>> we are in this very broken play, a series of not just serious but quite unique and rather unprecedented disruptions. >> i don't think we necessarily set a new logo we could arguably retest the existing lows at sometime before the end of the year. >> we have cuts -- five cuts christ in over the next year. >> the market is underestimating the fed. >> i think a mild recession is the most likely outcome. >> this is bloomberg surveillance, with tom keene, jonathan ferro and lisa abramowicz. jonathan: life in new york city

this morning, good morning, for our audience worldwide, this is bloomberg surveillance on tv and radio. your equity market is a bit softer this morning on the s&p 500, negative by 0.3% and we are on pac west watch again, down to about five dollars in early trading, negative by more than 13% and barely squeezed together a day of gains yesterday. right now, $5.16. we need to talk about the lead story later this afternoon, 4 p.m. eastern time in the oval office, congressional leaders with the president of the united states. lisa: trying to dampen expectations for the meeting ahead of time. we heard yesterday from and democratic leaders but the republican leadership said we are not going to work miracles here. it's basically saying stop hoping but we will resolve it today because it won't happen. jonathan: other people will be in the room but it comes down to two guys who have to sort it out. lisa: basically, at this point,

politicians are looking for the markets to push their hand and waiting for the markets to freak out and have a massive sell off and say we had no choice. the market is saying we've seen this movie before and we don't want to do it in as a result, it's making them more likely we reach the debt ceiling limit and we pass it and enter to fall because there isn't this pressure coming from market. jonathan: we are playing chicken with the s&p 500 and it's ridiculous and frustrating and exhausting and a lot of people try not to pay attention to this. what edge can you have around the story like this? lisa: absolutely none. it's politics and this is a game of chicken we don't know where the gravity lies. what we will see later today is perhaps the notes of room of

some sort of adjustment on either side and when president biden comes to the table. jonathan: have you got confidence with these guys to sort this out before the x date? many of you don't. this is the gallup poll released today showing 36% of u.s. adults say they have a great deal or a fair amount of confidence the federal reserve chairman would recommend the right thing for the economy. 36%, we are talking a record low. lisa: compared to 37% during her first year with the fed in 2014. a significant decline. i wonder if this is a jerome powell issue or an elected official issue and whether we see a loss of confidence with all elected officials more broadly. you see that across the board with a decline and lack of confidence that any party can deal with the economy properly.

jonathan: did you read that this morning that this is a jay powell issue? lisa: i think it's important because it means it will be that much more perilous for them to keep rates high if unemployment rates go up. if you start to see an economy that materially weakens and there is a lack of confidence in jay powell to start with, it makes their job that much more challenging going forward. i take your point and i agree but in this poll, you can see all the leaders who have no -- who people have no confidence in. jonathan: if you are wondering where tk, he's still working his way through the pole. what did you make of that? lisa: i thought it was interesting, nothing decline or the standards but the demand side. that tank to the fastest pace going back to 2009. is this a confidence issue by

banks? jonathan: we are anticipating it will continue with the year ahead. on the price action this tuesday morning, this is what it looks like now on the s&p 500. we barely put together a day of gains monday. in the bond market, yields are coming back about three basis points on the 10 year. hello, the euro is $1.09. lisa: fireworks over there. it's interesting it's going in the direction people weren't expecting which is dollar strength. we get fed speak today with phil of jefferson and later this afternoon, new york fed president john williams. the fed speak re-ignites week as president biden at 4 p.m. in washington, d.c.'s meeting with republican leaders. democratic leaders will also be there. they have already dampened expectations that perhaps we will get the contours of what

some sort of deal will look like. earnings continue today and we are more than 85% of the way through this earnings season and today we have oil majors like duke energy as well as aftermarket occidental petroleum and interested in some of the consumer discretionary like airbnb after the bell. our next guest pointed out that three sectors are showing double digit earnings growth in this earnings season including consumer discretionary. i find that fascinating and a time when people talk about a potential recession. jonathan: the chief investment strategist of oppenheimer joins us now. he is constructive on this equity market. jp morgan is not -- if great cuts happen, it will be the onset of a recession or the market falling. why do you think he is wrong? >> for one thing, i think when

we look at the market, it seems to be very confident from the october low of last year, of october 12 as well as on the year to date basis. it seems to be very confident that cyclicals are of interest are that up -- of value and growth in your best-performing sectors year to date our communications services. up 23% on information technology. consumer discretionary is up 14.5. all outperforming the s&p 500 which is up 4.78 and you worse performs are energy, financial. as you all know, i've been in the market since 1983 so that's every boom, bust and recovery cycle since then. there is no doubt about it,

we've got a situation here where we're coming up with the debt ceiling situation that is significant. the interesting thing in our view is the political suicide for anybody who takes the united states over the cliff into any kind of default, the last time we had one of these, we were taking it to the limit with the politicians. i think it was warren buffett got on a financial channel and said this would be the first time u.s. would default in 230 years and it would be a highly offensive thing. all of a sudden, within 24 hours or so, they came to agreement and it gets done and they kicked down the test kicked the count

-- k2 can down the road and i think that's what the market is betting on. i understand what you are saying that chair powell has a bit of difficulty in terms of his communication skills. when they speak to the general public, they don't always understand but having come from a position of being behind the yield curve to now, having cut inflation in half, nine cuts and most nice -- recently more, so far, so good. the economy is telling his plenty of jobs, businesses with those three sectors are showing resilience of double digit earnings. others are waffling along a bit but you've got an earnings season that is not devastating in a highly challenging environment which indicates that

businesses having gone through the financial crisis and having gone through the pandemic, having gone through the post-pandemic supply chain disruptions, all the political unrest in washington and the social problems in big cities -- they are still able to make money. it's natural that earnings are on the decline at a time like this but it looks like the light in the tunnel is not a locomotive but sunlight. if you have to run a gauntlet -- jonathan: that's a five-minute response to white marco is wrong. >> what can i tell you? u.s. me a question and i want to give you details. lisa: you listen to the bearish proclamations and you are trying to get your point across itches that all of these things are wrong. i wonder what you make of the fact that there has been a huge decline in demand for loans. how does that pair with consumer

spending? >> what we'd have to say is the businesses are getting very cautious in the near term. there was one point last year where there was one poll that showed something like 98% that people thought there was a recession last year or the beginning of this year and so far this hasn't happened. we waffled through it and they don't around when we are concerned. they are prepared to ramp up again. you can ramp up remarkably well and it doesn't mean you are perfect and can have also dish all kinds of sluggishness and i think we get moderate growth that if this thing but on a relative basis. that's not so bad. we will be away from free money

which is what got us into this situation overall was the pandemic and politicians adding a lot of liquidity to the system on top of the fed. politicians, ultimately it's the politico. if we don't like it, we should call their offices and have five of our friends and five of their friends do the same and then maybe we will get somewhere politically. jonathan: it's like a public service announcement. get on the phone. lisa: call your representatives. jonathan: thanks for getting on the phone for us this morning. i love that. the fed is taking all the blame. tell five friends and get them to tell five friends. in the next hour, alpha simplex,

from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word, senate republican leader mitch mcconnell warrants he has no secret plan to solve the debt limit deadlock. congressional leaders meet with president biden today. connell says he told the president it was up to him and house speaker kevin mccarthy to find a solution. mcconnell predicts the two sides will reach a deal and avoid a default. vladimir putin vowed to pursue his invasion of ukraine, accusing the kremlin's enemies seeking to dismember russia. he spoke at the start of the annual military parade celebrating the soviet victory in world war ii. he said a real war has been unleashed against the motherland. in china, more pressure on economic recovery that has already been called into question. export growth slowed last month

to 8.5%. imports plummeted almost 8%. economists warn a strong export figure is not likely to last forever and shipments are expected to drop this year. aramco introduce additional dividend boosting payouts for saudi arabia's government by billions of dollars. it comes at a time when weaker oil prices are pushing the kingdom's budget into a deficit. it says the new dividend will be between 50-75% of the annual cash flow. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> i think we could see continued stress and the banking

system broadly but very much at the lower end as we work through some of these covid excesses. i'm not sure we head of the woods but i think the big moves have already been done. jonathan: great to hear from j.p. morgan. good morning with your price action looking like this -- negative zero point 36% on the s&p 500. cpi tomorrow and ppi thursday and a congressional leaders meeting with the president of the united states later this afternoon at 4 p.m. eastern time in the oval office. looking at the bond market, yields are lower by a couple of basis points. we haven't talked about the imports data out of china. chinese imports are breaking down pretty severely overnight. lisa: has the recovery been entirely domestic with respect to domestic spending in china and how much will this trickle out to other economies.

this flies in the face of the idea that japan and south korea will see a massive spike up in economic activity as a result of china's reopening. does that continue and are we seeing that? jonathan: we will have this conversation in about 30 minutes time. looking at pack west, five dollars and about $.20 in the premarket and yesterday, that stock was up by 30% and those gains faded pretty hard going into the close. once you get a name down to this level, there's not really that much point of a move because you are up or percent. lisa: we've seen a lack of recovery more broadly with the regionals. you see fluctuations but it's still deeply depressed and the loan officer opinion story yesterday raise question about profitability. you're seeing tighter credit

conditions but not necessarily a credit crunch but you are seeing a lack of a profitability proposition. jonathan: you would have to explain with this is in there is a survey the fed can docs with loan officers giving their opinions on what's happening with lending standards and people are like whatever but it moved markets yesterday. lisa: we said that about the university of michigan inflation survey and how much that would potentially influence things and we said that about every economic indicator that's become a hot data point and suddenly the data dependency is a roving target. jonathan: i don't know what chair powell was up to. wonderful to hear from you again. let's start with the loan officer opinion survey, what did you take from it? >> thanks for having me on and the survey did not have a major

surprise as you been talking about. there was a tightening across the board in most lending sectors. the commercial and industrial loans actually eased up a little bit. it still tighter but not as dramatic as it was six months ago and commercial real estate is still tighter as well as on the consumer side. what caught my eye attention was two things -- [no audio] jonathan: we lost the connection. i assume it's back to us. i think we lost the audio connection. lisa: we will try to reestablish that connection. he was talking about how consumer credit is actually increased in terms of demand and credit creation and consumers are still borrowing and corporations not so much. i'm wondering this is a result

of who borrowed the most during the pandemic. consumers did not go for cheap credit so do you see reversal in the trends which is the push pull we see. jonathan: of pushback by andrew holernhurst saying this could have been worse than it was. lisa: i agree and i read that idea. this is what jerome powell said, just a continuation of some of the credit tightening we saw going back six months. there is a shift and to me, the fact that gerard cassidy's talk about the fact that consumers continue to oro and companies don't raise the question of companies not borrowing because it's too expensive and they don't feel confident they have the opportunities to invest or are they not r.o.e. because of some other reason, something

they see in the economy that is potentially dangerous? jonathan: gerard joins us again hopefully with audio. lisa has mentioned the demand component of that report, is that something we should be somewhat worried about? >> it's a good question. as you pointed out, the demand was down not only for c&i loans but commercial loans. we saw an uptick in the can additionally consumer side of the commercial to men continues to weaken as companies get a little more cautious about the outlook for their businesses which is something that's common in the economic cycle. lisa: i was looking through the data so was it that they are not confident about the future or companies have stocked up on cheap credit and don't need that much more?

why take the expensive borrowing at these rates if they can just sit on their hands and wait it out? we saw this in the first quarter gdp the companies weren't making a move, they were being more cautious than consumers who cap spending so is this a confirmation of that? >> that's a good point and i would say it's a combination of those factors. during 2020 and 2021, we had record dcm markets and they had plenty of debt on their balance sheets and haven't used it all yet but they are also getting more cautious and the banks -- as they enter this time, with rates being higher, it's more costly for people to borrow so that's another factor on the commercial side so it's a combination of those factors as you pointed out. lisa: were you surprised by this were mildly optimistic about the lack of credit tightening the people were expecting to see in terms of a rapid decline in the willingness to lend?

>> i was and i'm glad you mentioned that because sometimes, people get over excited about the credit tightening and it will be a credit crunch but not really. banks are in the business to lend as we all know. they risk it just that lending and may charge more for loans today but they are not packing up their bags and not lending. if they have real opportunities on a risk-adjusted basis, it makes sense to lend so they will. jamie dimon points is out all the time his earnings call that they are in the business to help their customers in good times and not so good times. you look at the loan growth last year and the second half of 2022 and it was double digits for the banking industry. we are forecasting we will probably get three or 4% loan growth so lending less is a fair statement. jonathan: would you say that's a

feature of monetary policy? >> i think you are right that monetary policy certainly -- certainly has influence that and we know the fed's balance sheet is grown dramatically and they are shrinking that balance sheet which is affecting the other side of the banks balance sheets which is deposits. i think you're right that that is a factor. jonathan: great to catch up and sorry about the technical problems. gerard cassidy of rbc capital markets. there is a sustained steady tightening of ted -- of credit. lisa: some people will say he thinks the market is underpricing the chance that the fed will raise rates higher and hold their. he would say people have overplayed the bank stressed or in this is another example. other people will read this data

and will say this doesn't include the credit tightening we have seen as a result of svb and first republic. it really is a tale of how you want to read the data. jonathan: how long do i need to wait for this quarter, in august? lisa: yes. maybe february. jonathan: super helpful, thank you. equity futures are 0.4%. coming up, the council on foreign relations on the debt ceiling debate with congressional leaders in the oval office with the president of the united states at 4 p.m. eastern time. we will count you down to that event. from new york, this is bloomberg. ♪ can help your business get a payroll tax refund, even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do.

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jonathan: live from new york city, welcome to the program on tv and radio. getting some data from a survey -- the u.s. small business sentiment from the nfib survey falling to the lowest level in a decade. here is an important piece of it, loan availability, the survey suggests there is not a material change in credit conditions for small businesses in the month. in fact, the availability of loans improved somewhat. it was at a decade low in march

but it didn't get worse. i think a lot of people were looking to the survey for information around that survey. lisa: it shows this massive divergence we see in what we see for the business environment for large and small companies and this confirms that which possibly is only exacerbated by regional banks withdrawing credit but that's not the driver. there is something else going on that's leading to a decline in confidence. jonathan: less than one in five firms say they are not planning capital outlays. they are not investing. lisa: do they see a recession coming or do they see it in the actual economy is it because the media put out the gloomy news of recession? jonathan: i sense you don't believe it's that. lisa: i don't know whether that's the truth but we saw this going back to the gdp report with the lack of investment and confidence and pulling the trigger on deals from some of the corporate executives at are still spending so what are they

seeing that the rest of us are not seeing as clearly even though profits are declining across the board? jonathan: you've got levels and you got change, only in at 3% of respondents said it was a good time to expand which sounds dreadful. it is better than the previous month because the previous month was the smallest on record. it tells you where we are at. lisa: it's still a tight labor market so it's tough to pay for labor and inflation is the hot and people have less money to spend especially on the lower and were they have less discretionary spending. smaller businesses will be struggling more. jonathan: equity futures are negative by 0.4%. that's the s&p 500 but on that nasdaq, is struggled to put together a day of gains in the banks faded like pack west, negative in the premarket, debt down -- backed into about $5.30.

two mondays ago, this opened up as a double-digit name, it got hammered last week and tried to make a comeback friday into monday morning but that story is fading quickly. into the bond market going into cpi tomorrow and ppi after that. on the 10 year, down two or three basis points. in the fx market off the back of week data out of china, some euro weakness $1.10 against the dollar. before we get to see this cpi and ppi, president biden and congressional leaders will meet at 4 p.m. this afternoon to try to break the risen deadlock on the debt limit. senator mitch mcconnell warned he won't come to joe biden's rescue.

joining us is a senior fellow at the council of foreign there a secret plan and do you have it? >> i come bearing the secret plan. consistent with what many of your speakers have been talking about, this meeting today is the best outcome is that they continue to talk and negotiate and open a little bit of daylight in the ability to carry on where this goes. there is no secret plan and i think the most important thing markets need to understand is we are in uncharted territory right now because when we have had these standoffs in the past, we haven't had such a polarized congress and polarized politics.

we haven't had such a narrow majority in the house and we haven't had a speaker who has made a deal we don't really know how much negotiating power he has. he did just pass a bill and it gives them leverage. there is no secret plan but i expect after this meeting today, everyone will take to brought politics, going to constituencies whether it's business constituencies or it is going after fragile red states where you have veterans, fentanyl, social security checks, you will have a full blast on media about what's at risk. i don't think the republicans are necessarily going to budge. i don't think mccarthy has a lot of room to budge so there is no secret plan.

lisa: when you said markets need to understand, there is a question about whether markets are being held hostage by this negotiation and as we heard yesterday, essentially politicians are waiting for markets to freak out for the s&p to take before they go to their constituents and say we have no choice. is that what will have to happen before there is a deal? >> i would agree with that that there needs to be market pressure and the needs to be something we -- it's unfortunate that's what we are looking to to pressure politicians, but without that market signal, it makes it hard for mccarthy to go to the holdouts who are holding him hostage and say it is time to do a temporary lift of the debt ceiling to get us through and get us some space to negotiate so that nobody loses

face at the end of this. lisa: if the politicians are waiting for markets to respond, markets are thinking we've been through this before and we will just lose their shirts and lose money and be on the wrong end of this if we play chicken. at one -- at what point do markets not respond and then there is no deal. it makes it more likely we get some sort of default. >> the fact that we are talking in washington about wall street looking at washington, saying you guys had to do your job, it shows you what i gap there is between d.c. and new york. it means the system is obviously broken and it means we are putting out this picture on the world stage of the united states

as being hugely dysfunctional and not a leader and steward of global markets. the pressure needs to come and whether it comes from outreach to constituents particular in fragile states or from markets, there need -- we need to have the pressure that gets us to a relief period so we can align budget negotiations and debt ceiling negotiations so everyone can walk away with face-saving. it's likely to be in the fall than over the summer but in the meantime, you will have a lot of politics playing out and that is bad -- it will give you a lot to talk about. jonathan: [laughter] we'd rather not talk about this. >> the talking won't end at this

meeting. jonathan: going into the g7, this shows the united states in a particular light. >> i think we lose credibility. we go in with the desire to project power, project the strength of the dollar as the central reserve currency of the world, our sanctions error economic craft, we have the most liquid capital markets in the world. i don't think we actually have the threat to the dollar that is out there now except from our own doing. it's our own goal from every way you look at it. janet yellen, her g7 meeting is cut short we have biden heading out to the g seven meeting at

the leaders level later this month. this will all be background music to a president that wants to talk about leadership, stewardship, responsibility. at home, we will have this political more asked of debt ceiling negotiations. jonathan: the u.s. at the luxury of doing questionable things. do you think that luxury is no longer there? >> i think our friends are watching us closely as we head into a presidential election cycle. our friends are watching this closely but we are literally playing into the hands of our foes, those -- we are handing the talking points to adversaries right now about the u.s. losing its ability to lead the global economy and the global alliances.

the timing is very bad. it's at a time when we are trying to reassert that leadership and we are not showing it at home. jonathan: we appreciate your time, wonderful input. from the council on foreign relations, politicians in the u.s. of had the luxury of doing silly things because markets ultimately forgive them because the treasury market is a different beast compared to the rest of the world. lisa: we've had debt ceiling questions in the pass and people have piled into treasuries and yields go lower and it's the opposite of what you would expect if the credit perspective seems to deteriorate. is this time different with respect to people's willingness to buy treasuries? i'm not sold on this. jonathan: that's the ultimate stress test for me. speak to an investment strategist and ask him -- if things get messy in the next

month, will you buy treasuries. if he says yes, then we have answered the question. they still have the luxury of doing silly things in d.c.. lisa: people talk about the longer-term implications which could affect dollar supremacy and other issues and whether the u.s. loses clout. i think that the bigger stress test, i agree. jonathan: we've had that conversation many times over the last 10 or 20 years. lisa: that hasn't stopped us before. jonathan: at some point it's different and ultimately every time we have this debate, that's the question we ask, is it different this time? equity futures are negative by 0.4 percent, from new york, this is bloomberg. lisa: keeping you up-to-date with newsom around the world with the first word. treasury secretary janet yellen says if congress fails to raise

the debt ceiling, it would have an adverse impact on the use of the dollar worldwide and will be an economic catastrophe for the nation. she told cnbc that the government would need to figure out what to do with the resources we have. president biden is meeting with congressional leaders today about the debt ceiling. the public is not showing much confidence in jerome powell. according to a new gallup poll, 36% of u.s. adults say they have a great deal or a fair amount of confidence that jay powell would do or recommend the right thing for the economy. that's the lowest level recorded since gallup track public confidence in the fed chair 2001. the former prime minister of pakistan has been detained. the former cricket star faces a number of court cases and was set to be formally indicted wednesday and it has to the allegations he did not properly disclose earnings from the sale of state gifts from his time in office. he has called for early elections next year after

getting ousted in april, 2022 and a no-confidence vote. goldman sachs will pay $215 million to settle a long-running class action lawsuit on underpaying women. the case involved about 2800 female associates and vice presidents. it was closely watched in an industry where women of long said that complaining of unfair treatment can do real careers. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> there is a dangerous shortage of growth outside china and they are feeling it from the rest of the world.

that's in large part because investment is not going into the right places. you basically have a misallocation of capital where it goes into a narrower and narrower group of governments in advanced economies. jonathan: that was david malpass weighing in on the situation with global growth. the dangerous shortage of growth outside china -- there might be a shortage of growth inside china, the latest information on encouraging for to killing -- particularly on imports. yields on the 10 year look like this at the moment, lower by a couple of basis points. looking at crude oil, slightly down at $72 and $.52. bank of america had a triple digit crude forecast and that got cut in february two 88 and cut again and they'd cut their

23 forecast for brent crude to $80 per barrel on a weaker outlook for global demand. lisa: we are not actually hearing we are seeing that in the data with underlying demand issues. look at the people flying around the world and the people driving around. there is not a massive decline in demand and you are seeing that come out in numbers. is it something that hasn't transpired or are they downgrading their outlook for crude? i am not clear on this point. jonathan: the first order effective of reduced credit and further interest rate hikes is weaker demand. the senior executive editor for energy and commodity joins us now. great to see you, do you think this is about what we might see further down the road with the softening of the market in oil? >> leases point is good.

we haven't seen a huge softening of demand around the world. the point about planes is well-made. demand is stronger in many parts of the world but the chinese demand has picked up. i think there is concern about the economic outlook in the year ahead and demand growth won't be as strong as people expect and there has been weakness in demand which is an indicator the industrial economy may not be far off from improvement. there is still little sign that russia is following through and plan to cut 500 thousand barrels per day. the american shale industry still grows with oil coming in from parts of south america and brazil and when you put those together, the supply demand picture doesn't look as tight as it has. there are lots of analysts who say it will tighten in the second half of the year in the market looks oversold but we

will see. lisa: biz this basically a macro bet that people are using to make some sort of statement on future declines in growth that people in the physical market don't understand? is that the narrative? >> that seems to be what many people are saying. i think people are using the same trade to bet on a slow down. that creates flows which aren't necessarily related to the real world supply and demand of crude oil but more to people's expectations of the economy. there is some of that going on when we look at the data. it seems the positioning has changed and maybe things will move up from here. lisa: how fragile is market positioning now? a lack of credit means

production will be less going forward. we've heard this from j.p. morgan in particular. they will not be per morse -- producing more shale so why should we invest in producing more and that will mean a tighter market later on? >> that's exactly right, when you look at the fundamental picture in the years ahead, you clearly have a picture where demand is expected to increase but we don't know how fast. recessions tend to trim supply growth but they rarely actually lead to a supply drop in total demand, just weaker growth in demand. at the same time, supply is constrained for the same reasons you mentioned with people not investing as much in oil production as they used to. the fundamentals on the surface look strong but in the recent months, something is not quite

right in that transmission mechanism. it's worth pointing out that a lot of people have been caught wrongfooted by this. jonathan: are the saudi's happy with $76 brent? >> they do not talk about prices and do not target a price so you can't get them to say they are. the recent production cut we saw from opec in april shows they are not happy at the price levels. they got a bit of a boost and its back to where it was. we see today in the aramco news that they are looking to take more dividends. the saudi budget deficit has edged into deficit on these weaker prices. the common consensus is to achieve the things they want to do, they are comfortable with getting prices closer to $100

per barrel and they are far from that. i think it's reasonable to infer they probably are not happy with oil in the 70's. jonathan: thank you so much as always. it's fair to say they are not happy with the 70 so what next? lisa: do they simply cut production more leading to it tighter market or is this something where they want to allow this to play out all the potential competitors who are getting lower prices? jonathan: haven't they tried that before? lisa: they have but if they cut more, it speaks to the tightness in the market later on. jonathan: crude right now is $72. the latest move from bank of america, looking at a 23 forecast year end for brent of $80 per barrel on a weaker outlook for global demand. the first oil to band is weaker.

this is year and when it was a 100 and it came down to 88 and now the targets come down to $80 a clear direction of travel. lisa: i'm distracted. i'm hearing these things about the oil market and then i read a story the last couple of days about airfares rising and more than twice the rate of inflation. you can't get tickets to a lot of places you want to go. double digit increases in the cost of airplane tickets for many consecutive months. and no pushback. you think about this demand and all of the vacation time and all these things that are coming out and then people are like the demand is going down. i'm struggling to square these things. jonathan: the price tolerance is absolutely incredible on this front. there's been no pushback. lisa: if you want to fly, you still pay.

jonathan: particularly on international travel. j.p. morgan upgraded the big players like american airlines and those kind of people because of the international travel component to those companies. the smaller airlines, less enthusiastic about them and i think that's interesting. tk sits there and he looks distracted and is looking at flight prices all the time, trying to gauge how much things are. they are increasingly expensive and there is no pushback as far as i can see. lisa: maybe that's why i was distracted by flight prices. it's pretty distracting but i wonder how much this is business travel or vacation. most of this is probably business class. people are forced to pay more and experience less? jonathan: we are diversified.

lisa: biden yesterday talked about how he would make airlines pay for hotels. jonathan: what did he have to say? lisa: just three phones for delayed -- just refunds for delayed or canceled flights. it was obviously catering to everybody's frustration with the experience. jonathan: i think there is an inverse correlation with how airlines are doing and how we feel about them. i think you can get a decent feel for what the experience is like at the moment. lisa: wasn't that the problem withalitalia? jonathan: they are amazing. they did go bankrupt. they had some trouble.

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>> we are in this very broken play, series of not just serious but quite unique and rather -- unprecedented disruptions. >> i don't think we set a new low but we could reach as the existing lows at sometime before the end of the year. >> right now, we have five cuts price into fed fund futures by the end of the year, that's a lot. >> the market is unpriced -- is not pricing the risk.

>> i think a mild recession is the likely outcome. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning for our audience worldwide, this is bloomberg surveillance alongside lisa abramowicz. your s&p 500 is negative by 0.3%. look to the regionals, pac west is down in the premarket. last monday, double digit, breaking down again this morning and troubling -- and having trouble squeezing out gains on the back of the senior loan officer opinion which we are obsessed with now. lisa: bloomberg intelligent said that even though it didn't show that much tightening and it wasn't encrypted designate of the revealing, joe the even though companies were tightening as much as expected, very few

were expected to increase their loans or loosen their lending conditions. jonathan: little many crises anywhere, all these little fires coming up everywhere. there are the arsonists down in washington, d.c.. 4 p.m. eastern time in the oval office with congressional leadership sitting all fun and games. lisa: they said we are not going to sort anything out. people will be looking for some sort of wiggle room with negotiating on either side and how much kevin mccarthy has a hold on the republican party. my question goes back to this game of chicken and i'm concerned about the idea that

wall street has seen this before and why should they lose money on something that's a game for washington to say we had no choice. without that, are they not going to get a deal done? that's a big problem. jonathan: playing chicken with the s&p 500 is what they are up to and we are not seeing a big break there. the overwhelming consensus is this equity market once rate cuts and growth as well and you cannot have both. lisa: there has been this game of chicken with the economist calling for recession for so many months that has not happened and better-than-expected results and you end up having a market that is sick of the game of chicken to price something in. jonathan: it's amazing to see analysts on the same page.

morgan stanley started the we can sit equities appraised for optimistic low probability. at jp morgan, equity markets and the fed into get between them in the bond market at the expense of equities. that's the issue at the moment. can you price in rate cuts and durable growth? can you have your rate cuts and growth as well? lisa: the only way you can have that is if you have immaculate disinflation. cpi will probably highlight that you cannot. we are getting sticky inflation in a number of different metrics so when does it get reconciled and markets that want to go up? jonathan: the market is down just a little bit. yields are a bit lower in the bond market. lisa: it's been an exhausting

market. we get that meeting today and then we get a host of fed speak including from fed governor philip jefferson and john williams speaking later on. how they talk about reconciling this gap will be interesting. president biden will meet with a republican and democratic leaders so how much do we get some signs there are areas where they can come to some agreement and what the potential resolution could be and how much they are looking to the s&p 500 force their hand? earnings continue and we are 85% of the way through this earnings season. i'm interested in the consumer discretionary's and wynn resorts with those surging this year, up more than 47%. the increase in consumer discretionary story is one of the biggest questions.

we see consumers still very much willing to spend yet everyone is bearish on how the economy will do that hinges 70% on consumer spending in general. trying to square this is difficult. jonathan: still a high nominal growth world. q1 is tracking a 5% growth rate. lisa: this is the truth, they are doing ok and you seen a lack of confidence by corp. road -- by the corporate world. jonathan: wonderful to have you with us. can this market habits rate cuts and its growth, too? >> not at the same time. part of the reason we have a challenge is the equity market

is way ahead of itself. i would say we have to follow the bond market and follow inflation. that's why everyone is treading water. how quick will inflation go down? if inflation continues to go up, we need to watch the bond market. long-term cash flows dislike inflation a lot. it's really going to be a question of the bond market going first and does the equity market follow? i think we are concerned about bond markets than equity markets. jonathan: are you still short treasuries? >> yes, the view is the same. many people would say march made that positioning challenged but what we see over the medium to long-term given the long-term trend in fixed income, we've been in a three year bear market for fixed income and have consolidated. if inflation stays sticky, inflation is the bane of bond existence.

people will realize that long-term cash flows will be affected by higher inflation for longer. a fed on pause, if we have rate cuts, it would be under a bad scenario. to me, that looks like not a very positive sign longer-term for equities but short-term mild inflation is ok. lisa: is this bearer some longer term or short term bonds given the fluctuations we see on the short end? >> i would say it's been on the short and i'm very from longer-term bonds. you think about the scenario with higher inflation, holding longer cash flows is not the ideal scenario so it's more medium-term on the center of the curve that would be interesting. shorter-term concept taken a lot of the moves. from our perspective, there's probably more movement available on the longer end of the curve.

lisa: we've talked about the debt ceiling issues and what happens for investments as we get closer to the deadline. we were talking about the test of whether people continue to buy treasuries if there is some sort of concern about a default in the u.s.. >> i think the challenge with treasuries is all of this has created this massive unrelated rest. you now have this massive risk that has nothing to do with financial condition but everything to do with politics. why people are waiting is that we need to see consolidation of the trend and where the market goes as a result of this because it's really unclear for us to determine what the ramifications of challenges with the debt ceiling really mean. it's very complex at this point so we are all waiting to see

what happens. jonathan: to pick up on what we were talking about, do you believe this is still a buy treasury moment or is it different this time? >> that's a good question. the challenge is why people were bullish on treasuries was because they were concerned about the safety of their deposits. it's really about following the money flow. it people are nervous and they think the u.s. is not going to default or there's not going to be challenges in the treasury market, i can see those have generally been the risk asset to choosing in a safe haven environment. if you look at other assets like gold and platinum, they really moved in this environment and indicates people are not sure what a safe haven asset is under these conditions. jonathan: i ask this because you are short treasuries. i wonder how painful that might be if we get to a situation where we can't keep playing

chicken with the s&p 500 and things going the wrong direction in the playbook of the last decade when this happens, you buy treasuries. that will put an awful squeeze on you. how do you when the team come down on that? >> the signals and treasuries are very mild. that's what you see across the board. the view on treasuries is mildly short. it's not anywhere in the same ballpark of the type of signals you sold last year. with that indicates is this is the tentative direction of weakness in bonds. because of the volatility on the noise which is not a strong signal, i would consider the trends are waiting for the next big evidence that something is changing that could be a bear market for bonds or we could have a risk off and a recessionary shock that comes earlier than all the economists predict which is later this

year. i think we really need a catalyst. i'm not sure the debt ceiling as a catalyst. jonathan: thank you very much. short treasuries but ultimately a lot of people cannot answer that question. lisa: that's what everyone has been saying because how can you predict? jonathan: you can't predicted. i think getting an edge on the story like this is impossible which is why people refuse to discuss it in detail. a bunch of scenario analysis. i was listening to secretary yellen yesterday who didn't even want to engage in that. lisa: she literally said that. jonathan: what use is that? the central bank is driving me nuts. they always say things like let's not deal with hypotheticals. i wish journalists would push back against that because they's

-- they spend their whole existence trying to establish a reaction function. how do you convey that without discussing hypotheticals? i wish people would just push back against that nonsense. it's a cop out. that's your job as a policymaker. the prudent thing to do is to do a bunch of scenario analysis and share with a look. lisa: that's a great point. jonathan: my rent is over. lisa shalett is coming up, from new york this is bloomberg. lisa: keeping you up-to-date with nusra around the world with the first word. senate republican leader mitch mcconnell warns he has no secret plan to solve the debt limit deadlock. congressional leaders meet today with president biden. he says he told the president it was up to him and house speaker kevin mccarthy to find a solution.

at the same time, he predicts the two sides will reach a deal and a full -- and avoid default. vladimir putin about to pursue his invasion of ukraine. he spoke at the start of the annual military parade celebrating the soviet victory in world war ii. he said that a real war has been unleashed against the motherland. biotech company novavax has plans to cut about 25% of its global workforce. the maryland-based firm had a little under 2000 employees at the end of last year. it was one of the companies that geared up to make covid vaccines after the coronavirus outbreak. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪ at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

>> it has to be done between the president and the house of representatives and the republican majority. short-term debt ceiling increase

would give us cooling off. the president needs to engage in the political reality of mccarthy's ability to leave the house and the president needs to her show leadership. jonathan: that's the life of senator bill cassidy of louisiana. here is the line for mitch mcconnell -- they are assuming there is a secret plan. the white house and the speaker needs to sit down and settle it. there is no secret lisa: lisa: little plan here. not exactly encouraging. i'm waiting for the spin cycle were everyone tries to pin the blame on the other party. if this is political suicide, it will be a question of who they can pin this on. i imagine we will get a lot of back-and-forth. jonathan: looking forward to that this evening. around 6 p.m. eastern time, every single news network in the u.s. will start the blame talk. i love that after a big meeting. lisa: that's the playbook is to

pin it on the other party and for them to feel like it's politically suicidal for them to go more than the other party. it's reliant on the blame game and holding the markets and the public hostage. jonathan: holdingbramo hostage. it's just starting. you are already fed up with it. later today at 4 p.m. each in time, meeting in the oval office between house democratic leader hakeem jeffries, chuck schumer, republican leader mitch mcconnell, house speaker kevin mccarthy and the president of the united states. amh joins us from washington now. how important is this meeting later this afternoon? annmarie: it's just an opening meeting. you can expect that given the rhetoric we've seen leading up to it, the redlines maintained for the white house and republicans in the senate and the house. this will just be an opening

meeting where i imagine the president will tell the republicans they cannot hold the economy hostage which is what secretary yellen said over the weekend and she said this is a gun to the economy's head. speaker mccarthy will say in order to get this through my conference, i will need to tie these two together and i will have to have physical cuts. you guys are touching on the important part. when they come out behind the north lawn outside the oval office, this will be battle for the airwaves, which side will be winning in terms of public opinion. lisa: who is to blame? what are the lines being drawn with how they are framing this spin cycle? annmarie: speaker mccarthy is made it clear that he's been wanting the president to meet on this. the president has said show me a

budget and show me a plan and then we can talk. the president says he is no problem discussing spending cuts and fiscal reform but he does not want to tie it in with the debt ceiling. you heard from the press secretary yesterday saying this is a manufactured crisis. the republicans continuously talk about there was cleaned that raises three times in the trump administration and then went to see that happen again and they do not want to set it resident. mccarthy cannot get that through his confidence. many thought potentially mitch mcconnell and joe biden can hammer this out themselves. they did so in 2011 but mcconnell said in an interview was one of the more important lines -- we are in a situation now in the house of representatives is much more reluctant to enter into a deal than we had in 2011 and that is at the heart of the problem for speaker mccarthy. he is not able to get a clean deal through his caucus. lisa: the legal consequences are

interesting because of the discussion around the 14th amendment. u.s. government employees are considering suing the federal government to continue to pay them and increase and make good on their obligations. they believe they are contractually obligated and are trying to get ahead of the situation like in the past where they didn't get paid for a couple of weeks. could there be a legal challenge to spending cuts that were agreed upon by the government previously? annmarie: i'm sure there could be and if they use the 14th amendment, that could cause a constitutional crisis. that would also invoke some legal issues on the others, saying this is a legal to do. this can get very messy. one thing that's important to note is that we have seen this movie before and it is different and mcconnell alluded to that yesterday. many maintain that none of these

individuals want to see a default. at some point, people still believe there will be a deal and deals don't get done in washington until the 11th hour. jonathan: the most interesting person in the room is always the quietest. i had a message about mitch mcconnell -- senator mcconnell spoke a little bit but to be honest hasn't really stuck his neck out in any way, shape or form so why is that? annmarie: from the beginning, he said this is a negotiation between mccarthy and biden. either the last one but the numbers are different. the house has control under the republican leadership. he says he cannot get anything through the senate that the house republicans are not able to sign off on. he is really sitting back and seeing how negotiations will go between speaker mccarthy and joe biden. what you saw over the weekend is republicans on the senate side

coalescing around kevin mccarthy. 43 of them wrote this letter saying they will not vote for a clean debt hike and then we had mitch mcconnell sitting down and saying there is no secret plan in the senate. it has to be worked out between the house leadership and the white house. jonathan: i'm interested in how a reporter engages the consensus. do you get the feeling in washington that the consensus is shifting toward some kind of short-term solution that cakes the canon to later this year? just that kicks that can to later this year? annmarie: this is a potential and we have seen this before. the big issue is potentially, there could be house republicans , if there is a short-term agreement and they need to have a longer-term agreement, that would be at the end of the year. three votes on raising the debt ceiling and for some, that is politically toxic. jonathan: great to catch up,

thank you. it won't get solved until the 11th hour and we don't know what the 11th hour is. we think we have some idea. that could be as early as june or as late as the end of june and as a policymaker, you've got to be concerned about these things and come in earlier to make sure that you don't it the day on accident. lisa: janet yellen said june 1 means it's probably closer to june 30 and that's why -- and that's what markets think. mitch mcconnell has been quiet as you said and i think about the political liability when the republican party is coalescing around former president trump is a likely candidate to run against president biden in the next election. there is this discomfort and unwillingness to tread into the morass of the different sides and the polarization within parties you see on both sides. jonathan: why get caught in a

fight? everyone will look stupid. that seems to be the take away this morning. lisa: that makes perfect sense at a time when you just want to stay clear because there is no winning here. everything will look bad after this. jonathan: how many more months of this? i'm talking about this specifically. it could go another 6-8 weeks? lisa: i'm struggling with the idea that they are waiting for wall street to respond and waiting for the s&p 500 to fall before they take action. jonathan: president obama encourage the market to respond to this mess. lisa: i remember that and i remember the idea that the fed was using the market to send a message and the transmission mechanism for political wrangling in washington, d.c. when do people get sick of being used is that mechanism? jonathan: it's highly

irresponsible to play games with financial markets. if that's the game, we need to pay attention to it. we will wait in on the situation in the equity market, near session lows and -0.4% in the meeting with congressional leadership is taking place at 4 p.m. eastern time. after that, the focus will shift to cpi tomorrow morning and onto ppi the day after that. futures are lower with yields down by a couple of basis points, down to 3.48 on the 10 year and one dollar 10 cents euro against the dollar. ♪ o you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

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jonathan: live from new york city, welcome to the program. this is bloomberg surveillance. on the s&p 500, negative 50.4. down .49% on the nasdaq 100. russell down .5%. the two-year is down 3.9722.

negotiations around the debt ceiling, we can't wait for that. and then tomorrow, the u.s. cpi and ppi the day after that. lisa: it's exciting stuff is in it? lisa:we are excited about cpi and ppi. to give you a sense, we get the rolling earnings come in. i want to talk about three different stories. margin compression, artificial intelligence, job cuts being rewarded. paypal come margin compression. those shares are down 5.52%. you see that through financial services, palantir aia, it's up 15.5% what you see at novavax,

the vaccine makers saying it is going to cut a quarter of its workforce and having some negative prognostication and that's up seven percent. how is this rewarding job cuts for increasing profitability? it's three snapshots of themes through the earnings season as people try to adapt and adjust in this era. jonathan: you're sitting in that chair. the adapt and adjust. you will be data dependent. we missed tk, he will be back with the impressions. tomorrow, u.s. cpi. the markets of already priced in and easing cycle.

credit spreads are likely to remain range bound things to strong investor demand allowing the spread sectors to continue registering positive excess returns. please welcome robert sit at pgim fixed income. when we get to the 11th hour, the 59th minute, 59 second, are we buying or selling treasuries? robert: on the short term you are buying treasuries. it would be a risk off event and there may be variations in how the curve deals with it. it could be bad for the back end of the curve. and then a flight to quality, treasuries do well. we have seen that in past debt crises in the u.s. before. i think that will be the case this time as well. it's worth keeping in mind that

24 months down the road, unless we happen to be in another debt ceiling debate i don't think this will matter. i think it's important in the short term, how it gets resolved. if you get certain kinds of outcomes, some that are widely -- an admission. the risks here that we may have evolved into a different type of secular environment where the growth is not so much debt driven. growth continues and we end up seeing the fed holding are doing more hikes and getting some upward adjustment in the curve. jonathan: two things to unpack, listing of them separately. the short term.

do you and the team think this gets solved anytime soon? the debt ceiling? and what informs that view? why do you look towards to get that idea? robert: the easy part is nobody interest to pay for it. they want to show they negotiated until the last minute and the system is in place, this freak of nature with this messy system that's been successful is designed to prevent anyone idea, party or group from getting too much power. it's very hard to believe anything forward or stop anything. it will go down to the last minute. what will be interesting in a way as if joe biden goes for a power-play, continues to say

this is the best budget you could pass and all of the spending, taxes these are the best policies he could come up with. you need to have a borrowing capacity and if they don't give him a clean increase he invokes a 14th amendment and makes the payment. the worst case scenario with the government being sued. i is upheld or shut down. if it is shot down every time you get the debt ceiling you get a raise. it's a loss and that it allows profligate, but for traders that would be a big win.

lisa: janet yellen has called us a constitutional crisis if it was invoked. that is not something they want to happen where they would get legal challenges. how does this work if the market sis on their hands? is everyone waits until the 11th hour to make any moves will mean that this will not get done in time? robert: i think you are going to see an increase in anxiety as the balances are read aloud. if there is an accidental default you will see a drop in stock prices. the economy is pretty resilient to those kinds of shocks. whether you look at

october 1997 or volatility in 2018, the economy was not derailed. the current cycle is the increase in interest rates in 1984. i think 12-24 months this will not be a major economic event. it could be short-term very trying for the markets. lisa: do you feel as if you are being used us upon and washington games or is this a good trading opportunity? robert: i think it's a little bit of each. in the cvs markets, in terms of the term structure. people are paying real money to prevent defaults in the short term. there could be a trade to do there. as an investor, everybody has their edge and i would think for

some, for investors their edge may be assessing was the 12-24 month environment? how are fundamentals differently price from where they should be? i think now it's one of those environments where the market is heavily biased into marketing a recession. having an optimistic view will be the best approach. tactical trades on the debt ceiling you could do on the margin but not the major? jonathan: did you buy some apple debt? robert: i'm not going to comment on that. jonathan: i knew you would say that. robert: i think the market here is supportive. it ceecee lyles is having traverse the range over the past 10-12 years. the command -- demand for

corporate bonds in the spreads are supported in the face of a recession is indicative of the fact that people will yield, the market is supportive and we will see spreads over the range of the last year. jonathan: robert tip on the credit markets, constructive. looking at the apple story, as i look out it, there was tons of demand and then they tightened things up and demand faded. lisa: there was a real-time pricing where apple said let's push this, and the people said we are looking for income at a certain point we will draw the line. there is a ton of demand but there is a price. investors would like the income and if it's not there they're

not owing to buy it. jonathan: it's not the market it was a couple of years ago. lisa: it's not 2013 and people are prioritizing income. jonathan: or post pandemic were people were buying bonds every months. lisa: when the fed is supporting the market and putting the thumb on the scale people don't care about income because there is none elsewhere. now that equation has changed and i wonder whether apple is selling this bond deal. is this a test understand what the level is for them to top and have access to this market? jonathan: it's like the fmh deal. and when they don't issue that much debt, when is the last time apple came last august? what can you learn from it? lisa: what the corporate rate is

for the highest rated and most highly sought after paper is. what is the line in the sand when it comes to income and corporate debt? jonathan: finding out from the sluice, people are tightening up and things are weakening. that feels a feature of this economy. lisa: does it matter if it is gradual or it happens all at once? people say wait for it. jonathan: citi still see hikes in june and july. tomorrow morning at 8:30. but coming up we have neil du tta.

lisa: treasury secretary janet yellen says that if congress fails to raise the debt ceiling it would have an inverse impact on the use of the dollar and be economic catastrophe. she says the government would have to figure out what to do with the resources that we do have. president biden is meeting with congressional leaders about the debt ceiling. the public is not showing confidence in jerome powell. according to a new gallup poll, only 36% say they have a fair amount of confidence they would recommend the right thing for the economy. that is the lowest level since they began recording. mitch mcconnell predicts that congress will keep funding ukraine defense despite growing calls from members of his own party to reduce or end the aide.

president biden has been called to ship out weapons to ukraine. ryanair is betting on the recovery of the industry. europe's largest budget airline is an talks to buy from boeing. under armour struggling in his turnaround effort. they wanted february that a buildup in inventory and recovery would take longer than expected. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪

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you've been a real rock star. rock star? what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart! >> i think the market is underpricing the risk of the fed remaining -- we are pricing in

cuts for the second half the year. if we can get past the banking crisis, i don't see a reason for them to jump into cutting. jonathan: the question we have asked this morning, can this market habits rate cuts? the one thing that could get this done is immaculate disinflation. if we could get that is the reason for the fed to back away. lisa: the likelihood of that is no. we should show a stickiness to the inflation. this is the main question and the question is not getting resolved, will we see massive rate cuts and the face of a massive crisis or will bc rates higher for a substantial period

of time. jonathan: it is a massive crisis, that doesn't sound like a reason to buy stocks. lisa: that is why you see equities rally. everyone is talking it down and then they say you been bearish forever? jonathan: banks are not rallying this morning. a move about 60 sent works out to 10%. we are down 10%. lisa: i just keep going back to that. everything is stable, you see deposit stabilize. i what point do we say it's over and we can move on to discussing fundamentals? jonathan: krx has been bumping on the bottom.

lisa: i'm going to bring up commercial real estate. tom tracks the building in the cities. it's difficult to get your hand around the data. jonathan: commercial real estate, what else is on there? lisa: airline tickets, first class to europe or asia. there also is the schools. jonathan: buzzwords like adjust and adapt. lisa: bowties, scrolling. jonathan: does he scroll through bowties? lisa: i will do more investigating. jonathan: if you want to get a bid in your stock, you hold an

earnings call and a problem i have with that, i have no idea if it's just a tech pro bsing me or if they need to buy the name? lisa: microsoft saying artificial intelligence will help us take over. other people saying google isn't in a good position. i don't think anyone has a sense of what is going to give someone the upper hand. a lot of the technology markers have questions around them. jonathan: mandeep singh joins us now. can you help us understand what is happening with ai. when they talk about the benefits and how well position

they are, how well-positioned are they? mandeep: i would look at it in two different ways. you have to look at the company's enabling the infrastructure. the chip companies. there is something underlying that is enabling this ai. the processing capacity you have. some of that has to do with the other aspect, the data side of it. how do you frame these models? a lot of companies are realizing that they did not have the ip, clearly there is value in terms of leveraging ai in terms of what we have done over the past five years. in terms of the applications that will be really disruptive, we don't know that yet. every ceo wants to leverage this

but they are trying to figure out what is the best possible way to monetize this technology? lisa: the demand for this new ai tool is unprecedented. the shares of 17%. how do you gauge whether something is real or a new fad on wall street? mandeep: i do want to use my application all lens. infrastructure revenue will be more tangible in the near term because that will help you build these applications. in terms of what will fit disrupted on the software side, only time will tell because the efficacy of working with the

technology is yet to be determined. the initial response is yes, this is something better than what we used to have and if you're able to weed out the noise and people can see you driving productivity. like palantir, they are a specialized software. it's great for fraud detection but is sought a solution you could roll out to thousands or millions of customers because it can be customized so quickly. yes they are investing in ai but they are not at a point where there able to quantify it anytime soon. lisa: just to get a perspective on machines versus humans. if they are concerned about the

unfettered use of technology in the theory that people don't understand if they try to extrapolated out, what it would mean. what is the likely outgrowth of that? how many imposed restrictions on the development of nuanced artificial intelligence is the humanlike elements and how they will be implemented? mandeep: look at how the internet content is consumed. there are safety issues surrounded and you put guardrails in terms of who can access the type of content that may be nefarious or not something you want your kids to be exposed to. over time, regulators will be late and terms of putting those guardrails up. for a productivity standpoint, you can see how if you can enhance someone's learning.

the bad aspects are highlighted first. like you can write an essay. but what about if it enhances learning? you could see value in something like ai being that personal assistant for a student. yes, you had to focus on safety and the regulators will commit eventually. like within any new technology you will see the disruptive aspects first. jonathan: students personal assistance? can i have one? lisa: a personal assistant to do what? write their essays or get the information they need to get those essays written? does this widen the divide? it raises a lot of questions. jonathan: when mandeep talked about writing an essay is a bad thing, what's bad about that? lisa: i have to help with some

of these situations. jonathan: how do you intend to help? lisa: just as a personal parent, the house offspring that write essays. his there is a concern in the development of critical thinking, being able to research information and concisely put it together in a coherent document. that is what chat she bt does for people. that said, could you open up to questions that are more qualitative, difficult and nuanced and how quickly can they do that before chat she bt opens up? with a personal assistant, what are they assisting with? jonathan: run the same page with critical thinking skills. there are so many other things

you can teach a school that are happily useless. i can happily help with that. ♪

>> the timing of credit conditions. this will be a very big deal.

the ecosystem of the americans have, america has a lot of banks. there will be this enduring tension. it is going to be one of the situation where yields remain entrenched. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: if you're serious about occupying that share you have to bang the keyboard and clear your throat. at the worst possible time. lisa: i'm trying. i don't know if i can. jonathan: from new york city this morning, good morning. it needs to be heard. equity futures on the s&p 500,

negative zero .4 percent. tom keene is back tomorrow. later this afternoon we are focused on this meeting between the president and congressional leadership at 4:00 p.m.. you speak to people while connected to the story and they tell you the same thing, they don't think anything happens today. lisa: they have to wait for the debates of drag on long enough to have political cover to do our best. this is why the market is not responding. politicians are waiting for the markets to respond. jonathan: it durable growth, rate codes, it's pretty decent stuff. lisa: to the equity balls, they have gotten it right. you can keep going with all your

discussions but it has not been happening. there is this frustration that the logic is that playing out of markets the way it traditionally does. jonathan: lisa shalett joins us now. thank you for being with us. it will ask you this. how frustrating is this market when you look at all the rate cuts being prized with the same time there is this feeling that we will continue to live with growth? lisa: there are a lot of conundrums in this current market. the single most frustrating thing is the benchmark. most institutional investors, retail investors define the market is the s&p 500 index.

that is up 8% year to date, 17% from last october slow. for the last 4-5 months a huge portion of the move since january 31 has come from seven stocks. the mega cap tech stocks. that led for the last 13 years. we nicknamed the fangs. what has been frustrating is underneath the surface, a lot of the indicators that are flashing recession have crushed the cyclicals. we have seen the devastation of the regional banking system as the fed has raised rates and as the implications of tightening have begun to show. and yet, there is that benchmark

supported by the heavy concentration at the top chugging along when below the surface, there seems to be some pain and suffering and damage. small caps in particular have been crushed. jonathan: can this persist and if it can what would bring down some of the tech heavy weights that have supported this market? lisa: and the reality of the short-term it can persist as long as we are in the stalemate. to your point between labor market resilience, the power of pricing and some of the nominal growth drivers. they can support some of those names. our thesis is been there are no companies that ultimately are immune from recession or significant economic slowing and

we don't think at this time it will be different. even though it has felt that way of moments. our best guess continues to be that there are some earnings disappointments out there. one of the things that folks have to digest is that the way earnings are modeled it looks like we are at a hockey stick towards recovery over the next few quarters with this first quarter that is being completed representing a trough, we get year-over-year earnings that are better in each quarter until we get to 2024 where market is looking for 13% earnings. we are still very close to peak economic growth and peak corporate profit margins. lisa: what would it take for you

to throw in the towel essay this time is different? lisa: the fundamental issue for us is a re-acceleration and consumer growth. if the consumer does prove to be resilient. if the slowing week expect to emanate from the credit crunch does not materialize. we would probably see that in the next two quarters where these earnings that looked like a hockey stick recovery are achieved. if those earnings are achieved, our thesis is wrong. lisa: there's another aspect to this which is perhaps the largest companies are consolidating market share to such a degree. you could see small caps blown up. declined dramatically which is something we have seen in certain pockets even as the

large caps continue to chug along and chart expressive growth. is that the new reality for a while? lisa shalett: it is possible. anything is possible and certainly there are a host of these companies that have very dominant positions. i do think we are out of political point, a political moment where the tolerance for further fei company consolidation does start to be debated as an antitrust issue in a way that it hasn't been for over 40 years since the reagan administration. some of government interaction has gotten us here. what may break the logjam may be some attempts at re-regulation? jonathan: have we done the debt

ceiling yet? lisa, please stick around. when clients ask you about this what are you in the team telling them at the moment? lisa shalett: the fundamental thing we are telling them is that it is not a question if it's a question of when and how. on the question of when, what will janet yellen do after she gets approval to extend borrowing and what we mean by that, at what pace induration is she going to issue? if you are down to a zero in the treasury account as possible that in the last four months of the year, she will be issuing to the tune of 650-700 $50 billion.

at the same time we might have some of these credit crunch issues where we are continuing to pursue quantitative tightening. the first thing we are telling clients, beware of the liquidity implications on the others. the second thing we are talking about is the how. it matters to forward-looking expectations of growth in terms of what is cut. if that's what it takes to get a deal done. commence ticket fiscal -- spending related opportunities, infrastructure spending that is in motion. those things have been the support to growth. if we need to take that out of the forward forecast, that will

dampen economic growth. jonathan: a wonderful response, thank you. lisa shalett. for people who are tired of speaking about the debt ceiling just play out for them. what of the line that the spending cuts democrats would accept to get the republicans over the line to come to a deal and will that lead to slower growth? all the different crosscurrents, the conflict, what happens with qt and growth in the credit crunch of regional banking issues. that if this is helpful to growth. lisa: even if they don't want to cut the budget that much, the fact that there is this ongoing debate puts a cap on how quickly spending could be accelerated. you have to imagine it would restrain fiscal spending going forward. that is negative for growth.

do you really get the perfect search and growth the way that lisa was saying would have to happen in order for prices to be accurate and yet they have not come down. jonathan: 04:00 p.m. meeting between the president and congressional members. next, terry haines on the meeting. appear in new york city, equity futures are negative 3.40. the effects market 109. import data out of china is not good as expected. yields are lower by two basis points. your 10 year is 3:48. --348. lisa: keeping you up-to-date

with news from around the world. mitch mcconnell warns he has no secret plan to solve the debt limit the dog. congressional members me today with biden. mcconnell said it is up to biden a mccarthy to reach a deal. vladimir putin vowed to pursue his invasion of ukraine accusing the kremlin's enemies of trying to dismantle russia. he spoke at the start of the military parade. he said a year or has been unleashed against the motherland. in pakistan, the former prime minister has been detained. he faces a number of court cases. he has called for early elections next year after

getting ousted in april 2022. aramco will introduce an additional dividend boosting payouts first saudi arabia government. this comes at a time where weaker oil prices are pushing the government into a deficit. global news powered by more than 2700 journalists and analysts. this is bloomberg. ♪ good night! hey corporate types.

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there needs to be market pressure.

without that market signal and makes it hard for mccarthy to go to the holdouts who were holding him hostage and say it is time to do a temporary left of the debt ceiling to get us through and give us some space to negotiate so that nobody loses face. jonathan: we are playing chicken with the s&p 500 in washington dc. here in new york city your equity market is not blinking yet. -.3%. your futures are down a basis point. 3.99 on the two year yield. the next stop on the data front, cpi is coming up tomorrow morning. and then onto ppi after that.

plenty of fed speak in between. at 4:00 p.m. a conversation between the president and senate leadership. terry, you said we can expect some non-meaningful platitudes. anything other than that? terry: i think you will get those platitudes without saying that they will not default. they will say they don't want to. but they will harden their positions. biden's position has always been , you can't cut spending it all. you can't cut spending on domestic discretionary and republicans are going to talk about the need to cut back

modestly to fiscal 22 levels. this gap is principal but no one is interested in bridging it yet. lisa: what is the over under soothing proclamations to the sky is falling? terry: if you could do both that's optimal. they are trying hard to get the markets interested in so far they are not cooperating. the extent they are cooperating, what they are seeing is republicans haven't done something whereas biden has not done anything which is why he is bringing everyone to the white house to show he is interested in doing some sort of a deal i'll be at without climbing down from the pers that he is not negotiating. lisa: you said there's a 30% likelihood up a default. how do you come up with these probabilities? terry: how i view this.

fundamentally, is there a one in three chance that somebody makes a serious mistake? yeah, i think so. i think that is more than a trailing risk. what is happening today will illustrate that to the extent that anybody is looking at this moment in suggesting that there is the beginning of a constructive path. jonathan: what is the one signal you can identify that would make you think it could be different this time? terry: if i am wrong on the suggestion that they stick to their spending guns and say we are going to sit down over a period of time and give the

markets assurance of the problems will be solved and solved on a particular date. that is not at all what i am seeing or hearing. jonathan: we have heard as early as early june, how concerted is the treasury secretary need to be about the x state? terry: i think she needs to be as transparent as possible. i think she needs to avoid the mistakes that some prior treasury secretary's of made of both parties where they surprise policymakers. whether it be surprise your own president or surprise of congress. there will be enough volatility in the negotiations without adding to at the volatility of a treasury secretary hiding the ball until the last minute.

she needs to be putting as many cards on the table as possible because not only will that help negotiations. that will help markets. lisa: jay powell faces the lowest confidence and lowest back pain from the public in history. this poll also have the lowest confidence. if you take a look at all of the politicians across the board, as they looked at the debt ceiling debate. as a look at the general dysfunction. how has this become something entrenched and an accepted fact that there is a lack of confidence in public officials? terry: i think it was quite entrenched. forud interesting about the gallup poll, all of these numbers are pretty tight.

if you come by the haidi lun confidence numbers, house repor -- high/low confidence numbers. joe biden comes out the least popular. but there's an opportunity here to enhance the president's own standing if he takes leadership on a deal. jonathan: a wonderful perspective. lisa mentioning chairman powell. his pretty much everyone in washington dc. 37% for janet yellen. the lowest going back to jack lew. lisa: was he the one with a lot of circles?

i think it's part of the mind. it's very confusing. jonathan: if you're going to sign bills, practice it. lisa: maybe that was since practice one? i do think it's an important issue at a time when people are rolling their eyes at this. it speaks to a lack of confidence. jonathan: they can't be a ringing endorsement, 38% have confidence republicans as opposed to 34% in democrats. it's a lose/lose across the board. lisa: we will see a lot of posturing after the fact.

jonathan: coming up, on the open on bloomberg tv. we will catch up with henrietta treyz around this debt ceiling nonsense. a little later this afternoon. lisa: i also wonder with the politics of the moment, the fact we are seeing this shipped with big company making out better than small companies and if anyone addresses that. big bang bonuses jumped 20% and regionals are getting paid that much less. how are they going to keep employees? this is something going on more broadly. smaller companies are losing out to bigger companies in a massive way and this will be a massive political issue as well. jonathan: it's a stockmarket

market issue. small caps are terrible. lisa: this raises the question, if you get paid out of big company. it's an interesting moment for an economy that relies on small businesses and they have no political voice. jonathan: you can contribute to the culture of large companies? lisa: you are in a rare mood today. jonathan: all the big banks that want you to come to work to contribute to the culture? it's so important to contribute to the culture and participate with the family. from new york, this is bloomberg. ♪

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lisa: welcome back, this is bloomberg surveillance. tom keene is off he will be back tomorrow. here with me is neil data. --dutta. to give narrative to this, it's difficult on any given day. we got the small business optimism survey that was disappointing. we see a bit of a build in treasuries.

a bit of dollar strength, the euro weakness. 1.0962. new york crude at 72.3 eight. tomorrow we get cpi data. do we have to be worried about inflation and the fed hiking rates further or some kind of softening? and then onto ppi. as we get small businesses showing signs of stress and big businesses reporting record earnings. one of my favorite economists. he is had of u.s. economic data. who will win here at the consumers they keep spending or companies that are pulling back spending and being more conservative? neil: the consumers will win.

the issue is that companies have been preparing for several quarters for a recession that has not yet arrived and they are moving further away, further offset some growth. if the consumer continues to hang in there. there may be some catch up where they restock their inventories, hire a bit more. to me, it's about what is the consensus pricing in and the likely outcome going to be in you pick your battles as wisely as you can. to me the consensus is expecting a recession to start in this quarter. june, q3, it doesn't seem like that is going to happen.

we had a strong auto sale number in april. we know from the public builders it was a strong month for new home sales. lisa: taking a step back, you said when you are talking about how the consensus is a consensus of economists or priced into stock valuations? jonathan: the bond market is pricing in rate cuts, 200 basis points between now and next year. that is hard to see in the context of a strong economy. people clearly expect some weakness in the economy. with respect to equities, they are still well off the highest. we have seen some rally of late. you could make a case to say

that the outlook for stocks is ambiguous. if recession risk is priced out that's good for earnings but that leaves the fed the prospect -- future rate cuts left on the table. lisa: what could we expect tomorrow that my shock the market? neil: i think there's scope for upside surprises on inflation. the question is whether the fed will lean into that by continuing to price over the summer. i think they probably take a pause. they are captured by events to some extent. the regional banking issues, there still an issue there. you also have the debt limit negotiations. there are things out there they can point to to keep them away

from hiking over the summer. but if inflation numbers remain firm, we are not going below trend. the unemployment rate is not going to rise as much as the fed expects. we are three point 4%. i don't see anything in the outlook that justifies i kind of move. it could be coming back in september talking about revising on their unemployment forecast. maybe they are taking up gdp and that could push them towards hiking again. lisa: it's difficult to know what's going to happen in the future or even what is happening now. the senior loan officer survey, even though nothing was surprising we saw a huge drop off in demand. the c-sweet factor.

executives say we are concerned about what is coming down the pike, how much we have to pay our workers. how do you pair these ideas with the strength we see in the overall numbers we are getting out of the surveys? neil: ceo confidence and business confidence has been quite sluggish since last june. companies have been cutting back capex, inventories have been a drag on both. consumers, their confidences been weak also. ultimately, what are they actually doing? companies are still hiring people. these depressed businesses are still going out and hiring 200,000 people a month every

month for the last three months. the hiring rate is stable at around 4%. you haven't really seen? there is a disconnect between how people say they may feel about things and what they're going on and doing. lisa: you see businesses are not engaging in mergers and acquisitions are doing capital expenditures which goes into economic trajectory. they are not pulling the trigger on things. neil: things will get clipped and a high interest rate environment. like m&a. you talk about capex, boeing orders are going out. those are capital goods, big-ticket purchases. again, it's not that the economy has to be booming. there is this expectation that

gdp needs to be 3%. no it doesn't. where's the consensus think it is going to be? the feds forecast is 0.4%. that is highly unlikely. just given what we have on hand for the second quarter. lisa: were talking about the short-term or near-term in terms of growth continuing. longer there is this question of whether we are bringing forward growth in terms of the debt ceiling debate. this question of whether they will be cutting spending going forward? how do you pair the short-term versus the long-term? neil: my primary disagreement with the consensus is over the timing. i don't see a recession is imminent.

i don't think one is likely in the next 12 months. but the fed is told us that they believe below trend growth is required to quell inflation issues. that is where the caution comes from. ultimately, there will be some kind of economic slump out there that the federal try to engineer to bring inflation back towards his target. if you believe in the soft landing you need to be hanging your hat on two things. one, some kind of productivity boom, bringing labor costs down. the fed basically accepts a higher rate of inflation and i don't see either as a baseline expectation going forward. it's about the momentum in the economy. that does not speak to a recession. the fed still believes that below trend growth is required to quell the inflation issue.

that means we have to stay cautious. it's a difficult environment for investors because it's hard to be sustainably optimistic on equities. i think that's part of the frustration. lisa: i would love your thoughts on the debt ceiling and what we are seeing and the excitement you expect in markets as a response? neil: i think we are going through a very public and open negotiation from both sides politically. whether the deadline is june 1 or not. i think the house republicans have done what they need to do, the administration has done what they need to do and ultimately there will be some kind of negotiation that resolve the issue. to me it just a binary thing. you either go over the cliff or not. i suspect they won't. and if they do get to a point

where they prioritize payments, that will be the opportunity to buy bonds because you are forcing a recession on the economy. lisa: you don't think longer-term this will reduce the u.s. ability to borrow cheaply and the ability for the dollar to be used globally? neil: what's the alternative? to me, it is politico. we will see what is happening. i don't subscribe to those ideas. lisa: is this the most fun time you've had is an economist? neil: the most fun time after the financial crisis. back then, everyone was looking for a recession and it was never in the cards for that entire cycle. pushing back on that was quite easy and the data bore that out.

now it is challenging because there are so many mixed signals and i prefer an easier job. lisa: highlighting the uncertainties as we parse through the push and pull of different aspects of the economy. we will be talking about the airline industry and how people are continuing to go there. and mark is seeing softness led in part by the regional banks in those areas that have been beaten up as people tried to find the next potential catalyst. lisa: keeping you up-to-date with news from around the world with the first word i am lisa mateo. janet yellen says that of congress fails to lift the debt

ceiling it would have an adverse impact on the use of the dollar worldwide. the government would have to figure out what to do with the resources we do have. president biden meeting with congressional leaders about the debt ceiling. the public is not showing much confidence in jerome powell. 36% of u.s. adults say they have a great deal or a fair amount of confidence that powell would do or recommend the right thing for the economy. that is the lowest level since gallup began tracking public confidence in 2000 one. mitch mcconnell predicts congress will keep funding ukraine's defense. despite growing calls for members of his own party to reduce or eliminate. they have called on president biden to ship weapons to ukraine. tempur sealy has agreed to buy a

steak and mattress for. mattress for has more than 20 400 stores across 49 states in the u.s.. under armour keep struggling in his turnaround effort. athletic gear fell after they missed estimates. they warned in february a buildup in inventory would lend to discounts. global news powered by more than 2700 journalists and analysts. this is bloomberg i am lisa mateo and this is bloomberg.

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>> you are going to see an increase in anxiety as balances run low end if there is an

accidental default there will be a drop in stock prices and a decline in credit spreads. 12 months from now it won't be a major economic event but it could be jarring for the markets. lisa: we have the market is saying you will not default and washington is saying get more concern. robert tip from pgm mixed -- fixed income. this emissive backdrop of resilience when it comes to discretionary spending. no area defines out better than airlines. after the bell we get news on some of these shares. there's a big question underpinning air travel which is how long can prices keep searching well beyond inflation.

year-over-year inflation came in at 27.4% for flights year-over-year. that is more than twice the rate of inflation. helane becker is here to talk about this. senior research analyst at cowan. why are consumers not pushing back on these price increases? helane: the first is that a year ago there was still omicron. in the second issue has a lot to do with summer travel, especially international travel. a year ago the u.s. did not remove restrictions until june 11 and a lot of people had already posted summer trips.

they had already decided where they were going and a lot of stuff was not open yet. now, people are tired of being home. they want to travel. they feel like they've missed out on a lot and they are going. you have huge demand. we are equal to where we were in 2019. but we have 10-15% less seats available in the results is that with demand, even with business travel knocking back. with demand so strong and exceeding supply, airlines are pushing up bears and will continue to do so until there is pushback. lisa: and you are not seeing significant pushback? helane: i am not seeing it in the summer. i'm worried about getting past labor day in general because we

normally see a dip. i am also a little worried because by then people might be exhausted by the prices and we don't think this summer is going to be significantly better than last summer especially in the new york area where we have a lack of air traffic controllers and the government asked the airlines if they would help by reducing capacity in the market and most of the airlines have employment that exceeds their pre-pandemic levels. the airlines were ready, the government is not. lisa: how are we looking at a divergence between international and domestic airlines? with a focus on first class which is demanding the biggest premium relative to economy. how are the gains we have seen

driven by the international flight path. the traveler the has that much more discretionary spending? helane: we see international outbound strong from the u.s. because the dollar has been strong. and bound we are down versus where we were. i think the other part of her question with respect to how the diversions between the two. that is the summer 2023 event, and domestic. maybe people will be so overwhelmed by the price of tickets that they will pivot and either shift the days that they travel or shift location. instead of going to europe, they go to latin america, domestic. you will see some of that

pivoting because of the differential affairs. lisa: will there be a decline of business travel or is it coming back because people are working from home and traveling? helane: i don't know the specific answer because my thought has been business travel will come back in different measures. you need to see your clients after a while. when you get to the time zone differences, is one thing to be u.s. east coast to london or western europe, you can make that work. when you start to get into the nine-hour time changes that exist in the middle east, or 12-16 hours with australia and japan, people realize it's hard to do zoom calls at 1:00 in the

morning. at some point, it does start to come back. we thought it would be international business but the days of if is tuesday it must be road our past us. you could probably get away with the one hour zoom call. i remember days where i went in for due diligence and flew home that same day. that's her stuff isn't happening anymore. lisa: how much of the resurgence of the chinese economy filter into the airline? helane: in the u.s. we see domestic first. last week was a very strong week

domestically. international has not come back out because of flights of not come back yet. in 2016 there were 100 flights between the u.s. and china and more between china and europe and now there are only 14. until that happens which is probably a 24 event i don't think you will see that come back. what you are seeing right now is family travel, people who haven't seen family because of the covid policy. i think you see students making their way back home, many were trapped outside of china. domestic is wary you see the strength rather than international. lisa: we see oil prices coming down's which mean a lot of the

margins will only expand. a wellpoint to the widening margins become a political liability for airline companies that are facing criticisms? helane: i think a couple of things. fuel prices come down, typically ticket prices fall. i think that's one thing to think about. oil prices are coming down because we're in a recession and that should bring ticket fares down. the airlines are one of those industry everybody wants to hate. even though it brings people together and you have a good economy you need a robust airline industry. it's one of those industries everyone likes to pick on so they need to do a better job than they are doing.

we are thinking as they invest in technology things will start to improve for them but the lack of seats is a problem in terms of recovery from irregular operations. there's a lot to unpack their lisa. lisa:helene becker from cowan. president biden was talking about people facing delays. coming up, we have the chairman of euronext as we parse through the next catalyst in the market that has been stuck assessing the ramifications of the emergence from a pin to make an inflationary shock unlike what we have seen in 48 years. bond yields are unchanged on the two-year, talking about the

stasis we are seeing. tenure futures are down .005%. tom keene is back tomorrow. this is bloomberg. ♪

jonathon: 04%. can't onto the open starts now announcer: everything you need to get start for the set of u.s. trading. this is bloomberg "the open" with jonathan ferro. ♪ jonathon: biden meets mccarthy approaching a debt ceiling deadline. tightening lending standards and we can