>> welcome>> to our bloomberg audiences. i'm john hyland with first word news. reaching the terms of the nuclear tree to -- treaty in russia, stonewalling efforts to discuss the issue. the treaty was extended for five years giving them more time to talk but inspections were cut shut down because of the covid-19 pandemic and efforts were rebuffed to restart last august. french labor unions protesting against raising the retirement age, defiance over the signature

economic reform. they expect only one third of high-speed trains to run and urged people to's work from home. trains were severely disrupted and many schools were closed. the secretary of state antony blinken is reiterating the u.s. commitment to preventing iran from developing nuclear weapons, wrapping up a two day trip to israel where they discussed commitment to israeli security and concerns about interior rating security in the west bank. the white house is ending a pair of covid emergency declarations on may 11, the end of the controversial titer -- title 42. it also allowed millions of americans at access to medicaid, the program that provides health care to low income people. george santos is giving up his seats on two committees less than a month into his controversial term, resisting calls from other new york republicans to acknowledge -- to resign from congress.

he has acknowledged inventing details about his religion, life, and career. global news powered by 2700 journalists and analysts in over 120 countries. i'm john hyland. this is bloomberg. john: i'm jon erlichman, welcome to bloomberg markets. kriti gupta: and i'm kriti gupta. we have a twofold story. economic data driving of shares from a sentiment perspective with bond earnings stories moving the index higher as all in all the s&p 500 drives things higher 5.8%. the bond market retracing the technicals that are in play there, looking at 352 on the 10

year, enough to take the dollar down with it. look, it is a risk rally when you look at the cross asset story and you can see that in the commodities space. nymex crude trading up 1.3% on the day. jon: we will continue to watch the headlines around opec and opec-plus but we have a bunch of names we are digging into over the next 10 minutes. let's look at some of the stocks we are watching today with general motors wowing hall street with their outlook and quarterly numbers. popping right now, and technology we have heard about sobering layoffs. earnings season, these results with user growth are encouraging investors, shares up 12%. you were talking about the energy story. exxon shares are up right now. there was a question about whether or not buybacks could be more aggressive considering all the money exxon has been making.

but perhaps that's the point. a difficult political dance right now. pfizer is a little bit weaker right now when you think about where we are in the covid storyline where the company is expecting less demand for vaccines and shots going forward. kriti: they were able to forecast all the way out to 2026. a lot to digest there, for sure. earnings relating out fast and furious this morning. one key message, margins matter. let's dive into the details with leslie, thomas, and joe. kicking it off with the golden arches, leslie, what does mcconnell's take away when it comes to the consumer? leslie: overall globally thinking the consumer is still strong and resilient they are saying but at the same time they are seeing tweaks in behavior from some of the lower income shoppers. they are still going to mcdonald's, they are still ordering but when they go they treat down.

they hoarder and spend less. instead of a burger, fries, and milkshake, maybe they cut it. cut the milkshake. jon: becoming a real balancing act for the company if they don't want to change menu prices but are dealing with higher input costs. and yet you are reporting on this continued expansion with innovative stores, including in kriti because home state of texas with a goal to roll out new locations. can you tell us more? leslie: it's significant for them, especially in the u.s. market here. they are planning growth for the first time in eight years. growth in the u.s. has stagnated for years and years, so it has been significant. they said they had gotten off track with opening new stores in their home market so they are looking to do that especially with some different formats. faster stuff, pick up drive-thru only locations possible. jon: great perspective, we will

continue to watch that mcdonald's story, leslie joining us as we kick off earnings coverage. ups today, shares are off -- up despite mixed results. thomas black has been going through the numbers. let's start with the market reaction. when a company comes out with a lower-than-expected work as it doesn't always prompt buying and stocks. but what's going on here? thomas: it's a lot about the investor trust in carol tomaa© a . taking ups over two years and outperforming. people are feet -- thinking she's going to get them through this really tough year this year. people going back to stores. there is inflation and all kinds of headwinds. investors are confident she is going to be able to steer them through that. kriti: an interesting dynamic

there between ups and amazon, taking less packages from amazon. walk us through the dynamic between being competitor partners. thomas:: yes this is part of the ceo effort to reduce margins on their largest customers that command larger discounts. amazon is the largest customer for ups. they are instead pivoting towards small businesses and the health-care industry, which tends to pay more per package. amazon is taking more of its packages in-house and as we see demand dropped next year, it's, that's one of the reasons as well you will see less of volume from amazon in the ups system. jon: all right, thomas, thanks very much. we will continue to watch that story. let's wrap it up with another major bellwether, caterpillar under pressure after their first

earnings miss since 2020. the maker of the iconic yellow bulldozer pointing to higher input costs. joe, walk us through what we know at this point. joe: i think investors have been looking at margins the whole time. they were going to focus on material costs and supply chains as they have for many years but what happened is they had a really nice run of 10% into earnings today had i think they just didn't get enough, right? they pointed to materials costs really eating into their good earnings. the operating margins were 17%. looking ahead to, management said listen, first quarter might be flat or down compared to that end during the call i think they surprised people by giving commentary on china. listen, china is only 5% to 10% of total sales for the company but they said they are not expecting 2020 three to be any better than 2022 and that in fact it will be lower so i think

that is on the mind of investors today. kriti: as we see commodities prices coming back up, how much of that is the driver around earnings? joe: that could actually be an upside. the ceo said that they were really happy with where things are going in the mining and energy sectors with rises rising historical levels being one of the upsides they are dealing with. things looking solid there. on the whole a lot of people said this morning by his the stock down, things have been looking good with the commentary but there was just enough there about the operating margins going ahead and china giving them pause after that first rise of the year. jon: circling back, you have mentioned a couple of times but the specific mention of china, should this be a wake-up call to anyone watching the story? joe: i did find it surprising

from a macro perspective. the 10 tons and above excavator market, put plainly meaning construction. construction is obviously not bouncing back as much as people have been hoping. that's something a lot of investors from a macro perspective will keep an eye on with china, moving forward. kriti: joe is all over metals and mining's as well as caterpillar. thank you as always. at the top of the hour we will be live outside the boeing facility in seattle. guy johnson has an exclusive interview. take it away, what are we expecting? guy: we are outside seattle at boeing and they are about to hand over this, their last ever 747 made by boeing for a commercial customer. dave calhoun is going to be joining us at 2 p.m. eastern time. a fantastic conversation with him, coming up. this is bloomberg. ♪

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allspring. purposefully divergent. kriti: this is "bloomberg markets." economic data and earnings on the same side of the equities trade today. employee costs index data is in focus alongside a series of earnings beats driving the s&p 500 higher. let's get more perspective from jill kerry hall over at bank of america securities. always a pleasure to have you on the show. our earnings finally in the driver's seat? how closely are margins driving the story? jill: this will be here where we transition from the fed impacting market inflation to a more micro driven story but so

far i think the results have generally been weak. a lot of the rally that we saw in the s&p 500 this month has been about sentiment and positioning and not necessarily fundamentals. equity sentiment interior rated dramatically last year. normally january is seasonally positive with conditioning reversals. we think that has been more of the driver this month they and earnings where the estimates were cut pretty dramatically heading into the quarter and we are still seeing a slight downside so far. it's still early, but those estimate cuts are continuing with margins that have been in focus i think, for many companies, with that sticky inflation and sticky costs pressure. some companies are areas with consumer staples or homebuilders where the lumber is going down and he will see some of those margin pressures easing.

so lots to pay attention to this quarter. on the consumer front we were talking about mcdonald's and the trade-offs consumers have to make buying lunch these days. against the backdrop you just shared we should probably clarify that looking at where the s&p 500 is right now this is sincerely a level or at least i should say the idea of continued gains at the end of 2023 is not really in your forecast right now, correct? look, this could be a year with more downside risk in the near term with economists expecting a mild recession this year beginning in the second quarter and lasting through the end of the year. look a lot of the measures that we look at and suggest say that the bottom in equities may not be in yet and we expect it could be volatile in the near term with more downside risk and typically the market bottom is about six months before the end of a recession. we do see then an upside and

risk once the market bottoms in the year-end target have is 4000 but certainly we have seen better opportunities within the market this year, pockets of it rather than just biding the index overall. to your point the stock market is a forward looking mechanism. what exactly is priced in at the moment? looking at the different -- jill: looking at the different valuation measures it's still expensive looking at the numbers we usually look at and the good news is that after last year's selloff, for long-term investors the backdrop for equities is much more attractive than a year ago. the value nations, where the market traits today, tends to be a better predictor over 10 years as opposed to weeks, months, or a year. the fact that valuations have gotten cheaper suggests we could

see mid-single digit 5% returns for equities on the annualized basis of the next decade if you are a long-term investor but certainly it could be volatile near term. i think there are areas of the market for we could see a lot more upside. for example, small caps is not an area you typically want to own heading into a recession but they are more adequately pricing in the risks. the russell 2000 is trading in relatively low historic multiples and we think those stocks should hold up well in a backdrop similar to the 1970's, where the fed was trying to tame high inflation and ended up being a strong time for small caps relative to other asset classes. jill: by comparison, though, thinking about tech, it is a really busy week on the tech front. it's an area you are cautious of? rep. hill: yeah.

i mean i think typically in the cycle one school of leadership is not necessarily new leadership in most cases. tech and growth stocks were the leaders for much of this cycle with tech -- benefiting from globalization and off shoring. a lot of those stocks have had a significant weight in the s&p 500 and for decades if you look at a chart of nasdaq earnings relative to the s&p 500 it was a street lineup for many decades but now you have things weakening, positions coming down. tech being a cyclical sector. covid was the exception when everyone was home buying goods and tech stocks were more defensive. tech usually being a cyclical sector. it's an area where we see more risk and even after all the recent layoffs you seen from the large tech companies we still see it as relatively bloated in terms of looking at how much

employment counts have grown relative to real sales growth over the past several years, even if you adjust for the recent layoffs. jill: we will certainly be watching the next chapter of tech. jill, great to get your perspective as always. coming up, geopolitical risks sparking a pause in private chinese investment for a major canadian pension fund. this is bloomberg. ♪

jill: this is "bird markets." time for today's for what it's worth. $242.5 billion canadian. the asset base for the ontario teachers pension plan. massive pension fund advents -- investor and we have learned exclusively that they have caused on investing directly in

private assets in china. sources telling us that geopolitical risks are a part of the reason for that. you have more now to talk more about this scoop. thanks for being with us. what can you tell us about what you have learned about teacher plans. >> basically ontario teachers sources told us they were pausing their entire investments in the private markets in china but that the pension plan confirmed they still plan to directly invest publicly in those securities and will continue to have exposure to china's private markets but through external fund managers rather than direct investments. kriti: it looks like geopolitics are at the source of it with we're the markets are performing there are wild gains can't -- coming out of the chinese stock

market. at what point does that come to ahead with the gains that you are seeing? >> as you know there's always a lot of chatter about how western countries are planning to go about the relationship with china. if one thing is clear it's that tensions are rising and it got to a point there a few months ago where xi jinping just -- confronted justin trudeau, accusing him of leaking the contents of a private meeting to journalists. canada has been upping its pressure on china with -- by restricting chinese investments into its mineral sector and announced plans to boost military spending, strengthening the ties with indo pacific regions as a way to, a way to counter china. the lack of clarity around whether there will be further

restrictions around a canadian company investments into china were vice versa was one of the reasons that drove who tpp to pause direct investments into the chinese private markets given that the private markets are more illiquid by design. jill: helpful contacts there. in terms of teachers we talked about the size of the massive pension fund. any areas to watch for with respect to investment in the come -- the country coming forward? clicks they said that their exposure was around 5 billion canadian dollars. however they do have about 20 billion canadian dollars in asia and they said they are still pushing further into the asian markets and recently announced plans to double the time -- the size of their team in singapore and opened an office in mumbai.

this comes as a part of their plan to invest over half of their new investments outside of america. kriti: a really crucial scoop, we thank you as always for bricking it all down. it's so to really factor in the china conversation as we talk about how tempting it has been wall street and clearly invest their money. jill: that was it -- john: that was a good outline on the rules of the road for where they've invested. the story, complicated geopolitical story, where the money starts to change in terms of those direct investments she noted as opposed to the other investment vehicles that a big pension fund would participate in. kriti: players are crucial. hedge funds, endowments, and how they approach the region. taking a look at these markets, once again green on the screen.

the nasdaq outperforming by 1.2%. the 10 year yield lower on the day by one basis point and the bond market catching a little bit more. stay with us. this is bloomberg. ♪ seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply. through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee, even if it received ppp, and all it takes is eight minutes to get started. then we'll work with you to fill out your forms and submit the application; that easy. and if your business doesn't get paid, we don't get paid. getrefunds.com has helped businesses like yours claim over $2 billion but it's only available for a limited time. go to getrefunds.com, powered by innovation refunds.

romaine: the fed meeting that the employment cost index is out and the market is pushing higher, this is the kickoff to the close. i am alongside katie greifeld. katie: look at the nasdaq the big tech in big tech, leading the index over 1%. romaine: another sign of inflation coming