming out of the pandemic? do they have a theory or are they making it up in a data-dependent way as they go? randall: i wouldn't say flying blind. as i think they have admitted, this is not your typical jobs market, not your typical recovery, and not your typical inflation. so they are not certain about the wage dynamic and price dynamic, but they no one thing, if they increase interest rates, reduce demand, that will put less pressure on prices. lisa: michael schumacher was talking about what the fed was looking for in terms of their communication, saying they are not getting into what they need

to be saying, which is they need to be raising rates, giving that conviction to markets. do you think they are doing a bad job on messaging, particularly with chairman powell? randall: i think that is unfair. i think people did not listen carefully to what jay said at the conference and a number of fit speakers came out after to clarify that. he made it very clear what the direction was. numerous times in the press conference he said, i'm not going to tell you what number that we will be at, but look at the most recent projections we have. we will get to 3.5 by the end of the year. that sounds pretty good to me. he is not giving a meeting by meeting number but giving a direction. the other speakers have been consistent in that. lisa: there is a fear that if that that goes into this stop and go dynamic, that they will make the same mistake as they did in the 1970's, stop raising rates to soon, and that another

bout of inflation will take over and cause them to move again. how are the dynamics of inflation similar to the 1970's, how are they different, making it not as big of a risk? randall: because of that experience, the fed is aware of that. jay and the fed speakers have said, the market is much too sanguine about them pulling rates down early next year. i think the fed realizes that it is not like you just put the interest rate up to 4% for a month or two and inflation comes down and everything is fine. you have to make sure inflation, inflation expectations are out of the system. that means keeping interest rates, i would estimate around 4%, for a while. it is not something that they will barely get into and then retrace. jonathan: isn't that forward guidance? randall: it is giving some

notion of what the fed reaction function is. whether you call her forward guidance or not -- there is this confusion about meeting by meeting guidance. next meeting we will do 75. he didn't say that we will not give you broad direction. jonathan: did you like that, lisa? no more short-term forward guidance but medium-term forward guidance. lisa: i am just thinking about 4% for some time, that is where the fed funds rate will be. that is a significant change from market expectations. what would cause a shift away from that, what do you have to see in the labor market to justify those moves? jonathan: what is quite a long time? 12 months in 06, 07. we are seven months away from the payrolls data.

randy will come back in a moment to break that down with us. futures down a 10th of a percent. mike mckee, what are you looking at? mike: the divergence between equities and bonds may get highlighted by whatever happens today. if we get a bang on number, everyone trades the way they did. if it is really weak or strong, that will cause people to start thinking about recession or the fact that the fed will have to go more. interesting to see what the headline number will be today. you have this fork in the road. as yogi berra once said, when you see a fork in the road, take it. it is probably going to be another month or two because these are backward looking numbers. the problem is we have not gotten a contraction in the past in jobs created until after a

recession has started. if you believe recession is underway, you could see this happening. but economists have never forecasted in advance a decline in jobs. it will be interesting to see how long it takes to get there, if we get there. tom: mike, i want to talk about this canard of a fully employed america. it is baloney. are we fully employed? randall: the only way you can talk about that is to talk about the math of it. the math of it is, yes, we are at a rate of unemployment where everyone who wants a job can find a job. there will always be people in between jobs. the fed's has a pretty good view on that, i think. the one thing about jackson hole with yogi berra, nobody goes there anymore, is too crowded.

jonathan: we are going at the end of the month. mike mckee is standing by alongside tom keene, jonathan ferro, lisa abramowicz. when this one drops, we will catch up with mike mckee, randall kroszner. and then the market response with jeffrey rob -- rosenberg of black rock. futures are essentially unchanged, but they 10th of 1% on the s&p. the nasdaq up by 0.05%. yields likely going somewhere in about four minutes. 250k is the estimate.

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jonathan: your payrolls data is 10 seconds away. futures up by .2% on the s&p. and nasdaq 100 up by .1%. let's go over to mike mckee. mike: this is quite a surprise. 528,000 jobs created or restored. interestingly enough, that takes

us back to where we were when the pandemic started. the change in private payrolls, 471,000. manufacturing payrolls up 30,000. on employment falls to 3.5%. -- on employment falls to 3.5%. average hourly earnings is up half a percent, more than anticipated. we go back up again after falling in the previous months. labor force participation rate drops .1, 62.1%. the prior month, june, which was 372, revised up to 398. a very strong payrolls report for the month of july that belies everyone's thoughts. i would imagine you are seeing some movement in the bond market. jonathan: big moves. up 14 basis points on the

two-year. 2/10s briefly -40 basis points. stocks are lower by .7% on the s&p. nasdaq 100, down by 1%. yields up, stocks down, dollars stronger. 1.0176. wow. 528. we were looking at 250. that is a big number. this is a big move tom: and the revisions. we are still waiting for that data. michael mckee, you be digesting this over the hours. would you explain how smart people like you get this so wrong? for mere mortals out there on radio and tv, why do we get this report so wrong? mike: in this case, you look at the contributing data, the data

points that tell you something about employment, and you try to figure out from there where it may end up. you look at past history. past history is that july numbers have underperformed the forecast since 2017 until this year. you have models in terms of what you know about various industries, and it is really hard, and it is even harder now given the fact that we are coming out of pandemic. tom: right now, i am doing that three-month moving average with revisions. 437,000 jobs over the last 90 days. that is a wow statistic. lisa: it is a labor market boom. average hourly earnings revised upward in the prior month's,

state at the same level of 5.2%. it comes as the participation rate continues to fall. what do you make of this? how does this signal the tightness or looseness of a market that the fed is trying to gauge out? mike: given the hiring levels, we saw a decline in the labor force of 63,000 jobs, then again 179,000 in the household survey, while unemployment fell by 232,000. in june we saw a 353,000 number of people dropping out of labor force. the labor force is continuing to shrink which is why we see the participation rate down. 315,000 jobs in june but lost according to the household survey. now we get 179,000 back, big drop in unemployment. those who are looking for work

are finding work. it looks like companies have not given up the coast on hiring even though the forecasts have been ugly. jonathan: that recession talk just got a freezing cold shower from the labor market report. tom: i think that is true. as you mentioned earlier, we have other reports before that next meeting. let's get a briefing from somebody who sat in the desk. randall kroszner continues to be with us. how does this change the calculus for the federal open market committee? randall: i think it is really clear that they are on a path to continue to raise rates. certainly, 75 basis points will be on the table for the next meeting. it is not only the strength of the labor market but also the significant increase in wages, higher-than-expected upward

revisions. that that really worries about inflation expectation becoming entrenched. they hope inflation will come down below 5% fairly soon. but if people are still demanding 5% wage increases, that gets them into difficulty. that is why they will continue to move. they will certainly be in the 4's early next year. i think it will be there for a while. when the fed moves rates up, it is not that they can just bring them back down, they keep them up for a while because they want to stamp inflation expectations out of the system. jonathan: does this pass the smell test to you, a number this big? randall: you never want to put too much emphasis on anyone month but you have an upward revision last month, strong number this month. the fed will not overreact to anyone number but the upward revisions that came last month

will certainly embolden them to move expeditiously, as they have said. i think it will be very close to 4 by the end of the year. lisa: can you talk about the path? you mentioned earlier you expect them to go to 4% on the fed funds rate, and stay there for a while. what will determine that like? -- length? randall: it happens to what is happening in the labor market, wages. right now we don't see the economy going over a cliff. this is exactly the time that the fed needs to be moving quickly. the economy has not sputtered yet, they need to move, but they also have not gotten the political pressure on the. this is the time to be raising rates to try and stamp the inflation expectations under the system. tom: i will raise my snarky arm

and say where is the neutral rate? i say that with great respect because with all the back-and-forth with all of our guests, when does this become painful, through the neutral rate? where is the neutral rate? randall: i always knew you were the troublemaker, and you continue to be. important question. one where the consensus of the fed, they say around 2.5, roughly where they are. but that is when they think of inflation being at 2% in the long run. in the short run with inflation still very high, you have a dramatically negative inflation-adjusted rate. 2.5 is not neutral right now. in the long run it might be, but it is quite expansionary. tom: are you giving up the

chicago school and joining ed posen at 3%? we need to adjust the neutral rate higher? randall: i am not saying the goals should change from 2%, i am not saying that in the long run -- it seems reasonable that they are in a reasonable range for the long run. in the short run you cannot say that 2.5% is neutral when inflation is 8%. you have a significantly negative real rate. this is a long run versus short run kind of thing. jonathan: randy kroszner with the latest reaction to this payrolls report. the headline number, 528k. the median estimate was 250. previousl revised higher. average hourly earnings year-over-year, 5.2%.

this is how the market responds to it. good news, bad news for stocks. down .7% on the s&p. nasdaq, .9%. given what we are seeing in the bond market, i can imagine why you're thinking that. up 70 basis points on the two-year. euro-dollar down .6%. dollar strength. 1.0182. you don't go from 300 to 500 k. if you are worried about a job loss recession, you have to kick that view to 23. i wonder what that means for how far fed funds go? larry summers said on wall street week with david westin last week, the idea that we are

at neutral with inflation where it is right now, and i would add it where the labor market is right now, to be blunt, it was absurd? lisa: indefensible is the work he used. jonathan: this morning it sounds absurd. tom: governor krasner was being delicate with his former public effort, being delicate about 2.5% moving out to 3%. before we get to jeffrey rosenberg, we have to make the call of the summer, priya misra, as the curve inversion plunges to -43 basis points. it is my call of the summer. jonathan: six basis points deeper. i am going to run, catch up with rick read in the next hour. and we will be hearing from the white house. secretary walsh coming up. we said the story that they have

to tell is getting better. i think they will be more heavily into the labor market today and maybe away from the jeep report. tom: futures -32. to make sense of this stunning report, jeffrey rosenberg joins us, portfolio manager at blackrock. how do you do multi-strategy with such a shock? jeffrey: it is a bit of a surprise. you have hit it on the head with good news being bad news. it is surprisingly strong, a reminder of how strong the economy is. we were expecting an eventual slow down but it is not here yet. talking about this ahead of time, what does the market do on a big upside surprise? there have going in from the fomc was the powell pivot, and

this is the payroll pushback. they will not be able to pivot as aggressively as the market was expecting post that fomc. yield curve flattening, big increase on the front end in rates. equities do not like that because they like the end of fed tightening. inflation does not come down, we are nowhere near neutral. you have a lot more fed hikes if you don't have that inflation coming down. tom: i have a bunch of dweeby bond questions for you, but it is important for a large population. many don't have fancy degrees. what is wrong with generating 566,000 jobs with a revision? why is so much good job three formation a bad thing? i don't get that.

jeffrey: it is about overheating and inflation. one of the challenges that you have is, in this report, you see a lot of signs of that wage inflation, wage price spiral. that is really the bigger risk. you transition from covid supply-side disruption, transitory, to something more persistent. the risk is inflation hurts everyone. if you don't snub it out thoroughly, the pain that has to happen later is greater. for financial markets, this means the fed will have to do a lot more, sooner. tightening financial condition to rain in the demand side is the only tool they have to address this inflation concern. lisa: before we were talking about the powell pivot, that the

payroll pushback. that is what we have seen with a lopsided markets. how much have we unwound that? how much more do we have to go? nasdaq future down a percent and going lower, but still well off the lows after searching the last few weeks. jeffrey: there is a nero reaction to today and then a longer run issue. there were reaction, 17 basis points, you are taking back a little but less than 25 as you price out following the fomc and the powell pivot. the bigger issue is what randy and summers is talking about. to say we are at neutral at 2.5% is a conflation. it is the different between the long run neutral and the issue of the short run. this is the issue that we will

be talking about for the next six to nine months. we are past peak inflation. we will see inflation decline, but to what level? the forecast from the fed, to say they are at neutral, as randy was saying, that is a 2% inflation rate. if you don't get to that 2% inflation rate, let's say 3%, that means you are nowhere near your long-term neutral. the whole bond market expectations in terms of where rates settle and have to reprice, because what we are pricing and right now is 2% inflation, 2.5% long-term neutral. that is all conditional on the realization of the 2% inflation rate. lisa: this is a sea of uncertainty, and we may be getting some direction of travel. where is your conviction right now as you try to understand where the risks are repriced in markets? jeffrey: we are a little bit

skeptical of the rally that we have seen in risky assets. we are still concerned that you have a shock in terms of inflation, what we are talking about here today with what the fed has to do in front of that, tightening financial conditions not conducive for risky assets. we have been pulling back from our risky assets position, did not add during the rally in july. it's important to recognize that when you're in bear markets, they don't go straight down. bear market rallies, which many are characterizing the last up move. a little concerned that we are in the consensus camp there, but all the data is pointed to considerable challenges to the risky asset profile going forward. a little more cautious view. lisa: what about your portfolio of cash?

i know blackrock has been holding and usually higher level of it. how have you maneuvered in that space? jeffrey: every portfolio management team runs -- ours, we have run higher cash levels as a way to reduce some of the risky asset exposure. the other issue that all investors are facing in this summer environment, it has been an exceptionally illiquid environment, very expensive to trade, using cash, as opposed to other means to bring your risk down. reducing your transaction cost, retaining value for our investors. tom: what do you do on duration? you are a meeting, yelling and screaming will soon. what is the duration call?

jeffrey: i will speak for our team. as you highlighted, a lot of different voices. you will hear from different voices in the next hour. it is still a cautious view on duration. that is the view of the uncertainty of inflation. markets are pricing in certainty. we will have a clean path to 2%. we are more skeptical of that being realized. if it is not realized and you end up with higher inflation, risk premium needs to adjust higher. you have to be more defensive on duration without uncertainty. tom: jeffrey rosenberg, thank you. futures -40. dow futures negative 222. lisa: before this payrolls report we were fluctuating between gains and losses. the reaction was so fierce and

quick, it was very clear. that 1.4% decline right now on the nasdaq catches my attention. it is a repricing of equity markets to what bob markets are saying. forget the dovish pivot. it will not happen with numbers like these. tom: i with think the dow futures negative220 will be -600. we are certainly not there at this point. the key number on the screen is the different between the measurement of the yield between the two and the 10 year, -42 basis points. i did some very careful work earlier this week off the bloomberg terminal, the descent of the two year inversion harkens back to the late 1970's. ira jersey, let's start with

that first. if i take the 2s/10s, first and second derivatives are starting. what does that signal? ira: that we will probably go more. i agree with the sentiment that this payrolls report has to readjust where all of the front and yields will go. long-term yields don't necessarily have to move significantly higher, certainly not out of the range of have been in this year. at some point in the future we will have that recession that will be driven in part by the fed and significant slowdown in both inflation and growth. law end-- it is really that you hear you'll that has to go up a lot more. if we wind up getting to a 5%, and the market prices for a 5% fed funds rate at some point, then to year yield have to go up

another 80 basis points, even after the big selloff we had this morning. lisa: which raises the question about the yield curve inversion. we have also been looking at it as we want to go more and more negative, to those we have not seen since 2000. how much can you give us a perspective on this portending a recession? is there a translation in terms of the depth of inversion and the length and recession? ira: not necessarily. we got to the 210 curve in 1980, -60 basis points. we had a relatively mild recession a year after that. it doesn't necessarily have to be a deep recession but the inversion in and of itself is a signal that the market thinks there is going to be a significant slowdown in the not-too-distant future. but keep in mind we have not been in the situation where all the slowdowns or the path have been driven by large part with inflation coming down.

that is not the case now. tom mentioned in 1970's. yield curves and guarded by over 200 basis points back then. i don't think we will see a 200 basis points inversion, but certainly 75 is not out of the question. tom: we will do some work on that. i want to go to the optimist, neal from renaissance capital talking about this unique report. important in his math, the phrase, an inflationary boom. critical to me is the x axis, persistency of inflation over time. the x axis will be the key adjustment for the fed, not the y axis. ira: if you mean the fed will go the mary daly route, like 25%

and then stay there, that is possible -- tom: is today's phrase the stay their jobs report? ira: it certainly heading there. we have another report and that has to be the consensus, no doubt. when i look at this report, the aggregate labor income figure, basically everything taken, it is still growing at 9% year on year. 9.3% a month ago. 9% year on year aggregate labor growth means everyone is going to have enough income in terms of, to be able to continue to buy even with higher prices. will there be substitution effects because of what is going up? yes that will happen. but with the labor market this strong, that means you can have more persistent inflation for large portions of the economy,

and that really has to worry policymakers. that is why they may have to keep interest rates higher than what the market is currently pricing. frankly, the market has 2023 wrong. i think there are opportunities there for people to trade around that. lisa: if the market has 2023 wrong, where is it most wrong? just on the front end in terms of how much people have to bring up their expectations for hiking? or on the long and, where there is a consensus-based into the markets at the fed will get inflation back down, a lower growth trajectory ahead, is that also in question as you talk about 5% fed funds rate for a longer amount of time? ira: i think it really is the front end, five years and in, that is mispriced. we are still calling for cuts in 23. if they do, at the end after we

have hiked to 5%. at the long end, it doesn't need to move much. even on the 10-year yield up to 3.40, that will still be a 3% decline in the treasury index. it still means a lot of pain for bond investors. it is hard to lump the bond market in here with inflation this. tom: ira jersey, thank you. this is the economics of the moment, noticing the bang up job report, gdp declining. productivity is plunging. we got some productive comments right now from michael casper , strategist at bloomberg. hugely employed america. i don't think there is recession. don't stocks go up?

how are you and gina martin adams going to recalibrate? michael: not necessarily. this report is usually inflationary. we were watching the average hourly earnings go up, revise hire for the previous month. it is fitting companies margins. we're also starting to see some demand destruction. revision for revenues over the next few quarters are starting to be cut. not a great picture for stocks. lisa: how much does this cut into profit margins versus the free cash flow that companies have that are doing well? paying employees more at a time when they are starting to look to cut costs. michael: market expectations for 3q and 4q are down about 40 basis points each. the revenue cuts are about the equal size. three qe ps estimates go down 422 basis points. four q, 322. fiscal year 2023 is also down

about three percentage points over the last nine weeks, which is the largest cut we have seen over the same timeframe, since we started recording the data in 2010. lisa: tom was looking at the indexes, in particular the dow, saying he was a prize it was not done more. a valid point considering the repricing we are seeing on the front of the yield curve. how much of this is because of the resilience we have seen in earnings, as opposed to misplaced optimism, as some have called it? michael: i think a lot of it is misplaced optimism. people expected inflation to start coming down a little bit, maybe some signs for the federal reserve to maybe start using in 2023, at least take a pause. but inflation keeps on chugging. you have to really bake in where the fed is going. it seems the rates picture is going higher and higher. tom: way too short a visit.

come back after you recalibrate over the weekend. alan ruskin with a blistering short paragraph, as everyone comes into the bloomberg terminal with opinion. wonderful analyst at deutsche bank. a million miles from recession, positive for the u.s. dollar. lisa: it is positive for the u.s. dollar because it means more action by the fed, and strength should be a good thing, but right now it is difficult for the fed to swallow considering they are dealing with 9.1% headline inflation. . this with an upside surprise in cpi next week, what happens? tom: dxy back to 1.07. futures -42. vix, 22.44. a stunning report.

coming up, something constructive to say. secretary of labor marty walsh. this is bloomberg. stay with us. >> everything you need to get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: we begin with the big issue, the fed has a lot more work to do. >>