>> the said does not just have to figure out how much is inflation, but her -- but where do we put the interest rate long-term. >> we have seen that the fed has been moving markets. >> equities and rates are working in a way that they are supposed to. >> the economy is not in recession. we are not getting a fed that is easing. >> it feels like the said has locked in a game plan. they want to get rates above 5%. >> this is "bloomberg

surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is retail sales tuesday. -- wednesday. this is "bloomberg surveillance" alongside tom keene and lizza -- and lisa abramowicz. forget higher for longer, we still need to get higher. a lot of people are jumping on board. tom: we will go into it. i am giving a shout out to liz young who has some great charts on the feed. i am sorry, it is a shelter some up, and are we spending on retail sales, or can we not afford it because of rent, mortgages and homes? to me it is really interesting, the linkage of tuesday and wednesday. jonathan: we will find out at 8:30 eastern time. our we significantly restrictive, deutsche bank does not think so. they moved that forecast from

5.1 to 5.6%. lisa: deutsche bank has been on the higher end of the terminal rate, and now perhaps they are still on the higher end but less so than they used to be. we take a look at what the market is pricing in. futures are looking at a 5.3% peak in july. it only comes down to about 5.1 by the end of the year. not only are we pricing at a higher terminal rate but we are pricing out some of the rate cuts. tom: you were looking at your stock portfolio and we were talking with kenneth and he said it is not restrictive. he is not on the edge of bullard but you asked the great question and he is modeling out 6%. lisa: it was nuanced. tom: he is an academic. lisa: this is the issue, he is saying you are seeing growth and inflation surprise, what do you do with that? on one hand you take the

terminal rate higher but what is the rush? he wants to get to 6%, but really slowly. jonathan: this is a discovery process so there are two ways of looking at it. even -- either you believe in longer variables and that the cumulative time has not hit yet or we have not done enough. if you are confronting those two risks is it still the case that you think that the bigger risk is doing too little rather than too much. we spoke to the richmond fed president and he says that he thinks the risk is doing too little. tom: if you are in the game look at the interview because they are asking from a different world each and it made for a really interesting market, and it was fascinating with the conservative heritage of the richmond fed. i think it was you who brought the inside out who said that he goes to the chamber of commerce and people only talk about inflation. does mobile wall street get that, there is no other topic?

jonathan: does the white house get that? i think they do, it is the number one issue in this country. lisa: this is really the thread, you start to see inflation re-accelerate. if you end up with a higher than expected inflation read with several prints consecutively we will talk about a different victory. jonathan: i was going to save the story but i want to do it now. lufthansa is the story of the morning. this is europe's biggest airline. it is grounding all flights and we were led to believe it is due to i.t. problems and then we found out in the last 30 minutes and these are headlines that you do not read. the lufthansa i.t. issues were caused by deutsche telekom cutting a cable because they were doing construction in the frankfurt region. that is unbelievable. tom: why doesn't it happen more often? one of the first people who

mentioned it to me was 20 years ago and he said logistics in the world the way that we are all linked together and one cable gets cut, oops. tom: getting another headline, they have already fixed two out of the four damage cables. what happened to german efficiencies? lisa: things that they never want -- what you never want to hear. this is not a good move. jonathan: shall i tell you my lufthansa story, i got trapped at frankfurt for eight hours and i send them a message complaining that i'm stuck in your airport and anyone who has been to frank fortin knows that its airport is boring. there is nothing to do. you know what they said, we hope you enjoyed the airport. we hope you enjoy the airport. that was lufthansa pr. lisa: i have a feeling that you did respond. jonathan: and did not rest -- and did not fly lufthansa again. for all of you that were flying lufthansa, my thoughts are with you. the yields are unchanged.

3.7 359. euro-dollar -.2%. lisa: into .5 hours you get retail sales for the month of january. how important will this be and expected to come in on a robust way. what will we learn from this? people have discretionary spending and you are seeing that in the numbers. in the real question remains, how long will it take to work down the excess savings from the pandemic which are still out there. 11:00 a.m., nikki haley officially announcing, i'm not sure what it was, but she is renouncing her bid in charleston, south carolina and there is a lot of question that she can win. there is a lot of questions about what this will mean in the republican party in the real question is the opening salvo of the contours of the race will be interesting. two :00 p.m., the congressional

budget office is issuing a budget and deft -- debt forecast and this will be more interesting because we figure out how much one way -- runway we have before we worry about the debt ceiling. jonathan: 3.416 yesterday. the last time the two-year was here was in october or november time, the s&p 500 was at about 3800 and right now it is close to 4100. that is the disconnect for a lot of people. there has been repricing and in the equity market that did nothing. lisa: we do not have -- tom: we do not have time to sit on that. the -87 basis points, i am not on the 900 -- the -100 watch what i am getting there quickly. jonathan: the senior global metro -- macro strategist at state street joins us but can we join -- but can we start with the bond market. we have had this repricing in

the lowest in the year was early february close to 4%. at the same time this equity market stayed resilient, what do you make of that? >> again it is the disconnect between what bonds have been seeing. i would add that the repricing of the two year had a fairly significant repricing. while we are inverting the curve more we are doing it with higher real yields and we have not seen that sense last summer. -- since last summer and when you get that on hinging in an environment where the view is that the fed needs to be more aggressive you have a cauldron coming together or risk should be challenged more than what we have seen. tom: what are the ramifications of the repricing of short paper, the library measurements and t-bills? marvin: for sure, it is the market coming to the conclusion

that what the fed has been saying is an appropriate view on how the economy will develop and how inflation will develop. we are taking out cuts while we are adding in hikes, and that is a dynamic which a couple of months ago was one of the things that drove risk assets higher. there is new information coming to the bond market and that is re-incorporating into the bond market view, but risk assets are looking towards those green shoots which seem smaller and smaller as we get this new data. we are in and every data point matters type of environment. jonathan: it is so easy to say the bond market is smart and the stock market is down. but it is not that easy because the economy has been surprising. the facts have changed. how do you decipher how much of the rally is justified by better economic fundamentals versus the

fear of what is to come. marvin: you know what, there is so much data and the data is so volatile. for me, i pick the ones that are really important in these broad tightening is that are going through. it is still inflation front and center. we have new data not only yesterday on that front we had the revisions that really make the fourth quarter disinflation which chairman powell talked about, nowhere near aggressive than we thought. and then what is driving that inflation number? it really is the wage growth and jobs being created. and that is going to either get affirmed with retail sales today, or we will have more data that gives the no landing or soft landing folks a little more runaway. so far it seems that this hotter economy is driving consumption,

which keeps the inflation discussion on balance. jonathan: given the incoming information, the terminal rate that you have penciled in, have you priced it higher? marvin: i had always thought the risk was underpricing, and we have erased that. the risk to me was always going to be potentially higher that this inflation story was a little bit more sticky and that is involving. i will do 25 basis points i 25 basis points. we are data by data dependent and it is not like all the data is saying that it is improving so slowly that it might need to go higher. that is what i think the fed would single -- would signal in march. and then we will go from there as the data comes in. jonathan: great to catch up, some of the greatest use in the mode -- in the market. spare a thought for j.p. morgan

who has had a tough time calling the market. he put out some research that said risks are shifting in the higher dm terminal policy rates and he was right except that it has not inflicted much damage on the equity market at all. you can make the call inaccurate one on higher rates as we price in higher dm terminal rates. but ultimately it has not inflicted the damage on the equity market. lisa: because it came on the heels of faster growth which left people rethinking what they cared about getting out of big tech, why is that riley yang, it really defies logic. jonathan: the rally that we have seen in tech, we talked about the reasons behind it and i still hear a sense of confusion from fed officials tom: from two fridays ago. tom:i totally agree but in corporate america i will go back to theme one, they adapt and adjust. they will adapt to the 6% rate.

jonathan: what is the fed? tom: they are massively data dependent. jonathan: futures are down. this is bloomberg. ♪ >> keeping you up-to-date with news around the world with the first word. the threat of more air missile strikes remains across ukraine as russia attempts to gain control of two reason -- regions. canada defense minister reaffirmed nato support and called for putin to leave the country. >> if putin wants the war to end all he has to do is leave ukraine and that is what the fact of the matter is and until that occurs we will stand strongly with our ukrainian counterparts. lisa m.: she spoke exclusively to bloomberg on the sidelines of the defense ministers meeting in brussels. the u.k. is considering back rating pay raises to nhs

workers. the financial times reported that the prime minister and the chancellor of the exchequer are considering a pay offer that would see higher wages kicking in from april this year alongside a lump sum payment that would effectively backdate the pay increase to january. china warned that it will retaliate over violations of its sovereignty potentially escalating a lingering dispute as both nations' foreign minister's plan to attend a security conference. the foreign ministry spokesman claims that the chinese balloon had inadvertently floated over the country after being blown off course. china insists that the balloon was a weather monitoring device. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

this is ge vernova, helping generate and move the energy that our world needs. ♪♪ welcome to a new era of energy. >> if it is not a danger then

why did they shoot it down? they felt was operating at an altitude that posed a threat to commercial aviation. >> on the one hand the administration is saying we do not want to characterize these last three objects until they recover them. on the other hand it was not a threat. both of those things cannot be true. >> the bottom line is that i think the biden administration is being careful, and very thoughtful. jonathan: balloon saga continues. tom: give me an update, balloon guy. jonathan: if you want the response from china it reads like this from the foreign ministry spokesman. you will love this one. try and translate this. "china is strongly opposed to this and will take countermeasures against relative u.s. entities that have undermined its sovereignty and security to firmly safeguard our sovereignty and legitimate rights and interests." what does that mean? ours sovereignty over american

airspace? that is new. tom: on a serious note it has to be eventually fold into taiwan and i know the newly ascendant republican house is making visits to taiwan, maybe that is the stew of balloons and pelosi like visits on the others. lisa: on the margins there is discussions over who owns the ultrahigh space. jonathan: 40,000 feet? that is china's? lisa: on the margins there is a peripheral debate. the more important conversation is that china is trying to signal strength amidst a real bungling of a message that has become a difficult place for the chinese authorities. it is embarrassing. jonathan: highly embarrassing for the chinese government. tom: huge. the person i really lean on on this with his international work with nato says that this is a treasure trove of intelligence data that we will get.

jonathan: what is amazing is that the aerial objects over the weekend, we do not know what they are. tom: it could have been a party balloon. lisa: they are not party balloons. people are saying that they do not appear to be from china. jonathan: you have the military shooting down things in american airspace and we do not know what they were and it is kind of nuts. you can shake this off as balloon gate and laugh about it but it is serious stuff. tom: it is. let us migrate onto other topics. jonathan: lisa is laughing about it. tom: harry higgs is too. lisa: we had a serious discussion about aliens with his humility -- with this administration and this is hilarious. tom: sturgeon is shocking westminster and exiting. we are going to go to terry, founder of pangea policy in washington. i am not going to mince words

and my amateur take is the lady from scotland is resigning because her party has had it with her. what do the various republican candidates face with a devoted trump party members along the path until november next year? >> by the way you have two things going on in the u.k. today. one, you have sturgeon bumping up against massive unpopularity and controversial policy and the inability to deal with independence and you also have here starmer kicking corbyn out. tom: i saw that. jonathan: there is a similar -- terry: there is a similar migration in the democratic and republican party where republicans are trying to get past trump and they really have for the last couple of years and that is accelerating. you are starting to see with governor haley and some folks placed to get into the race how successful they will be on that. tom: on a granule -- granular

basis on the voting booths of the primary, are republicans in name only as president trump would call them, are they in for a rude awakening? terry: that largely depends on the quality of the candidates and how many there are. it is generally forgotten that trump had about a hard 30% in 2016 and he is a little bit less than that today. there were so many other candidates that he ended up prevailing in a lot of primaries. if you coalesce all around -- around an alternative, summary with the positives and without the negatives, trump can be upended. jonathan: you think the organization exist to do that right now or do you imagine the field will be massive by the time we get around to the primaries? terry: i think two things. organization gives political parties to much credit. there are a lot of efforts both on the political side and on the

money side and you will notice a lot of these large money networks who used to support trump are going elsewhere. and what you have on top of that is an ability to push a different post trump narrative that appeals to a lot of people. i think there is a lot of room for alternatives. a lot of these candidates i think are running for cabinet positions rather than presidency. tom: i am shocked. lisa: for whom? and for what party? is this a party of the center moving towards the center or is this ultimately going to drive it back towards the edges simply that is where -- simply because that is where the critical mass is? terry: both political parties have the same problem which is that in order to get through the primaries you need to appeal to the core curious, if you --

purists if you will end on the general move back towards the center and it does not go away this time. and what matters and what changes is the candidates and the quality of the candidates. you will see haley and desantis getting in and probably senator scott of south carolina getting in who is a very intriguing candidate. there will be a lot of post trump alternatives. lisa: to end where we began with balloongate. there is one uniting feature which is a hawkish this against china. i wonder if that desire to appear hawkish will prompt this relationship to spiral lower and what you are expecting that to look like. terry: i think you were all correct amended ago in talking about this being an embarrassment for china. it is not the united states' greatest hour since we have had a lot of explanations about balloons and how early we detected them. but, there will be a desire to

resume the cold piece, i think. for markets what this means is up to defend stocks for quite some time. jonathan: i think that is a conclusion for a lot of people. the republican race heating up before the primaries get started. tom: it is a lot. here we are, we started, who is next. i have not seen within the zeitgeist. jonathan: we know the nature. tom: what does desantis do? does he wait to see if president trump jumps in. jonathan: the former president is officially in? tom: can we do have sunday talk show? jonathan: what do you want to do, football? tom: english football and politics. lisa: where are you going to sign us, what is our road trip and what are we doing? tom: the scuttlebutt is that there is an american looking at

the tots for over $4 billion. so we have a build up, i do not think we want him to leave because we have a great relationship but we could see him -- we should just be at the game during the broadcast. full disclosure i do not want to talk to mr. kaine, i want to talk to emerson royale. jonathan: are we talking about the score yesterday afternoon? tom: how bad they lose because they were like sleepwalking. jonathan: they should've walked away two or three nil. tom: is it over? jonathan: the second leg is in a few weeks time? tom: they are lagging in. jonathan: tesla is positive by .7%. production upgrades are not unusual. they will halt production at its shanghai factory until the end of february as it upgrades the facility to rollout a revamped version of the model three in the chinese market. this is according to people

familiar with the matter. tom: can we talk inflation? jonathan: sure. tom: i did a really adult fancy chart of new york city rents and i will not go into the details but it was very carefully done. if you take 2009 before the pandemic we are five standard deviations out on a rent surge. i could not imagine that let alone see ed. jonathan: since you pivoted back to that, are you moving? tom: we are trying to finally -- we might expand out. 1200 feet. you know. jonathan: get the whole family and. futures down .3%. from new york this is bloomberg. ♪

as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to 60% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.

jonathan: live from new york, equity futures backing away by .3%. pushing through 4.60 and this equity market did not lodge. that was surprised -- that was a surprise for a lot of people. the nasdaq down .4%. the bond market looks a little something like this. the two year still at 4.6054. i mentioned this earlier but the last time the two-year was here the s&p 500 was way south of where we are.

about 3800 the last time we were staring -- staring down the barrel of 4.60 or 4.70. that is where we are at, this bond market confronting a chorus of fed speak. pushing for more rate hikes. patrick harker said "we are reaching a point where we have done enough." it is going to be 5%, how much above five it is going to depend on what we are seeing. tom: i thought the research reports off of the inflation report and i think it will be the same at 9:00, 10:00 and 11:00 off of retail. julian emanuel well and mr. hyman refer -- affirms 2.5% inflation by the end of the year, as -- is that an outlier? jonathan: what is the rate call? tom: i did not read that far. i mean that is looking for a lower 10-year yield is what it sums up.

it is a jumble right now. jonathan: i cannot agree more. i was speaking to tom barker yesterday and there is so much they do not know about this economy. they are still feeling their way through. tom: it is original and off the pandemic and what kind of inflation or retail sales. we can get a combined tuesday and wednesday brief with the head economist at wells fargo. link the two reports together, how do you link inflation tuesday with retail wednesday, how do you do that? sarah: i think it comes down to what is happening in the demand environment and what is consumer spending willing to spend and how does that feedback into inflation. we have seen disinflationary pressures begin to mount and some of that is supply chain dynamics unwinding and a big portion of that is what happens in terms of consumer demand

given the battle against inflation that real incomes have been under. tom: are we and aggregate america. wells fargo has been claiming this. when you look at inflation or particularly retail sales. are we on a retail cow -- we have a retail countdown clock? we should work on that. sarah, i am fascinated by do you aggregate retail sales are -- or are they polarized with the habs doing well and the rest of america flat on their back. sarah: we still tend to look at sales in terms of the aggregate and it is tough to get some of the more detailed looks at how different consumer segments are doing. i think you can tell by the different categories of retail sales how consumers are reacting. for example when you adjust for inflation we have seen spending at grocery sales declined suggesting that lower income

consumers are getting squeezed. i think there is some parsing that you can do. overall we are looking at a picture where consumer spending is losing momentum. we are going to get a pop in the retail sales member -- number but you have to look at the trend over the past few months and we ended the year with a pretty big dove, two months of negative spending. lisa: you believe in rapid disinflation, so how do you look past what we saw yesterday and doubled down on this idea of a rapid decline in the inflation rate to a point this year? sarah: i think we have been conservative on how fast it will come down. directionally we are optimistic that it is easing but it will not be quite as quick work as many were thinking particularly after the december cpi report. we are seeing a lot of downward pressure on the good side in the

vehicle sector and as the industry recovers. you can see the shelter relief over this coming year. when we look at some of the underlying drivers when it comes to the labor market that is going to make it difficult to get back to 2% on a sustained basis so it goes back to the discussion on the last mile where we could get improvement but getting all the way back to 2% and sticking the landing will be very tricky considering we have a lot of inflationary pressure. lisa: i want to build on the last mile idea but before we get there, have you increased terminal rate expectation after the print? lisa: heading -- sarah: heading into the january jobs report, we were looking at a terminal rate between five 205 and a quarter percent, and i think that was looking like a polish considering the deceleration we see in november and december

spending numbers, but the data we see, not just the payrolls but the inflation data as well as the report, that is still looking like a comfortable call so we are feeling good about where we are. there is a lot that could happen between now and the june meeting which would imply perhaps raising the terminal rate further so we will get another employment report. that is in a good position and we are comfortable with that five and a quarter rain trend. lisa: talking about the last mile. we had ken rogoff on yesterday and he was basically saying the flood will in allow inflation to run hotter. do you hear a growing number of economists and thinkers pushing for this saying it is not really that important to get all the way down to the last mile?

sarah: we have seen the fed after the tremendous bout of inflation we -- they want to demonstrate their commitment to the 2% target and especially if you look at it the average basis. even accounting for the slow increase in inflation where it was averaging below the 2% target and looking back through the great recession, we averaged 2%. there is still the commitment to get it back down but you might see the fed willing to live with 2.5 and 2.3 if the difference is really seeing the labor market fall apart. tom: is amazon and retail sales the report this morning or is it a big deal or a smaller number? sarah: it is in there and a big deal. that shows up in the non-store retailer's and you can see the that moving the numbers around. if you have time day and the

seasonals are having trouble keeping up and you can really see it in the nonstore segments and it is really in there. tom: liz young had the chart showing shelter which is well in food. his food in retail sales. sarah: food is in there. one you get the grocery stores and you can see what that cost of food at home is. but to the one services side that we get a glimpse of is what happens at your food services and drinking establishments. you get a hint of what is happening with the discretionary services spending but you also have to think about what is happening on the inflation side given how much labor costs as well as food input costs have grown. tom: what do you forecast for that? sarah: we do not get that far into the weeds, but you saw a pretty big job in terms of inflation rate for food away

from home. so you will have to take whatever change you get and discount by .6% to get what is the real services spending signal that we are getting. tom: this is key data. jonathan: you have key insight. you moved the dial. tom: i think it is interesting and what sarah is tearing apart is the two worlds of anecdotally people are saying it is a crazy boom economy and paula is saying that the charge card sales for a window of january and february were as grim as they were in early november. jonathan: that is interesting. interesting. tom: it is a jumble. jonathan: sarah, thank you. bank of america looking for a punchy number, 2.6% months -- month over month spike. tom: headline, leptons, they pay

their bill to deutsche telekom -- lufthansa pay their bill to deutsche telekom. jonathan: this is kind of nuts. earlier on today the german carrier lufthansa which is the biggest carrier in europe, had to ground all flights. they explained that the i.t. system outage was caused by deutsche telekom cutting the cable doing construction work in the frankfurt area. they expect the problem to be resolved in the early evening. the latest update, some flight operations have restarted but all frankfurt flights remain grounded. not a great start to the week for this. tom: can i give you my frankfurt story. i land and i am late to the ecb as they are opening to see a giant in economics and it was such an honor to spend two days with him. and we have done some other things for bloomberg over the

years. i get in the car and i am the american taurus. the guy is a mercedes taxicab and i say i am late to the ecb can you get me there, fast. i look up the autobody seeing the trees go by and i've never seen that going by fast. i think he was going 110, they were flying. jonathan: no speed limit, do what you like. lisa: i think this is a fascinating story because we are talking about the revenge of the real economy and industrial world. we are so hinged on all of the data that we can transmit in seconds through these fiber cables and then there are people who have to lay them down and they are physical cables. if they get cut the world as we know it ends, and it is that dissidents that is leaving a lot of pitfalls and the lack of investment. jonathan: you just had to do something serious,, deadly

serious stuff and we will talk about next. terry is going to join us at 8:30 eastern time on the current season and the latest retail sales. the leader is having to travel for the second leg. mr. pharaoh should not be as worried as you. tom: can i ask you a question to his beloved queens parks rangers of said -- of shepherds bush. are they on the champions league? jonathan: they are not. there are no lower leagues. this is a super league try? jonathan: kind of but not really. was that a dig at qpi? tom: mohammed wants to do the show from there. he would come down. shepherds bush. jonathan: have you been to that stadium? nice. tom: they play richmond in season three. richmond went down. they believe.

jonathan: this is "ted lasso." this is bloomberg. ♪ lisa m.: keeping you up-to-date with news around the world. european commission president ursula von der leyen says that the european union's new sanctions package would target $11 million worth of goods used in drones, missiles, and helicopters. draft proposals show that the e.u. is poised to force banks to report information on russian central-bank assets as part of the latest sanctions package targeting moscow for the war in ukraine. a flurry of volatility in the final three months of the year was not enough for barclays traders who missed estimates in fixed income and equities sending the bank shares down. they fell more than 8% at the start of trading. as you've heard on surveillance, lufthansa grounded all frankfurt

flights because of a company computer issue. the company is urgently investigating. a person familiar with the matter says the i.t. issues were likely caused with deutsche telekom cutting a broadband cable. it is europe's largest airline by fleet size. a new lawsuit accuses venture capital and private equity firms of hyping the legitimacy of ftx, the crypto exchange that collapsed causing billions of dollars in losses. the firms participated in a marketing campaign to tout their own investments of hundreds of millions of dollars in ftx entities adding an air of legitimacy to the enterprise. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ advancing flight for future generations. ♪ welcome to a new era of flight.

♪♪ what will you do? will you make something better? create something new? our dell technologies advisors can provide you with the tools and expertise you need to bring out the innovator in you. get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today...

could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management. >> we may or may not choose to take rates up further if

inflation persists. if inflation settles maybe we do not go quite as far. if inflation's persist above our target we may have to do more. the biggest surprise has been the jobs market. jonathan: a special thanks to the richmond fed for a 20 minute interview with the president. very generous with their time. the similar story across all fed speakers they have more work to do. they have been surprised by the jobs market and there is push for a higher peak rate at the federal reserve the next up is at 8:30 eastern time with retail sales in america. just to set things up, equity futures down about .4% on the s&p. the yields look unchanged at 4.61 on the two year which will take some time getting used to considering that we were maybe talking about breaking down into the threes. the 10 year down to 3.73, let us call it 3.74.

the dollar weakness we have seen has not corrected any major way even with the push higher in yields. yesterday we had a big push higher on a two year and the equity market did not change in the dollar did not do anything. is that a disconnect between bonds and everything else? lisa: the only disconnect was that the dollar used to rally disproportionally and now the ecb is doing the same thing and you are seeing better than expected data out of the euro region. both sides of the atlantic facing the same issue that might leave terminal rates globally a bit higher. jonathan: the dollar a little bit stronger. the biggest corporate story of the morning, lufthansa, europe's biggest carrier grounding all flights briefly because they had a computer system failure because deutsche telekom cut a cable. the latest, all frankfurt flights remain grounded but some

operations have restarted and they expected to be resolved in the early evening. tom: they are going to get it fixed and i think bloomberg had a nice summary yesterday of the pickup from the software issues that we had in the united states a number of issues. i do not think they have been explained but that is something that we are following. we will have a brief from berlin. for me it is a mystery airline. chad joins us right now. i think there is a wide understanding in america that air france has a massive french and klm linkage as well. is it correct that lufthansa is all private and the german government has stepped away? chad: good morning. yes. the german government has stepped away from lufthansa, they had stepped into the airline during the pandemic. but they have pay back that money. what we have seen play out here

today this morning in germany has been quite an eventful turn of events with this cable that was cut. we actually learned by the german national railway. they were doing work and they cut a deutsche telekom cable which grounded the entire lufthansa fleet. lufthansa is not just the brand, but it is swiss, brussels, and austrian airlines as well so this is having an effect across air travel this morning. lisa: we heard a lot about some of the strikes and labor disputes within lufthansa and beyond the industrial con -- complex, does this connect to this tussle over power between labor and the employer's? -- employers? chad: this adds to the woes. they are dealing with labor unrest as are many companies.

there was a strike at the berlin airport a couple of weeks ago that shut down the entire airport. there are potentially more strikes coming at lufthansa on the horizon. all of these things are adding to the chaos for travelers in europe as they try to get from point a to pointb. chad: is it just in some -- lisa: is it insufficient bodies to take the grant -- to take the jobs or growing unrest because of inequity or broader social issue? chad: i think a big part of it is the really high inflation that you are seeing. you also have really strong labor unions in germany, so they are willing to push things to the edge to try and force lufthansa and quite honestly other companies to raise salaries by quite significant amounts. if you have the combination of

nation and also just the strong labor unions. jonathan: we have already articles about the u.k. in decline, we need to replace the u.k. with germany? the last year or so they have been exposed on energy relationship and exposed with their relationship with the chinese government while the u.s. is trying to do something about that. it seems like these stories are not popping up from nowhere. what do you make of it? chad: i think one of the things that everyone will be looking at is reassessing the time of angela merkel's chancellorship. i think that many people looking back on it now say that she should have taken more action when it comes to the relationships with russia, with china, and of course germany is really behind when it comes to digitalization. it is kind of humorous that this failure at louvre toms is

because of a cut of a broadband cable in the frankfurt area when this is something that is known in germany that the country really lags behind. i think we will see a reassessment of angela merkel's time as chancellor and how that will play out in the coming years. jonathan: i felt that there was a sense that the history books would not judge it to well. thank you, as always. always got the sense covering europe for a while that chancellor merkel was given an easy ride. i understood that she faced difficult issues but the legacy is about what happens in the 10 years after you leave with the policies in place. there is a massive opportunity to do infrastructure spending and we were talking about negative rates for the better part of a decade and the finance ministry every single year would celebrate the so-called black 0, no budget deficit and i always found that really strange. tom: the trap for me and most

americans is that we always look at it through some form of greater european or international prism. my question is how much was a slave to see -- a slave to she -- was she beholden to the domestic politics of germany which was the zero budgeting? jonathan: there is always a feeling that the government was running away from the previous government. and now this government has to face the consequences of what david -- what did not happen. there are many issues and we have talked about it many times. every time a foreign policy expert talks about the two major issues that the united states is facing a broad, one is russia and the other is the chinese communist party. in the middle of that is harmony compromising each and every effort repeatedly for the next decade. lisa: olaf scholz is between a rock and a hard place because if germany extricate itself from its relationship with china it

would go into a painful recession because of its dependency on revenues. it is not an option to make a heartbreak. on the flipside how do you invest in infrastructure now with an inflation problem and borrowing costs at the highest levels they have been. it is an incredibly fraught moment for someone who is picking up the pieces after a pretty calm. -- calm period. tom: part of the merkel situation was the free lunch. the answer is on a 1.07 yale -- euro, deutsche mark would be a 1.15 or 1.20 with a tougher exports with a legit deutschmark. they get a free ride with a weaker euro to use the stereotype, greece or italy is screwing up or milan. jonathan: we talked about the

pain on the periphery in some sense and not completely, but in some sense benefited germany repeatedly. tom: if you go back to ken, he was heated about the advantage we have in our flexibility here because dollar for -- because dollar is a sovereign currency. jonathan: the weak spot in the euro zone is germany. we talked about spain, portugal, and ireland for some time but its germany and has been. tom: netherlands, germany and that and it is the inflation of 10.1% in the united income which is emotional and they will figure it out in an anglo-saxon way. germany is 9% and culturally that is impossible in germany. jonathan: they got bailed out by the weather this winter. equity futures down .4%. retail sales data in america in one hour and 34 minutes away. we are trying to make that clock happen. the retail numbers.

lisa: are we going to have that countdown tomorrow? jonathan: you wanted to be ppi thursday? ♪

these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase. that's why we just boosted speeds for over 20 million xfinity customers, on us. so you get more of the speed you need for day and night streaming. more speed you need when you're work from homeing. and more speed you need as your family keeps growing. check in on your current speed through the xfinity app or upgrade to the speed that's right for you today.

>> the third does not just have to figure inflation. they have to figure out where we put the interest rate long-term. >> we have seen the fed speak has been moving markets. >> equities and rates are working in a way, teedo tottering like they are supposed to. >> you are not getting a fed that is easing.

>> it feels like the fed has almost locked in a game plan. they want to get rates above 5%. announcer: this is "bloomberg surveillance." jonathan: resale sales data 19 minutes away. good morning. this is "bloomberg surveillance" on tv and radio. equity futures down one third of 1% on the s&p. yesterday's session totally unchanged on the s&p even in the face of higher bond yields. tom: a lot of not looking at the market this morning. we have to look at the morning as we go 90 minutes to retail. -87 basis points. we have gotten third of the way to 100 basis point about two cups of coffee. jonathan: he just said forget haifa longer. they need to get higher. deutsche bank agreed.

their estimate, 560. lisa: you saw this across-the-board the board yesterday with fed funds rate repricing. the tension is, is this time different? can you get a no landing with an inverted yield curve? can you get a soft landing or no landing with the fed that has to do that much more without us understand the consequences? this is the question at a time when people are heralding that economic data like it's a green light to going to risk. jonathan: do you believe in longer variable x? tom: we have got to get the retail clock up. it will be a long and variable lag. that's the data dependency. i believe there is an inflation report before the march 22 fed meeting. it is more key than it was on monday. jonathan: after more than 400

basis points of hikes, all the fed has to show his the s&p 500 15% off its lows. the unappointed rate at 3.4%. underlying inflation still running hot. do you believe in longer variable lags or believe the fed is not done enough? lisa: by many metrics financial conditions have eased going back to early last year. this is the conundrum niel is highlighting. are they transmitting it through some of the other functioning with respect to the housing market? is it enough? a lot of people are saying no. jonathan: the lows last year were in the summer. tom: i ratably picked general mills -- i randomly picked general mills. like any consumer, like coco yesterday -- coca-cola yesterday, revenue growth 8.4%.

modeling on 4% or even 7% revenue growth. this omg rates are going up is dead wrong based on my youth. i did not eat lucky charms. other members -- lisa: for a long time. jonathan: were you running around the walls? lisa: i will that the marshmallows sit there to soak up the milk. it was strategic lucky charms eating. jonathan: we imported them once in the u.k. i had them for breakfast once in the box got put away and i never saw it. they don't make them anymore. tom: do you know how scarred my childhood was? i didn't know until college raisin bran could be eaten because we were told it was an adult cereal so we would not eat it. it was just for adults. jonathan: wasn't it marketed towards adults? just for adults.

you can tell us about it in your therapy session. the futures now down on the s&p. yields higher in yesterday's session. we are looking at yields unchanged. let's call it 375. lisa: we are watching the january u.s. retail sales coming out at 8:30 a.m. for month over month increase of 2% is expected. this is a strength that is on a real basis. will it move the needle because it is largely expected? 11:00 a.m., nikki haley is speaking perhaps again about her presidential bid that was announced yesterday. now discussed in charleston, south carolina. that's coming up on the show. 2:00 p.m., the congressional budget office with a debt limit forecast. i actually think it is going to be important. if they tell you the deadline is june, people will say great, i

don't have to think about it until may 15. jonathan: or june. do you want the good news? the clock is up. one hour, 24 minutes. tom: for me to start shopping and catch up on valentine's day. jonathan: love that. he brought of the prospect of a so-called no landing in this economy. they just published moments ago. he think's markets are pricing the no landing scenario is more signs of the no landing scenario where the economy remains strong and inflation remains sticky and persistent. are you on that side? >> good morning. good to be here. i did listen to neil and i think there are some good points they are making so far that the data

we have seen from services has been strong. but i think it is too early. we have seen a lot of damage on the manufacturing side of the economy. we look at small business optimism declining as well. we look at confidence that is low. if you look across a variety of spectrum, a variety of data, for now it is too early to say they will not be any kind of landing that the economy is flying. it is possible that this recession is delayed. if you're in the camp that we will have a slowdown or negative growth in the second and third quarter, perhaps we will price in and that is what the market is doing that we see it in the third and fourth quarter. it could be a recession delayed but it is still too early for us to know if it is completely a recession that is not going to happen. tom: you have to respect someone who quotes miles davis. you talk about the blue moon to

come and the fake out from this warm weather to the consumer. i will go to my childhood, which was blizzards in march. the blizzard is coming in march of 2023. can you predict it? gargi: i don't think we can predicted. the conversation was around this amazing weather we are having a new york city. i likened it to the equity market. we can't take the last couple of days of the weather or market participation and project it out. earnings growth at 3% for the next 12 months still looks quite optimistic. we were talking about this long and variable lag of monetary policy. we will still get at least two more rate hikes in the fed. inflation remains sticky. i think it is too early for us to expect equity markets to have begun a new lag. we have seen this before. i think we will see earnings come down. i don't think the growth part, if you look at what mastec has

been doing, i don't think this is the beginning of a new cycle. lisa: how much conviction do you have in this to lean against what we have seen in the past 60 days or 45 days of this year? can you say we are getting out of all tech stocks and going fully and the t-bills and that is it? gargi: i don't think one should get out of everything. i will say as of right now, looking across what yields we are getting in the front end of the fixed income markets, if you own icsh which gives you 4.6% yield, that makes sense if you think there is still data softening to come. we are in the equity markets you are pleased is very important. i think any kind of equities that need real rates to below/negative. for -- be low/negative will suffer.

there is a tremendous amount of cash on the sidelines. some of this rally is chasing. it is the fomo rally. the money on the sidelines chasing the equity market, especially the growthier parts that is more poorly, there has to be a reckoning of some port. stick to high-quality fixed income for now. think about bonds as regaining some of their ballast as we see the 375 in 10-year treasuries. stay vested in the value parts of the market. lisa: as i was sitting last night worrying i was thinking about this rush into cash and the disruption of possible debt ceiling debate. could you see a disruption in the cash play? suddenly people realize on june 1 the debate will become a real thing. gargi: when we know when the date is, and we have seen this

in the past, there will be some mispricing for sure. that is something that will happen. we will see that spike. once the debt ceiling get resolved that will come back. i think that is still something that could be between june and august. investors should be in the front end for two-year treasuries. clip about 5.5% coupon. jonathan: walk away. get paid to wait. tom: i am hearing that. there is some validity to that. reminiscence of a stock operator, a classic book everyone should read so they don't lose money. there's a point in it where you do nothing. the hardest thing is to do nothing. jonathan: especially after seeing these numbers. united up 33%. american airlines of 32.

you look at meta up almost 50%. apple up almost 20%. these are year-to-date moves. you see these moves playing out. tom: i'm sorry. to me it is really hard to do nothing. gargi: it is not doing nothing. it is not getting bullied by the rally we have seen so far in the markets and doing something as a result of that. the fundamentals makes sense to you if looking at -- it is trading above average, if that makes sense fundamentally in a positive 2% real rate environment, absolutely do something. it just does not make that much sense to me. fixed income markets make a lot more sense. we have talked about bonds being back. that is where you should be at. jonathan: great to have you in the studio. let's do this again soon. gargi chaudhuri.

from new york, retail sales in one hour and 17 minutes and 45 seconds. >> keeping you up-to-date from news around the world with the first word, i am lisa mateo. turkish stocks soared on the return from a week long suspension after authorities through their full weight behind investors. the index rose, outperforming all other major world markets and is headed for the biggest single day advanced since 2008. turkish authorities suspended trading on february 8 and canceled trades made after two earth weights hit parts of turkey and syria, killing more than 40,000 people. scottish first minister nicola sturgeon resigned after more than eight years as head of the country's government and independence movement. she's headed the semiautonomous administration in edinburgh since 2014. the decision to step down comes after an unusually turbulent time for sturgeon and leads her

scottish national party and independence campaign looking for a figurehead without a clear roadmap. ray dalio says china is coming out on top in the trade war with the u.s., adding the standoff between the world's biggest economies will likely not escalate in the military conflict. he told a conference in dubai that the real winners of the confrontation will be those able to tap into both the u.s. and china. washington and beijing have clashed on issues, including human rights, trade and competition for technology and markets. global news powered by more than 2700 journalists and analysts in more than 120 countries, i am lisa mateo and this is bloomberg. ♪

[office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management.

>> this economic catastrophe is entirely preventable. the solution is simple.

congress must vote to raise or suspend the debt limit, and it should do so without conditions. let's not wait until the last minute. it is a basic responsibility of our nation's leaders to get this done. jonathan: janet yellen. she will have some company. windows brainard joined her? she's been named as director of the national economic council. i'm told by the team it is late february. maybe in the next week or so. lisa: who replaces her? how quickly can they get somebody in there. she was the brain trust of the group. seth carpenter. he was named in a wall street journal article. tom: so i should be nice if we interview him. jonathan: we thought he might end up on the fed and he didn't. we are nice to setg again -- seth again is what you are

saying. tom: i'm glad you bring this up. there's a guy named hans nichols at axios. jonathan: don't know him. tom: he was on fire last night. hans is giving credit to deece who i thought got better and better at the job of getting through a lot of the domestic legislation. will brainard do that on capitol hill county goats? -- counting votes? jonathan: you have to coordinate policy across government. tom: maybe in the history of all of this there is not a wider disparity from the settlement, mr. deece, and ms. brainard. jonathan: she's got experience every 20-year span. tom: 25. jonathan: i'm surprised that it

happened so quickly. this is totally unsurprising but it happened quickly. lisa: it's a pivotal point for the federal reserve. i think speak into brian deese, she will bring the international prowess. the question about international trade and policy and how that dovetails into the u.s. economy. jonathan: should we get a wrap on the markets? tom: i was distracted by the retail clock. one hour, 11 minutes, 25 seconds until they start my valentine day shopping. jonathan: are the roses on sale? tom: we are going for a more multiple statement. jonathan: ok. futures down .2% on the s&p. yields unchanged on the two-year yield. 460 again after getting that yesterday. are you telling me that is what you do on valentine's day? take the roses out to make the whole thing cheaper?

tom: we just do a lovely, beautiful, equatorial flowers. jonathan: like leaves and branches. tom: you can't make it too big because it is a sixth floor walk-up. jonathan: we know your type. tom: henrietta treyz is about ready to walk away from the microphone. she was on fire the last time she was with us. we talked about the executive position with the vice chairman maybe wandering over to the white house. i guess we will see that. explain the nec advisor working with capitol hill. henrietta: it is a critical role. your number that from everything involving the 2017 tax bill. larry kudlow was nec advisor at the time. he was on the hill quite a lock. you had a big role with the trade war and the discussions

about the tariffs. you were mentioning the international component. that will be a big part of her job as we enter this new role. per level of respect across the capitol is widely spread. i imagine it will be met with a lot of enthusiasm. tom: i mentioned brainard a million years ago. i had a memory of reading she was just out of m.i.t. the basic idea is she was looking at studying american multinationals in the trade and labor dynamics. in your world is it still like the 1980's or 1990's where we are worried about losing jobs to china or is that history? henrietta: i think that is a huge part of not just the talking points you hear from the president but a big component of the legislation they are passing. i got asked this question by investors. do you have to pay attention to the restrictions we are putting on china, semiconductors and batteries, or the near shoring

and for ensuring and bringing manufacturing jobs back to the u.s. and providing $72 billion? it's a combination of both. you have to be of the walk and chew gum at the same time with those. lisa: brainard is widely respected and she will bring an incredible amount of experience and intellectual heft to the office. who replaces her on the federal reserve? how important is it to get a nominee quickly based on the difficult situation the central bank is in right now? henrietta: it is the key question. it will take a while. you have to think of the legislative agenda items right now. there is nothing until the debt ceiling, farm bill and resolution will be september. you have this federal reserve opening that will create the opportunity for hearings, for members to put holds on for whatever reason. we saw that in the last year

with various defense department officials. i believe it will be complicated, controversial. republicans will have a lot of reason to find flaws with every candidate. they will probably lead president biden to the center as much as possible. he's experienced getting nominees through. i imagine this will be a heavy lift. all the republican presidential candidates are coming out of the woodwork and people will have a lot to say about whoever it is. lisa: this comes after 2021 when jay powell was not renominated. some people say that is a reason why perhaps he delayed the decision to start raising rates. what does that say about the importance of brainard's role about why joe biden thought it was important to pick her for this position? henrietta: it's obvious they will be a huge gap at the fed as a result of this change and job shift. the short version is treasury

secretary yelling going to stay on for a very long? is it helpful to have her in a position to migrate over there? that is where questions have landed. i think we have discussed this in the past. this speculation about who will replace yellen has been going on for year-and-a-half at least. jonathan: do you think secretary yellen has been misused, put to one side by this administration? henrietta: privacy much attention to the global minimal tax going on. that was such a huge coup with congress and ustr. you see the consistent narrative she's had that will give her a lot of gravitas going into the debt ceiling debate, which we need all of. one thing about the clip you aired is she speaks about suspension and raising the debt ceiling in the same sentence every time she talked about it. that will be pivotal to getting the debt ceiling hiked.

house republicans are already talking about their willingness to suspend the debt ceiling. it's a benefit to investors because it will push out the date for a deadline. treasury can backfill its coffers and start extorting n -- extraordinary measures. the house republican conference and the senate could agree to these really short-term suspensions. i do like these mentioning -- the mentioning of it or as a hike. they are functionally the same. jonathan: we will see how prominent that role is in the years to come. henrietta treyz. just the feeling she has been isolated. i have seen several reports on that. tom: i said good question. i think you are dead on. i will blame her a little bit. jonathan: why? tom: she's an extremely competent, venerable economists. the treasury department -- i will go back to john conolly

with jfk and that terrible car in 1963. in my childhood treasury was not framed by andrew mellon. it was framed by john conolly who were business types, like mr. mnuchin and yellen does not fit central casting secretary of treasury. jonathan: we will pick up on that later. the latest from steve england er. he was looking for a pause from the fed in march. we now inspect 25 basis point hikes in march and may that were flat previously. they think the fed peaks at 525. morgan stanley was looking for a pause. no more. the data seems to change anything. retail sales at one hour and four minutes away.

we all have a purpose in life - a “why.” no matter your purpose, at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

i screwed up. so let us focus on the how. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. the eagle has landed. that's one small step for man... hey, what's up? uh... houston... we have a situation. how did you get here? you're characters in our video game! video game? yeah, it's what we do with xfinity 10g. it's like, you know, the best network imaginable. what the heck is that? those are the bad guys. are they friendly? the 10g network, only from xfinity. one giant leap for mankind.

jonathan: equities look like this on the s&p 500. down a little bit by a couple of tents of 1%. down .2%. one hour and 15 seconds away from the retail sales report. nasdaq down also. unchanged on the s&p 500 yesterday, even in the face of this. yields higher on the two-year by 10 basis points. 10 or 11 at the front end. the last time we were higher than this, 465 on november 8.

you go back to november 8, we closed on the s&p 500 very close to 3800. that gives you an idea of where we where the last time yields were at this level. this equity market did not move at all in the face of a real shift higher in yields and a recalibration and re-think of where people think the fed will end up this year. lisa: it is easy to say stocks are wrong. people push back and they say the facts have changed and things have gotten better. that is why there is some validity behind the gains we have been seeing. jonathan: so you think good news is good news for equity so far? -- equities so far? lisa: other people are making that argument more aggressively. jonathan: it has been led by tech with high yields. it is ahead scratcher for a lot of people. lisa: i am still struggling with that. let's look at the stocks i have been focusing on. airbnb. talking about road trips. a lot of people are going on

road trips and airbnb is doing well. saw 20% of bookings -- tom: i thought they were in trouble. lisa: they expect that to be the same in the first quarter. adding almost 10% to that in premarket trading. trip advisor seeing the same kind of move year-to-date and today with similar expectations. not only are you people looking more, but it is international. jonathan: the airlines are flying. these moves are phenomenal. talking about 3% moves on airline names. tom: i worked at pricing on a london hotel and i was shocked. i was thunderstruck. it is up like 60% from what i remember. jonathan: so are flights. lisa: i will get taiwan semiconductor manufacturing company. warren buffett took us take a couple of month ago and sold 86% of it in the most recent filing, which is very unusual for warren

buffett who is a buy and hold investor. shares are lower. tom: is it warren buffett selling or is it his team selling? does he have anything to do with the selling? is he directly involved? i don't know. we don't say larry fink sold. we know it is blackrock. is it mr. buffett selling? lisa: is his personality changing with the succession idea? jonathan: i hate that question. do they know something we don't know? it is like the fed. lisa: they always know something. jonathan: they sound cautious. do they know something we don't know? based on their performance the last few years they don't know anything. fed officials pushing for rate hikes. lori logan saying, "we must be prepared to continue rate increases for a longer period.

if such a path is necessary, all to offset any undesired easing and conditions." kathy jones says it is likely the yields for bonds for two or five-year maturities will continue to move higher on the shift and expectations about the path of fed." tom: it is really going nowhere off of what we saw yesterday. rounded down -88 basis points. a remarkable moment in fixed income. kathy jones joins us this morning. he talk about something which is the shift in the yield continuum, along maturity and along duration. where are you shifting and where to be in fixed income given the -- you go to the belly of the curve. are you brave and go out?

or are you short, short, short? kathy: we have moved gradually towards the intermediate part of the curve. through the belly of the curve. we are starting to move out of bit. if we get close to 4%, we will move that further. i think the issue was that the market has gotten too far ahead of itself in pricing and right cuts and not keeping up with where the fed was. we had that tempering and the following. part of that was also due to lower volatility in general. we were mispriced for the fed policy. now i think we are getting back to a more realistic level. we are seeing inflation slowing down and yields coming down long-term. the market got way ahead of itself. tom: this is like active, passive equity markets. it's along a continuum.

jonathan: we have seen a real shift. based on what you have seen so far -- kathy: it is not as far as we would like it to go. we would like to see maybe close to 4% on the 10-year. i think we might given the vehemence from the fed about hiking rates and the market has been too optimistic about rate cuts. we will be buyers when we get there. we are more cautious now on credit than ever. one of the consequences now of this rally has been because volatility has come down and the spreads have come down so much, that is getting us more cautious on credit but not so much on rates. tom: we are about 170 tighter than last year. what explains that move? is there anything in the fundamentals that explains that move? lisa was pointing this out.

if you think we will get a higher terminal rate in 2023 because the data is just good and you have to push out every session call, isn't that a backdrop where high-end credit should report well? kathy: yes. unless the reaction function the fed tips us into recession. in high-yield you have a lot of companies turned out their debts. the rising rates in the near-term is not affecting them. we did see a big drop in volatility. high-yield tends to move with equities. you have lower volatility in the equity market, you will get those spreads coming in. what we are seeing towards the end of the year and next year the increase in volatility is more likely as the fed convenes the -- continues to hike. we see loan officers tightening credit. that survey showed 41% tightening credit at this phase of the game. that's a pretty serious indicator that is headers --

adverse for high-yield. they can keep going for a while but the cycle is going to be difficult and we will see the fault rates come up at the end of the year and next year and the market is not priced toward. lisa: a lot of people thought of the high-yield bond market as the canary in the coal mine. a lot of analysts have said we like equities because credit spreads are also tights of the credit market is confirming our view. are you saying that credit no longer operates as the canary in the coal mine and is trading in tandem with equities subject to the same data and disruptions? kathy: i would not say it is the same data. they are highly correlated so they will move together. i think what is happening in the cycle is there was a lot of runway for high-yield issuers. a lot of easy conditions. what we are seeing is the conditions are changing. i would not be relying -- i don't do equities but i would not be relying on the high-yield

market to support my equity position in this stage of the game. we get into the end of the year, get more rate hikes from the fed. we are seeing a slowdown in nominal gdp, tightening of credit availability. those are not good for high-yield. lisa: we can do this without seeing the default rate pickup. we are seeing it among certain leveraged loans and specific triple c rated bonds. people have turned out their debt. companies are in a better position. why is that not a counter argument to being bearish in an asset class that is still offering quite a bit of yield? kathy: is offering a lot of yield but not relative that what we would get it safer assets. it means the default rate will only pick up slowly. maybe it will peak at a lower level of the cycle than it has in the past. that is good news. when you are priced where we are in spreads today, it does not

give you compensation for any risk. i think it is a complacent market right now. it does not provide enough risk premium, even though the nominal yield is high relative to sitting in cash. it is not that great. tom: run before tom spots the piano behind you. kathy jones, love it. two's versus 10's/ . david rosenberg puts this out on twitter. the yield curve leads the economic cycle in inverted last summer. for him that means q2 and q3 have a bullseye on their foot -- four heads. tom: we had him on yesterday and he was heated. he went classic rosenberg. he went to goods inflation. i did a careful study of that pre-pandemic goods inflation.

running rate is near 0%. it is 0.25%. pretty careful study. we have gone from 11% inflation on goods all the way back to 1.44%. we are moving towards were trend was even as we worry about the service space. jonathan: the view out there is amazing. something has to be very wrong about this year. either you don't think the fed has done enough and they need to do a lot more or they have done too much already. that's a wide range of outcomes. lisa: if you take it further and the bigger idea that the fed could raise rates to 5% or 6% to not cause a recession or some sort of financial accident. jonathan: what if we said no. tom: it does not matter. there are times we watch baseball and the umps are blind. it is usually like three or four umps in baseball. you have ending with two guys

thrown out of the stupid thing because of their call list. that is brilliant. jonathan: do you think it is good they got chucked out. tom: they completely screwed up. jonathan: do you have the var in baseball. tom: we do in baseball because it's a tight plate. they often get it wrong. jonathan: i like how rugby does it. they put a microphone on the official. as they look back over the video the referee will explain the decision on the microphone for the whole crowd. tom: which is it? jonathan: you want me to choose a team? lisa: arsenal. tom: i have no clue. jonathan: i think mann city. this might be their moment. and harland needs to get something done. tom: he is doing nothing. jonathan: that's a problem for the team. what do i know? you are choosing arsenal? lisa: yeah. jonathan: i thought you were a

liverpool fan. lisa: i like the gunners. tom: who are the gunners? jonathan: arsenal. [laughter] they are meant to be your enemy, for goodness sake. still trying. 10 years plus. this is bloomberg. ♪ lisa m.: got to make that apology again. keeping you up to update -- keeping you up-to-date, china will retaliate over violations of its sovereignty. potentially splitting a lingering dispute just as both nations' foreign ministers are attending a conference in germany. china's spokesman claimed the chinese balloon down by u.s. jet had inadvertently floated over the country after being blown off course. china insists the balloon was a weather monitoring device. chinese pensioners returned to the streets of wuhan for changes to the medical benefits.

a large group of people gathered under an overpass, singing and chanting well police stand by. bloomberg was not able to independently verify the videos. that if come after protests against pandemic lockdown swept through china in november. the international energy agency boosted forecast for local oil demand as china reopens its economy. they raised estimates by 500,000 barrels a day for the first quarter, and just under half as much for the year. that would push will consumption declined by 2 million barrels a day this year. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ is an elegant ev. yeah, with 389 horsepower. ♪♪ it's electric. with an edge. ♪♪

>> i think the most likely scenario, and i give it 50% as

we end with sticky inflation. 3% to 4%. there is a possibility of an orderly disinflation. i give that 25%. there's an equal probability of 24% of the new inflation. we find out that service inflation is very difficult to bring down. jonathan: lucky to catch up with mohamed el-erian and a bloomberg opinion columnist on his outlook for inflation. the likely outcome of 50% was the probability he assigned to that scenario. sticky inflation. sticky for longer. retail sales offering more information about this economy and 43 minutes and 12 seconds time. equity futures look like this. -.25%. yields unchanged at 375.41. you have noticed some of the wealth intraday moves we have seen from the lows to the highs.

i thought the price action yesterday off the back of the cpi print was kind of nuts. lisa: it looked like a yo-yo. someone was playing a game. not to blame the -- how much of this is some sort of programmatic trading? jonathan: can you make that sound again. i will use that at the opening bell. you like that, tom? i think it needs to be a sound effect for the show. did we used to have a script? a little cartoon used the pop-up. tom: we had a relationship. lisa: when the price action is like -- jonathan: we have not heard you say rip up the scriptural long time -- script for a long time. tom: it is not like the ads on bloomberg. we don't overdo it. jonathan: which ad? [laughter]

tom: joining us now is someone who nailed the dynamic of hargett carbons downstream, upstream. stephen schork joins us now. thank you so much for being with us. i want a more general conversation. , right there is a massive bet on $100 barrel oil? jonathan: some are looking for triple digits. tom: stephen, it is not what you do. you don't try to guess the barrel. you look at the micro stuff. which valves are being turned in america. how do you react to the certitude of $100 a barrel oil? stephen: right now i'm not there quite yet through the first six months of this year. we do a lot of algo, a lot of quantitative modeling for price forecasting.

for the third quarter coming into this -- for the first quarter coming into this year we had the meeting of our outputs on the high end at $91 a barrel. when we look to the start of summer, that jumps to -- let me look at my notes -- $96 a barrel. there is potential of $100 a barrel at some point this summer. clearly there is statistically the probability. it makes sense. the demand is expected to be strong. we can drain the spr. apparently it is a political slush fund. you can take that down to zero and it does not increase refinery capacity. there lies the problem. tom: the kansas city chiefs are playing the other team. as they were playing your beloved eagles, every other ad was an electric car ad. electric vehicle usage, is that

in the world now? do you see that in the data? stephen: absolutely we are beginning to see it. we are most likely seeing it in gasoline demand. demand is problematic if you're just assuming no one is driving ev's. demand is anemic. you have to consider this winter. the i-95 corridor to the maine border, there is no snow on the road. from these coast wyoming, no snow. we have ideal driving conditions. gasoline demand is about 4% below a year ago. according to our modeling, 2% below the probably stick range -- probabilistic range. they are cheaper than summer prices, yet demand is not kicking in. if europe saying it is just the fossil fuels, we have a problem. gasoline demand is a tremendous economic leading indicator.

we have to factor out the fact that more people are driving hybrids. i was bragging during the super bowl, but to console myself i kept having to remind myself i drive an electric hybrid suv. i put 17 gallons of gasoline in this thing every four months. i drive 1400 miles before i have to refill those gallons. i get 79 miles to the gallon. that is the future. we are in the ev world where it is a zero-sum game. pv's are great but there is no panacea. lisa: we can build on that point. i'm trying to understand how you can parse out the dynamics to come in with some expectation of where prices are going to go. the international energy agency said world oil supply is said to exceed demand for the first half of 2023, but it will shift the deficit as demand recovers. we have no clue. anything can happen. have you had a corollary to this? stephen: absolutely.

this is why you do the probabilistic modeling and quantitative modeling. you are looking at a series of price variance over daily, weekly, monthly returns. you are running simulation models of these exalted as factors, these plaques want events. two years ago no one knew about ukraine being a major factor. no one was expecting to see a hostile white house towards the u.s. hydrocarbon industry. we do not know. there is the random component you have to model into these models and you come up with a range. there is no such thing as an accurate forecast with regard to we will hit this price, hit that price. you come up with a probability of ranges of events and that's why were coming out with the median output of all the modeling we are running.

we are getting this potential oil as low as $62 a barrel or $91 to $100. jonathan: you said a line, that ev's are not that environmentally friendly. explain that to us. stephen: look what is happening in california. we are at the first lifecycle ending of the solar panels. california never had a plan to dispose of the solar panels. all the heavy metal that is sitting in dumps with the heavy metals leaking out into the environment. ev's are such a small percentage of the global market. when you talk about the amount of earth, something the size of the state of arizona and nevada to say our demand. the amount of earth you have to rip up to get to these have a

metals -- heavy metals. we are ripping up china, congo, argentina to get to the cobalt. we have to rip up the earth and it will make 100 2030 years of coal mining and oil drilling look like a pinprick on the amount of environment of degradation to get those virtu e signaling metals into the battery. jonathan: why don't we have that conversation more? stephen: we are such a fractured political nation. if i'm saying something, 50% of the people think i'm not some kind of or pushing some kind of agenda. i was looking for a meeting of the minds. i want to promote my hybrid. it is the best of both worlds. a little fossil fuel, which we need because demand is not going away in a little electricity. tom: we love the different opinions at how you have taken

the eagles' defeat so well. stephen: on the heels of the phillies. it's been a tough year for philadelphia. tom: it has been a brutal sports year. schork will never come back if w keep that up. jonathan: he might be watching golf this weekend. tiger woods is playing some majors but has not played on a regular tour since 2020. he will tee up tomorrow at 3:00 p.m. eastern time. mcelroy, justin thomas, tiger woods. tom: we are we on the saudi arabia golf tours? jonathan: the battle continues. life golf. tom: i can see us at the masters, the three of us. jonathan: it is so relaxing,

that tournament. such a beautiful thing. you should listen to the commentary at the masters. it is like therapy. beautiful. ♪ has many concerned about credit, savings and insurance, especially for those in underserved communities. why is financial inclusion at the top of the business agenda? up to now, we have not done well with bringing women, minorities and other marginalized groups to the table as buyers of financial services. the financial services community has a responsibility to do this, to be inclusive for all, and there's big business benefit in doing so. cracking the code on even one of these underserved communities would dramatically impact the bottom line. imagine providing services to women at the same rate as we provide them to men in the financial arena. this could open up an additional $700 billion in annual revenue. firms are getting smart

and we are helping our clients today solve for this issue. ( ♪♪ ) go. go air that runs factory. go sensors and software. go find leaks. go fix-em. emerson technology detects compressed air leaks to save manufacturers, like colgate, over 20% in energy costs. go brush your teeth. go boldly. emerson. when people come, they say they've tried lots of diets, nothing's worked over 20% in energy costs. or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating

that focuses on optimizing insulin levels. we tackle the cause of weight gain, not just the symptom. when you have good metabolic health, weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

>> markets ahead of us are

optimistic we will avoid a >> real slow down. >>volatility -- avoid a real slow down. >> we do not think it will act in a way that will drive the economy into recession. >> the labor market has all these distortions that are coming off. the economy has all these distortions that are coming off. >> the moment to the market sniffs that the fed may come off, -- tom: good morning. jonathan ferro, lisa abramowicz, and tom keene. rain tale wednesday after a tuesday inflation. markets are moving still off inflation, may be in front of retail. that difference in yield, i'm going to call it new low. i am on the 100 basis point watch. jonathan: it is moving to the front end again.

a new high of the year, very close to 4.65. 4.6479. this really started on payrolls friday, that blowout number. there is a risk that we price in a terminal hi ray at the federal reserve. you push out that pekin yields, you push at that peak from the fed and you price out rate cuts this year. tom: you saw harvey the other day. you had englander earlier from standard charter adjusting the fed call as well. catherine rogoff, this time is different, but in the opening montage, we do not know what is going on. if rogoff does not know what is going on -- lisa: nobody knows what is going on. as an investor, is your

thesis to go with momentum? this is where someone's investing theory must reign supreme and nimbleness to change. tom: lisa looks at "what is your compass?" we can say it is part of our journey. jonathan: part of the journey, not the destination. if you are not confused, you are not paying attention. if you are confused looking at the incoming information, you are not alone.i ge the idea that the -- i get the idea that the federal reserve is also confused. they have to wait for more data, and that is because they have lost conviction about what they need to do. they had so much conviction last summer. all of a sudden it is like "we

hope." long and variable lags is what you say when you do not know what is going on. they use it as if it is scientific. no one has got a clue. tom: you have a very good point. that harkens back 3 or four decades. i will give an association to chicago and milton friedman. we are using data terminology and somewhat use data theory in a modern time. lisa: the data is becoming less and less reliable. the said officials keep talking about their surprise with the labor market report from friday and there was this article in the bloomberg businessweek magazine talking about how people do not answer those surveys. it makes surveys a lot less

reliable. what are we relying on to make our call on the economy? it will get revised. lisa: i was not -- jonathan: i will have to get them on one day. lisa: do you think they want to talk with us? jonathan: that would be an interesting conversation. i want to understand how they put that data together. i am interested in the long-term inflation expectation part of that survey. if you call someone randomly at home they probably feel like inflation is up 15% or 20%. when the go grocery shopping, that is what it looks like to them. tom: on an inflation basis, we will see that food is a part of that and shelter. indirectly we heard from sarah house and at wells fargo that amazon and all we do their plays into retail sales.

we have to wonder through the data. there is no other data point for me today. jonathan: that lift on the front end and that deeper curve in version are negative 90. going into retail sales, 25 minutes away. what was interesting about yesterday as we have that move at the front end. i disconnect for some of you but we will see how that plays out. tom: over the years for so many it has been a conversation to listen to jim beyonca. he is the macro strategist at beyonca research. he is listening to wall street. you reach out to the recent word from deutsche bank, and you are looking at the no landings scenario that he and others are

talking about. talk to us on the possibility of a no landing. >> the no landing scenario, using the plane metaphor, is growing every day and what is driving that is the labor market, as we all know. the problem with the labor market is that there is no problem with the labor market. if there is no problem with the labor market, the fed will see no reason to pivot. something new is beginning to come up in the marketplace, the probability that the fed raises rates in june 2 5.5% has gone above 50 -- june to 5.5% has gone above 50%. this is the first time that the market has gotten ahead of the fed. the market is starting to think that the fed will go further than they are communicating

right now. something has changed, and i think what that is i thes inflation report yesterday. services are not in disinflation. they look very sticky right now. we are dropping off big numbers from last year -- 0.7% in february. once we get past june that all turns ended becomes a tailwind for inflation to push higher. that is what the market is starting to sniff out. jonathan: we have repriced entire treasuries lower. we have priced in a hi terminal rate as well. jim: 40% of the rally in the equity markets ain't stocks. it is 2021 all over again. we have bed bath & beyond moving and the meme stocks.

we have seen this movie before. when you strip that out and look at the rest of the market, it is up, but it is not up as much nearly -- not up nearly as much as everyone thanks. forward -- the pe ratio of what earnings are expected to be in the next few years? 18.5%. lisa: what are variable lags at this scenario, given we are not seeing it? if anything we are seeing easier financial conditions. jim: that will be the biggest concern we have going forward here is the uncomfortable question of maybe the fed is not as sufficiently restrictive? maybe where we are is neutral and that is all we have done in

the last year? that is why we are having a no landing. that is why inflation is so sticky. that was the assumption behind all of the recession calls at the beginning of the year. "we have raised rates a lot. that has got to hurt." why we are seeing the markets price and 5.5% is that we are not sufficiently restrictive. jonathan: what do you make of that phrase, "longer variable lags"? jim: it is relevant to the extent that this is not a neutral market. i come back to it is a post-covid economy. all the rules that we understood about the economy recovered have changed. the biggest one we all know about is work from home. barely half of the offices in the u.s. are occupied 5 days a

week. everyone is on some range of remote work. that is a huge change in the economy. there have been other huge changes in the post-pandemic economy. when people say "i don't understand. we have to be data-dependent." i think what it is, is they are saying "when is it going to start looking like 2019?" he rules have -- the rules have changed. tom: milton friedman of chicago, which is why -- it is the monetarism and do it either of the -- ether in the air. jonathan: do those lags get shorter? isn't that basically the observation we thought?

that was the conclusion we had. tom: without question, the financial lies asian -- financialization has changed the dialogue, but still there are larger macro features in hand. the pandemic has messed up any analog to the past. lisa: we do not know what we will see when the economy gets back to a more stable state. we are not going back to 2019. tom: these theories are carrying a lot of baggage from the past. jonathan: the economy is like the recent balloons we have seen. it will keep drifting until it pops. 18 minutes away. tom: the balloons have a compass. jonathan: this is bloomberg. ♪ >> keeping you up-to-date with

news from around the world, with the first word, i'm lisa mateo. nicola sturgeon resigned after more than eight years as the head of the country's independence movement. a surprise move that will reverberate around u.k. politics. >> this decision comes from a deep assessment. i know it may seem sudden but i have been wrestling with it, albeit with oscillating levels of intensity for weeks. >>it leaves the scottish national party and independence campaign looking for a new figurehead without a clear roadmap. ursula von der leyen says the european union's new sanctions will target $11 billion worth of goods and technology used in drones and helicopters. the eu is poised to force banks

to record information on russian central bank assets as part of the latest sanctions package targeting moscow. the u.k. is considering act pay. financial times reported that rishi sunak and chancellor jeremy hunt are considering a payoff that would see higher wages taken from april of this year alongside a lump sum payment that would effectively backdate the pay increase to january. i'lisa mateom -- i'm lisa mateo and this is bloomberg. ♪ , getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application.

go to getrefunds.com to learn more. we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business or giving back to the places that inspire you. no matter your purpose, at pnc private bank, we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

>> we don't know what is going on.

the labor market has all these distortions that are coming off. the economy has all these distortions that are coming off. you do not want to race ahead like you know what you are doing for sure. i would not be surprised if interest rates and up at 6% to bring inflation down. jonathan:. what a number -- what a number. that is ken rogoff. that is a sophisticated individual saying, "i don't know what is going on," tk. what do you make of the possibility of 6%? tom: i need to relisten to bob seeger is my answer. i am looking at the brm screen -- btm screens. for a huge percentage of our listeners, this is a whole new world after all.

jonathan: will get excited about retail sales in 30 minutes' time. 200,000 is not population adjusted. 200,000 going all the way back to the 60's? lisa a.: i think about what i just heard there from jim bianco. we do not know where we are. this is making us question what the new model is. what do you make of 6%? what do you make of the unemployment rate where it is? what do you make of these numbers? we do not know where that will rest. jonathan: thanks, matt, for reaching out and letting us know your new call. i sure those three points with all of you. the labor market is resilient. less progress has been made towards disinflation.

yesterday's cbi -- financial conditions have failed to tighten enough. the conclusion for him at least? the fed needs to go higher. tom: that 0.429 is emblematic of that concession. jim, this time is different within consumer america. we are off the pandemic. are we acting almost in a broken state because this time is different after the shock of a pandemic or is this typical loom from stimulus? -- typical boom from stimulus? jim: i think it is typical boom from stimulus.

a lot of the stimulus money we saw handed out in 2020 and 2021 has not been spent. these people still have spending power. we do not see a booming economy but we see numbers continuing to move forward. retail sales numbers are expected to rebound. they are expected to be up a decent amount, maybe 2% meaning that spending will be continuing. if we are talking about a recession and a pivot, and we are talking about 3.4% unemployment. i have to think that at the federal reserve they look around and say "i don't think we should even think about pivots." tom: it gets back to 5.5%, and that gets us back to a bob seeger economy. i was mentioning the giant of

the midwest there. great, jim, but are we ready for the adjustment if we get back to rogoff's 3.5%? jim: that will be a difficult adjustment. if we get to a 6% funds rate -- we just had 5% yesterday. that is the first treasury security to yield 5% in 15 years. if we start to see 6% on those numbers, all of a sudden people will look around -- i can get 6% without taking any risk whatsoever by parking it in a treasury security. that will prove to be a lot of competition for the idea that the stock market can continue to roll ahead -- roar ahead. lisa a.: that is why people are

saying -- you think that this time is different, that it is not a predictive measure of a downturn in 12 months? jim: i'm not sure i would go that far to say it is not predictive. i tend to look like ken harvey of duke who is the one who developed the yield curve indicator. when it persistently inverts, that was around thanksgiving, and it usually leads by 10 months. that would put you in the fourth quarter for a recession but it can be as long as 18 months. that could put you in the first or second quarter of next year. the yield curve -- i don't think that. wall street is that patient i -- i don't think that wall

street is that patient. it might still be a 2024 scenario where we see a downturn and not the middle of this year. lisa a.: if we do prolong when a recession comes, will it be a more problematic recession because the fed will have to raise rates? jim: it can be a more problematic recession, if it is going back to bob seeger again, if it is a recession driven inflation. i don't know that the fed will have to raise rates as much, but they want see recession and say, "back to zero!" maybe they will cut rates back to 3% or 2.5%. a a lot of people are expecting

in a downturn it will be a road ride back to 0%. we might not see that this time around. jonathan: financial conditions -- how do you track that? jim: that is a good question. there are all kinds of the financial conditions indicators that measure things differently. the fed has various measures as well. if i was to look at it, i would look at the more traditional goldman sachs indicators. anecdotally with zero dt options with meme stocks like bed bath & beyond doubling in a day,, it seems like it is a very easy environment right now. it is not a tight environment, and that should be concerning over at the fed. that is why i was confused when chairman powell was talking about tightening financial conditions in his press conference because that is not the case by a lot of measures right now. tom: on bloomberg radio, over

the right shoulder of jim bianco is -- we are harkening back to interest rates when bianoc was using the monro trader. jonathan: he was talking about zero dte options. i have 60 seconds left. can you tell me how much you think that has shaken this market about? jim: they list options every day and they expire every day and half the volume is in options that will expire today. it has created intraday volatility, so you see these big swings. yesterday was up 1%, down 1%. we have to be ready for this idea that the market is up 1%, what does it mean?

weight a -- wait an hour, it is down again 1%. what is a mean? jonathan: we need to do a promo. " what does it mean?" then replay jim bianco. we. appreciate that -- we appreciate that. tom: jon ferro on surveys. i didn't know that. it is becoming difficult. eric hug roshan says -- erica groshen says jon ferro is right. jonathan: retail sales in america up next. ♪

hi, i'm katie, i've lost 110 pounds on golo in just over a year. golo is different than other programs i had been on because i was specifically looking for something that helped with insulin resistance. i had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult for me to sustain weight loss. golo has been more sustainable. i can fit it into family life, i can make meals that the whole family will enjoy. it just works in everyday life as a mom.

jonathan: 23 seconds away from retail sales data in america. equity futures on the s&p 500 look like this -- the 10 year, 3.75. we came very close to 4.65 a few moments ago. >> we will start with retail sales because that is what everyone wants to see.

it is a big beat this time. up 3% after a 1.1 percent decline in the prior month, trying to get the download of the census bureau's update here. the x autos number is also strong, 2.3%. it was down 1.1% last time. we new auto sales were big in january and that would add a lot. we have some beyond auto sales there. vaseline, 2.6% so it looks like americans were happy to spend some money this past month. the control group, which goes into the gdp report, up 1.7%. that was after a -7/10 print in the initial report last month. it looks like some very strong numbers in terms of retail sales. americans are out there spending

some money. i will get you the break down when you look at the market reaction. i am going to guess you have some market reaction. jonathan: you don't have to look at it, mike. we push higher again on a 10 year yield. two year versus 10 year, in and around nine basis points. yields are a bit higher. the dollar is a bit stronger on the back of that upside surprise for retail sales. tom: what i am watching as the revisions. they go in the trend of this good stock retail spending in america. i want to remind everyone, this is a nominal statistic folded in. in the control group, the revision is zero point -- is

-0.7. jonathan: the estimate was 0.9%, credit to samuel coffin who is looking -- he was looking for a big upside surprise. they just saw fantastic activity. you put this together with what we have seen in jobless claims, sub 200,000. whether you think this is the right conclusion are not, this is the consensus and it has shifted towards a high terminal rate and the extension of this expansion. tom: we are somewhat on the -100 basis points watch, which is historic. the american economy is avoiding recession. in the fourth quarter there was gloom.

3.1% -- how are we going to shift in april? how are we going to shift the second week of may our view of where we are right now? jonathan: you have had some time to go over the data. people might be asking is this a quirk of the calendar? is there something about the month of january we are struggling to figure out? michael: it is unusual to see the amount of strength we are seeing. i told you motor vehicles were strong, and they are. cars alone are up 6.4% on the month. everyone waited to spend their holiday cash on cars in january. also gasoline prices add a lot to the retail sales numbers because they were down by 4.8% in the month of december, but. they were flat in january

there is strength across the board here. electronics up, 3.5%. furniture stores up 4.4%. health stores up 1.9%. tom, food services and drink places up 7.2%! that is quite an astounding number. it is the only services number in the retail sales and it is very discretionary. people, despite what they may be telling investors, are confident enough to go out and spend discretionary thingson -- spend on discretionary things. tom: we saw on coca-cola yesterday, people pay more for lay's potato chips. you see it in the beverage sector as well. do you see any reticence to

spend money given higher prices? lisa m.: -- michael: it doesn't look like it. we saw a small rise in food and beverage. people were not spending as much as they had in prior months, but-that may be inflation affected. people were just happy to open their wallets. sales were not good in december. you wonder how much of that was people waiting for sales that either did not come more started coming january. it can help boost the soft landing scenario people are talking about. jonathan: more fuel for that scenario. michael mckee, delivering an upside surprise. your -- that print is a new

high for 2023. right now, 4.67. on a 10 year high by 4 basis points. to 3.78. the move in the fx market, euro-dollar shaping up as follow. euro-dollar looks like 1.06. tom: i think of a lot of people in congress saying, "i know the fed wants to break our backs and slow us down, but it is not happening." our team has put together wonderful voices, ken rogoff yesterday, jim bianco moments ago. the currency strategist has decades -- are you close to amending your view? are you close to making a mcquarrie shift here?

is this what we have been dealt, full speed ahead? >> we will delay our view, not amend our view. a recession will start this year. it will not be in the first quarter. on the other hand, surveys are still pointing to a recession coming in the u.s.. look at the pmi's they are below 50. it is still pointing towards downbeat expectations. so are the conference board surveys. the consumer while, he may be spending is not in a happy mood, tom. jonathan: -- tom: how can you say the consumer is not in a happy mood given the data we just saw? thierry: the u.s. consumer is in

afraid of inflation taking his ability they were afraid of hotel room-- -- they were afraid of hotel rooms being booked. was that a reflection of a positive mood? not necessarily. inflation has a way of making people fear the future and they spend now. tom: you heard that from bargain yesterday. thierry: look, once that spending got through in october and november, we had a dull december. when you adjust by inflation, january is seeing a bit of a bounce back. i always remind my desk people though, you have to take these numbers and deflate them make them in real terms. it does not look back rate. jonathan: you said something interesting there. it is about the inflationary backdrop. you buy now.

doesn't that keep spiraling? doesn't it become entrenched? thierry: but it cannot continue forever because budgets are limited. inflation has a way of eventually breaking the back of that spending. eventually you see reeling, road because of inflation, and you are forced to -- it cannot happen indefinitely. jonathan: the witness in december or the -- what is the story here? the weakness in december or the strength in january? thierry: we have a boost to retail spending in january greater than people surmised. jonathan: why isn't it just reality? why isn't that an accurate characterization of where we are? thierry: it is an accurate reflection of where we are. what i'm talking about is the future.

we are not saying that the recession is starting now. there is nothing consistent with the data that suggests recession is upon us. you will see the u.s. economy weaken. our view on the dollar is predicated on that. we do not think that weakness in the dollar is over. we see a deeper recession coming in north america generally than in other parts of the world. tom: is data -- we make jokes about it. we have a countdown clock. do you like our countdown clock? would you put up the arsenal man countdown clock please? i remember when you were at bear stearns and we waited 3 days for malpass to approve an edit. it was slow motion.

what does all this hyperventilating about data due to us and the fed? thierry: it makes us crazy. tom: thank you! thierry: it is difficult to be certain in the trends you are looking at when you see fluctuations. there are a lot of things -- i think they are underestimating the amount of credit tightness in the u.s.. when you look at the nfib survey, it is collapsing. the credit markets, things look recessionary. we are about to go into a recession. jonathan: terry wiseman -- thierry wiseman therre. we will continue this conversation with jack manning, mohawk man and 90 a level -- mo

haghbin and nadia. lisa m.: turkish stocks soared on their return after week long suspension. turkish authorities suspended trading on february 8 and canceled trades made on that day after earthquakes hit turkey and syria. the threat of more airstrikes remains across ukraine as russia attempts to gain full control over the donetsk and luhansk regions. >> if putin wants this war to end, all yes to do is leave ukraine and that is what the fact of the matter is. until that occurs, we will be standing strongly with our ukrainian counterparts. lisa m.: ray dalio, the

founder of hedge founder bridgewater is --hedge fund bridgewater associates says that china will win the trade war. the investor told a conference in dubai that the real winners of the confrontation will be those able to tap into both the u.s. and china. washington and beijing have clashed on issues, including human rights, trade and competition for trade and markets. global news, powered by more than 2700 journalistss and analysts. i'm lisa mateo and this is bloomberg. ♪

what do you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

>> we are seeing a little bit more of a return to normal in the labor market. tom: gibbs there. if you are just joining us on radio or television, we will get perspective in a moment. futures -14. we are all watching the bond market. lisa a.: this is where you are seeing a repricing more so. 2 year yields surging to the highest level so far this year. through 5% to the highest levels going back to 2007. tom: we will talk more about the

prosaic economics of retail. post-pandemic new york, there is something going on in luxury. dana tell see owns the high ground here. -- dana tell see -- the windows are screaming at me post-pandemic here, except for one house. i want you to explain to our international audience at caring group. gucci is a train wreck. what will this new guy do add to gucci? -- do at gucci? >> one of the things in luxury is they have archives. you can reinvent. he has frankly the luxury of

being able to capture everyone's interest. you can redo the logo. you can redo the clothing in the leather goods. you can put out some new items that become iconic. he is going to make burberry interesting. i believe there is a 15 year lifecycle to a bunch of these designers. tom: the san diego padres just signed a six year extension. he is japanese. there he is in the burberry plaid top to bottom. that is the world dana is living in. lisa a.: are the retail sales we just got speaking to this question of the luxury purchaser or was this broad-based? >> you looked at apparel, you looked at furniture, they showed strength also as well as a strong uptick in restaurants.

i don't take january as seriously as i take march, april, and may. your hearing about retailers having inventory levels up in the third quarter -- lisa a.: just to build on that, how much is fueled on this idea that gasoline prices are lower so people have more discretionary spending? >> look at the savings rate. people have been using their savings to live on. we saw food inflation yesterday. lisa a.: how sustainable is this given that some people are expecting the savings will go down? >> i think these rates are extraordinarily high. i think the comparison with omicron also boosted sales in

the month of january. we also saw the flipped of physical stores. lisa a.: the flip to physical stores and a flip back to physical goods. how much do you expect a re-acceleration of some of the inflation in some of those areas as people have been sitting on their hands for a bit, waiting for things to stabilize, and are now getting back in? dana: i think some of the discretionary items, the price increases are over. some categories are looking to reduce prices by 5% from the increases they took last year. tom: span this over to the joe feldman world. we are going from a digital space to talking about the windows in luxury new york city. who will win the war? dana: it will be the innovative

retailers who win the war. home always remains relevant. one of the exciting things is you saw a pickup in electronics too. tom: i am afraid to ask. what electronics sales are alisa and i going to see at our houses -- are lisa and i going to see at our houses? dana: the smaller more micro-items become more popular. lisa a.: when do we see a diminishing in this momentum? from your vantage point, when do we see it? dana: we have seen it in discretionary. discretionary sales have moderated. i think overall discretionary continues to move on steadily and will be on the back half.

i think the lower to middle income consumer where you have seen the tree down -- lisa a.: can you build on that? how much are you starting? to see some fissures we are talking about windows on fifth avenue, but the reality is cars, rent, all of this is expensive and hiding into the average american. dana: you have seen customers with $100,000 household incomes, companies like walmart are seeing more consumers with that level of income. your seeing some of the lower tier company is where the average household income they were getting is under $40,000, . the trade down israel. -- the trade down is real. tom: 90 days ago we were all

wringing our hands about stuff. i have always heard that price clears inventory. dana: that is what happened. on the same side price cleared inventory. you will see inventory come down. for some it was up 20% or 30% in the third quarter. wholesale accounts like department stores are moderating orders for the first half of the year. tom: macy's, they do not have the wooden escalator anymore. they have had a wonderful strategy of going to the middle. what is macy's doing to get through the summer to get back to school? dana: they are using data science to modernize their department store in order to figure out how to price appropriately. tom: so more makeup is the answer. dana: they brought in pandora jewelry. they have expanded the candy glories -- categories.

tom: that is good. you put the wallet of the wallet share in your new bag. lisa a.: the wallet share is going to the stores and not staying at the mall. the market is trying to understand this. on the one hand bad because the fed is going to raise rates. on the other hand, good because companies will continue to get the revenue from that, tom. dana: we have more clarity -- tom: single best buy right now? dana: i like ralph laron -- ralph lauren and i like deckers. tom: an enthusiastic retail report. every once in a while a note comes out that stops you. brisk has been publishing -- bruce kaz min publishing a scathing critique. it is a long, thoughtful essay

from the gentleman from -- lisa a.: that is what we heard from jim bianco, this question of what is the new normal. perhaps the fed is not as restrictive as some people think. tom: do not get it from us. we protect the copyright. you can go to jp morgan to get the kasman note. he walks through williams and the rest on r starred. ken rogoff push to get olivia blanche -- pushed against his colleague olivia blanche hard. lisa a.: perhaps the central bank won't have the conviction to go the last mile. tom: claims tomorrow after this bang up retail sales statistic.

futures, -12. 18.94. exit stage left! brian deese at noon. this is bloomberg. ♪ go. go green. go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson.

jon: live from new york city this morning, good morning. a futures down .4% greater countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is "bloomberg: the open" with jonathan ferro. jon: live from new york, coming up u.s.e