>> stop searching but it is not just tech behind the move. bloomberg markets starts right now. kriti: a quick check of the markets. green on the screen for the s&p 500 and higher than 1.3%. the nasdaq almost hitting to present as reserve all around the session highs. the bond market is seeing the selloff. volatility is seeking back into the conversation. 406 on the front end and is interesting to see it sustaining about 4% and that's a few maybe the federal reserve has more to do.

bloomberg dollar unchanged. it is a tug-of-war between weakness in the euro and strength in the peso. right crude, higher -- brent crude is higher by 4% but trading at $80 handle and that is crucial when we are talking about recession. outside of the earnings story, which is what driving the risk sentiment, investments were having to choose -- to economic numbers. earlier economist -- an economist gave her take on the economy. >> this will set the tone so the first look is important. we do expect some revisions and there always are but this sets the tone for what the expectation of the u.s. economy was at the start of the year and it tells us two things. we are losing momentum from what we saw at the end of last year but two, the economy is proving

resilient. kriti: as we are looking at some of those companies, we go to a global bellwether, capital -- caterpillar, it shares going in different rector than the broader market and falling coming after it of little changes at the start of the year. it is a tug-of-war when it comes to caterpillar because the earnings came out, the shares went up immediately. the profit margins surging but is this a one time story? >> the profit for the first quarter was incredible and the beat by one dollar per share. the numbers look good and the company gave upbeat outlooks, saying demand look good for 2023 but where investors started to turn shower were the order books. the bout lock -- the backlog in orders look flat -- look flat. that is where people hammered down on and i sat down with ceo

-- with the ceo and he said our customers are telling us demand will be good through 2023 and that is significant because normally, our customers won't give us much past the first six months. if you talk to contractors or rental companies on the ground, what they have been telling me over the past 1.5 months is that we have seen projects that are shelved are wary -- shells already. interest rates are coming through and costs are going higher and a lot of people are saying, maybe we don't want to do this. that comes down to, is the first quarter as good as it gets for caterpillar and that is on display. kriti: you cover the commodity sector in addition to global bellwethers like cattle battle -- like caterpillar. if you see caterpillar better, the macro whether saints -- weather is -- that is not the

readthrough, right? >> the market is up overall and caterpillar is down quite a bit more than we usually see them and i think people are worried, the bout -- the order backlog didn't look as good as we were hoping. the ceo saying the inventory is excavators. the inventories for those will be down in the back half of the year so investors were drilling down into this specific company are hearing that and saying, we are not excited. when we pull out, there are good news. the gdp look solid. it is not just an economy based on construction or mining. it is a much broader economy so i don't think the, on the right lens, investors are just trading down on caterpillar. it is important that people -- keep an eye on them because they

are in -- the manufacturing sectors. kriti: the china story is crucial. when you talk about the global exposure, i like to look at caterpillar but it feels like it is broken to some degree when you talk about a broken bellwether but maybe that is part of the story. economic growth at the core of the micro and the macro, slowing in the first quarter more than expected and this comes on the back, the strongest consumer spending in nearly two years. it is a paradox. joining us is tiffany wilding. what is going on? have you square the two? -- how do you square the two? jon: the economic data -- tiffany: the economic data is received -- we received isn't centauri tories lee noisy. when we look at statistics, we tried to smooth through the noise and i think the narrative that comes out of it,

consumption was boosted by special factors including how unseasonably warm the weather was in january. potentially by some of the distortions from the seasonal factors, we did not have an omicron variance or depressing consumption. as a result of that, we had an artificial boost in consumption in the first quarter. that momentum appears to have disappeared late in the quarter. that will probably result in consumption looking weaker in the second quarter. overall,'s moving through this noise, we are looking at final domestic figures which is a core version of gdp running around 1%. that is in the context of broader trends towards tight financial conditions, tights monetary policy, stress in the banking sector that will slow lending lightly and probably a

bigger headwind to gdp growth in the second half this year. kriti: square that with the banking term. -- turmoil. everyone is saying the credit crunch is coming, is that credit crunch coming? tiffany: there has been interesting research. they look historically -- when banks see big declines in their prices of equity, there is a paper that looked at 30% declines historically. that has coincided even without a broader banking panic or deposit run, that has coincided with a two percentage point drag on gdp through slower lending. i think it is reasonable to believe that you will start to see the impact of this in the back half of the year. also, the federal reserve is having to wait this out with the fact that inflation is elevated.

that was the bad news for the federal reserve officials with this gdp report, we got higher-than-expected reads on first quarter core inflation. i would usually highlight that inflation does like --lag. when you start to see the economy decelerate, it won't be until a few quarters after that that there is pressure on inflation. the fed has a tough job of managing these two sides of these issues on their mandate over the next couple of meetings before inflation starts to come down. kriti: talk about the deceleration. there are worries as we see commodity prices rebuff, shelter staying almost put. a lot of the corporate price hikes that are helping them weather this particular earnings season fairly well. talk to us about stagflation and sticky prices. how sticky are there -- they? tiffany: we have had over the

last couple years, we have had a big price level adjustment that has happened. we haven't seen the same degree of a wage level adjustment. all this is saying is that real wages have been negative. we do think as a result of labor scarcity issues, that will get better as the labor market weakens. we think wages probably -- they still have room to go to catch up to the price level adjustment. people are saying, i have had this bit of an increase in expenses. i need more in wages and maybe i will switch jobs to get that. those kinds of dynamics will go on and they will keep inflation, at least the parts of inflation the fed is focused on, they will keep those pieces of the inflation basket stickier for longer. our forecast suggests core cpi inflation does get down to a

3.5% level at the end of this year but there is reason to believe that it remains sticky about the fed's 2% target for a long. of time -- for a long period of time. kriti: does the fed hike after this summer meeting? tiffany: there's a lot going on in the economy and a lot of uncertainty. i think one and done is probably the answer which is in line with the market. kriti: give it a few minutes. i'm sure everything will change in a blink of an eye. we take the economics we were talking to tiffany about and apply it to the markets. bank of america's jill carey hall. what is going on underneath the hood? we will ask her. stick with us. this is bloomberg. ♪

kriti: this is bloomberg markets. tech is driving the surge in today's trading day session but only partially. let's discuss with jill carey hall, over from bank of america. it is a pleasure to have you. you have an earnings picture that is coming in strong. caterpillar, we discussed on the show, meta and alphabet and microsoft talking about they are able to weather the storm because of the price hikes. what happens when the consumer is unwilling to pay anymore? how could he do these armies deteriorate -- do the -- how quickly do these earnings deteriorate?

jill: i think the earnings season has come in better than -- we have been surprised to see strength in some tech companies have reported. beyond this quarter, what is important to pay attention to this earnings season is guidance for the out quarters. it is early but we will get more companies and smaller companies reporting over the next few weeks because there, i think we are below concessions for the earnings forecast on the second half of the year. our economists are expecting the mild recession will start next quarter. we think we will see downward revisions to earnings. a lot of investors were expecting the worst going into earnings season. any other companies that have beaten it so far have seen positive reactions and anyone that has missed has gotten more of a past. kriti: it is interesting that it is getting a pass because law -- because not too long ago, any sign of weakness was punished to

the extreme from retail to tech. instead of getting a pass, in the next earnings season, what are people looking for? kriti: --jill: overall, we saw said -- sentiment deteriorate markedly late last year into the beginning of this year. from here, we will pay a lot of attention to guidance and to the inflation data and how that is impacting companies and margins, how china is impacting companies. we are seeing better data there. one of the things that we are expecting is that even though is cyclical, we expect cap x -- there is a lot of reasons companies need to spend right now, whether it is on reassuring or supply chains or automation given how sticky we have been or whether it is on getting to net

zero esg initiatives. for many companies, cap x beneficiaries could hold up well in comparison to other parts of the market so even though we have been more neutral on equity, we have been recommending over the next quarter, investors stay invested in versicles over defensive areas and santa clara -- and secular growth stocks because a lot of positioning in cyclical is testing. some of these areas are ones where we are seeing some of the cyclical daigle bottom -- cyclical data bottoming out. kriti: i love that you mentioned cap x spending because it seems like there was so much souring on the idea of value versus growth. talk to us about the story of picking the winners of last year.

they are still pokey -- posting record profit. if they are able to come in better on profit margins, but exposed to the spending, are they a good bet? kriti: we like --jill: we like energy and for the cyclical sectors we have been mentioning we have liked, overall energy and materials are two of those sectors that are beneficiaries of cap x and higher commodity prices. they are under owned by investors. men it -- fund managers and encouraged a lot of that cyclical positioning. this out -- except for industrials. energy stocks are very cheap so that is an area that we like. a lot of the defensive sectors

were more cautious, the one that is overweight is consumer staples given the backdrop focusing on higher stocks continues to makes -- cents -- make sense. considering how cash yield is time --high -- as flow is the value after be -- cash flow is the value attribute we should focus on. kriti: we thank you. a lot of focus on the real estate sector specifically, what kind of canary in the coal mine is a specifically as office privacy -- as office property is a concern. varnado security load today. joining as is abigail doolittle -- joining us is abigail doolittle. a double whammy of a story.

>> some are calling this a crisis for commercial real estate so relative to vornado, they spent their dividend. what it -- what makes it not surprising is that back in the first quarter in january, they cut the dividend in cash by 20% and it was expected they would cut again and they wrote down their portfolio by $6 million. the second largest in new york city and they are bloomberg -- and bloomberg lp is to -- 2% of their revenue. it wasn't surprising they would cut dividend but to suspended for a week, these are stocks known for their dividend yields. the bloomberg terminal shows a 10% dividend yield. that 10% would be an attractive and sensitive -- attractive incentive for an investor. for the rest of the year, it is

gone. the question that raises is how bad is it? kriti: people are getting scared when it comes to commercial real estate because they are saying, the falls are around the corner. is this the start of that? or is this a specific story to vornado? abigail: it is right across the board, it is a macro story. there are other areas of real estate doing fine like hospitality but relative to offices, he goes back to the pandemic with people working from home. the value of their portfolio in 2019 was $5.6 billion and this last february, it went to $4 billion. it has to do with rising delinquencies relative to debt because cnbs is a big deal and brookfield had defaulted on properties. they defaulted on 765 million relative to l.a. properties and other defaults we have seen from

blackstone, makes it interesting. it goes to values. for those big wealth capitalized companies, it is nonrecourse debt. it tells you they think the debt is not worth saving. where are we in the endings of this game? it is hard to say what it has to do with refinancings because with interest rates going up, that is the double whammy to the pandemic. lease signings, if leases that are up don't get signed, that can create a problem for landlords. kriti: you mentioned brookfield as well. i wonder how long it will take to see more of the main players come to the former -- forefront. abigail doolittle walking through the story. one hedge fund manager wording that risky -- will face largest -- larger losses this year. this is bloomberg.

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kriti: time for the wall street beat where the world's biggest publicly listed hedge fund is picked -- is taking a bearish dance. simone, emerging markets were supposed to be the go to trade and this is how you had the insanity in be developed markets -- in the developed markets. it happened? >> plenty analysts believe there is value in emerging markets and many including the likes of goldman sachs, blackrock, are getting along but not man group. one person spoke to us in february and he is the head of emerging debt strategies and he says expect payment ahead, the

rally solved late last year going to come off. his belief is that the monetary tightening we are seeing from the fed as well as the qualitative fighting is pulling things out of the system and that will make things difficult for emerging markets, many of which are experiencing serious problems in economic fundamentals. kriti: how does this break now -- down because it felt like the canary in the coal mine was the story in india, saying that india, which is supposed to be a no-brainer bet, saw these massive outflows because of the story. to what extent is that bleeding through to the rest of the em universe. >> if we go into our bloomberg em debt index, it gives us a story. the top holdings in that index is china and mexico and saudi --

saudi arabia and the uae. they are doing well and they have a lot of money in their debt is looking stable. china is its own issue but if you look deeper down the list of who is in peace em index, you get to turkey to places like egypt which is damaged by covid and by the start of russia's war in ukraine, raising food and fuel prices. cbs really blowing out there and you look at places like ghana and sri lanka. there are serious issues with some of these countries that are farther down the list. kriti: it is interesting from a macro point of view, if you are bullish from commodities, invest in em but how risky is too risky? we speak to the deputy director of the u.s. national economic council on the pressure building on the white house to pass a

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>> i am john hyland with the first word news. that is according to federal prosecutors who say jack teixeira wanted online gaming associates to delete messages. he is accused of taking sensitive benefit information about russia's investigation of ukraine. a major union representing train drivers in the u.k. -- saying it will continue strikes. the union said today three more days of strike action will take place today in june. labor unrest has flared since last year as double-digit inflation squeezes budgets. turkish president made his first

public appearance in two days, easing speculation over his health after he became briefly ill on live tv. he spoke on a video broadcast. the government says he is in good health although he is suffering from an infection. diplomatic's -- diplomats are shipping efforts -- that has already claimed over 500 lives. both sides have repeatedly broken a 72 hour fight. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm john hyland in this is bloomberg. -- i am john hyland and this is bloomberg.

>> welcome to bloomberg markets. kriti: green, as you look at the s&p 500, hired by 1.4% and it is a tech driven move but it is not just tech. you're seeing biotech and some of the industrials as well and even some banking stocks and a bit -- in the rally creating momentum. the bond market is not catching the same momentum and 4.05 on the front of the curve in will attend basis points higher. it is not having a reppert -- a ripple effect. the uber dollar is flat, a tug-of-war between weakness in the euro and the strength in the mexican peso you are seeing -- peso. brent crude creating at 878 handle and below 80 -- at a 78 handle and below 80. >> we have to talk what is happening in technology and the

mighty move of meta is down 100% this year after quarterly results were a crowd pleaser. we will talk about amazon's numbers later this half-hour. mobileye moving in be other direction in down 20%. allotting -- a lot of people are talking about the price connection with tesla and electric vehicles and what that means for markets like china and how that impacts mobileye. with health care, we have to talk about what is happening. the drug portfolio they're not performing to the tune of what wall street was looking for and those shares are down a percent but eli little pretty -- eli lilly is moving in the other direction. it is showing a lot of hype in the issues of obesity and drugs and the comments from them are getting into the ear of investors. kriti: i have a new obsession of

biotech and our producers roll their eyes when i mention it. as we talk about the biotech story and the bank story is in focus, the saga around regional bank continues in the ceo of one of the largest banks in the world told bloomberg it is in a global concern. >> the credit -- the credit suisse was a specific case. while the svb was a specific case, it highlighted issues with regional banks and that we will see play out in a small number of names and we have seen first republic. i expect we will see that in a small number of names and it will not be systemic. there will be repercussions. jon: those banking concerns potentially weighing on what the fed will do next week. they will get fresh gum data. mike mckee is joining us.

between the banking turmoil and the fact that you are seeing signs of a calling economy as measured through the gdp report, this is point to one more rate hike and applause by the fed? --and a pause by the fed? kailey: --michael: at this point, but we are seeing is a gdp report card on the economy, it has a little something for everyone. i brought both my economist hands to this. the gdp is up 1.1% and weaker than it was in the fourth quarter. the consumer spending spot -- part was hot. business investment will start. change in inventories down 1.6 billion after rising $136.5 billion. the prior quarter is rare -- it is rare for things to go down.

are they ahead of a potential recession? that will make a difference to the fed in figuring out what happens in the next quarter. consumer spending comes in strong still. business spending dropped off significantly and we are waiting to see what that means. we are getting good stories out of some of these companies and earnings. the trade show, little change this time and the inventories have crashed. real final sales takes out the inventory portion, up 3.4% and stronger than the headline number of one point -- 4.1%. the atlanta fed's gdp now report, don't pay attention to the numbers. they are close but what you want to look at here is that they have gotten much weaker as the quarter went on. we saw the same thing was consumer spending so we are setting up for a weaker start to the second quarter then we began this order. it was january that boosted what

we got. kriti: that was bloomberg's mike mckee as we see the economy slowing. there is another issue at play. let's bring in the story of the debt ceiling and who better to ask is ramamurti -- is bharat ramamurti. he joins us right here on bloomberg television. a pleasure to have you on the show. thank you for joining. it is fair to talk about the debt ceiling here at the -- a time without -- where the white house will not risk the full credit and faith of the united states in the first place. the gdp debt limit bill has been passed. as the biden administration planning to meet with speaker mccarthy? bharat: nothing has been scheduled but the president has been clear he is happy to meet with the speaker and the rest of the leadership to talk about her budget and spending policy at

any time. what he will not do is negotiate over a default about whether we pay our bills as a country. he says we are not a deadbeat nation. in 200 years, we have never once defaulted on our debt and the idea that the gop is threatening to befall for the first time in our history unless they can extract the most extreme version of their partisan agenda is irresponsible. jon: what --kriti: what will it take for them to put something on the books? bharat: the gop can deal with this tomorrow by passing a clean -- and increase the debt ceiling and we will talk about tax policy and talk about our two different visions on where the country should go on fiscal policy. it is within their power to do they did under president trump, raise the debt limit even though they were adding a trillion dollars to the debt, mostly --

$8 trillion to the debt, mostly to wealthy -- the wealthy. what we have asked them to do is the same thing they did under president trump, which was done it 80 times in the history of this country, increase the debt ceiling, reduce -- eliminate the risk of a default and let's have a reasonable, informed conversation about where he spent and how we tax -- and how we tax. jon: speaker mccarthy's ability to pass a bill in the house says to many that the ball is in the white house's court. why a decision right now? bharat: the president is defending an important printable that is important to explain. we can have a system every year

and the gop bill would raise the debt limit only for one year so it will put us right back in this position next spring. we can have a situation where, every year, one party is allowed to hold the global economy hostage until they can extract things from their policy agenda. we can have the sign -- we cannot have those kinds of wild swings in a policy in the president is holding firm to a principle that says we cannot default to the debt and we can have a conversation about fiscal policy generally. last year, the president sat down republicans and democrats in the house and senate and negotiated end of the year spending that democrats and republicans ended up supporting. not everyone got what they wanted but no one was threatening to collapse the global economy unless they got their way. jon: you do address some of the long-term questions. let's talk about that, the fact

that we have a reasonable roadmap here, arguably the next decade where we will talk about sizable debt loads each year. what you think is the best way to address that issue over the long-term? bharat: it is right there in the president's budget. it says, what spending we are in favor of an the tax policy we are in favor of. it would reduce the tax deficit over $3 trillion over a a-10 year period -- it would not connect the kinds of dishes cuts the gop bill would do. the gop bill cuts 22% spending on veterans medical care. the v.a. says things will be eliminated because of these cuts. moody's estimates that if we enact the gop bill, it would increase the risk of recession

and result in less jobs. we have a different vision that cuts the deficit but is progrowth and pro-innovation. we are happy to have it -- that conversation but we will not have that conversation on whether we default or not if the g --if the gop gets away. kriti: part of what is reported is -- this is the gop's opening offer when it come to the debt limit bill. part of the biden administration's vision is bringing things back to the u.s. soil, initiatives that could feed to their inflation story. how is that better than pulling back on the benefits, to your point, that are said, but that -- will hit parts of the country who need that health -- that help but we are dealing issues with the economy? bharat: part of what the gop is

going after are some of the clean energy and production tax credits were put in place last year under the inflation reduction act. those are attracting tens, if not hundreds of billions of dollars in private investment to the u.s. and some reporting is showing that a majority of it is going to republican districts. by repealing those credits, but the house republicans are saying in many incidents -- and send this -- instances, they would rather see jobs go overseas. that is a heavy price to pay. it is something we are not willing to do. jon: the markets will be watching this debt ceiling story closely and they were -- are watching the latest in the economy. we got later -- data points today. for some time, you have talked about what is happening in the jobs market and the strength of the consumer overall but there

is worries about recessionary risks. you think we are headed towards a recession? bharat: but the data today shows, we are well underway towards a transition to steady and stable growth and the economy remains in good shape. as the analysis at the top of the segment noted, some are spending is robust and we have a consumer driven required -- driven economy in many ways. that is good news. real disposable income is up 8%. there is a lot to like in the report and we continue to think that with over one million jobs created in the first quarter of this year, with an unemployment rate at a 50 year low, there is a lot to like where -- on where the economy is. kriti: you will have to have you back on when we get more economic data. the final question to you on the debt ceiling, when is the x

state? bharat: we urge congress to act to eliminate this threat at the -- immediately. and -- in terms of the x state, that is something the treasury department has spoken to and i believe that to them to comment. kriti: deputy director of the national economic council and adviser of strategic economic medications, thank you as always --always. amazon has increased cuts. will that affect -- this is bloomberg? -- bloomberg. ♪

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jon: this is bloomberg markets. time for our stock of the hour, a day when we are talking about tech and meta's results. amazon investors are seeking clarity on the sales growth. it has seen go down. we will see what the trends are telling us about the consumer, the e-commerce business and the enterprise with the aws cloud this is. -- business. kriti: a lot of high standards on the back of some of the really stellar tech earnings we have had this week. for more on what to expect, let's bring in cr -- let's bring in cfra senior equity analyst arun sundaram. you are expecting upside on the stock. where is that coming from? arun: the story for 2023 and 2024 is a turnaround in operating office.

we are expecting a multiyear turnaround for profits and margins especially as all of these cost-cutting initiatives take fold. we will start to see strong operating profit growth and i think the operating profit growth will come in the retail sentiment -- segment, we haven't seen operating profits over -- and a over a year. last time a eight north american retail segment posted that was in 2021. the only reason amazon was able to post profits over the past year was because of aws. although we are seeing aws's growth slow, -- i don't think investors know the true potential of that retail segment because we haven't seen amazon flex their earnings power yet. i think that is starting now. it will probably be a multiyear story. jon: i was going to ask you

about that because may be the same part of that question is what is the top line story go -- look like going forward. it is a remark -- it is remarkable that a company that is no longer a tech start up double digit topline growth in percentage terms this year that ended last year and i know you are not expecting that this time around. can they get back to that or is it a lot more focused on the bottom line for the foreseeable teacher? --future? arun: 42023, the focus is on the bottom line and there is a lot of headwinds on the top line. one of the reasons the topline is falling is because amazon is going through tough -- growth is slowing there. the first party online business is growing at a 16% cake or --

and there are macro when -- headwinds. consumers are shifting their spending or to services over goods and that is likely to have more of an this emotional impact to e-commerce economies -- companies in our view. that is why we are expecting slower topline but the focus is on the operating profits and flexing that strength in terms of. earnings power -- in terms of earnings power. kriti: go ahead. jon: we will be watching that story. arun sundaram joining us from cfra on the amazon story. coming up, suncor buying the oilsands assets of a major global player and we will talk about the changing energy dynamics. this is bloomberg. ♪

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jon: this is bloomberg markets. time for today's for what it's worth. our number today is 5.5 billion canadian or 4 billion american, that is how much suncor is going to be paying for the energy assets of totalenergies. suncor will have total control of the massive fort hills project. this will continue as shift we hav majors around the world away from canada's oil sand, sometimes seen as a controversial investment in aes she environment. the canadian players and many ways doubling down. kriti: as we talk about that next was -- that acquisition

cost, you are seeing some shares higher by 4.3%. when you look at that acquisition value, you never see that kind of reaction from the shareholders. it is usually a merger arbitrage to the dow center but we are here higher than 4%. jon: it puts them in the pole position. they have 100% control of a very large project and when there are different parties involved, we have been talking about teck resources, another canadian company, it had a stake in the same project that suncor acquired. you can see a lot of canadian managers that have been compiling this control of their businesses and it will be interesting to walk -- watch depending on where you think oil prices are headed but a lot of people are bullish on the canadian names. that oilsands exposure has been a complicated story. kriti: something we will keep an eye on and keeping an eye on the markets, they are rallying. the s&p 500 is higher by one for

six percent -- 1.6%. this is mark -- more markets coverage ahead. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get

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romaine: a case for stagflation, never mind all of that. earnings and focus, s&p higher on the day, up almost 1.6%. kicking you off to the close this thursday afternoon, mix of macro and micro continues to drive the market. the range has been broken through. just two days ago, we had one of the biggest drops we've seen on the s&p 500 in about a month, today seeing the biggest gain on a percentage basis