>> it's a risk off day in the markets. bloomberg markets starts right now. let's dive into the price action. the rally that started the week off, the stock market dropped as much as 2% earlier in the session.

the nasdaq is down almost 1%. it's not just the stock market, the bond market as well. take a look at the bloomberg dollar index. even in the face of a stronger dollar, oil is higher. that has everything to do with a historic opec decision. it will cut 2 million barrels per day. that's back to the stock market. to me, that is the story. >> we have had this recent patch of rallies. what we will consider is 4800 is optimistic. the problem is that right now

the market has been held by technicals, sentiment, politics, geopolitics. we have to wait to see what the earnings look like and most importantly what happens tomorrow with jobs number. >> joining us with more insight is our guest from bloomberg intelligence. he was one of the loan balls in the stock market. he was shooting from -- shooting for 4800. he says ultimately it's a battle between the short-term and long-term traders. >> it's always a battle between short-term and long-term traders. when we are looking at the market, we want to look at it from a couple of different perspectives.

you also want to consider what was priced into contending with going forward is not only the technicals we can substantially, but everyone and their brother is saying it's just bear market. i think you want to question that. we have priced in enough low expectation that companies cannot beat those expectations. >> i'm glad you said that because a lot of the emphasis is on earnings. haven't we been pricing in a slowdown in the bigger large-cap names going back to one year? >> yes we have been. at least in the first half of this year, most of the market performance was really closely related to interest-rate movement.

we did see a bit of a change in tone in september where it was still something about interest rates but also really about a massive selloff in cyclicals to the point where our models would suggest the market is effectively pricing for a recession coming. this sets up for an interesting earnings season because if the consensus is saying earnings are going to grow, maybe they can't make consensus but it's already priced in the market. the market itself is saying we are probably going to get somewhere between 5% and 15% decline in eps. that is not likely to surprise stocks. what's it going to take to see a sustainable turnaround in the equity market? >> equity market recoveries always start on a massive --

that has been met. one thing that's good to be troubling is bottoms almost always have some sort of fed pivot. that's why the market assistance to what's happening at the fed. we've at least seen an environment where the market is conditioned to see hawkish movements, hawkish commentary by the fed. it's difficult to imagine a situation where -- instead it's more likely the market will glom onto dovish commentary. we likely have a lot of volatility associated with that. until we get to a point where the inflation numbers have weakened enough the fed can say you're right, we can stop for now, we can take a minute at least and see the impact of the economy of the hikes so far.

>> perhaps a lot more to still price in. thank you as always. get more insight and perspective from our next guest a chief market strategist. thank you as always for joining us. do you agree with what she just said, perhaps pricing in a recessionary take where consensus is still saying we have growth to see? >> gina was right on talking about the earnings component. a lot of what's going on, we see our earnings expectation come down. i think there might be a little bit more to go as we go through the third quarter earnings. here's what we need to pay attention to. margins are going to be something the people are watching because we have seen longer-term inflation

expectations start to steady a little bit. if that is true which means cost pressures are going to come down, we have seen goods prices come down and supply chain issues start to alleviate. that should help the story when it comes to margins on earnings. i'm not sure what people are expecting. it supports story they are expecting, maybe there's an upside surprise. it's going to come down to the guidance we hear and what demand is saying. it doesn't look like the slowdown so far has destroyed manned and i think that is key. it comes back to how this feeds into the fed and what their path forward looks like. >> it feels like even though we are talking about a pivot from the macro to the earnings picture, the fed is still in the driver seat. is this perhaps where the market are coming to sensitive to the fed that has been saying the

same thing for at least a year now? >> that is so key. we talk about our we in a bear market, i think this is important. over the last two days, almost 6% gain in the s&p before move down today. let's look at what this started with. the jolts number is positive. it's one data point. manufacturing was a little less than expected. again moving the right direction for the fed at some point to begin a pivot but i don't think we're there yet. i don't think the fed is going to change their story at all for the next two meetings this year. they're going to continue to raise rates, they are telling you they want to go into restrictive territory and at the last meeting, jay powell told you we are just barely entering restrictive territory. have a long ways to go, the fed is going to continue.

when the market realizes that, we might see some pullback in the gains we've had the first couple of days this week. kriti: that brings me to the timing of it all. back in 1962, i don't expect you to know what happened then but basically it was the year of the cuban missile crisis but also the year of nine months of declines in the stock arc it only to get turned around by the cuban missile prices -- cuban missile crisis. is that what we need to turn the story around? >> it's not the ukraine issue, it's also the fact we are in a midterm election year. both of these issues are playing into this sentiment.

typically in a midterm election year, you are also positive 6, 9, 12 months out. there is support for the market and if we see services continue to come down a little bit, obviously we have the jobs report the jolts number, let's see if we get participation rate going higher, wages level out. these are more data points that i think the fed will take hold of and start to possibly change their story the beginning of next year. so we look at timing, think you're looking more at next year fo fed certainly not in 2022. kriti: you mentioned the midterm elections which is a crucial point. is there a particular race or swing state or result that could change the market dynamic? what are we looking for? >> for such a long time, there

was a perception that there was going to be a red wave in the midterm elections and that pulled back a little bit. it starting to gain a little bit more momentum. do republicans take the house? the probability is yes. the senate could be the surprised. if so, new taxes would go away in many people's minds. there's a lot they could happen in the midterms, we will see how it all shakes out. kriti: we will certainly have you back on to talk about it. coming up, opec-plus agreed to cut its output limit by 2 million barrels per day. what that means for tensions with the united states as well as global oil prices. this is bloomberg. ♪

>> full panic mode. >> democrats thought they got a reprieve. they are facing difficult decisions in november. the lesson they want or need is anything that causes prices to start marching upward again. kriti: that was bob mcnally speaking earlier today in vienna about the democrats reaction to the news that opec-plus has

agreed to cut its collective output limit by 2 million barrels per day. resident biden called the cuts unnecessary. the white house put out a statement said they are disappointed. the global economy is dealing with a continued negative impact of vladimir putin's invasion of ukraine. what this actually means, 2 million barrels found like a lot, but you have to put it into perspective when it comes to how much of these quotas were being met in the first place. that brings me to the bloomberg intelligence chart. visualizing what this means in terms of how much they have to cut. is it a full 2 million barrels or is it actually 880,000 barrels per day? this is kind of graphic i want to walk you through. if your target is only being cut

by 500,000 barrels, for countries actively have to cut their production. the bulk of that coming out of saudi arabia. as you go to 2 million barrels per day, that number goes to eight. it's only a handful of countries that bear the brunt of that. at the very bottom, oman tiny piece of that equation. as you start to see these countries cut their production from a markets perspective, it makes sense that you are only sing the market rally by just shy of 2% on brent crude. a lot of these countries were meeting their quotas to begin with. -- were not meeting their quotas to begin with. anne-marie joins us from washington, d.c.. it feels like something the oil markets are shaking off at the moment. can they continue to shake it

off in the months ahead? >> i a lot of that depends on how demand shakes out. also what happens with china in terms of their covid zero policy and lockdown. if china comes roaring back, you will see prices start to spike on demand. then the sanctions are going to start to bite. the year in union sanctions will start -- the eu sanctions will start to take impact in december. our colleague sat down with the deputy prime minister of russia. it's his first interview since vladimir putin's invasion of ukraine with an international organization and he had said this price cap is going to be a blowback for those if they sign up for it. >> it creates a bad precedent.

it will primarily hit the ones who are doing it. there's a number of examples. if it is implemented, we are not going to [indiscernible] >> where the price goes depends on a number of things going into the winter. what we should note is that that likely is going to be what you are seeing in the prices which is a muted response welcomed by the white house. the issue with washington and their allies in the gulf, part of opec plus is that the timing of this is very challenging. have the president over the summer now this decision just

one month out from the midterm election when gasoline are high on the polls. on top of that, it's the optics that and what the press secretary just said it is clear today that opec-plus decided to side with russia. there is some rhetoric happening between washington and the kingdom. kriti: walk us through what we can expect to hear from the white house at a time when they are still trying to pursue oil prices down. this does not seem like a successful result from the trip to saudi arabia that was so controversial a few months ago. >> a statement from jake sullivan, there were two important points. number one the president may not

be done tapping the strategic oil reserve. also the will consult with congress on additional tools. this is something that would not be welcome at all in the middle east. >> thank you so much. still ahead, health officials are ramping up efforts to get people vaccinated and boosted against covid-19. this is bloomberg. ♪

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kriti: the fall and winter season rolls income at the possibility of another surgeon covid cases -- another search in

covid cases. medical experts warn the campaign to push for boosters needs its own boost. last winter, omicron gave a lot of people a massive scare. the speed at which it spread and the symptoms were drastic. early in for another variant or another wave as the winter approaches? >> the variant is always a wildcard. i don't think anybody's going to make any predictions about new variants. omicron and its lineages that we are seeing our harley -- highly infectious. we have toolbox now of vaccination, treatment, and testing. if we use all of these tools, we

are going to make it through. if we don't use these tools, we could see deaths continue to rise. >> speaking of those tools, i'm curious about the long-term effects that come from having covid. does it impact your ability to recover from a cold or the flu? flu season is also coming up. how much do we know about the long-term effects? >> we don't know enough about the long-term effects of covid. there also signals or hypotheses that the earlier infections of covid resulted in more long covid and we are seeing the same thing with omicron. that has yet to be fully determined in the data. what we really don't know this year, the wildcard is going to be covid plus other respiratory viruses. if you have children in school, if you have returned to work and

you were going inside, one thing you might have noticed is that because we are predominantly unmasked, there are so many more respiratory illnesses circulating. we saw an influenza epidemic in australia. we are keeping our eye on synergies that could emerge. respiratory illness from influenza or covid can land people in the hospital. having both is not something we want. vaccination is really where it's at to keep yourself, your family, and your community protected. kriti: i am curious about the effects of the booster printed is the efficacy of the booster going to be a strong as perhaps the previous rounds of vaccination? >> i think we are waiting to see how the data plays out, but let's remember it is the vaccines and yes hopefully the

booster that has the strains that are currently circulating. we also have to remember that has been a lot of covid infection. we have this growth in our population immunity. what it is is knowing that that will waxed and waned. doing your part to get vaccinated, to stay home when you are ill, and prevent the transmission to others is key as we head into the winter season when we are indoors and we want to see family and friends over the holidays. it is just a game of adding the layers of protection that you need to stay safe. kriti: always a wealth of information from the johns hopkins bloomberg school of public health. the johns hopkins bloomberg school of public health is supported by michael r. bloomberg, founder of bloomberg lp and bloomberg philanthropies. we are still seeing red on the screen when it comes to the s&p 500. we are well off of the session

lows. the russell is still down over 1%. the dollar is higher. this is bloomberg. this is bl at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect.

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>> you are seeing red on the screen. not as much selling conviction as earlier today. at session lows, the s&p was down almost 1.5%. keep an eye on the benchmarks. the 10 year yield, the bond market also catching a little bit of a selling spree. with a higher yield, the dollar

gets stronger. a reversal of what you saw the last two days. here's the difference, the dollar strength is not waiting on the commodities market. brent crude is trading at $93. opec-plus announced a cut of $2 million per day -- 2 million barrels per day. green on commodities, read everywhere else. >> watching the energy stocks in trading. we had so many trading days were it would be common for rallies to fade. here we are after the huge move of the last couple of days with muted losses as we get ready for more earnings, more outlooks. it helps to look at some companies that are right in front of us giving us their updates. a big player in the world of potatoes, their comments were enough to inspire investors to

buy into this stuff. it's interesting when you have a company like helen of troy with a warning on guidance and that name is also green. there is a corporate story that indirectly involves a couple of companies. we watched twitter surge yesterday on the elon musk move. tesla also under pressure as investors wonder about how elon musk will be spending his time running both of those companies going forward. kriti: a lot of people sang earnings are going to be driving the stock story. earlier we spoke with the san francisco fed president who doubled down. >> i don't see that happening is all -- at all. ics raising to a level that we believe is restrictive enough to bring inflation down than holding at their until we see inflation get close to 2%.

and demonstrate the price stability is restored. >> let's bring in our global economics editor michael mckee. your interview with mary daly was a great one. you had specific questions, the idea of whether or not there could be a pause coming given the uncertainty of the markets. she was very clear in her response to you. >> there's a real disconnect between the markets and the fed over the past week or so. it has come and gone as the markets want to price in the fed backing off. they went to price in the idea of the fed cutting rates next year. mary daly was clear today, neither of the sins is going to happen. they going to raise rates to restrictive territory. they're going to leave them there until inflation shows

signs of coming down. she said the amount of the raise is less important than how long we leave them there. >> i love how you talk about the markets. i have to ask you about the global picture when you're looking at the macro for example on rba earlier this week raising by 25 basis points shocking the market. the federal reserve is only going to be looking at what's right for the american economy. it to what extent do they have to pay attention to what's happening with other central banks? >> they are paying attention. not so much australia because they didn't raise rates as much. because everybody except for the chinese and russians are raising interest rates these days. you get a collective global tightening and credit. as mary daly told me, what you see is the market rates are

tighter than they otherwise would be because there is a global tightening underway. have to take that into account. they have to make sure the rest of the world doesn't push them into over tightening. >> you made the point but i want to reiterate based on mary daly's comments when you asked about will make it to peak rates, whether or not the market view from some it sets the stage for rates coming down. she did not indicate that there would be anything of that sort as we move into next year. >> not in 2023. she left the door open a little bit in the sense that if the economy should collapse, the fed would have to respond. at this point, it doesn't look

like there is any reason to think that this bargraph you are seeing now is correct. she said it's quite wrong because it does price in rate cuts starting march of next year. she thinks they will get through the year without moving anything and inflation will only fall to about 3% by the end of next year and still have further to go. they will stay tight. kriti: michael mckee, we thank you as always. let's continue the conversation with our next guest joining me in studio. do you agree with mary daly that they are going to keep rates at that level for all of 2023 not making any major changes? >> at this moment, the fed it is their primary objective to communicate to the market that they are going to do that. she gave the caveat that if the economy goes the wrong direction and collapses, they will need to shift gears. when i look at what is priced into the market for next your, i

think it's interesting that we are pricing in cuts. one could make the argument that we are pricing in a small probability of a very large cut which is consistent with what she has been saying and our take is that they are going to try to keep rates on hold for 16-24 months but it is unlikely they will be able to do that in practical terms. >> mary daly making the point that rates key in getting inflation back down to more normal levels. in your own analysis, that idea of inflation returning to 2% levels, any sense on the timeframe of getting to that point? >> i think that woman look at the details of what has actually been driving inflation, a lot of it is simply oer shelter costs and the housing sector. housing sector behaves with a lag in terms of when prices

increase and decrease and that flows through to cpi. the middle of next year, i would expect the trend would be toward decidedly lower inflation then this year. more importantly, what we have been fueling in the market is trading off of realized inflation through the book of this year. next year the market and the fed will begin to shift the narrative on inflation expectations. in that context, we continue to see breakevens complex -- compressed. that is consistent with the fed long run objective of 2% inflation. there will be a point at which they can claim victory on the inflation front even if the realized data has not come back in line. kriti: if you are betting on persistent inflation, a very hawkish federal reserve and central banks around the world, does that mean you keep selling bonds nonstop?

>> it means there will be a floor for yields in the two-year sector. there won't be a floor in the 10 year sector. the current thinking is that the curve can continue to invert. as deep as -75 or -100 basis points. big macro trade for 2023 will be timing the cyclical steepening when two years rally, the 10 year rallies as well but less and the market wants to bring that trade forward the fed keeps pushing it further out. >> you are our. -- rate strategy guest of the hour. how would you characterize the broader mood of the markets as we stepped into october? >> i think the market is looking at what's going on in the rest of the world.

they are seeing some pivots in terms of other central banks taking their foot off of the tightening accelerator and looking at tracks in their own economy. we all know that each economy has come out of the pandemic in different shape while the u.s. and europe and all of north america are continuing to deal with higher than expected inflation. the reality is that we are going to very quickly run up against the fallout from the wealth destruction and the equity market as well as the housing sector. it think people are starting to get nervous about that and i would say apprehension and caution have been the defining characteristics of this market in october. kriti: -70 inversion in the yield curve, we are looking at -40 right now. why -70? walk us through the math. >> it's pretty straightforward

if you believe the fed is going to be effective in fighting inflation. embedded in outright yields, there is an insurance premium that investors are willing to pay. we want to be holding treasuries when things go wrong in the growth environment and that is what we are expecting will shift the tide and we see 10 year yields ending 2022 closer to 3% into 4%. given that funds will be 4.6% in february, that's their path toward inversion. kriti: closer to 3% of the end of 2022. you heard it here first. thank you as always. coming up, canada's largest city is facing a housing slump. mortgage rates in the u.s. jump to a 16 year high. this is bloomberg. ♪

kriti: canadian homebuyers and sellers are growing wary of making deals as evidenced a dip of the number of homes sold in toronto. the united states, mortgage rates rose to the highest in 16 years. thank you for joining us. you are seeing mortgage rates rise at the same time that affordability among a key younger demographic is dropping. >> they are directly related. the search in mortgage rates -- surge in mortgage rates has been

so extreme, it's been like slamming the brakes for the housing market. sales are plunging. if you look on a monthly basis, prices seem to be following suit. >> we have talked about the s&p 500 being in a bear market when on average, stocks declined 20% from their peak. in the housing market, we are starting to see signs and canada of housing prices in a bear market. >> that's right we do seem to be heading that way. particularly in toronto and other markets around toronto that experienced the steepest surges during the pandemic, they are following the hardest. almost no one thinks this is over yet. royal bank of canada had a report saying before this is all

done, canada will have been in a historic house in correction. we expect weakness in the housing market here and across the country to continue into next year. kriti: let's stick with that story. to what extent are the issues in canada, the canadian housing market going back to pre-covid times, to what extent are you seeing a move similar to what we saw pre-2008 in the united states? are those parallel situations? >> in terms of magnitude, things are falling the far already fast. there are distinctions between what's going on in canada right now and what happened in the u.s. 2008. the key is just how much home prices surge in the last two years. the fall in toronto going back to october 2021 levels. a lot of people are still sitting on a lot of home-equity.

if you bought your house anytime earlier than last year. that will help cushion then. in canada, we also have stress tests. it before you take out a mortgage in canada, you have to prove you can handle interest rates at a much higher level. that means that anyone who bought their house in the last two or three years will be tested for rates at about what they are now. that means the expectation they will be able to handle them. >> building off of those comments, a few things you reported on extensively include unlike the stock market were it's easy to sell stock if you are concerned, selling your home can be a different matter. the supply story we will have to march -- watch. i know you have spoken to people who say maybe it's easier to rent for the time being which is

something we have to watch when it comes to the inflation story. >> it's a complicated picture. there are so many different variables. the supply issue is interesting because right now with rates so high, you wouldn't want to sell your house and move somewhere else unless you had to. you would be giving up historically low mortgage rate taking on today's higher one. that prevents people from listing to move elsewhere. at the same time, demand has fallen so much that listings are lingering on the market. taking longer to sell anything. it looks like inventory might be growing, but it's really because homes are not selling. the rental market, i guess you could move to the rental market

also but the rents are very high as well. kriti: let's follow up on that. what could turn that around? are we waiting for the ultimate recession that everyone is saying is looming on the horizon to come in, ring the rates down and flush the entire market out or is this something that will spur new demand homes? >> i think there is a stalemate going on. prices are in many places, this is not a universal thing because so much depends on geography, but where prices got too high maybe prices have to come down more before people will be able to buy or rates were have to come down. one of the two things will have to happen before you get the housing market moving again. >> before we go, when we started this half-hour reviewing some of

the hawkish commentary coming out of fed officials. in canada, given how many people are economically tied to the housing market, do we have a sense on whether the central bank in this country is leaning on how much higher they will go for interest rates? >> the bank in canada has been more aggressive than the fed. the expectation is that it will continue. right now the market is pricing in 75 basis points more of tightening from the bank of canada in the next few meetings may be going into january. people are starting to worry that like the fed, there may have to be a pivot if the large consumer debt load the canadians are carrying in their mortgages and elsewhere start to get into trouble to way too heavily on the economy. right now, the signal has been the tighter monetary policy is

needed and it is going to come. >> great conversation, thank you both for shedding light on a big issue that we are watching here in north america. may come back, opec-plus agrees to/oil output. what will it mean for prices at the pump? this is bloomberg. ♪

>> this is "bloomberg markets." the number $90, that's the oil price opec-plus is trying to maintain with its move today to/ its collective output limit by 2 million euros per day. one representative saying anything less would destabilize some countries in the block.

earlier bloomberg spoke with russia's deputy prime minister. >> indeed there will have been two important decisions. one you have already mentioned and that is the decision on cutting output by all countries in the group. the second decision which is just as important is the extension of the cooperation because it was scheduled to expire at the end of 2022 but now it has been agreed that it will be extended until the end of 2023 which gives the market significantly more certainty and pricked ability. -- predictability. that's why the decision was taken to balance out the market. this is very important ahead of the winter season when we would also see seasonal decline in demand. this decision which has been made today helps the market to

balance that out i think it's a very weighted decision and a timely one. >> geopolitics are front and center with this price cap development. from the white house perspective to keep oil flowing out of russia, but at the same time and effort to damage the economy there. >> president biden calling the opec move unnecessary. this is crucial because he made a controversial trip to saudi arabia earlier this year trying to increase the production not decreased. it seems like opec-plus has gone in the opposite direction. what's interesting is the market reaction. on the huge reaction of $2 million -- 2 million barrels per day, the market price is still low because so much of this has been priced in.

take a look at the market action. the stocks are down .3%. stick with us for more markets coverage. this is bloomberg. ♪ at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect. millions have made the switch from the big three

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>> the most crucial moments in the trading day. this is "bloomberg markets: the close" with caroline hyde, romaine bostick and taylor riggs. ♪ caroline: just two hours left a trading. what a wild day it has been. romaine: we came out of the gate really low. hit about 2% on the day. we are trying to crawl back to the green. that is