mark: i am mark crumpton bloomberg news. the trump organization longtime cfo is in plea talks with new york state prosecutors to resolve tax fraud charges and avoided trial. they are accused of conspiring to avoid income taxes by giving some employees perks that were not reported to tax authorities. even if it settles, the trump organization would still face the fraud case alone. first lady jill biden has tested positive for covid-19. he white house says she is in south carolina with the president, who recovered from covid a week ago. she is experiencing mild cold

like symptoms and has been prescribed a course of paxlovid. the white house is the first lady will isolate in south carolina and will return home to washington after she tests negative twice. california is baking under searing heat, driving electricity demands to its highest the summer as sweltering temperatures bear down on the u.s. west coast. the highest temperatures will linger in northern california, where it could reach 109 degrees today, one degree shy of the record. the heatwave is the latest test that california's power grid has faced this summer. singapore is prime minister and waiting warns the u.s. and china may quote sleepwalk into conflict over taiwan. he spoke in an interview with bloomberg editor-in-chief. >> we are starting to see a

series of decisions being taken by both countries that will lead us into more and more dangerous territory. you could easily see accidents happening around the time one stait or south china sea. it has happened before. mark: tensions remain elevated. beijing announced new patrols around taiwan following the arrival of another u.s. congressional delegation. 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. >> welcome to bloomberg markets. >> a quick check on the market.

if you woke up this morning, there was a lot of red on the screen. slowly but surely, some of that has reverse. looking at s&p 500, we hit 4300 and migrate north up from there. the nasdaq was off more than 1% earlier this morning, declines again well below 19 at 20 now with about 19.5 handle. really interesting area the lack of fear is the relive this rally doesn't seem to continue. the homebuilders, some of the homebuilders, housing data confirmed the housing market was in the contraction. you would not know it up 1.6% on the day. jon: we will talk more about the outlook for housing coming up. going deeper under the hood, the dow jones being helped out by walmart. we are going to have more conversation coming up this half

hour on the retail sector. between walmart and home depot, you have seen a pop in both stocks on the takeaways from your quarterly result come up about 5%. we saw the recent rally in technology. now that analysts would be cautious on the competitive market that zoom participates in, that stock is down. yesterday, we were talking about the filings. warren buffett adding to the ally financial stake of about 4% on the session so far. taylor: keeping our eyes on the equity market, we will go back to the big economic data we got this morning. the once booming u.s. housing market turn to cool off a bit. falling in july, the slowest pace since about february 2021. for more, i want to bring in our retail reporter and housing and economic reporter, patrick clark. what do you make of the data we got this morning for there may

be confirming some of the data we got yesterday when we spoke with you? patrick: homebuilders are spooked about the health of the homebuyer. they do not want to see inventory sitting on their balance sheets, it costs them money. they will build fewer homes. jon: if we try to look across the country, i know you and the team have been looking at different pockets of the u.s. where you are seeing changes. maybe you could walk us through geographically what is happening. patrick: the markets that were really hot throughout much of the pandemic and years leading up to the pandemic got overheated in the first half of this year, when mortgage rates started rising and home prices did not adjust to them quickly. those places, whether it was dallas or for next or austin or boise, it came out of nowhere to become one of the hottest housing markets in the u.s..

those places became too expensive and buyers have to, a large degree, step back. sellers are student to get the message. taylor: isn't this exactly with the federal reserve wants? patrick: housing needs to cool down. some way or another, it is not sustainable. the challenge and the scary thing is, we are still short millions of housing units in this country. homebuilders deciding it is too risky to build them is not the best solution to a pretty terrible housing shortage. jon: helpful context, thanks. a lot to watch. patrick clark. taylor was talking about the fed story, they are focused on fighting inflation. retail giants have to navigate inflation, as well. we highlight walmart today, having a nice pop on the dell, up 6%. the lower profit estimates seem to be so fast.

this is a company that had very cautious, not too long ago. let us get more perspective on what is happening with walmart and more on the back-to-school shopping season, home depot also in focus. oliver chen is cowen's managing director covering the retail sector. as we look at the numbers -- i will reiterate in the case of walmart, they warned about what the picture would look like. there were expectations. what are the takeaways on how a player like walmart is dealing with inflation right now? oliver: great being here. what we are seeing is a generally stable u.s. consumer. walmart has always been a retailer focused on everyday low prices. it is well positioned to offer consumers value, a mixed picture in term of the consumer environment. consumers are looking for value, great prices and walmart is gaining share in this environment. consumers are trading down,

looking for flannel shirts that are below $12. middle and higher income consumers are trading into walmart because it is such a great value. it really mixed picture. however, results were better than feared, the company previously guided down and evaluation is attractive as well , and our view. especially if you are a long-term investor. taylor: before we get to valuations, talk about the comments from the ceo. they are seeing middle and high income shoppers coming in and shopping down, trading down and go into walmart. oliver: walmart has build a better business over time. retail has been very reinvented. the curbside pickup and ship from store. walmart plus has a deal with paramount. they have changed in terms of capturing a broad array of shoppers who like innovation inconvenience. at the same time, walmart is

america's everyday store. 90% of america is within 10 miles of the. that clear value is important. what has been happening is a broadening of the customer appeal and inflation is impacting everybody. gas inflation, energy inflation, certainly year-over-year. these are big numbers. jon: oliver, to shift gears to another player in home depot, it seems like inflation was a factor there in terms of basket size, what people walk out of the store ends up being a little bit less. there does still seem to be some focus on the housing market home improvements. we talked about concerns on the housing front, but a decent quarter on that front for home depot? oliver: in terms of walmart's results and talking about different categories, certain aspects of home, lawn and garden have been better. some watch outs from walmart's reporting, electronics has been

tougher. there are crosscurrents. the consumer is going out again. as we look at what is working and what is not in retail, we like categories like fashion and luxury brands. we like beauty. we also like companies that offer exceptional value, such as grocery outlet. taylor: how are you thinking for some of the other retailers that we will get this week? ross, kohl's, t.j. maxx. the ability for all of these companies to compete with a walmart within amazon -- with an amazon, and protect against inflationary pressures. oliver: it is really quite opportunistic. this consumer is searching for value. cowen likes the off-price sector. kohl's we recently downgraded, it is a retailer that is a bit in the middle. apparel at kohl's has been

tougher. it is also weather sensitive, and they have had miss executions or opportunities to improve kids. we like the handbag sector, tapestry reports this week. handbags are getting pricing, consumers are accepting price increases. it is not one-size-fits-all. the medically, you either by great luxury brands with pricing leverage, or look for retail that can execute on value. jon: quickly before we go, this time last year, the worry about having enough stuff heading into the holidays was a key concern for retailers. now it seems there is concern about having too much stuff. is it possible that will have a deflationary impact at the end of the day? oliver: based on our data and research and consumer studies, there is too much stuff out there. inventory levels are 15% to 20% higher than we would like to see. that is true at walmart, too. the same time, we see more promotions.

there is not enough for the right stuff and too much stuff generally, some discounts and promotion are definitely happening. people are having to markdown items more than they wanted to. not everything, but it is very true across the industry. taylor: cowen managing director oliver chen. we appreciate it. in the meantime, we want to bring you a market alert. nasdaq turning positive on the day, we had a nasdaq that was trying to flirt around noon going green. this index was up more than 1% when we woke up this morning. positive, not by much. 1/10 of 1%. it is the resiliency of these markets that continues. we will talk of of the resiliency of the rate markets. ian lyngen of bmo capital markets joins us next. the outlook for treasuries next. this is bloomberg. ♪

taylor: this is bloomberg markets. treasury is weaker, lower yields

higher. investors are starting to digest the cooler housing data. ian lyngen with bmo capital markets joining me in studio. rp keeled -- are peak yields behind us? ian: it will take a lot to get back above 350. have consolidated it, the biggest potential when it comes to u.s. interest rates is in the front end of the curve. the fed will continue to hike rates that will put upward pressure on two-year yields, maybe three year yields depending on how aggressive they are in signaling the terminal will be higher. for now, we are reasonably confident 10 and 30 year yield will not return to prior peaks. jon: while we are waiting for what comes out of the fed minutes, clearly we are looking at a fed that is dated. are there any takeaways from recent data?

you have been looking at the latest jobs report. ahead of the august jobs report, what it tells us about what kind of wiggle room the central bank may have. ian: i think they have a great deal of flexibility in terms of how hawkish they want to be from here. i could see them going 75 in september, that would be predicated on the fact jobs remain strong. we only have one cpi print that shows a flat month over month read. frankly, a lot of that was energy prices. we saw airfares down, which are a classic pass-through of jet fuel costs. the fed does have a reasonable amount, as they pointed out, flexibility. i think they will take it and err on the side of being as hawkish as they can, assuming jobs continue to hold him relatively well as we saw in the most recent report. taylor: you look at the curve inverted by 43 basis points. does the duration of the

inversion or magnitude from 20 to 30 to 40 matter more to you? ian: the duration matters. the longer we can state this negative in terms of two tens, the market will become more habituated. in prior cycles, the fed lost control at the long end of the curve, that is why we have inflation where it is and 10 year yield at 280. the fed could lose control at the front end of the curve this cycle and in practical terms, that would be the two year yield trading well below effective fed funds. that could be powell's conundrum. jon: at a point in time when we are seeing so much focus on where rates go, what can you tell us about how busy you have been? ian: the treasury market tends to pick up around quarter ins at the end of the year, the middle

of the summer, relatively slow. that has not been the case this year. part of the reason we have seen a pickup in volatility and a pickup in activity overall has to deal with the fed's shift to a data-dependent mode. when the fed is data dependent, that means every date of release matters and they are all treatable opportunities. that is the most we are in right now. i would not expect it to pick up over the course of the next two weeks, but it certainly is not going to slow down dramatically from here. jon: great to get your perspective, as always. ian lyngen on the latest thinking within where the fed from here. a lot of people in canada wondering where the central bank in this country will go after we got the latest inflation numbers today, suggesting things are cooling down things to lower gas prices. when you look under the hood, still enough evidence higher rates are on the horizon. we break it down, next. this is bloomberg. ♪

jon: this is bloomberg markets. time now for what it is worth, we are back on the inflation focus. this time in canada, 7.6% was what we saw in terms of consumer prices in this country year-over-year on the still pretty high. the thing is, this number was down substantially from what we had seen in june at 8.1%. the headline reading would suggest maybe we have seen peak inflation. when you look under the hood, different take away. but a spring in erik hertzberg with more details. -- that is ring in erik hertzberg with more details. in a most seems like this would be a similar reaction to what we saw in the u.s. last week. when it comes to the core inflation story, it is a reminder a rake -- rate hike is

on the horizon. erik: it came down to 7.6% year-over-year. if you look under the hood into the details, you saw a lot of the core measures strengthening. you saw measures like the comment to cups essentially. you saw the debate of canada falls closely rising to 5.3%, a record going back. some tightening there. energy, gasoline was a major reason why the headline rates fell in the first place. you look at decreases in gas prices in canada, you see energy and food, all those core measures still increasing. really, he see the headline coming back. still a lot of inflationary pressures underlying these. taylor: does that confirm the stickiness of inflation? erik: i think that is exactly it. there is a stickiness with those

core measures. we are seeing the breadth of inflation still happening in canada. once again, it is one of those things where previously in the year, we had gasoline prices rising. those are still trickling through every written the economy and influencing other prices. -- within the economy and influencing other prices. jon: we just got through a segment talking about with the next fed move will be. maybe 50, 75 basis points. the same dialogue is taking place at the bank of canada, which is already raised rates four times this year, correct? erik: that is right. before the release this morning at 8:30, markets for pricing just over a third chance of another 75 basis point hike here in canada. the september meeting. in july, we had the 100 basis point hike from the bank of canada.

this morning, we are looking at just over a third odds following the release. they kicked up substantially. now we are looking more closely toward a two third likelihood that the bank of canada will proceed with another 75 basis point hike at the september meeting. taylor: erik hertzberg joining us on half of bloomberg news. we think about some of the stickiness, some of the central bank decisions underway. you have the resiliency of these markets. one of the big ones that released it to me, peak yields might actually be behind us. we have consolidated a new trading range within the rates market. jon: think about the drivers today. walmart and home depot were able to pass on inflation. that has played into the story of stocks the s&p up. still a day of weakness where we see the oil price down, that

plays into what we just talked about with erik, gas prices cooling. this is bloomberg. ♪ this is xfinity rewards. our way of showing our appreciation.

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mark: keeping you up-to-date with news from around the world, here is first word. president biden will sign the landmark climate change and health care bill today. it is what he has called the final piece of his pair down domestic agenda. it includes the most substantial federal investment in history to fight climate change. some were hundred $75 billion over a decade. -- 375 billion dollars over a decade. it would also help 13 million americans with health care. liz cheney is in danger of losing her seat to a primary