kriti: stocks in the red, is the macro driving the markets? bloomberg markets starts right now. ♪ kriti: let's get a quick check on the price action because we are seeing stocks selloff maybe not as aggressively as earlier. the essen t 500 is down 0.5% -- the s&p 500 is down 0.5%. the stock market is nothing only thing selling off him of the bond market as well.

the 10 year yield is breaking through the technical levels. the volatility matters here and we will look at what levels you should be watching. the dollar is unchanged and what happened to the bond market leading the currency trade in those days were last year. at the end of the day, there is one question with a lot of positive data and a lot of negative data, is 50 basis points still on the table for the fed? >> at this juncture, the incoming data does not change my view that we will need to ring the fed funds rate above 5% and hold it there for some time. at our meeting two weeks ago, setting aside what financial markets expected us to do, i sought an economic case for a 50 basis point increase which

would've brought the top of the target range to 5%. kriti: that is the cleveland fed president speaking earlier today. let's get more insight on the data because there is a lot of mixed of messages. anna wong is a former economist with the federal reserve. let's talk about the data we got. the ppi data in the fed survey from philadelphia are out. what is your initial take? >> i think the ppi gave us a glimpse of what will happen to the pce deflator which is due next week. more than ever, if investors want to decide for what the fed will do and how the fed interprets the data we got lately is to be able to think about what the pce deflator would do. i think the ppi shows that medical care services has picked up in terms of inflation. it's something a different

signal than the same category in cpi. that means that next week in the pce report, we will likely see the core services excluding housing category indicating a pickup in inflation momentum. powell had mentioned that indicator have been steady around 4%, showing no signs of disinflation. i think we will see an acceleration in that indicator next week. kriti: we will keep an i on that but talk to us about the data we got out of philadelphia today. it's usually not something the markets trade off a but eels like something many traders are talking about. there is an estimate of a minus 7.5 rating but we got a minus 23. >> i think the data has been all over the place for the u.s. economy lately, partly because of whether an seasonal effects

in january. i would take all this data either on the positive or the negative with a huge grain of salt. the big picture is that the economy is slowly softening. we had a very weak end-of-the-year lesser but now we have some pickup in activity. once you smooth it, it's picture of a very slowly decelerating growth momentum, not a drastic decline or a huge acceleration. kriti: i hear what you are saying but there are still so many mixed messages out there. what do we look for? what one single data point will make or break your case? >> the pce inflation next week. that's why i thought the ppi data we got today sends a real signal about what's going on.

a price signal would be more valuable than one entity or soft sentiment surveys. i would pay attention to the high-quality data which is pce inflation, pci wage indicators. that would be what i would focus on. kriti: you heard it here first. always a pleasure to have you on the show as always. let's bring it to the equity market so let's ask stuart kaiser from citigroup. we are looking at a bond market that is pricing in 5.5% when we talk about the peak policy rate. why is the equity market not selling off more? >> that's a good question. we have turned the year so far. expectations were extremely low coming into the year for economic growth and hawkish for the fed.

the data has just not delivered enough negative news to justify the positioning and sentiment that was in the market. you see the market grinding higher a little bit. on the inflation side, there is data that's in line with expectations and growth data that has been stronger than expected. it has either pushed out the recession risks or has minimized the depth of recession people were expecting. i think it's all positive for equity markets. kriti: does that mean it pricing in a no landing scenario? >> they are definitely levitating. i'm not sure what that means but what the markets are telling you is the expectation for a very near-term significant deceleration in the economy and deeply negative earnings revisions in the short term have declined. that's just opened up space to the upside.

if you are sitting here today and you look at the accumulation of data, it's in line to slightly better in aggregate than the market expected. you can include corporate earnings as well. kriti: is the microbe now driving the trade? many analysts are predicting this that the fed will not drive the trade, earnings will come are we there yet? >> i think we are there just because we've eliminated the rest of it if that makes sense. late last year, the discussion was more about inflationary risks. the risk going into this year was much more about growth and earnings. that is where the market is focused. from an equity perspective, you've done the hard work on the valuation side. what you are left with is the markets are struggling to get a sense of if and when these earnings revision happens.

the u.s. equity strategists have produced a standard downward revision already. if you look at the eps last year, a lot of work has been done on earnings but if you going to get us to move lower in equity markets, you will need something that looks more like a hard landing in the economy that does a lot of work to get the earnings expectation number lower. kriti: let's go back to the valuations part of this equation. if you look at the year to date rally in the stock market, is driven by tech. how do you hedge against the fear that a lot of these tech stocks are overvalued? >> it's a great question. the nasdaq pe was down 35% last year. the market did a lot of work already to discount a lot of large-cap tech valuation already. in the third quarter of last year, the discussion was around cost and layoffs in the tech sector.

at that point, user to lower expectations on earnings. when you came into this year, you have large-cap tech sector that de-rated valuations in low expectations on the earnings side but in the backdrop, your rates were coming off of it. you set up risk reward very positively for large-cap tech from that point. i'm sure you can find stocks today were valuation is the elevated. a fair amount of work is already been done at the index level. kriti: how do you hedge this? what do you buy? >> if you are hedging recession risk, we have directed people toward small-cap u.s. equities and banks so those are a cyclically levered part of the equity market that is internal. if you want to hedge a domestic slow down, that's an area. the other thing that we like is if we see a large decline in

volatility in u.s. markets. looking at that 3-6 months calls on the vix or puts on the s&p 500, that makes sense to us. domestic cyclicals is where we see good value. kriti: we didn't even get to the options part, we thank you as always. more on the show ahead but let's get to first word news. mark: in georgia, a special grand jury investigating election interference by former president trump and his allies said it believes perjury was committed by one or more witnesses in their final report. the jurors concluded there was no widespread fraud that would have led to overturning president biden's win. a judge has said details about who the grand jury said should be charged will remain sealed for now. inflation at the wholesale level

in the united states rebounded last month by more than expected. the producer price index jumped zero point 7% last month, the most since june. that could push the federal reserve to go ahead with further interest rate hikes in the coming months. there is a report that russia has lost at least habits tanks since it invaded ukraine almost a year ago. that comes from the u.s. based institute for strategic studies. it says russia is getting older equipment as replacements. bloomberg has learned that two of the world is just sovereign wealth funds are interested in buying minority stakes in national basketball association teams. foreign investors have expressed their interest and are looking for a possible match on a it's another example of how persian gulf money is oil money is

jumping its values in global reports. global news, 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh ♪♪ 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.

kriti: this is bloomberg markets. wealth is becoming an increasingly booming business on wall street and the raymond james ceo is one of the country's largest networks of financial advisors and he joins us in studio alongside sanali basak. sonali: sonali: it's the beginning of the year and a lot of ceos are thinking about strategy for their business and you a month of a order where you are returning 26% on's -- on tangible common equity. what is it about the business model that is different for raymond james than some traditional banks? >> it's great to be here on set. it's really about a long-term vision. we have been consistently following a strategy. the fact we kept flexible on the

balance sheet, the 26% return, we have doubled the amount of capital to be well-capitalized and you put that excess capital we have the returns because we focus on long-term growth, making the platform great for advisors and listening to the one serving their clients in making a big technology investment over the last eight years. it's given us a platform on the desktop it is leading the industry. sonali: speaking of investment, a lot of ceos are preparing for choppy times with a lot of layoffs. what are you doing in terms of hiring especially for the advisor network across the country? >> are advisor backlog is still very robust. the number of advisors joining us to still high. the big secret to ours is turnover. we have attrition of less than 1%. a lot of people are filling 3-4%

and we don't have to do that because the advisors want to be there and they want to stay. because of the growth in the number of advisors, we had a record asset annualized at nine point 8% which was industry-leading and we have to hire people to support them so when people are laying off, we are continuing to hire because we want to make sure the service level stays as high as it's been in the past. kriti: where are you positioning a lot of these people you are hiring? where you fall in the trade-off? >> we have a brand-new office space that opened during covid on park avenue. we have consolidated our offices there and we have people around the country. our three back office centers are st. petersburg, memphis and southfield, michigan outside detroit and denver is a smaller center. we are hiring people for all those locations and in saint

pete, we almost had no competition in hiring another major banks are also hiring and lord. some don't have to come to the office at all that we have people coming into or three days a week in we are flexible and hiring was tougher at the peak of covid but it's going back to almost normal levels and error attrition is down again as well. sonali: you are around the country and meeting with advisors, what our clients saying in this environment? there is a question about cash giving you more than 4% so why invest in fixed income? what do your clients say? >> the advisors bellwether into what clients are thinking. clients are a little unnerved. we are all wondering where this economy really is. everybody talks about a recession but with full employment, it's hard to imagine a recession but the market is up and down. client optimism is that the

market is improving and half of them think it's positive on the stock market but that means half jones. the good news is what the advisors are doing in our survey is 97% of the clients like their advisors and think they are doing a good job so their jobs to help them navigate the market. sentiment is cautious and cash has to find new places. our percentage of cash is not really gone down but a lot of it has moved to money markets are higher yielding funds of even though the -- is there, it's -- some of it has floated back into equities. kriti: you got a boost when it comes to your net interest income. how does that translate into demand for your clients? >> the lone business has sought on the little bit as rates have gone up. we have great mortgages and we know what's happened to the mortgage market. given that, i think clients have to get used to new interest

rates. rates are up on those products as well as loans. historically, rates and the 5% range or not that high historically but when they went from almost nothing and come up, it takes time to adjust. economically, we are ok of these raised people just have to get used to them. sonali: how concerned are you about the mortgage market? do you have concerned about cracks in the market? >> you always have some worry but i get paid to worry. our best year was -- 2009 was our worst year. our long-term model says to think long-term and not worry about the next quarter. we are being cautious with their own capital and liquidity and then mortgages is the same. it's a combination of housing prices that are up and mortgages that have slowed down.

mortgages are coming back in housing is coming back some but there is no doubt those prices are elevated and the rental market prices are elevated which makes the trade-off for people to buy homes. it doesn't take a lot to jolt the market either way. kriti: just yesterday, one ceo said we only have until july until we hit the debt ceiling. does that worry you or your clients? >> i don't think most people day to day in terms of clients worry about the debt ceiling but if you look at the economy, how much debt can you have? we put a lot under in covid and remember presidential campaigns a while ago, people ran on the debt ceiling and now no one talks about it. even though the budget shows four or $500 billion in debt payments, it will be over $1 billion at these rates. we will add that and the deficit

and you saw the estimates coming out at another 9 billion over the next 10 years. at some point, you had to deal with it but it doesn't look like politically that will happen anytime soon. we will have to learn to deal with a but there will come a time, i don't think this year, they will have to start addressing that. sonali: what about the investor sentiment around that? if this doesn't get resolved, how does that impact how investors are willing to engage in the -- with the uncertainties in washington? >> the average investor will say ok, as long as the debt ceiling gets extended and the economy is going, they will be fine being in the market. longer-term, it will be a question for all of us. at some point, you had to repay that. we've been growing it for a long time but if the economy ever goes the other way, you have to deal with it. kriti: paul riley joining us here in the studio, we thank you

as always. a pleasure to have you both on the show. still ahead, the levels you need to watch on the 10-year note. this is bloomberg. ♪

kriti: this is bloomberg markets. something caught my eye and it comes down to technicals but not for the equity market, the bond market. you've seen a complete repricing when it comes to fed swaps. the peak policy rate might not be 5.1%. it's actually 5.5% has been backed up by the fed speak we are hearing but what does that mean for the surface level yields in the treasury market? for a while, we are in this weird trading range. kind of higher and lower, going

between 325 and 375 area we have broken through it and a lot of that is coming because of the fed pricing, the idea that 515% or 6% is on the table. what does that do to how high the front and can go as well as the back end? we still haven't broken through the level we saw at the end of the year which is 380. does it actually stay will be the big question. we will ask our next guest that coming up and more fed speak ahead with the st. louis fed president jim bullard. we dig into the latest economic data and what it means for the fed and the market, there is a lot to digest, stick with us, this is bloomberg. ♪

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jon: welcome to bloomberg markets. kriti: let's look at the price action. we had a massive selloff in the beginning of the session but not the same as now the s&p 500 is down about 0.6% and the bond market is starting to selloff. the fed speak is leaning more hawkish. the 10 year yield is that 384. the dollar is not doing a whole

lot. nothing to write home about. the commodity prices are something to write home about. jon: we continue to monitor the earnings stories that have been going across north america and cisco has been outperforming as the equipment demand story remains relatively up. the shares up 6% but shopify, that stock taking a hit at 16% with concerns about the outlook that we shared by the e-commerce giant today. for bank of america, there are some challenges on the investment ranking side these days and we reported on possible job cuts on the horizon but tech resources could spin off their coal business as they focus on metals. they are looking into possibilities for that and their shares are up by about 5%.

the macro versus the micro. a lot of attention on today's u.s. economic data. kriti: jp morgan gives their take -- >> the improvement is happening but it's happening slower than we originally anticipated. as a result, is too soon for the fed to stop liking at least for now, at least two more rate expected. kriti: as we talk about the hiking cycle, getting headlines from james bullard speaking on the economic outlook and he more rate hikes are needed to lock in disinflation. he says that growth is expected to moderate and unemployment will eventually return to normal. nothing to write home about but certainly something to keep our eye on in james bullard is usually an uber hawk. this is the message we are hearing from many people

including the cleveland fed president. let's get more insight from jennifer lee at bmo capital markets. is it fair to say it's a done deal that the fed will hike more aggressively than expected? >> i would not say anything is a done deal but for sure that we will most likely see more hikes. we have another two more hikes baked in. depending how the shares go, we could see more rate hikes. jon: we were just talking about the policy hawks that are james bullard and master. we got similar hawkish messaging from them. james oler talked more specifically about the likelihood of a soft landing becoming more crystallized. it feels like there is a growing

chorus around the idea of no landing. from here, what kind of picture are you painting? >> we are still looking for a soft issue landing -- softish landing. we have to bear in mind that mr. bullard does not -- he is not a hawk this year. there is a compelling reason to raise 50 basis points of the last meeting. it seems like a big chorus of all that policymakers jumping on the bandwagon saying their work is not done and playing down the possibility of a hard landing. kriti: what does that mean for the lag we expect in the markets? the fed has been hiking for a while so when do we see the full effect of what the fed has been doing? >> we've seen a lot of it

already. it's like a lot of tightening. we are already seeing a lot of that play out. the difference this time is that the job market remains very tight. no matter how you cut it and whether you believe the 517,000 increase in january, i don't know if that's sustainable. the fact that the labor market remains tight and the jolt survey is still very high. very strong labor demand and that's what's keeping the fed on the rate hike watch. it's quite possible we could see two more rate hikes. jon: i know you are looking at the central bank speak around the globe. how would you compare what we are now hearing from so many fed

officials to what you are watching in markets like europe and japan? >> everyone is going in the same direction, even the bank of japan. it's like the ecb is uber hawks. almost everybody is calling for 50 basis points and a growing number are calling for more rate hikes beyond march as well. that's march and may so we will see how that fairs. england is still speaking hawkish leave but not super hawkish. they dialed back after the last meeting to 25 basis points. bank of japan is still a big question mark. kriti: about 30 seconds -- talking about the recession case scenario feels like no landing.

is that scenario more likely than a hard landing scenario? >> i would say a hard landing scenario is declining. we are still in the camper a mild contraction which is been that way for some time. judging by the data this week, for the retail sales report, it signifies that the consumer is not down and out. the consumer demise in the u.s. has been greatly exaggerated. i wouldn't put too much stock in that one january number but over three-month average, consumer spending is slowing but it's not hitting the ground hard. kriti: jennifer lee of bmo capital markets, thank you for joining the show. let's talk about what she was

saying and translate it to the general market. i've been thinking of something you flagged earlier in the week which is the small-cap story. if you talk about a recessionary scenario, it should hit the small caps first. give us your take on what the russell is telling us? jess: it's around the flat line but not down as much as the broader larger indexes. when it comes to the small caps, the russell two thousand did seek in november of 2021 but many of the stocks were already under pain two years ago and that had to do with strategist already pricing in much of the pain in case of recession. when you think about the past few months, the russell 2000 has hit resistance and was at overbought levels earlier this month it has eased off. that was more of a technical hurdle in the short term.

they don't necessarily expect that the russell 2000 or the s&p 600 will test their autumn lows again especially with this case where you are seeing these robust retail sales numbers and strong jobs growth. it's most likely the case that potentially, the u.s. can skirt a recession so many port olio managers have continued to add more exposure to the small-cap stocks. jon: going from small to big, you can't ignore the fact that we had such a strong run-up in january as some additional context. that is going to be something we have to be mindful of is well. jess: when it comes to the strong run-up in january, the information technology index that tracks small-cap stocks, they had taken off in that matters because typically, small caps bottom before large stew

coming out of a bear market. the smaller technology companies in particular so traders are trying to figure out the strength with small caps but also in the growth segments as well. that's a sign that could bode well for the small corners of the market for the broader market as well. that's something traders are focusing on now moving forward. jon: thanks very much. we will take a quick break and door dash is checking out non- restaurant delivery services. it will all be in focus after the bell and we will break them what it means for the food delivery company coming up. this is bloomberg. ♪

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jon: this is bloomberg markets. duringdash fourth-quarter results are expected after the bell. there is growth and delivery demand despite investors fearing the impact inflation is having an customers and their willingness to pay for take out. joining us is mandeep singh. we were talking about the resilience u.s. consumer and the retail sales data and people are still going out to restaurants and we heard from uber recently and there is the willingness from some consumers to pay a premium for delivery. that will make this doordash report interesting. >> it will be interesting to see if they can sustain that 20% topline growth. the delivery side of things slow

down but they instituted well on the ridesharing side and showing that the ibita line will continue to form. it's important for them to make sure they are not burning cash in any of the newer segments they are expanding into. kriti: when it comes to market share, compared doordash to uber eats or the others. >> this is still a very fragmented market. when you think about gross margins for delivery, it's not more than 50%. ridesharing is north of 60% area we have seen that with uber getting to 20% ebita margins but the delivery side is a three sided market laced and the

delivery side is one-sided. the fact that you get sony vendors specializing in grocery and convenience and alcohol, that makes it worse for this market. doordash clearly has exited -- is executed well but we need to see that in profitability. jon: what broadly was should we look to as far as them cutting coughs -- cost? this is also a company that has expanded globally, they are in europe thanks when acquisition and i imagine people have questions about that cost as well. >> that's where i think the supply acquisition is key. until last quarter, all these companies were paying to get apply either more drivers or whatever but this time around, uber said they didn't have to spend on supply acquisition and

that's a big art of the cost terms of -- in terms of what drives leverage. kriti: something we will keep an ion. we thank you as always. we are looking at applied materials, the semiconductor company will have first quarter results after the belt and the company outlook may reflect weaker demand. let's bring in ian king and it feels like chips broadly have been on an upswing lately. what makes applied materials stand out here? >> it's going to provide us with a read on the future spending plans of the chip industry in general. that's because it's the largest maker of chip equipment, the sheens you need to make chips. the key thing is what's happening with china and what it's doing in terms of its own supply. does it have enough of its own

chips to fill its own orders? jon: if they could make more machines to deliver on those orders, they would be? >> that's been the story all along for the last few quarters. analysts are saying, if you can't get the machines out, how long can this last? we are seeing reduced spending from micron and intel. kriti: tell us about the spending because if you are looking at a long-term horizon when it comes to domesticating some of the manufacturing capacity, shouldn't it actually hurt prices and hurt margins more if you bring them back on shore? >> that's something that has nothing to do us applied materials and has to do with the actual chips themselves .on ensuring is actually good for applied materials because it will force a replica nation of facilities where is everything

now is done in terms of efficiency, the bare minimum. if you decide you need to have capacity in certain locations regardless, in theory, the spending goes up and it's not as prone to some of the swings we have seen. jon: you mentioned geopolitical. trade restrictions have been a source of tension within the industry. what should we watch for on that front? >> that's a good question, one of the things applied materials can give us a good read on is how fiercely the restrictions on u.s. exports to china are. they said this could cost us $2.5 billion in lost revenue in exports to china if the rules are applied. if we get some permits, maybe it could be as low as 1.5 billion dollars. that will be closely looked at

it we get guidance in that particular area. kriti: where is the growth market for a like applied materials? what regions are they looking to? >> clearly, china is increasingly shrinking as an opportunity. they are saying that the overall budget or demand for chips may be in a downturn and that hurts capacity spending. chipmakers are really locked into this fierce competition to include their technology and therefore spending, high-end, anything related to ai processing where there is a gpu or a microprocessor has to be done on the absolute leading edge of production. that gives these components greater capacity and makes it more efficient and gives him the ability to crunch more data. that's the area driving demand for the highest end machines and

technology. jon: let's come back to the ai boom and you have seen a stock like nvidia this year getting so much attention, maybe stealing the spotlight from the broader chip industry. >> it's been crazy. the bottom line is, somebody has to move all of this and someone has to be making sense of the data. as far as investors concern, this is the company that is made its name in this area over the last few years and we are betting it will be leading the way as we have seen new features being understood into everyday life which depends on ai. >> we will be watching that closely and we will watch the earnings later today. applied materials is coming up later and coming up, the insurance giant painting a picture of the road ahead with

its asian operations and interest rates. we will hear from the ceo next. this is bloomberg. ♪

jon: this is bloomberg markets.

time for today's for what it's worth and our number is $170 million which is the pretax earnings benefit tomanulife financial and the canadian insurance giant which also owns john hancock expects rates to be elevated. earlier today, the ceo shared his outlook with us. >> the big unknown is how high will rates need to go to get them nation to the target rate. i think it will be difficult to get inflation down to target rates and it will be stubbornly sticky and high. after having a decade of lower rates which is has in a headwind with us, we are seeing an environment of higher rates which is a causative fair business and their industry. jon: obviously, there was the expectation this year that the interest rate story would be a net benefit to the financial services industry.

the question is what is the economic road ahead and what kind of damage can come from that depending what landing we might have. kriti: i think this is where perhaps some of the larger companies and wealth managers and asset managers can learn from the market, the idea that maybe the carnage of last year, the impact of the fit pricing we discussed earlier, maybe a good chunk of it is already showing up. how much of that you need to take into account? jon: very true and for this company which has huge exposure in asia and china as well, the reopening is a story we will have to watch. he is optimistic for the year as well. kriti: let's get a quick check on these markets. the s&p 500 is still on the red, down about 0.5% and the nasdaq is down about the same margin.

the 10 year yield is 382, higher by about two basis points and dollar and brent crude, nothing to write home about area stick with us, more markets ahead. this is bloomberg. ♪ 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.

romaine: we are kicking off to the close with two hours left in the trading day. economic data as may be behind us. the big question is what is -- maybe -- katie: we look at what is going on. romaine: it is good to see you. katie: it is good to see you. i missed you. a lot of rumors by am back on set. the s&p 500 is still off by about 0.5%.