kriti: stocks changing and all about the market at its core, bird markets starts right now. -- bloomberg markets starts right now. ♪ kriti: we've got red on the screen when it comes to the equity markets. some real pain on the s&p 500, the nasdaq, the russell. down about 1.2% on the u.s. benchmark. when it is not alone in terms of selloff, the bond market is taking it as well. it comes down to that employment data. we will break it down with mike mckee but the 10-year come up 3.71, higher by about three basis points. everything changed at 8:30 a.m.

with the labor data. as you see yields go higher, the dollar stronger, you are seeing a little muted volatility perhaps specifically in the bloomberg commodity index. reacting broadly to the stronger dollar story. at the end of the day, oil and copper in the green. we will get into that later in the show. for now, some breaking news coming from across the atlantic. a crucial moment when it comes to the ecb saying they should aim to reach the terminal rate by the summer. i want to bring an michael mckee attempt digest all of the information. talk to us about what this headline means. is there a consensus? mike: there is a consensus at this point -- >> it looks like we are losing mike mckee but we will bring him back in just a moment. these headlines are in fact coming. he is saying some of these

headlines or miller road excuse me is saying you are starting to see this terminal rate get hit into the summer. if you look at some of the pricing we are seeing in the options market, specifically what the european equivalent of the fed funds rate would be, it is not that out of consensus. it is being pricing at 3.75% and july is where we are looking. milroy says if we look -- we hit that terminal rate by the summer, it is not going to be that contrarian a take. it is coming from france. he does echo some of the statements you have heard from the president. christine lagarde was saying the ecb should defend on the data. they are still looking at that core inflation. i want to bring in michael mckee one more time and talk about these headlines. at the core is still the issue of whether or not inflation is crucial. that is way that is way the france story comes in handy. france, italy, they are them manufacturing hubs along with

germany but for a lot of europe. if you are starting to see french inflation peaked, that is good news. i want to bring in mike mckee. give me your take on these headlines. michael: i think the accra phone hit the terminal rate a few moments ago. the general consensus is you will get to the terminal rate in the midsummer. milroy is not out of consensus there but he seems to be sending a message that he does not want the ecb to go too far too fast. he suggests there has been some good news. about inflation and about growth in france. so they should be -- the ecb should not be obsessed with mechanically just raising rates. they should take into account data. they should be data-dependent which is an obvious thing for central banker to say. i don't think he is out of consensus or making a radical call here for the ecb.

>> let's bring it back stateside. i want to chop up -- talk about the job story. dominating the u.s., the core of it that reaction fund. especially when looking at the corporate pain and amazon and salesforce. tom davidson spoke about the trend. listen to what he said. >> if you look at salesforce laying off 10,000, look at big tech company of the day with more layoffs, to some extent there was some element of bloated jobs. you had a tight job market especially in the technology area. yet companies that ramped their headcount very significantly. some of it was a miscalculation of demand. some of it is turning out to be bloated headcount. there is a possibility that you could see some margin improvement, amazon and some of these other big tech companies from scaling back their headcount. but i do think it is worrisome for the current state of demand

for e-commerce. >> tom forte talking about that headcount. connect the dots for us. still a very hot labor market according to this morning. >> jobs in terms of news headlines, they gather the same kind of attention that we see in terms of tech stocks. their weight in the indexes. but they are very small in terms of weight in the overall payrolls. tech jobs are maybe a couple of percentage points of payroll. there are 155 million jobs here. when you're talking about 18 or 20,000 jobs lost at a particular company it is barely going to register in the macro sense for the overall economy. in worse if you are seeing the huge layoffs, setting off or something in the auto industry where you have many more workers. it is only a small part of what is going on but it is one that garners a lot of attention. >> some thing we are going to

keep our eye on as we start to see how the markets react to the payroll number tomorrow. bloomberg news international news and policy correspondent we thank you for connecting the dots on both sides of the atlantic. that's talk about the market specifically. i want to bring in a special guest making his debut on the show. the new york stock exchange senior market strategist, always a pleasure to have you on. connect the dots when it comes to the labor story we are seeing today. really spooking the markets. what we might see on 830 a.m. sharp tomorrow. >> thanks for having me on, i'm excited to be here and hopefully the first time of many. what we have seen from the labor market data this week in terms of the components within the isn any fracturing, the jobs numbers, this morning, job -- drop in the challenger job layoff, as well as the claims data, all points to the fact that tomorrow's number will probably come in better than the

street has expected. we do know that labor and the employment picture, it does lag, monetary policy. we should not expect to necessarily see the labor market rollover at this point. mike made a great point in terms of seeing the recent headlines in terms of layoffs, being pretty contained within the technology sector where there was some over hiring, over the last couple of years. we are not seeing that spread widely within the economy at this point. one of the key focal points within tomorrow's data would be on the wages. the wages numbers. >> it is interesting. you start to look at these inverse correlations, starting to rebuild, it was very much a trademark or hallmark of 2020. this inverse story of the labor data versus how the market reacts. is that then replacing the bond

market for example as a driver? the idea that yields higher were driving the losses in the stock market, in the labor market or wages taking that spot? >> i think, clearly, inflation and labor are very much intertwined. right now, the cpi data and the employment data are going to be the key volatility drivers for the market like we saw very much was the case last year as well. as we are seeing inflation start to roll over, the focus does start to shift more toward the labor market data as you pointed out. the key will be the later in the year, the fed's job will get a little harder as we start to see the economic impacts of monetary policy start to flow through the labor data.

it becomes a little more politically challenging for the fed to continue to tighten and keep policy really tight if the labor market does start to rollover. >> is there a risk of the labor market rolling over so quickly that the market and the economy is not prepared for that disinflation, deflation ticks kind of this expedient track and easy essentially a very fast version of what you saw in the 80's, which is a quick path to -- the corporation, what we saw coming out of the pandemic is very much in recent memory. they are having a very difficult time hiring people, coming out of the pandemic. we are still in a tight labor market. there is going to be a reticence to really have widespread job

cuts very early in this process. >> i have got to end with the dollar story, we got to go global, talk about the ripple effects we are seeing from the dollar when it comes to just -- not just the stock market but the commodity market as well. is the dollar solely at the wind -- women of the bond market? >> we have seen interest rates differentials driving the u.s. dollar throughout last year. to start the year we had the dollar moving lower as we got the better inflation data out of europe. as that has -- as we have now refocused on the wages side of things, we have had the dollar moving higher again here. one thing i would point out from the equity markets is that dollar headwind we had all of last year, if we have rolled over here, it becomes a tail and it will help on the earning side of things. especially from will to nationals. >> something we are keeping and some thing we saw show up in the

earnings last year, microsoft, amazon, apple. we will absolutely have you back on the program, senior market strategist, we think you as always. time for the first word news with mark crumpton. mark: thank you, seven was not a lucky number for house republican leader kevin mccarthy. he failed to get a majority vote for speaker despite offering his gop detractors is simpler way to oust him should he get the job. he is under growing pressure from many lawmakers on both sides of the aisle to find the votes he need or step aside so the house can open fully and get on with the business of governing. new hampshire status as a first in the nation presidential primary state is now even more in doubt. democrats there missed a deadline set for today by the national party to maintain their early primary spot. state chair ray buckley says that republican governor and other leaders dropped as -- a

quote poison pill by refusing to move the new hampshire primary date and expand early voting access. the national party voted to replace iowa on the 2024 residential voting calendar with south carolina. a significant move is coming in the russia-ukraine war. bloomberg has learned the u.s. and germany will send armored vehicles to ukraine, an announcement may come as soon as today. armored vehicles have been near the top of ukrainian president volodymyr zelenskyy's wishlist as his forces seek to counter that tanks and other armored vehicles that have been a key advantage for russia in the conflict so far. russian president vladimir putin has ordered his forces to cease fighting in ukraine for 36 hours starting friday afternoon. the kremlin said president putin gave the order tuesday for russian orthodox christmas. it follows an appeal by a patriarch of that church which has close ties to the from line. ukrainian officials denounced

that as a truce. the capital has demanded russia remove its troops from ukraine as a condition for any cease-fire. 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'm are crumpton, this is bloomberg. yes i also

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stay tuned for that because i will be asking about tesla. what does that mean for demand for battery sales? there is so much to discuss in las vegas. >> it is ok.

i appreciated it. ed ludlow, covering all things at the consumer electronics show in las vegas. perhaps back with an even better arnold schwarzenegger impersonation. this coming from james bullard. he says inflation is likely to slow. it is still too high, measures are falling. he talks about the labor market performance. he says it remains strong but the inflation expectations are consistent with the 2% goal. he said rates are getting closer to the restrictive zone in 2023. that is the crux of what love the messaging -- we are getting closer and closer to the end of the tightening cycle. this comes in the context of the fed minutes we saw yesterday.

the concern is not necessarily recession. it is about the immediate reaction. that includes the bond market, strength of the dollar. perhaps any sort of rebound in the stock market that will not make the federal reserve's life any easier. james bullard making those comments appeared we are going to take a quick commercial break. the era of negative yielding debt is coming to an end. this is bloomberg.

kriti: this is bloomberg markets. i am kriti gupta. an historical moment when it comes to the bond market. in the last two years, we have not had a shortage of his store coal moments. the federal reserve would argue the global monetary reaction to

it. it is coming as we see even the most negative yielding debt return positive. we are looking at the bloomberg negative yielding debt index. it includes treasuries. the last holdout, jgb, japanese government bond, debt is turning positive. it is going lower and lower when it comes to the negative yield. the jgb story is crucial. inflation is becoming a global story. it is not coming down fast enough. catching up to japan in a way that is not great. they want more inflation after decades of starting to see the slowing growth, demographic changes. new management come into the central bank. yet, here they are, trying to suppress the yield moves, inflationary moves with the yield curve control.

from a global perspective, you can buy a japanese government bond and get some yield out of it. where in this market do you find returns? this is a fascinating index and a historical moment. in 2023, do you see a reset when it comes to markets? not just the stock market but global allocation. do you put more of your money in asia for a reason like this? coming up, it comes down to a labor market surprise as companies added more jobs. we will discuss the effect it has on the fed. we will ask megan greene about what this means for the stock market and the bond market. this changed at 8:30 am with private adp data, sending the s&p 500 lower. the dow is down by .9%. the nasdaq underperforming.

we want tack on our side. the 10 year yield, 3.70. this is bloomberg. ♪ 202 pounds on golo.'ve lost so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this."

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>> welcome to bloomberg markets. kriti: it kind of feels like the market is paring some losses. you are seeing the s&p 500 down .8%. it changed at 8:30 a.m.. we will dive into what is changing the market. mitt is not just the stock market, it is the bond market. the 10 year yield, free .7. it is moving to basis points.

off the economic data. as yields go higher,. the bloomberg dollar stronger. the ripple effect is a bloomberg commodity complex down 1%. the exceptions, oil, copper are still stronger. jon: it is also interesting, we are not in earnings season but when we started the new york year, we have a lot of quarterly results to get through that will be so important as we try to get a sense on were corporate america is going. mixed performance from some of those companies. walgreens down 7.5%. less covid-19 testing seems to be weighing on the top line performance. the power of the potato, 10% surge today. a strong stock last year was t-mobile. showing subscriber performance that is pleasing investors.

those shares of 3%. constellation brands is under pressure as the ceo was addressing headwinds for the company. kriti: certainly something we will keep an eye on. it feels early to talk about earnings. today, the trade 100% driven by the macro. we heard from the global stanley chief economist and got his take on the data this morning. >> the initial jobless claims data, what we are thinking will happen, businesses will try to hoard labor. what we are likely to see is slower payrolls -- we will get tomorrow's data, we are looking for 185,000. we are looking for a slowing down of hiring, not a wave of layoffs. jon: let's bring in martin adams

-- more context. it feels like this balancing act will be part of the themes of the market. your team has written about this. you look at the market reaction to a relatively strong jobs report today. you see the weakness. maybe things cool down. in the back of people's minds is you had such lousy performance for equities last year. >> it is something of a balancing act. the stock market moves well in advance of the economic data. the job market is still too strong and contributing to inflationary pressure. valuations are dependent upon rates. economic data is not strong outside of the market.

we continue to get evidence there is just a generalize slowdown in spending happening and those are weighing on earning trends. there is not a lot of good news for the market to absorb. that is why we have had such a rough start to 2023. kriti: do you think the labor story will be driving the markets? it will likely drive tomorrow. are people really looking at how many layoffs, how cost-efficient each company is? gina: i think they are for a lot of reasons. they are looking at the tick by tick of layoffs because the presumed impact on inflation dynamics and the federal reserve's response. that said, for the tech sector, layoffs can be perceived as a positive component of the margin outlook for some groups. they have had enough rating to

suggest they no longer have an embedded premium or long-term expectation of robust growth. it is a matter of those companies finding the right margin balance to stem the deceleration they have experienced in earnings growth. for the broad market, it is still about the fed. for the tech sector, it can be perceived differently. kriti: in about 30 seconds, i have to put you on the spot for my producer will kill me, tack are still the fastest -- tech are still the fastest growing companies. these cost-efficient cuts, why not buy into tack? -- tech. gina: i think we have to be careful about what we characterize as tech. some people look at amazon as tech. fair enough. announced layoffs have not been particularly positive for that stock over the last several

hours, predominantly because of a gross premium embedded in expectations. other tech companies have announced layoffs. you have to look tech by tech and carefully assess valuations. a lot of them are in the perceived safety stocks or those that have this growth moat with an embedded premium that is still deflating. kriti: we will certainly keep an eye on that. gina martin adams, breaking down the case. you see layoffs continue more and more. for more insight into the stories, joining us is megan green, global chief economist at the kroll institute. i have to ask, from a macro perspective, from an economic perspective, do these layoffs even matter if you are seeing slowdown in every other part of

the economy? megan: the layoffs happening in the tech sector are dominic the headlines but they are not broadly based. the labor market has held up well given the rate hikes from the fed. from a macro perspective, the tech layoffs do not matter very much. we would need to see it be more broadly based and ethic that will eventually come. you played a clip earlier where the notion that we could whittle down job openings and not see a deterioration in the labor market was surfaced and that is a great theory. i want to believe in it, intellectually, but there is zero precedent for it. when you have these rate hikes, the point is to kill off demand and slow down the economy. i think the labor market will start to deteriorate but i do not think it will happen until the second half of this year when corporate earnings come in weaker, companies have rising borrowing costs and they start laying off workers. we are still in the hoarding

phase. you see that with average hours worked. they have started to converge with their historical average, suggesting companies have stopped there backfilling. that is an indication companies really are hanging onto workers, hoping they can get to the other side and not have to lay them off because it was so difficult to find them to begin with. jon: you talked about the second half. one of the tension points in these first couple of trading days of 2023, we side with the fed minutes, we are seeing with the latest labor data. the idea that there are some in the camp that the fed will be in a position where they can or may cut rates in the second half of this year but there is still such a strong messaging based on the data we saw today that there is still plenty of rope to fight inflation. where do you see the rate strategy going throughout the rest of the year? megan: i think chair powell --

services inflation being the biggest component of inflation now. given that it is largely driven by wages, which are really sticky. i think inflation will remain sticky. i think peak inflation is behind us. by the end of the air, inflation will remain well above the fed's target. that is not to say the fed will wait until inflation is at 2% to start cutting but i think the fed will get rates above 5% and will have to keep them there in order to see inflation come down. i do not think we will see rate cuts this year. i think markets have been pricing that wrong and the fed has been clear with its messaging on what it intends to do based on the data it used today. the markets have constantly second-guessed that end have been betting on a fed pivot. the markets would love to see a fed pivot. it would be an incredibly inefficient way to run policy. i do not think we will.

see it happen this year. i do not think there is a fed put anywhere other than the credit markets. the fed would absolutely pivot. it would have to step in. that is its job. beyond that, declines in equity markets, i do not think the fed cares about that. a recession, chair powell has indicated they might cause one and that is probably better than not causing one. waiting later and having to hike rates even more and causing a deeper one. kriti: megan green with the kroll institute. we will have you back on to have this conversation. breaking news out of twitter. laying off engineers, according to information. it looks like they laid off 40 employees on the team. something will be monitoring as we talk about the labor story and the twitter story. coming up, bed, bath & beyond warns it might be to file for bankruptcy.

all the details, next. this is bloomberg. ♪

kriti: this is bloomberg markets. i am kriti gupta, alongside jon erlichman. bed, bath & beyond joins another retail chain on the precipice of bankruptcy. the chain said it might not be able to continue. let's welcome bloomberg's john edwards, who has been all over this story. this is coming after a lot of store closures, they tragically lost their cfo. to what extent is this a surprise? john: it is not really a surprise. it is almost inevitable.

they struggled in the past several quarters with declining sales. they have had trouble with their merchandise mix. it starts to cascade on itself as we reported back in november. suppliers have stopped supplying bed, bath & beyond because they are concerned about getting paid. while bed, bath & beyond remains, at least for the moment, a large national retailer, suppliers want to have their goods in front of them but they were worried about their viability. it turns out to be accurate. jon: and then you add to the equation a changing rate environment, john, for retailers. a challenging time on the finance front and i would imagine the targets, walmarts and the costcos of the world are waiting to see what plays out.

target looked out a lot of private label offerings. that was part of this bed, bath & beyond strategy. to turn to some of the private label offerings and that seems to have not worked out. . what has your team learned about what went wrong on that strategy? john: it was a variety of problems trying to get deeper into private label. starting a few years ago, they try to introduce a bunch of new private label brands, ideally, if those work out, they boost margins because you are not paying an outside supplier. they had a variety of missteps in introducing those. plays a large order and then decide, no, no, it needs to be a small order and that would delay the overall order and you would end up with nothing in the stores. and then they brought in mark from target who had a lot of success with private label but part of his problem was he try

to apply the target playbook a little too exactly to bed, bath & beyond, a smaller company with less internal infrastructure. they were not able to translate his past success with private label at target to bed, bath. you end up in the situation where they made this big bet, reduced sales of national brands. they more recently try to reverse that and go with the national brands but they had supply problems. it has been a real mess. a lot of it has been execution. jon: we will continue to watch. thank you always for the context. bloomberg's john edwards with the latest on bed, bath & beyond. turning now to another crisis, ftx, the crypto exchange was eyeing individual retirement accounts. bloomberg asset management

reporter has been digging into that story. it is an excellent story. when we think about the focus on the marketing dollars and the celebrity endorsements to make ftx a household brand beyond crypto enthusiasts, can you walk us through in part what they were trying to do of reaching retail investors through all the marketing money. >> one thing ftx was successful in doing was attracting every day, both the crypto enthusiasts and other people who thought they might dabble in cryptocurrencies. the way they do that was through channels like sports marketing. we saw their names on arenas and jerseys. one other avenue would went down was partnering up with companies that customers already trusted. think ne-yo banks. they even attempted to reach out

to investment advisors and look into investments like retirement accounts for asset gathering. it shows you this sprawling web they laid out. kriti: annie, how successful was that strategy? did it yield anything? a larger customer base? annie: looking how far ftx did get, it is staggering. we spoke to people who were under the impression that ftx was insured in the u.s. it shows you how the influence campaign did reach people. the ftic issued in august a cease-and-desist letter, saying they were misrepresenting how their assets were actually backed and the ftic did not ensure those assets. you can see how to a person, it can be easy to get confused by

representations. maybe you did not see the cease-and-desist order. it shows you how far they were able to get. jon: as your story points out, even in california, regulators are looking into not just the ftx story but investors associated. thank you for your reporting. time for a quick break. when we come back, we will talk about continued housing challenges in canada's largest city. more details as we come back. this is bloomberg. ♪ ll work with you on a comprehensive wealth plan across your full financial picture. a plan with tax-smart investing strategies designed to help you keep more of what you earn. this is the planning effect.

jon: this is bloomberg markets. i am jon erlichman, with kriti gupta. 19%. that is how much home prices in toronto have dropped since march of last year.

the housing market in canada's biggest city is in the neighborhood of bear territories. he joins us now from toronto with more perspective. how would you characterize what has happened in the canadian housing market over the last 12 months? >> 2022 was a historic year for the canadian market, the toronto market, in particular, which is what we got data about today. it was the biggest one year drop in the history of the benchmark price in toronto. that benchmark price has only been compiled since 2005. there has never been a bigger annual drop. the closest was in 2008. that does not compared to what we saw last year. as you pointed out, the annual price drop does not really

capture the full extent of the drop because for january, february and march, prices were going up considerably. it was only the last nine months that prices have been falling. that was still enough, despite the first three months of gains, to register the biggest annual drop in the benchmark's history. kriti: the toronto housing market, the canadian housing market has been a point of concern even before covid. how much further could the drop you just talked about drop? ari: that is the question right now. the market is going into a bit of a winter deep-freeze. only a little over 3000 homes traded hands in toronto in december, which is a very low pace. new listings has also dropped off. it seems buyers and sellers are

waiting on the sidelines. traditionally, the market heats up when the weather starts heating up in spring. the could be the next big test in spring. when people need to buy or sell might be waiting for their opportunity. it could be that they cannot wait any longer than spring and we will see what happens. the big question will be, are there more buyers or sellers at that point? the declines have slowed down -- the declines in pricing, that is -- has slowed down since the big drop earlier this year. very little transactions are recurring in all. what happens if more transactions start happening again? will the price decline resume? jon: quickly before we go, we started the half-hour talking about the jobs landscape in the u.s. we will get a jobs report from both countries tomorrow. the bank of canada will be watching that.

how closely do they have to watch what is happening to the housing market? ari: that will be a big question for the bank of canada. they had a lot of focus on the housing market in their communications in terms about concerns about financial stability, broader financial stability from a stabilize decline in housing prices. that is not the base case for most economists but they will be watching closely, particularly as the steep run-up in prices causes the economy to slow. most economists are expecting canada to enter a recession in the first half of this year, even if it is a shallow one, which will make it harder for people to stay in their homes. you cannot pay your mortgage if you do not have a job. kriti: breaking down the canadian housing market for us. we thank you for all the information.

stocks and bonds are both in the red, seeing a lot of pain. stick with us. more markets coverage ahead. four jon erlichman, i am kriti gupta.

>> the focus on the labor market here for the market on this thursday afternoon. so far, not necessarily liking what they see. clawing back most of the gains yesterday. the market is a little confused about how the fed will react. >> a little confused but a clear -- you have bonds selling off. energy. really ripping today. >> that is pretty much the only