jon: welcome to bloomberg markets. kriti: there is green on the screen and no one saw this coming that this kind of rally would stick passed last week. the nasdaq is outperforming. some of the gains are fading a little bit and we will dive into the numbers in a second step the 10 year yield is down about six basis points and the dollar

moves as well. brent crude is treating with a handle. jon:: diving deeper, we will talk more about the retail stories with home depot on the move. you talked about technology not to stateside but the u.s. chinese companies listed are on the move, string of encouraging signs over the last use -- and. alibaba is up and paramount global, one of a few stocks investors are excited about based on her chair hathaway and increased stake in that business. kriti: it is a little bit of a rally from the likes of the numbers just mentioned but there is also eco-data. producer price growth took a step down in the latest sign that inflationary pressures are beginning to ease.

we break it down more with michael mckee in this follows the cpi report from last week. does this make a trend? michael: i say no because i've been asked that but it is at least some good news that the fed wants to see so it's good news for the markets. on a core level, there is a big difference between prior months and what we saw in october. there is no guarantee that ppi or cpi will continue at the same rate but it is the first hopeful signs we have seen that perhaps the fed is starting to have an impact. jon: based on what the market is thinking in terms of rate moves, what can you say as we move into december and next year? michael: we seem to be locked into the 50 basis points idea

for december 14, not only as jeep i will set it yesterday, we had lael brainard saying it and other members have endorse that as well. they want to slow the process even though 50 basis points is a lot and we want to look around and see what's happening to the economy. there was a clue in the ppi. they look at wholesalers and retailers. the way they get there price levels is to look at their profit margins. i did it chart that shows walmart and the walmart profit margin, even though they had a reasonably good quarter, the net margin was negative and the ppi for trade services which is what they call it is also negative so it shows some margin compression and if that continues, you will see companies not able to raise prices with margin trouble but you will all see price increases

slow down. jon: that's helpful context and you help us with our transitions on this tuesday because we will continue the conversation on the retail front with walmart results so thank you so much as well as home depot. both stocks are moving higher after better than expected results and we want to get more perspective on what's going on. joe is the senior managing director and assistant director of research. brendan cases joining us on the quarterly results. just on walmart, the lead on your story was the idea of consumers flocking to walmart to look for deals in this inflation filled environment. >> walmart is getting a lot more traffic both transactions and the average ticket is up. they are also getting a lot of traffic and higher income customers and they say three

quarters of the market share gain was due to households earning more than $100,000. to your point, in an environment of high inflation, people will look for the lowest price they can find in walmart's reputation for low prices is serving it in good stead and bringing people through the door. kailey: good numbers on the sales, not just for one more but home depot. kriti: hop into the conversation, what about on the inventory side. although both companies posted top and bottom line numbers, the inventory diversion seems to be was driving the stock into different directions. >> the inventory of walmart and home depot did come down where was from the second quarter. they made some improvement clearing from goods in the in stock positions the companies have are in good shape now. a large portion of the increases you are seeing are actually coming from the inflation built

into the inventory. we think when you look at the units and the turnover, it's much better shape than they were, we are not fully through clearing the excess they had to start the year but we are getting closer to that. the market reacted positively that both walmart and home depot had better looking inventory relative to expectations. jon: you mentioned that reputation for low prices got some people in the door at walmart, but we should highlight the fact that having such a large grocery business and that's one thing people need these days helps out with their retail business overall. >> that's a big part of it. walmart is getting more than 55% of sales from rosaries which is the thing that people still have to buy, inflation is high but walmart is still suffering on the general merchandise front.

all that stuff that fueled the big surgeon the inventories. that remains a work in progress even though they are making improvements in that regard. it's really the groceries that are enabling them to really boost sales and gain market share. they weren't talking about comparable sales growth rate for grocery which means people are coming and buying more of their food at walmart than other places. kriti: those everyday low prices, for home depot, what's striking to me as i grew up 15 minutes away from a walmart. the idea that walmart and home depot are closely placed together because of a recessionary cycle, part of the big conversation is not just consumer spending for walmart but perhaps how the home depot side of the story tracks the housing market. are you concerned about how a pop in the housing market might

feedback into lower home depot earnings? >> when it comes to housing, it's interesting because housing turnover makes up only a small percentage of the home depot sales. when you think about housing, it's driven by people who staying put in their homes and if they feel good about the value of their home, they will continue to spend on projects and invest. so far, home prices are starting to decelerate. they are still up year-over-year so to the extent that people still feel confident that there home has added value and they can invest there and they are spending more time there, many people are maybe only working in the office two or three days per week is more wear and tear and the aging housing stock and prices are holding up relatively well even with the deceleration. i think that means you will see people invest in their home.

project backlog is still very high ends there is still a lot of interest from the diy customer wanting to do smaller projects. jon: as we await the retail sales data this week, beyond the case for home improvement or the case for groceries, what will you be watching closely as we get into this key holiday season for retailers? >> that's an open question. walmart did well with this prices but does that mean everybody will do well? maybe not. target reports earnings tomorrow and it will be interesting to see with the dollar store reports and department stores as well. a lot of questions out there about the outlook for u.s. consumer spending even though people still are spending a lot at walmart. kriti: thank you both for being

with us. coming up, all eyes are on the chance of a return of the debt ceiling debate given the u.s. midterm results and we will have more on that next. this is bloomberg. ♪

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jon: this is bloomberg markets. we are just monitoring some headlines which have impacted the markets. the s&p 500 is impacted on some headlines about poland convening its national security council. it is our understanding that there are some reports out there citing a senior u.s. intelligence official that they were russian missiles that crossed into poland, killing two people. the intent of those missiles, obviously, there is a lot still to be asked on that front war raging between russia and ukraine but given that close order, sensitivity issue and i want to bring in abigail

doolittle on this. abigail: the market reaction is severe and this is what happens when we have these headline. the s&p 500 had been up and the nasdaq as well we have a big decline and the doubt lead to the downside about half an hour ago so we went from a big rally on ppi to muted market action and we have the doubt down about 2/10 of 1% as investors sort out what's going on. we have the defense stocks climbing about 5%. north are roman and the others are climbing and up on the year about -- northrup garman -- grumman and the others are climbing year over year by 30%. jon: we are looking at all of these indices and reacting right now to those headlines.

just to reiterate -- poland convening its national security committee -- kriti: it's something you are seeing a reaction to in the bond market lower on the 10 year yield. i tiny spike in the dollar, almost turning positive. i want to bring in a true expert on the fx rates. this is terry wiseman from mcquarrie on the breaking news. what is your initial reaction into this action on the bond market on the headlines coming out of poland? >> it's the natural reaction of the markets to move into safe assets like bonds but if i were out there trading, i wouldn't take this too seriously. russians have launched 100 missiles into ukraine in the past 24 hours and some of those were shot down so as possible this was a piece of a missile that landed in poland and i don't think the russians would

have targeted polish territory. my gut healing is that this will die down and there will be some diplomacy, talks behind this to try and find out how to make sure it doesn't happen again. jon: even looking at your note today, when we watch some of these common trades of the year, the most obvious one is the strength of the u.s. dollar. the road ahead always potentially seems to be influenced by whatever geopolitical headline we see and that's something that we will have to track in this particular case. >> keep in mind this is one event in most geopolitical headlines of come out over the last 72 hours and they been positive with g20 summit where the president of china and president biden met on the sidelines in the australian prime minister met with

presidentxi. we even had the news early in the morning that the russians were going to allow safe passage to ukrainian products through the black sea. you have to balance what happens today with poland against the more positive geopolitical news over the last 20 -- 72 hours. kriti: as we talk about the war in ukraine, from a market perspective is the readthrough into commodities like oil and grains and arguably metals. there is a correlation when the war first broke out in the bond space between oil prices and the bond market and now that correlation is flipping a little bit. what do you make of that? >> it's more a risk off movement to bonds today. when the war started and people thought this would direct disrupt commit -- commodity

movement across the world and insurance rates would go up, first thing people thought of was inflation and they thought about fed tightening and they thought it was time to sell the bonds. now what we have is not that kind of situation. i think the broadening of the war has irked traders to think that would be recessionary in another supply-side shock that is associate with a deeper recession and maybe this is why the bond market is rallying in the face of this. it's really about risk off and light to quality step when people are confronted with headlines that they don't know what to make of, their flight of's first resort is into the bond market. jon: going through the different asset classes in that initial reaction, crude oil was moving higher and some weakness for the euro. ranges are important and it

doesn't look like we have moved outside of any of the recent ranges to your earlier point. when you get what -- one headline risk story, what to the test ranges look like? >> it depends on the market but i can't imagine the u.s. bond market will move more than six basis points in the yield on the 10 year. that is probably the limit given the nature of the headlines. this leans a little toward the innocuous side in the immediate reaction is not what people would have done if they looked into the details and extrapolated the headline to what might happen next including the diplomatic push. kriti: thank you for being with us. we put you on the spot and we will also put romaine bostick on the spot. as we watch the immediate fate

of the stock market off these headlines, you are starting to see a comeback. what is your initial taken what the stock market is pricing in? >> it's a knee-jerk reaction and if you look for context, you have to go back to what we saw in march. when russia first invaded ukraine, there was a barrage of missile strikes that came very close to the polish border. they landed in ukrainian territory but when that happened, the market sold off quickly on the thought that a strike on a nato member country would require some sort of response by default. there is still a lot we don't know about the latest missile strikes and whether there is going to be some sort of coordinated response either publicly or diplomatically or militarily. the main concern here right now is you can focus on the macro and the micro but you know politics -- but geopolitics are still in the mix. jon: within poland, this

triggers a process for a committee meeting on national security and defense. it's my understanding that would consist of the heads of defense, interior, justice and foreign affairs ministries and also coordination with intelligence services. that's the body that coordinates decisions on national security and defense. we have no idea at this point where things go from here but clearly, we have to watch for additional headlines coming out of poland now that they get this committee together for an urgent meeting step >> this brings up the issue of article five. one decision is being made by the polish government as to whether they would like to respond in the binding nature of article five that means other nato countries would have to back poland in some way or another it poland decides they

want to read -- retaliate or make a defensive maneuver. in the united states, there's always been a subtext, the idea that you can have the warfare and all of the monstrosities that come out of it but u.s. companies and corporate profitability and ultimately u.s. economic growth would not be as impacted by it. while there may be here, it may take some of the risk sentiment off the table. it wouldn't necessarily change the fundamental project re-of the market. -- trajectory of the market. jon: thanks for helping us to break this down. the ap is reporting a senior intelligence official said russian missiles crossed into nato member poland telling to people just outlined that the polish government is holding emergency meetings due to the situation. joining us on the phone line is maria taddeo who is just getting

these headlines as well. what more can you tell us about how things might play out from here? maria: we need to focus on the polish government and the findings they come up with. there is always the risk with the war in ukraine that it could spill over to a member of nato and spill over into a member of the european union. there is a difficult diplomatic elation ship that poland and the russian federation have. poland is a country that is openly supportive of ukraine and they have very complicated historical context going back to the end of the second world war. for the polish, the polish population is 100% in support of

ukraine and the government and prime minister are also 100% in support of ukraine step the fact that this is a nato country if indeed there was a missile strike, that's the nuance could change the nature of the conflict and could be a real danger. as you know, ukraine wants to go into nato and that means the potential to have 30 countries to come together and support this effort against russia. the scale of this would be much bigger than what we have up until now. kriti: i want to ask you more about the cultural momentum you touched on. poland is far more sensitive to russia then ukraine. a lot of the refugees coming from ukraine have been on the polish border. talk to us about the history

behind this? maria: you have to understand the major tensions between russia and poland. the polish present the russian federation. they are 100% in favor of ukraine. they feel this is something where there is no nuance. they want to support with weapons and getting their own weapons. that's their number one priority. kriti: thank you as always for breaking down these headlines. this has moved the market significantly with the s&p 500 only up410 after gains of 1% stop the vix is jumping up to 25

and brent crude is at 94 and still retreating from session highs. stick with us, this is bloomberg. ♪ (jennifer) the reason why golo customers have such long term success

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romaine: here's what we know on the situation in poland. two russian missiles landed within the polish border. the prime minister has convened right now. an extraordinary meeting right now on the national security. let's get to maria. what are some of the navy -- the nato members doing right now? >>