>> we are still in a slower growth environment. >> i think earnings estimates are not really reflecting the fact that we are slowing down as much as we are. >> i think tech outperforming could be the forward expectation. >> microsoft is magnificently positioned and so is google and amazon and meta. >> google and amazon, these are stocks that could be up 20% the rest of the year. >> this is bloomberg surveillance with jonathan ferro, tom keene and lisa abramowicz. jonathan: it's fair to say that tech bears are in the driving seat this morning, good morning,

this is bloomberg surveillance. equity futures are positive one third of 1% on the s&p 500 but check out big tech with big results after the close yesterday. microsoft this morning higher by 8%. tom: it was really something, charles cantor really sounding it off and he may be in the best position of anyone. he was game changing his seat within the market today with futures up 12 and it says what do we do to get through this we can get onto apple on may 4 after the fed? jonathan: it's a beat on the bottom line for apple. and they talked of the generational shift we are about to see. lisa: this is what everybody wanted to hear. open artificial intelligence will change your lives and make us work less and be more important is what they want to hear and they say this will be a game changer and google says we've seen this thing before and they are up 1% but apple is up

more than 8%. jonathan: too much happy talk, first republic shock yesterday. you have this big weighting on the index would big tech getting it done and this worry in the financials captured by first republic. tom: i was captured yesterday afternoon watching every tech slide from nine down to eight. i went back and forth on twitter with dr. el-erian and to me it's the el-erian field of game theory right now. i suggest the institutions including fbi see look at this as a discrete bank issue and not something that has contagion to other banks. i'm just guessing. jonathan: the latest news and less 24 hours after all this and there is speculation at the moment, they could be selling up to $100 billion in assets. this will be painful it they go in that direction. lisa: the bigger question is it a first republic issue and svb

issue or is it a broader issue? we saw earnings after the bell that were stable. this is a model. it's an economic model and at what point are stock traders saying this economic muddle is goldilocks? tom: we have to wait for the data including economic data today. the muddle is many different narratives. you can choose your narrative that's all there is to it. i'm not surprised by the tech dominance we saw and what we will see. one thing yesterday that struck me is they announced a massive share buyback at ups. i'm sure the audience will sound off on this. within that is the idea of them hiding how well they are doing. guidance is tough, we will lay

off at 3m etc. but use the cash. there is a real oddity going on here. jonathan: we will get meta a little bit later and amazon after that. tom: it's important we have things to look forward to but this morning, we've got boeing, norfolk southern and then we have arson no. --areseult jonathan: this is what the market looks like now. a much bigger lift on the nasdaq off the back of those dig tech results after the close yesterday. in the bond market, three point 40 on the 10 year, a break of 4% on the two-year yesterday. on the back of weaker economic data and the fed indicators. i haven't seen money supplies discussed so much. m2 is back on the agenda.

lisa: amid the optimism in tech, you are seeing pessimism in the underlying economy whether it's consumer confidence or fed surveys or the idea that the tightening is taking hold and that's the reason the sense of business investment we get from u.s. wholesale inventories and durable goods through the month of march that is due at 8:30 a.m. will be interesting. here we are talking about american resilience and corporation still making money and doing well and people are pricing out rate cuts -- rate hikes and pricing in more rate cuts by the federal reserve. is this really an economy were companies can pass along price increases to consumers or is this an economy in decline? we get meta reporting after the decline of those shares are up 70% year to date and can they come through the same kind of optimism we suffer microsoft with open ai and google? are they still remaining resilient at a motley time?

norfolk southern also at 8:00 a.m. and we will talk about what happened with the fallout of the derailment in east palestine, ohio as well as roku and mattel. some of the specific stories are interesting. with norfolk southern, regulation is key so how much more will there be? tom: it will be interesting to see the forward guidance. jonathan: i'm waiting for that as well. joining us now is the chief strategist at hsbc. you have been bullish but not enough to turn december -- defensive. save nice positive catalyst about to hit us, what is it? >> i think it's partly the earnings season. what we saw yesterday confirms that earnings are not as bad as feared which is good and i've

taken away from you guys in the introductory remarks is the muddle. this is the best thing that could possibly happen to us now. quite frankly, if we got things to good, then what lisa was saying, we will probably price out the rate cuts. we will actually price in more rate hikes again. we don't want things to be too good. likewise, we don't want things to be falling off the cliff. it's actually really good to have a couple of things to the upside in a couple of other indicators surprising to the downside. that's absolutely great from a risk as perspective it means lower volume and rates and it means we can get going with stocks higher. tom: can you have a bull market for a constructive market if a certain percentage of the stocks don't participate? >> i think so, particularly when

you look at the last couple of years what that has done to market capitalizations and market concentration. that obviously hasn't changed. we see some of those names have such an outside weight with things like first republic yesterday that that doesn't carry the weight as much. the same applies to europe. we have a bit of that china reopening trade in europe, better consumer spending. that's coming through and we've got the realization that european growth in the u.k. and the eurozone is not as bad as feared, it's not great, it's not rock 'n' roll, but it's absolutely not as horrible as people have fear. lisa: how long can economic muddle beat goldilocks? >> it's probably going toward

the summer. our timeline is for the summer/beginning of the second half with the next three or four months. the problem will be that we will have much higher earnings expectations and much higher top-down growth expectations. the narrative for 2023 a couple of months ago was the first half will be bad and then the fed will pivot and then you get a recovery the second half. that means the bar to beat on the earning side and the top-down site in the second half will be much higher. our forecast is headline inflation in the u.s. will re-accelerate toward or .5% for the end of the year and we still have two rate cuts by the fed being priced in. that sort of fights each other, that cannot happen in combination. one of those will be wrong so our timeline is next three or four months towards the summer becoming a little more defensive and a little less constructive. jonathan: next week, the fed

comes into view. where does that leave the fed decision next week? >> i think it's basically more of the same. if i was the fed, i would be as boring as possible but basically saying that 25 basis points will not give you as much guidance as you possibly think. we will not be concrete that this will be the last or there will definitely be another one. they will still say we are data-dependent and there might be better labor market data but it might not be opening the door or leaving the door open for another 25 basis point hike. as long as they do that, it will be a pretty non-event. jonathan: staying bullish, thank you so much. this was the note that was put out overnight -- a hawkish pause needs -- leaves

the most room. it sounds a good bedtime story. a dovish hike in may? not too hot, not too cold, just right? lisa: there was something in that note that was interesting that he highlighted which is core cpi has gone back to the range it was in from 2019. where are weak in the fight on inflation? in the earnings reports, you also see really motley picture with some comedies able to raise prices more than their fundamental costs just with some companies able to raise prices more than their fundamental costs. tom: what's lost in the news flow is the inflation watch in the answer is, if you throw on a 4% inflation and you don't believe in the 2% inflation but of its 4% plus whatever gdp is,

you get revenues still pretty good and maybe another quarter of earnings that no one is expecting. jonathan: proctor and gamble, kimberly-clark, pepsi, credit suisse this week. lisa: increases. jonathan: double digit across the board and the consumer does not seem to be pushing back. lisa: it didn't bother their bottom lines and i love chipotle which beat earnings because avocado prices went down. tom: did you write that tweet from chipotle? lisa: with the volatility and inflation, the opportunity is there. jonathan: you don't strike me as a chipotle guy? . they should sell margaritas. yesterday, first republic cut in half and this morning, struggling to bounce up and next, christopher marinac on a

beleaguered bank in the united states. lisa: keeping you up-to-date with news from around the world with the first word -- house speaker kevin mccarthy is moving ahead with a vote this week on his bill, making a debt ceiling increase to spending cuts. the measure is in danger of being sunk by mccarthy's fellow republicans. gop lawmakers are midwestern states have raised concerns about provisions that rollback fuel related tax credits and subsidies. the pentagon is learning valuable lessons from the invasion of ukraine. according to the defense deputy secretary, those lessons can come in handy in case of a conflict with china. this united states needs to build a steady ammunition pipeline. high-frequency indicators in china show the economy kept expanding this month. the strength of the recovery is under scrutiny because of unemployment and uncertain

global environment. our index of eight early indicators rose in april and that was largely due to a jump in car and home sales from a year earlier. shares of microsoft are higher after the company posted quarterly profit and sales that were better than expected. corporate cloud demand was resilient, plus the company gave up beat forecast for its growing artificial intelligence services. microsoft will step up spending to meet customer demand for new ai tools. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> we need to have clear standards that apply that are transparent and i'm really concerned about the fallout, in particular, i'm concerned that we are seeing a flight of capital away from community banks, wafer midsized banks to the giant banks. jonathan: in many ways, that's precisely what we are seeing. a conversation between the republican senator ted ruth and eric colleagues. on balance of power yesterday. you can watch that on bloomberg.com and the bloomberg terminal. welcome to the program with a lot to get up to speed.

just about positive on the s&p 500 but that marks big moves elsewhere in big tech. microsoft absolutely flying, the beat on the top and bottom line strong guidance about what's to come around ai and up to boost his name by almost 8% in the premarket. that's the good stuff so let's get to the bad stuff. first republic cut in half in yesterday's session, is now positive but just 3.8% this morning. it's a single dollar stock, eight dollars, single digits. from jenny montgomery scott yesterday, listen to this -- they need to pull off the mother of all pivots to survive. tom: the reporting yesterday said what needs to be done at frc. christopher marinac has not been

a stranger and we thank him for his participation. what was out there yesterday, article two article, research note to research note was a guesstimate of the haircut needed. let's review -- they have garbage loans, jumbo mortgages taken out at 2% or whatever. when you do the math, is there a way to ascertain the required haircut for their management to find stability? >> i think there is. they have a lot of government securities and loans that are simply underwater because of interest rates. it's not a credit issue, it's more interest rates and they have fixed rate mortgages that were done at 3.5% and the world is easily two or three points higher. that's the reason for the haircut and it's the uncertainty about the ability to raise capital. that's always where the challenges for these banks. i think the lack of knowledge

and the lack of questions monday night did not help matters. i think the company needs a solution and there's three ways out of this. they could raise capital, sell or fail. tom: what's interesting is the optionality for secretary yellen and other government institutions. do you suggest it will be a clean haircut with or without government intrusion or will they be able to negotiate some form of more balance sheet take out that includes some form of equity option? >> the treasury has a program in place where community development banks where the treasury invests in preferred last year at a 0% rate for two years and that was 2% after that. they would have to make a special dispensation to make first republic a buy but is not a crazy solution. it would give them capital from the government like we did in 2008. that would be a one company solution.

i'm not sure they will do that but it's an option that the secretary has at her proposal if she wishes to. jonathan: you said three options, raise capital, sell or fail. let's assume they don't want option three. what does option one actually look like? >> they would have to do a combination of equity and preferred. equity is the best alternative. it would most likely be done on last nights prize been on this is early a lot below. it would allow the tangible capital to recover, take losses, move down the road and lived to fight another day. will the company dilute their shareholders by such a massive amounts? we saw this happen in 2008, nine, and 10 so as not the first time we've been through this exercise. it's a question of whether the board and the management team will keep the existing team. they will have to unless they find a bid this more reasonable. lisa: we are talking about this

company and debating whether it's idiosyncratic or emblematic of larger bills and the regional banking sector but a more concentrated version. how do you look at this in terms of what it exposed about the broader sector? >> overall, credit quality is so good. thanks give out way better information than 15 years ago. if we look at substandard rate in credits and special rated credits, anything that's not a pass, you have typically 2.5% today that is double medic at a bank. that's away away from 10% back in the great financial crisis. we have a long way to go for credit quality to match the last cycle. i feel credit is not the issue, this is the interest rate problem in many banks have securities available for sales and even though rates are down, they are still below water and easily 10-12%. we either have to raise capital

to create confidence around the losses or we simply have to wait. in the case of first republic, it's impossible to wait. they need a solution quickly. lisa: we also have to think about what the implication is for lending and loan creation. ubs says banking and industrial loan growth looks to drop about 5% in the last few months of the year and 10% in the first order of next year which is associated with recession-like conditions. are you starting to see that type of necessary response to the lack of deposits around the balance sheet? >> i would disagree with the percentage change. banks will be very careful about the standards they make and the weight they allocate credit. the flipside will be that they will charge more for that. i think repricing and the banks is better than folks realize which could actually be a positive for net interest margins beyond this quarter. this quarter will be a challenge but in the third of four

quarter, we could see stabilization but also increases in margins. jonathan: this was really kicked off the middle of march with svb but we've understood the rate story which is an aggressive hiking cycle. i'm already getting messages from people saying what took so long to consider asset sales this large? what have they been doing? >> that's a great point. a lot of companies thought they could simply use their liquidity from the banks and other sources to work through the issue. i think that was a false narrative. the reality is if banks would have been more likely to hold money at the fed all along instead of buying treasuries, he would have been easier solution and they wouldn't have had a mark to market issue and that accounting has been harmful here , no different than 2008 and nine but we have to account for this every quarter and i think the lack of understanding about when banks would see either sales of securities are simply

natural amortization has been more that challenge. we are getting better transparency but i still think the issue is to raise incremental capital to create confidence around the issues we still have. jonathan: wonderful to get continued input from you on this story, thanks for being with us. first republic a stunning note readingfrc needs to pull off the mother of all pivots. they will certainly try a combination. tom: you are looking at item number one and that's maybe a static analysis. lee said nailed the dynamic nature of what we are seeing with the banks. i would go with the lending slowed down in a phenomenal overlay note. nobody is talking about the revenue producers are walking out the door. i cannot say enough how 20% of

the revenue producers produce 80% of the profit and that means 80% of the profit margin dynamic is moving out the door now. i don't want to mention the names but all the other firms we talk to each and every day. jonathan: a similar story to credit suisse in the last year. lisa: that's the key issue they talk about with ubs integration and how concerned they are about retaining the talent. jonathan: looking ahead to the federal reserve next week and the data this week. your equity market is just about positive on the s&p 500. ♪ erospace, advancing flight for future generations. ♪ welcome to a new era of flight. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey!

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jonathan: equity markets are positive this morning. on the s&p 500, positive one third of 1%. the nasdaq 100 positive 1.2% this morning, a lift given to it by microsoft, up by almost 8% in the premarket. of feet on the top and bottom line for microsoft with encouraging words about the cloud and the future of artificial intelligence and what it means for search. allete for that name in other names, amazon is positive off the back of that and looking forward to meta later. tom: first republic bank has a nice lift up to 850 and begins

to roll over. it will be interesting to see. for those who are bored by this, it matters to global wall street and we will follow every tick of first republic this morning. jonathan: still going with an eight handle. here is the bond market -- monday-friday, the two-year was up at yesterday a break of that level, down three basis points on the session and dragged lower by these regional fed indicators . big talk about money supply contracting at the fastest rate in who knows how long and we will talk about that in a moment. in foreign exchange, keep an eye out for euro-dollar middle of april, $1.10 and we are back to

one dollar $.15. a strong euro story in the mix this morning. that's want to watch. tom: i will go to euro-yeah and. -- euro-yen. jonathan: they still want your review of the spurs game over the weekend. tom: they blew up the coaching staff and then they came out with a fan appreciation committee. jonathan: have you ever seen anything like that? tom: i almost choked on the last sip of my martini. jonathan: the players are doing that. tom: tom: i've never seen it. lisa: i don't want to go back to the dollar but one thing that was interesting. did you see the comments on that? there was one top conviction

trade was short the dollar because of policy missteps and because of policy missteps by the federal reserve and the potential debt ceiling debate. it was all around the most bearish thing in terms of his view but telling at a time where he didn't have much other conviction. jonathan: a legend of the fx market going back a ways. the trade he missed may be the biggest miss of his career, suggested by drucker miller going long u.s. dollar last year. the way he explained it i thought was interesting. he didn't have much faith in this administration or this federal reserve and ultimately, that was the reason why he wanted to get long on the u.s. dollar. that was a trade that fell apart at the end of september with major moves up the back of a much stronger dollar and weaker euro and weaker pound and that's turned around over the last few months.

tom: francis donald joins us now. really good at the minutia that adds up to her growth to mystic product. if we don't get a recession but we get a muddle, 1.5% gdp, not under zero, what does that feel like? >> it depends how the central bank's response to it. i am more concerned about that very slow but persistent weakness than i am about a garden-variety recession.

we know what to do in garden buyer -- garden-variety's recessions and banks typically pivot but what we are witnessing is of covid distorted economy where we see de-that hung on much longer than they would have another cycles and housing is already starting to reap accelerate. i'm not sure we will get the same response in things like gdp data to the dredge -- true the additional shots we seem. the risk is we continue to hear that there is no recession and therefore you can go along but if the fed says no recession means we hold, that's a different investment playbook. tom: you got a colored dot chart. it looks like louis vuitton purses. the chart you mentioned is one of your great concerns and lisa mentioned it earlier which ism2 growth. i'm surprised on that. >> i'm not just of monetarist.

we look at all elements that lead to the economy doing poorly and that's the problem here. no matter what the assessment of growth is going, every traditional leading indicator of recessions is flashing red. some of these are flashing red not consistent with small recessions or big problems we had like in 2008. that's not necessarily where we are going but i say to my team that even if we cut in half hour concern about down size and growth, we are still looking at a very difficult economic environment. to ignore the breadth of the challenges that exist, i think that will be problematic. tom: lizann saunders scored this out yesterday on twitter. lisa: there is this idea of what happens when suddenly the restriction by central banks starts to play out in markets.

you say that the economic muddle is difficult to read because we don't understand the different inputs and the cycle but if you take it at face value, white -- why if it's not too hot or cold in the fed is stuck in the middle and things can grind forward for a few months? >> because we are an extremely high levels of interest rates for this level of the economy and we are heading toward a sizable credit crunch. this is why data like the senior officer loan survey will be incredibly important. even if gdp numbers are not negative, this is still an economy that's struggling to produce revenue and will struggle to produce jobs. we will have to move away like we moved away from the concept of the unemployment rate giving us a good sense of the health of labor market, we will have to move away from gdp is giving us a good sense of general economic activity that exists.

if the federal reserve will still be focused on these traditional indicators like gdp and unemployment or even that pce inflation rate, we will not get relief from the. this is a market that is already priced in some relief. the problem with slow growth that is not a full-blown recession is we likely don't get relief on the rate size and this will produce a challenging risk environment. lisa: when you talk about some of the challenge profits and things that corporations do, this is one of the most surprising aspects of the earnings season. proctor exit -- procter & gamble and kimberly-clark had expanding profit margins and were able to increase prices. what does this say about how much weakness there is or how much tolerance there still is by consumers to absorb those price increases? >> it speaks to the de- synchronized nature of this environment. we see some of the challenges that flow through primarily to

small businesses. small businesses are heavily credit dependent and they. the majority of jobs since 2020. as companies feel the pinch through the credit channels, they will have to cut costs in some ways i think that will flow through to the labor market. we have a consumer that held on longer than it would have historically but all evidence suggests excess savings are coming down and credit will be coming down and labor market will weaken. there is ability to absorb those price increases but six months from now, not so much. it comes back to the job not telling us what is happening now. we are ok now but it's to look forward six months and that's why it's key to this aggregate between coincident indicators, leading indicators and lagging indicators. when you do that, coincident data is find of the leading indicators is where the challenge is. fusing those two muddles the

story. jonathan: the bank of england says we need to accept that we are poor. er. we are facing the reluctance to accept that and we are all worse off and we have to take our share to try and pass that cost onto one of our compatriots and say we will be all right but they will have to take our share, too. this is bizarre. he is saying we need to accept that inflation is high and that wage growth won't be enough and we shouldn't push for higher wages. what do you make of those comments from the bank of england? >> it's concerning in the sense that we know the bulk of these challenges have hit low income households across the world who have seen their share of spending on food and energy rise. i do interviews with people

talking about record lines at food banks so telling someone who is struggling that they have to accept higher inflation will go down more problematically. however, the bigger investment concern is that we are used to an environment where central banks provide relief and comments like this keep me up at night because they say some of the difficulty we are seeing in the base and what we are seeing for household is a future bank policy and it suggests we have to reassess that decision for all central banks globally and if we do that, we may not be getting the standard relief rally that comes when you see lower growth. it's effectively a stagflation response and it's much more challenging for almost all asset classes than a two quarter dip of a fed cut in a re-acceleration. i'm not sure the market has grasped the risk of the

recession with no rate cuts. comments like this concerned me. jonathan: thank you so much. there is a reluctance to accept a yes. we are all worse off. is that something we need to accept? lisa: let them eat cake is the marie and when at moment. -- marie antoinette moment. jonathan: another embarrassing moment for the bank of england. when you've got thoughts like those, maybe that's a moment not to talk. tom: england is way worse off than the united states now. jonathan: in your equity market, positive 0.2% and the euro is stronger against the dollar ,

$1.10. lisa: keeping you up-to-date with news from around the world -- speaker kevin mccarthy is confident his bill linking a debt ceiling increase to spending cuts will pass in the house floor this week despite the within his own republican party that threat to vote against the proposal and some don't agree with the measure and work requirements for medicaid requirements. the u.s. will gradually let sanctions on venezuela of the country moves toward restoring fair elections. that's according to the deputy national security advisor. he spoke in columbia at a summit aimed at restarting negotiations between the venezuelan government of nicholas missouri -- nicolas maduro in the opposition. shares of google and alphabet are higher after they reported first-quarter results that beat estimates. the cloud unit turned a profit for the first time. it's dominant search business

weathered the economic downturn. u.s. companies in china are growing more pessimistic about their relationship between the two countries. according to a survey, 87% of those responding are negative about u.s.-china ties which is 14 points higher than the previous survey. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪ if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity. [ cellphone vibrates ] you'll get proactive alerts for market events before they happen... and insights on every buy and sell decision. with zero-commission online u.s. stock and etf trades.

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>> microsoft magnificently position and so was google and so is amazon and so is meta-. these folks own the largest computers in the world and they will rent them out to everyone

else and everyone else will enjoy a 500 basis point margin improvement over time. that is going to be very good for the economy. jonathan: just absolutely brilliant yesterday. charles cantor mentioning the big tech names and the enthusiasm for microsoft reflected in the moves this morning with microsoft positive by close to 8% with equity futures getting a lift on the s&p 500 and the nasdaq which the nasdaq is flying off the back of these numbers from microsoft. the s&p 500, futures are positive about a quarter of 1%. before we go forward, we just rolled over on first republic in the premarket so we are negative in the session so it's a break of eight and we are trying to get into the sevens on first republic after the stock was chopped in half yesterday and the follow-through from yesterday was asset sales up.

we spoke to jenny montgomery scott who summed it up -- they need to pull of the mother of all pivots to survive. it will either be a combination of asset sales and possibly a capital rate. tom: our team is up in san francisco working on this and in washington as well. will washington get involved in this discussion today? i would guess they will, a new low at 7.75. jonathan: things that move pretty fast. it's still april and this got going fast. tom: they are overcome by events. off of the wonderful comments of charles cantor, we had the senior analyst at oppenheimer this morning with a real gift on microsoft.

let's go back to the time of the old microsoft. let's begin with a new microsoft. how is this microsoft different than the microsoft we covered years ago? how is it different than our stereotype? >> for one, is not a monopoly anymore. they have to compete in creating products and they were far behind amazon and they had to be more innovative. you see the take the lead on ai and model their business model around ai which is different. tom: what is their use of cash picture? do you look forward with this good news and margin resiliency with the defensiveness? do you look for a new use of cash and by by -- in buybacks and dividends?

>> they have a steady dividend. they say they will spend more money on capex for ai with new nvidia chips that are expensive and they are buying a lot of them. lisa: do you by the promise of open ai? >> totally, i think it will be the most profound thing we have seen in 10 or 20 years. i think back when i first got on the internet 30 years ago go how much of a revelation that was and i think we will look at the same thing. lisa: is it a real liability for alphabet that they downplayed it to get a competitive edge with respect to microsoft and downplay fears that they will lose preeminence with their search engine? will they be left behind because they are not emphasizing it to the same degree? >> it will be a critical 6-9 months ahead of us.

open ai gets better and more people use it but we know google and amazon are throwing billion's of dollars into it and they have good language models. people will start using them and microsoft may again become the operating system for the pc for the next 20 years. lisa: i understand the promise of this in terms of efficiency and productivity. what is the timeframe for this being actually profitable for the likes of microsoft? >> for open ai, they have a product that is helping people write software. it has improved the amount of software any programmer can do by 50% and they charge $10 a month for that. they have 10,000 companies using that product but they will charge a similar add-on for office 360 five and that will probably be in the next 6-12

months where they will add on prices to these applications. they are just bundling together a whole set of products that they never would have gotten before. tom: you've been doing this for ages. can you extrapolate what you witnessed yesterday with microsoft, up 8%? can you extrapolate that over to apple and nvidia and broadcom etc.? >> that's a great question. i think the microsoft share will be difficult and amazon's core will be important but i think it's company by company. they are not trying to say their leading indicator on macro because they don't know where macro is going. it's probably slowing down. they think they are gaining share on six or seven different products.

we are not sure what it means for the whole tech sector going forward. lisa: as you talk about artificial intelligence, where are the ethical concerns as many tech giants have been talking about perhaps pumping the brakes a little bit and understanding it better before it gets rolled out en masse? >> that's a great question and i'm no expert but firearms kill a lot of people in medicine kills a lot of people. it doesn't mean you stop making medicine. i think the genie is out of the box in ai but we will need some regulatory rails around it. jonathan: thank you for the latest on microsoft, that stuck up more than 8%. -- that stock is up more than 8%. frc is down about 6% on the session. tom: we try to avoid

inflammatory words but this is a plunge and now a new low. jonathan: yesterday was a plunge and we've had to redefine what a plunge is. it got cut in half by close to 50%. lisa: now people are parsing whether this is specific or something for their regionals. tony dwyer said his view remains the same that this highlights some of the broader concerns in the bank industry that affects their belief in recession and we saw that yesterday. first republic drag the entire market down. tom: may i suggest that perhaps we see government announcements before the market open on this? jonathan: we have no idea. you can speculate. tom: will we enjoy this at six dollars? jonathan: if you look at kre, the regional bank, you get a

free market view and it still posited by half of 1%. the more this is isolated, the more comfort we can take away from the situation and that's what people will be focused on. does it lead to difficulties elsewhere or will it be isolated to this name? elsewhere, you are still seeing things holding up. lisa: it's because of this muddle through and how much tech is supporting everyone. jonathan: meta later and onto amazon tomorrow. it's a stealth rally, something like 20% higher. tom: i agree, it's off the radar. jonathan: microsoft and google because of ai, amazon quietly under the radar putting in a gain of 20% year to date. tom: i cannot cite the source but thoughts of amazon having announcements this wednesday on

expense control, job reductions in moving further away from the covid over hire. jonathan: lorihein will join us shortly move will talk about the banking situation and if we get a credit crunch later this year and where it leaves the federal reserve which is facing weaker data so far which is starting to drag down yields in a material way. we've gone of north of 4% on the two-year south of 4% on the two-year. later on, blackrock and the 9:00 hour and j.p. morgan asset management. he is looking for 3% through the curve from the two-year all the way out to 3.00 through the curve. we will have that conversation a little later with your equity market just about putting up -- holding up at fading on the s&p 500 is first republic struggles to balance with that stuck down 8%.

♪

we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

>> we are still in a slower growth environment. >> i think earnings estimates are not reflecting the fact we are slowing down as much as we are. >> microsoft magnificently position and so is google amazon. >> mehta, apple, amazon. google. these could be at the top of the game this year.

jonathan: two stories this morning. one good, one better than good. the other, ugly. good morning. this is bloomberg surveillance. i'm jonathan ferro alongside tom keene and lisa abramowicz. just about holding on to a seven handle on first republic. that is the ugly news. here is the better than good. microsoft in the premarket close to 8%. the comments around ai encouraging for this. that is what they want to hear. but they are facing a important moment this morning. tom: i agree. is this a discrete camp where this is like the s and no crisis

in the early 1980's. -- s and o crisis in the early 1980's. there has to be a massive focus on the fed reserve. jonathan: the conversation the last few weeks was that svb collapse was not a -- lisa: you do not see these pledges without a downturn. it is notable. you may get a longer-term defensive. good news and bad news it is the model. do you street -- do you treat it as risk off? tom: michael dart came yesterday. he said this beautifully. the media likes to do interest rate and financial market analysis. there is a point where it rolls over to the balance sheet

analysis. are we to the point where asset dynamics may be more than the parlor of rates? jonathan: jamba gunnery in the past hour. this is a line -- janet montgomery scott in the past hour. -- these are the decisions right now. i am not sure what option three is. we will pick on the story throughout the hour right here on bloomberg tv and radio. we are positive on that s&p positive by .1%. tom: one note as we go to lisa, it is the widespread of the tf those compared to the keynote.

all you have to know, it is a cliché, we are in uncharted territory of the high three month yield and the low 10 year yield. jonathan: no other spread to talk about right at the front end of the curve. lisa: there is an idea you see three month yield highest relative to one month yield going back to the early 2000's. as a result, that being a d-day for the debt ceiling debates and where the money gets cut off. we are focusing on the economic data. u.s. wholesale inventories for march comes out at 8:30 in the morning -- 8:30 a.m. how much will that be confirmed in terms of business orders? how much will they be going down? meta will be the latest to

report. given the fact that google shows resilience with respect to that business. the shares are up or than 70% at meta. other interesting earnings to note northern southern -- nor folks southern coming out with what happened in east palestine ohio and how much this reads into regulation and more clamp down by the u.s. government to make sure this never happens again. a motley picture of stories that is not getting clarity in terms of where we are in the economic cycle. jonathan: this take shine off of the microsoft earnings yesterday. this is just in from the u.k.. this is written by catherine kemo here at bloomberg microsoft $69 billion takeover at activision blizzard has suffered a blow after they vetoed the gaming industry's biggest ever

deal saying, "it would harm competition on the cloud. ". it cannot be solved by remedies by sale of blockbuster chat gtp. this is according to a statement that came out months ago. activism -- activision blizzard is down by 12%. and taking some of the shine and polish off of the story yesterday with microsoft. the stock was positive by close to 8% now it is positive by 7%. lisa: this is where regulation and the potential of policy becomes major risk. it is not antitrust it is rejection of the businesses overseas, in china, elsewhere, to this point, it is how much this can drive everything. with a potential risk. tom: microsoft up 8% now at 7%.

we will watch it closely but i just did not want to go forward here. infinite warfare. when call of duty goes live -- like 10 years ago. lisa: have you ever played it? tom: call of duty? well -- you know, right here on tv it is an ugly site. [laughter] jonathan: let me bring the real value if i can. macro soft plans to appeal to block the activision deal. it is down hard. and the s&p 500 futures are fading fast. we are about unchanged now. first republic in focus. down almost 15%. negative. tom: first republic under seven

dollars. jonathan: now trading in the sixes. lori heinel joins us now at state street global advisors. we are trying to figure out what this means to the global market economy and the fed reserve next week. how do you view that data this morning? >> you have to put it into perspective. what is this mean for financial conditions broadly? they have an impact on the u.s. economy in particular because they provide mortgages and do a lot of things that actually help to propel the economy forward. it is disturbing through the lens of tightening conditions. and yet through another lense while the fed continues to tighten. lisa: given the fact we see resilience of other small

regional banks and earnings, how much can we understand the systemic restriction in lending this will apply to markets in the broader economy? >> we think it is not systemic in terms of a major run in the bank so to speak. you reference the crisis from the 80's earlier, we do not think it is that environment, but it does tighten credit conditions. we have a variety of other things including the fed potentially raising rates again. will this pass over the next couple months or will it become more insidious? part of that will be what the fed does in may and what they signaled they will continue to do. we still have a view that the fed has gone too far already. they continue to press on the brake pedal, and it could create quite a stress in summer and fall. lisa: we had a guest that came on and said nobody knows to what to do.

it is goldilocks so let's go and go into risk. why not go that route for the next couple of months if we are waiting to see this and that. meanwhile we have companies bread and butter of america delivering better than expected earnings. >> this is very much a trading market. we went overweight u.s. equities in our most recent call because we see resilient earnings coming through. corporate balance sheets are in pretty good shape. this is not a story that impacts finance in short-term. the question is how long do you buy the trade? it is only a mental -- a momentum trade for sure. it will get more -- over the next couple months. we will see if we see credit conditions tighten. in derailing the u.s. economy further than we were expecting. tom: are we getting -- jonathan:

are we getting indications of that now? >> we are. consumer health is less than it was. we are back to pre-covid levels in terms of earnings power. corporations have been resilient, but it is a pivot trade. it is not about just by commodities, you have to be more selective. look for where there is relative valuation and strong cash flow. jonathan: we appreciate your insight. lori heinel of state street global advisors. and this is an individual writing that they see reasons for a hawkish pause. at the fed reserve followed by a hike in june. unless they can can firm that a slow down is already in place. we see the risk favoring an on hold position. here is the view in the market. equity futures on the s&p 500

totally unchanged on the s&p 500. with the first republic down 20% again in the premarket. tom: that is on top of yesterday. jonathan: this is the session low and on top of yesterday. we trade right now at six point 40. on first republic. tom: front and center for the bloomberg finance team. we do not see the speculation yet of what the events this morning will be. jonathan: this started the week at the close on monday as a $16 stock. it has been cut in half and then some. down the 6% in the premarket. or on that and we have securities in the next hour on bloomberg tv and radio. the market unchanged. nash equity market unchanged. -- equity market unchanged. >> soule is pledging to not

build its own arsenal. the u.s. and south korea will discuss this agreement today at the white house. kevin mccarthy is moving ahead with the focus this week with limiting spending cuts. with the danger of being sunk. by his fellow republicans. midwestern states have raised concerns about provisions and rollback by -- biofuel tax credits and subsidies. the pentagon is learning valuable lessons from russia's invasion of ukraine. according to deputy -- of u.s. defense the lessons could be helpful with a conflict with china. they say the u.s. needs to continue to innovate space and build a pipeline. microsoft beats quarterly sales. corporate cloud computing demand was resilient.

it gave an upbeat forecast for its artificial intelligence purposes. microsoft will step up ending to meet customer demand for new ai tools. the bahamas to plans to tighten crypto regulations that were tarnished by the collapse of ftx. the company was based on the island along with its fall and founder sam bankman-fried. he moved to the island as a nation soft -- global news 24-hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. 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.

>> what we are doing is rare -- you're responsible. i think it is important for the leaders in the senate to force real spending reforms. let me be clear, under no circumstances should the united states to on debt. jonathan: ted cruz conversation with joe matthews yesterday on bloomberg tv. -- you can find it in the bloomberg terminal. looking at the market right now the s&p 500 totally unchanged. it was up nicely off of the back of better been good numbers for microsoft. the nasdaq still positive for what it is worth.

the microsoft -- microsoft is higher as well. even after the u.k. comes out to block their deal. with activision. if you're away from the screen right now we are in the sixes. we went to five in first republic bank for minute. and we are at 6.5 at the moment. and in the last 24 hours our reporter is putting this together. first republic is exploring 50 billion up to 100 billion dollars in assets in an attempt to skew itself from turmoil. this is for the whole of the industry over the last month or so. tom: in a way we discuss this in the past hour. the jargon is haircut. the bond is 100 and maybe it is trading at 72. to get somebody motivated to buy that where do you price the

bond? that is a discussion but is not happening. jonathan: let's make it simple. i give you a mortgage and rates are at record lows. and they are at something like 3%. you struck a deal. tom: and now it is at 4% right now. jonathan: and then all of a sudden that does not look as attractive. what is interesting on this story when you explain it like that is that it is interesting that the financial institution is facing trouble around that. we have not seen much pain in the housing market off of the back of it. i think that is interesting. you look at the housing data, it looks like -- economist yesterday said that the housing story in this country has already bottomed out. lisa: there's a number of different aspects here including cash. wealthy individuals are posting cash it is not a credit story on that front more. on the margins if the mortgage rate goes down which is closer tied to the treasury and fed reserve. if they go down, people still

need to buy homes. the deficit of housing is offsetting the tightening of credit conditions. through in regional banking, and --[laughter] i am forgetting whose word it was. jonathan: it was bank of america or something like that. this is self-limiting because ultimately rates will have to set lower. i think this is the pce we were talking about which pushes back against this idea. tom: this is dynamics. it is important to understand this is a multidimensional space. we will not -- go deep into that, but we get the price up you'll down bond recovery. but with that, you get a presumed slowing economy. and if revenue producing talent walks out the door for competitors, and boston, silicon valley, wherever, this is very

dynamic. we will try to capture that with our guests the bounce off of 5.50 up to 6.80 at this moment. -- 6.68 at this moment. and we are talking with are reporter. what is the latest on that 6:00 a.m. video yesterday? >> this was already known. we knew president biden was going to be seeking [no audio] reelection in 2024. everybody was talking about the price -- vice president remaining on the ticket until 2024. but bidens biggest vulnerability going into this election is his age. he is the oldest serving u.s. president at the moment. if he did win the election he would be at 86 years old. we had a conversation yesterday about this he takes all these

trips and his physician says he is fit right now. whether it is joe biden versus former president trump, the next term, both of these men will be in their 80's. jonathan: let's get into the meat of this this morning. i don't know if you've seen this yet, the chinese president and ukrainian president are holding a phone call. i'm that one for us. >> it's been puzzling that the chinese president has yet to call ukrainian president since the war is after there was momentum that they thought xi would make an outreach after he visited putin in moscow. he has put out a fuzzy blueprint about a peace plan he would like to see and yet, the united states said that even if this peace plan were real, most of it really looks like it was to the help of president putin. he

would have to engage the ukrainians. until now, in this moment, the first time he had this call since the war began with zelenskyy, he had not reached out to crane. how can use a you want to be a broker of a peace deal when you only speak to one side? i would obviously cage this with skepticism that obviously xi jin ping has a note limits relationship with putin. going as far as to say putin is a defender of world peace. but this will draw pause from the global south that are pushing to end this war. or dealing with high inflation, food prices, energy costs, and they want to see a --an end to this. jonathan: i want to recap this headline.

chinese president and president of ukraine holding a call to discuss the war. and with the diplomacy under president biden and the white house, it is not around ukraine, but also in the middle east where we saw china broker a conversation agreement between saudi arabia and iran, how much of a challenge is this becoming? >>xi jinping is -- a headline mentions that he says negotiations are the only solutions for war. but the united states has said nothing about ukraine without ukraine. ukraine will be the one that decides how the war --ends. president zelenskyy does not want to give up land. and there is a question of what happens with crimea. it makes it harder for the united states because, the president of china is giving countries and potential plan or

outlet they can sign up for. we saw that most recently with brazil's lula going to beijing and criticizing the united states. and closer to home, emmanuel about con -- going to beijing saying that they want strategic autonomy with how europe views the relationship between washington and beijing. this makes it harder for the united states, at the end of the day, it was china that was only able to broker the deal between -- and chiron. the united states was unable to do that. there is no communication between iran and the united states. the president of china could help broker a deal between russia and ukraine because he does have putin 's ear. jonathan: we are looking forward to the conversation. at 5 p.m. eastern they will catch up with this man richard haass. with council of foreign

relations. with more detail on this. negotiations are the only solution for war. and that is the president of china saying that they will send a representative to ukraine and president zelenskyy says his call with the president of china was long and meaningful. tom: that is interesting with the headlines mentioned earlier this week. jonathan: with the chinese ambassador early on. if you want to get up to speed with the price action the s&p 500 about unchanged. two names to watch microsoft up by more than 7%. first republic down a little more than 20% in the premarket. ♪ ♪ welcome to a new era of energy.

jonathan: equities on the s&p 500 holding on unchanged on the essence after a decent game -- on the s&p 500 on a decent game -- again after gains of more than 1% earlier. one move responsible for the big move is microsoft. we will run through that in a moment. outside of that, to focus on the bond market, the two year yield north of 2% reaching the level today and down this morning by seven basis points to 3.8 eight. on the 10 year 3.38. there by a single basis point. we are on your date highs.

an intra-date height of the year on a watch for the euro against the u.s. dollar. right now it is 110 47. 11070 six a few days ago. that is the highest on the year. we are getting close to that right now. stronger euro in the mix after some data for the week so far. lisa: it's been interesting to parse through the banking sector. before we get to the single names. andrew hollinghurst came out and said yesterday why we discussed little information for the macroeconomy and bank results. he says the bank sales and assets is not a concern. the data remains mix but the market continues to focus on the reading of the slow down narrative. how much of that is what we continue to see in the market? jonathan: guidance with revenue coming in at a little over $17

billion. in the numbers dropping a few months ago. and meta 's reporting about a bit later. lisa: let's look at what is moving under the hood. we have first republic with the shares pummeled. cut in half as you mention. down 15%. we are at a penny stock almost 6.80 nine cents -- 6.89. duvet selloff 100 billion dollars of assets? will that be enough? pac west showed stronger results yesterday showing stabilization in their does -- deposits. it is still up 14% but other regional banks are suffering. you see this with first republic america among those. down 1.4%. -- first republic, comerica among those. it down 1.4%.

nell microsoft said they would block the activision deal for the call of duty game. activision blizzard shares down more than 10% in response. alphabet shares down 1.2 percent after beating earnings and giving projections. they did not mention open ai and chat g3 -- chat dtp enough and so people are concerned. jonathan: we've got to play the game right now to defend their position saying that ai, right now, is something they will continue to work on. whereas microsoft is going through a full-scale embrace of this with artificial intelligence with language like this, "we look forward to continuing this journey of what is a generational shift --♪ [laughter] tom: he gives it -- we have an

individual talking about this. we translate what does she mention 500 basis points. move the decimal point over to. he says some a make $.32 on the net margin, ebita, they will 4% or five percentage points because of ai. that gave me pause. jonathan: is the journey so far. the first step. numbers from microsoft and google after the close yesterday. from meta-, amazon, and others coming up. padhraic garvey with ing financial markets saying in part this, "while 10 year yields have seen their peak already it will be there imminent prospect of rate cuts to receive and the carbs. we think cuts will come before the year ends, but the fed is

still pushing for a higher for longer narrative keeping greece deepening reflexes at bay. ". tom: he has really move the show. it is important for us to have padhraic garvey with us from ing financial markets. thank you for joining us today. west coast first republic have the distraction of, there is a point where they shift. what is the decision that you see that will force them to shift to rate cuts? >> a recession, to be honest. tom: do you need a recession out front to move rate policy? >> we will see a recession. the labor market is beginning to move. we see claims rising. we have to remember the unemployment rate is a lagging indicator. if the odds firmly favor the

u.s. economy being in a recession in the third quarter of this year. one of the things we are looking at this here very carefully, is that before silicon valley bank went down, lending has only gotten tighter. there is a strong correlation between the tightening of lending standards relative to the performance of the economy. tom: we have a two-part analysis of are we restrictive and then you have other features that many others mention making us evermore restrictive. can you state given this cards dealt, can they be super restrictive? >> powell is as strict events -- restrictive as he needs to be. but they face a challenge. it is not the eu are the u.s. alone. it is a global thing. the fed reserve has the global central bank and they have to deal with this. they will pitch visit may and they will keep it there. the longer they keep it there the more restrictive it will

feel. at a certain point, we will get things beginning to crumble. the inflation story has got to write itself. we know the fed will deal mandates and look after inflation. if the economy begins to crumble, they need to switch the focus back toward the economy. that is by by the time we get to q4 -- that is why by the time we get to q4 this year we think the fed will cut rates. we are slightly more aggressive than the marketplace in terms of rate cuts by the end of this year. jonathan: can you talk to me about money supply? is that something we should be more focused on? >> m2 is through the roof and has been for a while. what interests me is the -- coming from him too. let's talk about deposits. they are significant. currently $18 trillion. there's a lot of discussion about the falloff of deposits in

the banking sector. the u.s. economy has an excess of deposit. if you look at where loans are in the economy, there's around $12 trillion in loans. the difference between loans and deposits is anomalous. why is it there? because the fed has been in gauging qe since the crisis. that is what you get, you get an excess of deposits in the system. jonathan: money supply contracting is good news and not a bad feature of what the bank can do? >> absolutely. and the fall and deposits that we've seen since last year will continue and should be inspected. if the fed is engaging in tightening you should expect bank deposits to ease lower and trend where loans are at. that is a natural process. lisa: how do you deal with the

criticism that people may say this has been going on, lending standard -- standards are already tight. they are still passing along price increases and consumers are still spending. this is not look like a recession. >> it doesn't look like a recession right now. we have had a recession text, the banking system has had a shock across the bells, --boughs . but the thing that interests me is that if we have a recession, we are typically talking about a blue-collar recession. restaurant workers getting laid off. against the backdrop of having an issue of getting restaurant workers. that is a jets position that makes the whole narrative -- a juxtaposition that makes the narrative difficult. we have to look at the full picture and it suggests that we have pressure on the economy,

coming from the level of rates and tightening of lending standards the next couple months. lisa: let's talk about the flip site. we use ea that -- do you say that this will be a white color recession with what they are doing with the staff in the pan-dem -- white collar recession? >> yes. lisa: and then everything follows? >> right. lisa: credit is usually the harbinger of what is to come. it is not lashing -- flashing red if conditions are tight, why do you not see more concern? >> that's an excellent point. we run various correlations between credit spreads and the economy. when you look at the bmi numbers -- pmi numbers they suggest that

credit spreads are widening further. i suggest that we have a huge demand for fixed income out there. i mentioned the discrepancy between loans and deposits, the residual is going into fixed income securities. the banking sector is a big buyer of securities and they are forced out of the credit curve. that will force the entire market out of the credit curve. we have that happening in terms of demand for securities. any time we've had a hiccup in the marketplace, such as silicon valley bank, progress has gone down for a few days, maybe a week, then it goes back again. so that is big demand. the second point is, i do not believe that the marketplace is sold on the notion that we are headed into a recession. there is a belief out there that we will soft land. so we have a different opinion, we think we will have a bumpy

ride. we are talking about for and output of about .5% in q3 and q4 to cut rates. we expect delinquencies to creep higher and default to creep up. and we expect to see a credit spread implication. writer credit spread as a consequence -- wider credit spread as a consequence. jonathan: we are very briefly trading in the fives. 11% in the premarket. the broad market with the s&p 500 and the positive. coming up next congressman french hill of the u.s. house of representatives joining us. that conversation just around the corner. clicks keeping you up-to-date with news from around the world with the first word on lisa mateo. mccarthy discussing spending cuts on the debt bill.

this is despite indecision with his own party. some do not agree with the measures. the u.s. will with sanctions on venezuela with 100 moves toward restoring fair elections. that is with deputy national security advisor that spoke in columbia saying there is a summit to restart negotiations between the witt's violin government and opposition. shares of alphabet are higher after the company reporting first quarter results beating estimates. they turned a profit in the cloud unit. for the first time. and the u.k. has delivered a huge blow to microsoft proposed $69 billion takeover of game maker activision blizzard. they say regulators vetoed the bill. -- deal. they said it could turn into higher prices and less

innovation for gamers in the u.k.. and password sharing could backfire, the crackdown on netflix password sharing could backfire. that is from research from can tár in february. spain became one of netflix's first target is to introduce of fee for users who share their login details with another household. global news 24-hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ this all-new ariya is an elegant ev. yeah, with 389 horsepower.

♪♪ and all-wheel drive. ♪♪ it's beautiful. it's a beast. it's electric. with an edge. oh, let's go with that. ♪♪

>> to default on our debt would produce and economic and financial catastrophe. congress must vote to raise or suspend the debt limit and do so

without conditions. it should not wait until the last minute. jonathan: that's exactly were going to do based on where things are right now. that is janet yellen on the latest. tom: she is having a breakfast they are. do you think she is looking at her cell phone? jonathan: you want to talk about breakfast there? tom: no. the weenies are great. jonathan: we can have a conversation another day. here is the equity market turning higher positive .2% on the s&p 500 and the nasdaq lifted as well. off of numbers from like yourself. microsoft premarket has gains of about 8% even with the u.k. pushing back against the activision deal. microsoft up close to 8%. alphabet was lower by more than 20% at one point this morning but now it is -- first republic

was down by more than 20% this morning but now it is down by seven. -- 12%. tom: what we know for certain is the president of the united states even with the democratic persuasion may talk to a banker in our legislative ranch this morning. we picked the republican from arkansas. french hill developed the trust years ago in arkansas. he joins us this morning. i think -- you more than anyone in congress is qualified to talk about the contagion effect of what happened in these market exercises on the west coast. there are 74 banks in arkansas, how are they affected by svb and the alphabet soup that gets you to frc? >> it's good to be with you this morning. staying in touch with my bank commissioner in arkansas and in touch with the industry they

are, our bankers are doing well. they been able to maintain and grow deposits. excellent earnings reports. the business seems solid there. that is why i feel like the contagion challenges we had since the first week of march connected to the banks with unusual his new strategies. tom: william isaac robert metoo and others had to deal with multiple bank national crisis. what would you like to see from the executive branch to assist the troubled bank? >> i think the fed has taken quick action, i think they had the tools that they need to resolve the situation that we face right now, both in their temporary loan facilities, and there are 13 -- section 13 powers that they have. and in the use of dodd-frank's powers in deposit insurance coverage if they feel like it is a systemic risk. lisa: we have to shift to the

debt ceiling debate. markets are not focused on it yet, but they will be in a couple months time or sooner. kevin mccarthy is trying to put together a republican plan for putting through votes to have this be the unified agreement. a lot of people are pushing back in the republican party. do you support this bill? does it have what it needs to cross the line? >> i do think it does. kevin mccarthy has listen to his conference over the last 60 days. he has created a consensus program that meets his two sanders. one is that we are not supporting -- and we support a tax increase. he has a plan that has savings of four and $8 trillion over the 10 years and raises the debt ceiling until next year. i think it will pass and could pass today. he's done a. good job listing to our conference what.we need is for president biden tilde answerer

speaker mccarthy's call from february 1. let's meet and discuss this on a partisan basis. lisa: individuals would push back saying this is a grab bag of republican talking points under the bill that mccarthy put together. is it the right starting point? do you feel like both sides are arguing in good faith? >> the senate and democrats led by chuck schumer cannot pass a clean debt ceiling. it is an offer to increase the debt ceiling. what we've talked about this for two years, to stop the pandemic level of spending and go back to controlling spending. we proposed a spinning cap on discretionary spending. we propose things that will help the economy grow and give people money back and help taxpayers save money. i think it is a good list. i think it is a good starting point and unifies republicans to pass a debt ceiling. tom: we have aged on this.

the late great -- peterson. sam of georgia, -- sam nunley of georgia, i've heard it all before, when will we get our act together with a commission that will get this done and do its job for republicans and democrats when they refused to do it? >> that is a good point and i agree with you on mandatory spending. in our programs like social security and medicare the programs that are growing expressed a year at sometimes. president obama had that opportunity. to set goals and no action took place. when president johnson started the great society programs and spent trillions of dollars you had management of only one third of the budget and not a big risk cost. now we have two thirds of the budget on mandatory spending and we are facing risk.

over the next 10 years at think a bipartisan commission to tackle up and down mandatory bending is important. tom: some look at economics and say we got lucky with a set of interest rates low and low -- where growth could stay above interest rates. but basically suggesting that the government had a gift handed to them that would allow for the debt extension over the last 10 years. do you feel now things have changed? now the mathematics is different and the congressional -- at the congressional budget office? >> i think so you have interest costs that are exceeding national defense expenditures in the coming year. $10 trillion of interest over the next 10 years. we are talking about interest now crowding out spending priorities for congress. that is a wake-up call for congress and a wake-up call to go back to debating how do we

have zero deficits and manage spending programs? jonathan: i'm confused maybe it is because i am a foreigner and i've only lived here seven or eight years. i thought you had to raise the debt ceiling by approval by congress, is that not the case? >> you are very good this morning. you are raising the debt ceiling and covering spending that is already taking place. but us the opportunity to have the two way conversation -- this is why a think joe biden is a hypocrite on this issue. he was the lead negotiator when he was vice president on increasing the debt ceiling with budget reforms. nancy pelosi in 2019 did the same thing with donald trump. sorry, we cannot raise a debt ceiling we need budget reforms. it is an opportunity for the two sides to have a conversation. that is why the debt ceiling boat is important. jonathan: the game that congress seems to play misleads the public. i'm not here to advocate we

should have massive deficits or move to 40 trillion or more. i just think it is disingenuous to sit here and say you have a debt problem but at the same time we cannot raise the debt limit. ultimately, as you know, with congress, you are a part of, it is already approved this spending. at the same time, we cannot be saying we need to raise the debt limit and get debt under control. and you say both of those same things simultaneously? >> i think i have in this interview by answering tom's question to get the long term drivers of debt and deficit down. dear point about bringing the two parties together to work on a bar partisan basis -- bipartisan basis. i take your point technically but congress individuals need a deadline. the debt ceiling is a hard deadline. and the budget for the 10 year forecast can be a more flexible deadline. jonathan: it is a conversation we will continue to have.

thank you very much. french hill. this is a conversation that is going, you've had this a few time with the politics. tom: it is a politics and the failure of the commissions. not just symbols but others in the back. we have commissioned ourselves, -- the efficacy of commissions to get things done. it is vapor in the cultural and political wars. jonathan: the debt growth in this country is unsustainable. we all understand that. but it is not explained well enough by politicians in washington that they already agreed to this spending. they already agreed to it. that is it that is the bottom line. tom: i think it is a good time -- jonathan: they are having a fight about it. tom: i think you look at american -- you have a clear vision than we do. jonathan: peter tchir joining

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>> our forecast of headline inflation is that it will really accelerate towards 4.5%. >> we end the year with inflation uncomfortably high.

>> every traditional leading indicator of recessions is flashing red. >> we will see a recession soon. >> earnings estimates are not reflecting the fact that we are slowing down as much as we are. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> good morning. i'm jonathan ferro. bloomberg surveillance. price stability. how about talking things away from those earnings and bank stories? global brent crude under $80 a barrel, first time in a number of days. >> breaking $80 and all it takes is a break of four dollars -- of 4% on the two year and we are talking recession in the u.s. higher now by four or five basis points on the two year. the two year below 4% in the

last 24 hours off the back of weaker fed indicators and all that. i will say this, talking about what's happening in housing, things are bottoming out, not getting worse. homebuilders have been all over this. if you look at the chart, he talks about recession. if housing is up and to the right, it's hard to talk about recession in the u.s. that's the pushback from the more constructive you on the u.s. economy. >> we saw it yesterday in earnings that were good. there's ones that were not so good, norfolk southern, with what on first glance looks like an earnings beat. >> you can pick your narrative in data both with home sales doing ok, resilience, and a

recovery potentially in the building space. how do you interpret this into a fed call? how do you interpret this into a longer-term economic call? or you do not even try. >> i will go back. i think we have to give, with all the gloom and that -- gloom in that, the optimistic economic story that does not get you to recession or delays it further. >> unemployment still 3.5%. if not unusual to have a recession after that but the argument is the labor market has not cracked in a major way. the fact that homebuilders are building, the housing indicators are recovering. there's a massive debate. >> and a polarity. i'm not sure there's any gray area. there's team a. it's like there's arsenal,

manchester, totting him not in between. >> it's a rorschach test. i pronounce it differently but basically you can pick your narrative. i would argue that a lot of people say all of the recession indicators that traditionally are flashing red ahead of a downturn are flashing red. we heard that from frances donald and many people, saying, if you look at yield curves, tighter lending conditions, contraction in certain factory indexes, this speaks to the same narrative. >> the data check. we will do it off an index. first republic, let me plot it. plunging to a 550 level, spiking moments ago with huge volatility at 6.9. >> it is all over the place. with a lot of doubts. some conversation this morning suggesting they could be looking

at asset sales up to $100 billion, big numbers. 6.90 in the open market. microsoft a bigger story, up 8% in the premarket. helping out this equity market more broadly on the s&p, on the nasdaq, much more so with a bigger waiting, find, going into meta tomorrow, apple tomorrow. >> peter scheer said i think me ta -- joining us, the head of macro strategy at academy securities. pull together these narratives. we have never seen these. pull the narrative together. >> we are in a slow bleed into the recession. it is coming. it is starting at the white collar level. you go back to the simplest thing.

struggling with how to keep deposits will hurt lending and small business, which has been a huge driver. >> so much to unpack. china, a pretty emphatic thing to say. why was it a head fake? >> they were already partly open. they were going from 60 to 80, 70 to 90, but also focusing on their own economy. we already have this inventory.

i hesitate to say glut but we have an inventory glut, supply chains that have stacked up, so we don't need china's production now. the way i see this world shaping is you have china alighting with autocratic resource rich nations. we are seeing a shift from made in china to made by china. i think you will start to see china trying to sell chinese products globally more and be a true competitor. i think that will be the shift. >> we can build on that later in the conversation if we have time. if the reopening in china is a head fake, what is europe with the cac 40 up 20%, the dax up 17% ? >> they have become a mess. they are trying to figure out where they fit in. the nice part is i think some of their companies were undervalued. so some of that catch-up made

sense. i am neutral to bearish on europe. i am. fairly bearish to neutral globally. > i was going to say, is it so much better in the u.s.? regional banks, the ongoing grind we see there. we have been talking about first republic. is this a specific story or does it indicate something broader that's just going to grind out? >> there's two things going on. one has the -- one has been the shift away to what yield am i getting on deposits and is that still functional? they have also said your assets walk out the door at 6 p.m. it is your people. if you start losing people, that becomes problematic. how do you retain people in an environment where you're struggling? >> is that the key issue, that we are going to see them more

broadly throughout regional banks as more banks try to parachute in, take the best talent, and there will be this trip that will tighten? >> it will make people have to come up with solutions quickly, mergers, acquisitions. we have phenomenal relationships and great business models at these places. so there's value to that. and i think someone has to capture that before those assets walk out the door. >> let me digress. we don't need a history lesson on milton friedman. does m2 matter? tell us what it is and why you pay attention. >> i have not been paying attention to it lately. it's been dropping off. >> it was all the rage 30 years ago. >> it was all the rage when we had to figure out whether alan greenspan was carrying his briefcase in the left or right hand. sometimes, when the fed was not trying to do this forward guidance -- they should have already been stopping before

that. i do think the economy is slowing down and it is showing in the declines. >> are we super restrictive when we add in the interest rate dynamics and the balance sheet dynamics? are we beyond restrictive? >> people don't have car leases do every year. everyone will have to reset. corporations did a phenomenal job during covid issuing debt, but some of that starts rolling off, and it will take time for the 5% rates to hit the consumer. i think we are at the early stages of that and it only gets worse. it is not anyone is rolling 5% now. we still have people rolling 3% to 6%. >> part of this conversation is about vulnerable parts of the market. i promised you time to come back to the point about the chinese consumer, chinese companies. let's finish there. who is vulnerable? is it tesla?

can they go about creating something like a luxury brand to compete with the european players? we know lots of the names in china. where will the competition be most fears? >> it will be for everyday items, cars, dishwashers. it will not be our quality but they will try to sell their brands. they have taken a lot of the ip. they have a lot of the manufacturing know-how. it is not as good as what they produce for us but it will be cheaper and they will aggressively market that. they just struck a deal with brazil. they will make their cars in brazil. that is a signal that china wants to sell their things that were really only consumed by the chinese market. >> interesting conversation. peter tchir of academy securities. the reopening in china, a head fake. >> it's a debate. i will go back to it. i know you are going to the opening at tiffany's friday for

that big event for lvmh. someone noted, he's all over that puppy. i saw him yesterday. the answer here is lvmh is saying we are on the pacific rim. we are going into chengdu. that's pushing against the chinese slowdown. >> one thing. please. there was some talk a number of years ago. if you have a struggling football club -- not that they are struggling -- but that is the man you want to buy your club. >> can we reach out to mr. arnaud's team about ac milan? >> wouldn't that be phenomenal? >> yes. you could take that out of petty cash. >> you could. live from new york this morning, good morning, this is bloomberg. >> keeping you up-to-date with

news from around the world, i am lisa mateo. house speaker kevin mccarthy has bowed to the demands of a small number of lawmakers who threatened to sink his debt limit bill. overnight, he decided to make changes to make sure it passes this week. tax breaks for ethanol were restored and the bill now accelerates new work requirements for medicaid. the u.s. and philippines made a show of military cooperation not far from waters in the south china sea claimed by china. the american and filipino forces used live rocket fire to sink a decommissioned vessel. the south china sea has been a flashpoint between the philippines and china. shares of google parent alphabet are higher after the company reported first-quarter results that beat estimates. alphabets cloud unit turned a profit for the first time. it's dominant search business weathered the economic downturn. boeing says later this year it plans to boost production of its

cash cow jet, the 737. the company reassured investors that a recently discovered manufacturing defect won't hurt its delivery and cash flow targets. still, boeing notched its seventh straight money-losing quarter. a huge blow to microsoft's proposed takeover of blizzard. regulators have vetoed the deal. it could result in higher prices, fewer choices and less innovation for gamers in the u.k., the court said. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity. [ cellphone vibrates ] you'll get proactive alerts for market events before they happen... and insights on every buy and sell decision.

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>> tech outperforming. last month was one of the -- last month had one of the best days for tech. that relationship between financial conditions and tech we need to look at. >> brilliant jeff yu on tech and the relationship with financial conditions. equity futures on the s&p positive 0.1%, a small lift, bigger on the nasdaq on the back of big gains elsewhere, microsoft in the premarket higher by more than 8%.

first republic lower but recovering from the lows of the session, down by more than 20% at one point. at one point we traded close to $5.5. that was about 7:13 this morning. recovered since then to about $7.3. the opening bell one hour and 13 minutes away. >> meta-earnings this afternoon. have you been to that location in manchester city? >> no. >> ok. we have tickets. it is on the west stand. very cool. it is about 5, 6 rows up by one of the goals. >> this is not an average premier league game. not at all. >> we have major issues this morning. we go around the horn -- that's

baseball talk -- because lisa wants to talk about google or microsoft and jon's got another stock and i want to talk meadow with -- talk meta with mandeep singh. meta down to $91, total crater. why didn't you tell me to buy at $91? has zuckerberg saved the company? >> clearly they are showing a lot of cost discipline and laying off 25% has given them that boost when it comes to the operating margin. ad dollars have dried up, add spend has gone down. but they are showing cost discipline similar to meta and that is driving that. >> did they get the meadow that -- the memo? i put up the meta banner and

said facebook because that is how people think about this. what is meta? i still don't get it. >> do you know i like calling them meta? they have asked us to but ultimately that's what embodies the failure of this company, meta, the metaverse, which is why they deserve to be called meta. they have recovered because they will stop spending so much money on the metaverse. do you see the discipline around that story, sufficient discipline? >> i think so. they realize it was a bad pivot. when you look at chatgpt, clearly this market is more established, it's organically building up. everyone is joining the bandwagon. that didn't happen with metaverse so they made the pivot too quickly and they are realizing that. clearly they were losing

creators so a lot went wrong for meta last year. they are trying to fix that. it is mostly a cost-saving story but my sense is they are trying to fix their ad stack, doubling down on reels, their video equivalent to compete with tiktok, but still missing on that engagement. youtube views are up 60% on shorts, which competes with tiktok, so clearly they have the creators and meta still doesn't have that organic content they need. >> how much are they relying on the u.s. banning tiktok for all their growth? >> that could be a driver in terms of catalysts for topline. that is what they need in terms of driving the engagement back, but you are in an environment where search is resilient, social media ad pricing has come under pressure, and connected tv is the next frontier when it comes to ads, which is why youtube is a great asset alphabet has and you will see them do well.

>> i'm old enough to remember, perhaps three months ago, when some of these companies were supposedly a read on the broader economy, because ad spend would reflect company's willingness to advertise. has it stopped being that way or are we still expecting slowdown on that front? >> i think what digital ad spending is telling you is there's a slowdown in the economy and the software models are more resilient. software is more recurring in nature. digital ad spending is discretionary but within that bucket search is the most resilient and alphabet yesterday called out travel and retail being the verticals that win big in terms of their ad spend. >> you've mentioned bandwagon. he goes back to 1849, which is the first time i heard the phrase. ai. explained to our audience why ai

is not a bandwagon item. >> clearly, think of, you know, what search does. it is using page rank. alphabet has been successful in keeping that mode because they have the best data in terms of driving that page rank. that is not proprietary. same thing with large lang which models. you are using the entire open internet to train your algorithms. everyone has that but you need proprietary data to differentiate your search results and how you drive engagement. that is where alphabet still to me has the best data for these large lang which models. you have to mix page rank, which will have an impact on their gross margin, because these are expensive, but clearly, i think your results are going to be more driven by how you can train your algorithms for the large data set that is available on the opener -- the open

internet. >> what i hear from you is we are writing off google to quickly. >> absolutely. if they keep showing cost discipline, you are setting up for a slick wykle rebound at -- for a cyclical rebound, as has always been the case for alphabet. so still, to me, this is a great asset where search drives it and they continue to hold that share. >> any read at all on that ad spend story? >> social media ad spend will be under pressure because of the pricing aspect i called out and advertisers will go towards the highest roi channels. that is why you heard travel advertisers go to google. >> mandeep singh of bloomberg intelligence. do you watch shorts? youtube shorts? those short videos? how is that working out? >> it's an interesting

experiment. we are experimenting with digital. my answer, although i could be wrong, youtube is different, and i don't understand why, except, anecdotally in my house, that is what everybody is looking at. that's a starting point. and i have a guy telling me youtube matters. you are going to see bloomberg surveillance with lisa's newsletter and a real focus on how people consume three of us on youtube. the shorts are a teaser into that. >> the numbers are decent. that's for sure. >> they are pretty decent and we have a great team. we have some when i call ray youtube on this. >> why do you have a nickname for everyone? >> i was outside that bookstore where julia roberts fell in love

with cary grant or whatever and their israel youtube -- and there is ray youtube. >> you are describing notting hill. that is hugh grant. >> not cary grant? >> no. guests coming up. awesome lineup in the next hour on bloomberg tv. running you through this bond market, bank difficulties, and the success that is microsoft in the premarket. all of that still to come. ♪ conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible.

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tom: interesting earnings this week. van de -- mandeep singh was outstanding. watching futures, up now. we have to wonder out at the 8:30 our with economic data. durable data. aircraft reporting today. michael with the data. what is x aircraft? michael: it means you take out boeing. it costs a lot of money to buy a jet. here are the numbers for the durable goods orders, up 3.2

percent after a 1% decline in the prior month of february, rather amazing. the forecast was for just .7%. i will guess a certain amount of it is boeing. durables x transportation is up .3% after a .1% decline in the prior month and a -.2% forecast. that has to be something to do with both cars and boeing. now we are getting the revisions to the prior month and the prior month was down 1.2% for durable goods orders. capital goods orders, nondefense x care, down .4% after being down .7%. this is the bad news part of the report. boeing is worth a lot of money but the rest of the business spending numbers are not as good.

the forecast was for just a .1% drop. we also see a .4% drop in shipments. that is going to effect the first quarter growth levels, but it does show companies are starting to pull back and that obviously is going to be a question for the fed. what does this mean? does it mean that the economy will slow like they want or that it will collapse? tom: looking into it further, the two year yield down three basis points, 3.93%. the two year yield was about 4% and there's other stuff going on, including the banking issues, but nevertheless to see a 3.92% to year yield gets my attention. curve inversion. there are some dynamics that are interesting to say the least. lisa: there is something going on. i am just not sure exactly what it is. tom: mickey is looking into the

data and i'm looking at first republic bank -- mckee is looking into the data and i'm looking at first republic bank. this is march data. michael: this is march data. tom: does this give you a better gdp number? michael: michael: michael: well michael:, it will give economists adjustment. we also have wholesale inventories and retail inventories that were -- wholesale comes in as expected, retail significantly higher, so that would suggest an addition to growth, so at this point, i will guess off the top of my head, a bit of a wash, but we will let the people who do this for a living, with some good numbers. let me go through this quickly and tell you that nondefense aircraft and parts were up by 78.4%. now, this is a dollar value data and that reflects the fact that boeing had a good month,

delivered 60 aircraft, and that matters. motor vehicles were down .1%. motor vehicles in this report are fleet sales. that was down, so that gives you an indication of how much boeing matters for the rest of the durable goods report. tom: bowing off the price of 2.02. up 3% now. you heard that from lisa earlier. futures up 10 points, nice advance off the quiet we saw an hour ago. j bryson joins us, chief economist at wells fargo. thrilled there cope -- thrilled dr. bryson could join us. what is the nuance in your guesstimate of the american economy forward? jay bryson let's start with where we are now. these numbers are interesting

and we published a report where we brought down our gdp forecast for the forced quarter significantly and it's based on revisions the commerce department has made on the back of retail sales. we think tomorrow it will only print 0.8%, significantly below consensus. so it is not contracting at this point and i would not think, as we think going forward, you are going to see that in the second quarter, but in the third quarter, given the fed tightening and what we think will be some credit tightening, i think we are still looking at a modest recession in the second half of this year. lisa: as this data comes in, each point different from the other, a miss, a beat, evening itself out, are you getting any more clarity with your convention -- with your convection? jay: if you said what is the probability of a recession this year in your view, i would

handicap it at roughly 70% or so. a soft landing is not out of the question but given the fact that things appear to be slowing, manufacturing has installed, housing is contracting, consumers are still hanging in, but higher interest rates will slow things down. if we see credit tightening on top of this because of what's happening in the banking sector, that points to a recession. it is not a foregone conclusion but it's the most credible case. lisa: you talked about housing is one of the indicators that it is slowing down yet we have seen a resurgence with respect to housing starts and sales volumes. this morning, the nba mortgage application number came in at a 3.7% gain month over month after seeing several consecutive drops. how much are we actually seeing the rolling recession move away from industrials, housing, tech

-- industrials, housing, tech, creating this modeling economic growth? jay: in terms of the housing numbers, it makes sense. look what has happened to the 10 year treasury security. the has brought rates down. if you were sitting on the sideline, that may a reason to jump in. so you have sectors going in and going out and i think that is typical for most shallow downturns. you go back 20 years, the tech downturn, tech got hammered during that time, but the housing market was booming 20 years ago. this is not the financial crisis, where everything was going down at one time, or the pandemic. this is different sectors that will roll in and out. i think we will start to see some spending contract later this year. tom: going back to your call tomorrow.

first quarter gdp of 0.8%. construct that. help me with the partition of how you get to a sub-1% american economy. jay: right. again, we took down our pce, personal consumption expenditures. we had guessed that would be up around 4%. now we are looking at 2.5% given the revisions. if you look at business fixed investment, the i part of that, we think you will see a negative number. there will probably be a big drag from inventories. we had a big inventory build in the fourth quarter of last year so you are looking at a 1% to 1.5% drag there as well. tom: peter lynch's team at fidelity told me that was there thing looking at the american economy, spending. if you have a zero point --

where is to mystic final sales? jay: i will guess we are somewhere one to 1.5%. >> so we don't have a recession domestic economy held up by good export numbers? jay: no. as a matter of fact, net exports will probably be a little bit of a dragon the first quarter. tom: i was rude. the reason we did that is because jay does not understand this but we need to make some news. lisa: this goes to the point we were hearing from peter tchir that there will not necessarily be the same kind of global trajectory, global impulse, as in the past, starting with china and the fact that the china reopening is a bust when it comes to how much they plan to import from places like the u.s. and possibly even europe. how much are you factoring in kind of the changing global structure of trade as a reason

for slow growth and slower growth for the u.s. going forward? jay: in the near term, it does not have much of an effect, but we are said to have a series of reports on this in terms of deglobalization, and it's a modest headwind overall. if things come back to the u.s., which is good in a long-term sense, but as that transition occurs, the overall cost structure will go up. we will not be as efficient. it would be one thing that would potentially weigh on the long-term potential growth of the u.s. economy. tom: be nice to sarah house. you are giving me a 0.8% statistic. sarah is stressed out so be careful. jay: but she is our inflation guru. this is more of a tim quinlan sort of thing. tom: jay bryson, thank you. quinlan leading the charge at

wells fargo with dr. bryson. other than two sharp spikes down, someone near the bottom for the day, down 15% intraday premarket on frc. we have some green on the screen, lifting back up to maybe where we were at 5:30 this morning. i was not here. the two year yield 3.92%. your observation on gillian tan's work? the reporting we have on frc? lisa: first republic is being viewed as a specific story but with caution and that is the feeling, that yesterday, when we got the report, it brought the whole market down with it. tom: separated out. lisa: then it started to separate. pac west came out with earnings that calmed people down, up more than 13% in premarket trading. still divergences but there

is not complacency in the market. there is a feeling that something will change the creation of credit in the months to come. lisa: a banker in arkansas was eloquent about his faith in the institutions that were there in 1982 during the savings-and-loan crisis overlaid on dodd-frank and those safety nets are there for the rest of the season. we will see. the only problem is is survive not thrive. are we talking about that kind of scenario where profitability is challenged? tom: sonali basak is on that story as well. coming up, david rubenstein of the carlyle group. this is bloomberg. stay with us. morning. ♪ >> with the first word, i am lisa mateo. after months of north korean missile tests, the u.s. will be puffed -- will beef up the

deterrence offered to south korea. president biden and south korea's president will announce the agreement today at the white house. kevin mccarthy has made changes to the debt limit build to try to lure votes from republican holdouts. tax breaks for ethanol have been restored, a demand of midwestern lawmakers. the measure will accelerate new work requirements for medicaid. an independent team of aviation safety experts will review recent near collisions at u.s. airports. the people on the panel will advise the faa on how to improve the air traffic safety system. in january and february, there were eight incidents involving airlines rated as severe by the faa. four resulted in investigations. chevron warns that supply chain disruptions will continue next year. that will complicate output just as airlines are demanding new jets. airbus has flagged shortages on

seats, semiconductors, raw materials and labor. u.s. labor board prosecutors accused starbucks of refusing to negotiate in good faith that one of their newly unionized cafes according to a new filing. starbucks has not responded. the company has said that it is the union not negotiating fairly. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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in pursuit of long-term returns... pgim. our investments shape tomorrow today. >> there is definitely a divergence in the action of stocks and those big stocks that were sold off heavily last year were reinvested in this year very heavily so you have these

big swings. there are so many different actions weighing on the different sectors that it's almost like you've had a slow rolling recession since last year. tom: sarah hunt is chief market strategist at alpine saxon woods. lisa abramowicz and tom keene. we are watching frc as well. that seems to be the story of the morning. annmarie hordern watching that, making clear it is a topic of study. frc at a five level but backed down under seven, 6.92, down 15% today. if you go to our lincoln guide at ford's theater in washington -- go to where lincoln died at ford's theater in washington and where he actually died, next-door, there's a museum, of which substantial people in this country said we have to build this with the memories, the

iconic images, the iconic america that is all of ford's theater. david rubenstein providing leadership on that. he's with carlyle group and has a fabulous study of iconic america. and for the keene family starts strong with fenway park. you have done so much for this country. why did a baltimore orioles fan start with fenway park? david: of course, fenway park is the oldest ballpark in major league baseball, built in 1912. it was made famous early in the 20th century by a player named babe ruth, who came from baltimore. he was born in baltimore and most famously he was traded from the red sox to the yankees and the result was -- tom: i did not know that. david: and for 86 years, the red sox did not win a world series. they call that the curse of the

bambino. but the curse of the bambino might not be because they actually traded babe ruth to the yankees. it might have been because for many years the owner of the red sox refused to have african-american players on the team. so they gave a try out to jackie robinson. he was not good enough. they gave a try out to willie mays. he was not good enough. as a result, they did not have willie mays. had they done so's, they probably would have won a world series. what i try to do is talk about eight iconic parts of america, the pluses, the minuses, the things people do not know as much about the history of these iconic symbols. tom: it's a wonderful series spanning all the way to the golden gate. i will say i did in my youth sit off the dog out on first base side and gaze at pump see green -- at pumpsy green standing next to ted williams. i want you to talk about the american cowboy.

it is not something we can see across nebraska or down in oklahoma. talk to me about the american cowboy as iconic america. david: when we were growing up, we probably watched tv westerns on television all the time, and that was not accurate. we called those cowboys but the real cowboys were people herding cattle to slaughter and to be used for meat and so forth. those cowboys, the people who succeed them now, there are not so many, but there are people who do cowboy related things and rodeos. i went to a lot of rodeos in cheyenne and fort worth to see what cowboys do today but the cowboys of old, they were not all white men. large numbers of them were african-americans. a lot of them were latino. we have an image that they were white men and they were shooting

indians. they were really hurting cattle. it was a tough life but different from what we saw on television. lisa: i cannot keep track of all the hats you wear as you pervade intel spheres, which is fantastic. what strikes me about this series you are doing, you were quoted as saying i don't support any candidate any time anywhere. i do not give money to politicians. i have never given a penny to anyone running for president. instead, it is to historical institutions to educate people on the past. why? david: i am chairman of the kennedy center and the national gallery of art and on the library of congress board and i think it's more effective to do those jobs if you are not involved in politics. secondly, i think that the way politics works today, if i'm giving large sums of money to people, which is fairly common for business people to do, you are seen as having bought something and maybe done

something you should not do, so rather than participate in that, i stay out. i am registered as an independent. i did work in the white house under president carter but now i stay out of politics. tom: somebody is looking for a rescue of wealth management schemes wrapped around the shroud of banking. can big money like carlisle, apollo and others come to the rescue of fractured banks like first republic? david: i think the fcic would -- the fdic would prefer to have banks as opposed to private equity investors buy these assets because banks are in the business of running banks and can consolidate them more readily. there's a concern about private equity people making a quick buck or something, which was seen as happening during the last time we had a financial

service problem. the principal issue for a bank today is there's a hole on the balance sheet. with a hole on the balance sheet, someone has to make that whole. the bank has to say we will take a loss or the federal government has to say we will make you whole, which was done before in 2007-2008. there's a lot of political pressure not to bailout shareholders or creditors and not make it possible for banks to come in and get that paid for by the federal government. that's the principle reason you have not seen someone by first republic yet. lisa: is there a sense that these stories we keep hearing about in the regional banking sector, that it's idiosyncratic, or is it your sense that it's a broader issue having to do with the interest rate regime we are in? david: interest rates going up have not been helpful because people -- a lot of the regional banks bought federal securities,

federal treasury securities, and those are worth less if you mark the market, but if you have to crystallize a sale, as was the case with silicon valley bank, the things they had to sell were sold at less than people thought they were worth because interest rates forced the value down of some of the securities these people held, so that is the problem. first republic, i think something -- the government would like something to get done but at some point someone has to say yes, we will make you whole for losses you might absorb if you buy that bank, and there's a lot of political pressure on capitol hill not to do that, but i suspect something will have to get done or the bank will not be able to find a buyer. tom: david rubenstein, thank you. with carlyle group. putting together a series of programs out to the golden gate bridge, iconic america, tonight at 10 p.m. on pbs. lisa: what he just said was

interesting, that until the government guarantees to help make people hold for losses on the balance sheet of first republic, a deal will not get done. somebody has to blank. and washington doesn't want to deal with the political fallout from being considered bailing out a bad actor. tom: an important comment. we have only one minute to talk about it so i will not get myself in trouble here. this goes back to a generational issue. the rockefeller foundation 10 days ago mentioned this. there's this whole thing, the rescue culture, which mr. rubenstein alluded to do. there's a hole in the balance sheet. nothing else matters. you have to plug the hole and we have this touchy-feely modern process now where everybody has to feel good. it is like a blue ribbon at little league baseball. nobody is getting a blue ribbon for showing up in the frc debate. someone has to fix this. lisa: that is the key question.

is it the government? is there an interest by the government to step in? is there a discussion -- why is there not a discussion about why not let it fail? what is the issue? tom: under central banking theory, we have a lender of last resort knowing that the banking industry always, at some point, has failures. you have to have a failure process. that is what this is about. lisa: who are we protecting? it is not depositors. if they are protected -- tom: we cannot do what david alluded to there, and i agree with you. it was newsmaking. there's this whole mood that the fancy people around this bank cannot be compensated for it, so it just falls away here. right now, it is falling away. you do this to me every morning. you ruined my 9:00 hour.

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jonathan: good morning, good morning. the equity market trying to bounce. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, microsoft kicking off tech earnings. first republic considering major asset sales, and