>> i am leaning toward the bond market view that we are in for some volatility. >> we are kind of bouncing into a ceiling and the floor effectively. >> its generous ends terms of fed cuts coming. >> the fed has done a good job of supporting the economy while raising rates and trying to tame inflation. >> i'm in the camp that it will not go immediately back to 2%. there is another upside surprise waiting out there in the inflation data. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. alix: jonathan: live from new york city this morning, good morning for our audience worldwide, this is bloomberg

surveillance on tv and radio. equity futures are just a little bit softer. from secretary yellen this morning, time is running out for the dead sea in conversation. tom: day by day we will stagger toward where something gets done. i believe there is a meeting today? we look forward to an actual meeting with actual substance? jonathan: speaker mccarthy and the president of the united states later. from brainerd over the weekend, the staff is very engaged and characterize the engagement as serious, constructive and speaker mccarthy says this -- he goes on to say we are nowhere near reaching a conclusion. the ongoing staff level meetings are not protective in the talks so far have not produced agreement on anything. is different staff telling them different things in washington, d.c.?

lisa: there is a different political calculus and seems there is progress on one side but not making progress on the other side to negotiate a better deal. it's clear as mud and people are not shocked by this. janet yellen said this is making u.s. borrowing costs more expensive. it's like the one area of markets that starts to care. jonathan: we are already paying the price for this mess and the delay around the conversation. secretary yellen doubled down on her warning. her deadline is early june but we will come to back to that later. let's talk about the u.s. consumer. later this morning, 8:30 a.m. eastern time, u.s. retail sales with earnings from home depot. tomorrow, target and after that, walmart. the top line from home depot, they see full year comp sales down four or 5% and they had seen it as approximately flat that said slight downgrade for

them. lisa: there is a question whether this is reflective of the broader consumer this is a home depot specific and housing specific type of story. those shares are lower by almost 5%. they said it has to do with lumbar deflation and unfavorable weather. perhaps there is something that is more specific to the industry rather than a larger statement about the retailers including target tomorrow and walmart. tom: they make clear it's been a cold spring across this nation. we experience that in new york with the first warm days in the last couple of days the weather is part of it but lumbar deflation gets my attention. you will see that across other products. you will get a feature of the income statement where you got less inflation, less nominal gdp, the animal spirit of the nation on a price and unit space leaning to perhaps lesser revenue. jonathan: getting commentary and numbers as well.

they observed more broad-based pressure across the business and the weather in california disproportionately impacted results. the full year is down 12-13% and they have previously seen things down in the mid single-digit. it's a downgrade to the outlook from home depot this morning. lisa: comparable sales they see down 5% versus flat earlier. how much is this a home depot issue and how much a broader retail issue? how do you take these stories and turn them into positive news? tom: the home depot in beijing had a tough time over the last few months. let's not forget the china statistics. it's tangential but nevertheless disappointing. jonathan: we will talk about the downside surprise to home depot. tomorrow, target and the day after, walmart as well. their broader market is taking a

little move lower. futures are negative by 0.2% on the s&p 500 and yields come in by three basis points on the 10 year. lisa: we will get a broader read on the retail sector at 8:30 a.m. where we get retail sales and it's expected to be dominated by automobile purchases as well as gasoline. how much will this be inflation driven? home depot shares are lower by almost 5% as we get the sense there is perhaps a shift in the consumer. 10:00 a.m., the senate banking hearing will take place with silica and bank executives. they say is the fed's fault for manipulating the rates. they're supposed to be a separate hearing in front of the house financial service committee with the fed vice chair michael r. i want a split screen of greg becker and michael barr.

michael barras is terrible management. around 3 p.m. today is the meeting between president biden and house speaker kevin mccarthy so do we get a sense of how these hawks are progressing? the one area of the market that cares is the one-month t-bill yield which is gotten to the highest it has a we are seeing some moves on the front end and janet yellen will talk about that. jonathan: imagine being an investor in tech stocks last year and then listening to the fed? they said it was transitory. can you believe they blame the federal reserve for that? lisa: they are doing the blame games in town. jonathan: marvin, wonderful to have you with us. the debt limit remains an issue but for now, evidence of

recession is missing. is recession evidence missing for you? >> yeah, it certainly not clear. i think that recession is unfortunately somewhat unavoidable after the banking situation we are waiting for that to make its way through the economy. the consumer is still strong and jobs are still robust based on the latest numbers. inflation is proving sticky. tom: i look at the inflation and there is a single headline from home depot. granted it's a commodity and its volatile but lumbar deflation, will we see more headlines like that? >> probably, the good side of things has been a bit more volatile in the discussion. it comes down to services and wages in this economy and that's where the fed is focused. it's the stickiest of the sticky if you will, parts of the inflation discussion. tom: i looked at copper carefully this morning and i looked at newcastle coal in

australia. i look at these commodities and they are rolling over, indicative of a slowing china. how do you fold that into your investment allocation at state street? >> for sure, it is signs that you've got growth problems that are starting to emerge as we go through the one year anniversary of the tightening cycle in the developed markets. those recessionary signals are all over the place. it's kind of one slice of the american consumer this making it harder to play. if you can look past the timing of this consumer with some of these retail earnings and some of the statements coming out softer, you get to a much slower growth discussion if you were willing to put those investments in play, they are out there. lisa: do you think this is disinflationary that would give

a reprieve to the fed especially if the stress we are seeing in the banking sector is real but a slow burn that will not necessitate a real response? >> for sure, i am in the camp that this credit tightening i expect in the second half of the year is going to have a bigger impact on the economy, particular on the default side of things and overall loan growth slowing. you do get a more disinflationary type of world once we get there. the timing is really hard, it's not the expertise of global macro to pick one month over another, but going into 2024, those headwinds seem much stiffer. lisa: where is the debt ceiling debate on your radar? >> if you talk to my coworkers, they say i get overly excited

about it. i certainly think that the market is a bit sanguine about this time given the volatility on the deficit side of things. it's just harder to pick the date when we will run out of money. that creates a problem for washington which seems to need that impetus to get things moving. i very cognizant of the amount of reserves once we get the deal. that creates more challenges for bank deposits at least in the short term, potentially in the intermediate term given have the shape of the short-term curves are somewhat inverted at this point. jonathan: let's say we knew the x date was june 1, would there be a different practical deadline where we would come to an agreement to pass the legislation needed to skip the dreadful outcomes that most people are predicting if we go through the x date? >> i think there would be a

great sense of urgency. we are running out of time very quickly and the president is still going to the g7. the litany of conversations coming out of washington show different degrees of concern. that in and of itself is a concern when you talk about a date two weeks away. how you get there is hopefully an acknowledgment that june 1 is a date we should focus on and a temporary agreement to get us past this or we go into territory where we've never been before. tom: he's killing it. jonathan: marvin from state street, thank you. home depot in the premarket, down by more than 4%, cutting the outlook for 2023 and we get a read on the u.s. consumer with retail sales coming out in a couple of hours time then onto target and walmart.

tom: we make jokes about the euro and a home collared. -- and home depot is collared. i love the milwaukee cordless belt sander, really helpful at home. on depot is at 265. lisa: it sounds like he's sick of the bills he's paying at home depot. jonathan: have you been to a home depot yet? tom: no, there is one down below us. lisa: you've never been? you haven't done any home improvement? jonathan: he's still never been. lisa: pictures? jonathan: no, the stock is down by more than 4%. hr denny research is about two hours away. from new york, this is

bloomberg. lisa: keeping you up-to-date with news from around the world with the first word. president biden meets with house speaker kevin mccarthy and other congressional leaders again today to try to avoid a default. mccarthy says the two sides are nowhere near a deal to raise the debt limit. the standoff has been roiling markets as investors bet whether an agreement can be reached. ukraine says the air defense system defeated what it called an exceptional russian missile blitz overnight. the attacks included six hypersonic missiles that were aimed at the capital city. ukraine says it destroyed 18 russian missiles. global oil demand will rise more than expected this year because of china's post-pandemic rebound. that's according to the international energy agency. it says world fuel consumption will rise by 2.2 million barrels per day to a record 102 million.

the agency expects demand in china to hit an all-time high. wells fargo has agreed to pay $1 billion to settle a shareholder lawsuit. the plaintiffs accuse the bank of making misleading statements about its compliance with federal consent orders. that was in the wake of the 2016 scandal over the opening of unauthorized customer accounts. wells fargo ended up paying $3 billion to settle. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

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>> we are only a couple of weeks away from passing something in the house and the senate. you have to have something done by this weekend and we are nowhere near any of that. i appreciate the president willing to talk but there is no movement. jonathan: high-level talks a little later today and that was house speaker kevin mccarthy sitting down with the president of the united states later on the debt ceiling debate. senate talks are not productive and lael brainard says they are somewhat productive. are you loving this?

you've got two weeks of it. tom: they will kick the can. i don't know who will kick it. lisa: maybe president biden. tom: it might be a joint kick. jonathan: let's get to the price action. on the s&p 500, we are a little bit softer, negative 0.14% and yields lower by three basis points. a little defensive this morning. home depot is trying to get off the floor, negative by 4%, coming out with earnings later this morning. 15 minutes ago, indicating the outlook is not as good as it was. this comes ahead of earnings later this week from target, walmart and retail sales at 8:30 a.m. eastern time. tom: this goes back to goods disinflation.

there is a lot of other things besides lumber and you wonder where it will be. oil at $71 is not $100 per barrel. jonathan: downside surprise for retail sales and industrial production, not looking good over there relatives of the boom people expected this time of year. tom: we will see that at 8:30 a.m. where are we right now in the debt ceiling debate? joining us is a real authority on this, wendy schiller at brown university. there is the public debt acts of 1939 and world war ii, 1941 and we get to eisenhower in 1953 and the debt is 275 billion in the senate has a connection and they call up goldfinger and they sell $1 billion of gold at fort knox to cover the debt. that's the history of this madness.

are we repeating history or is it new this time? >> i think you are raising an excellent point about the relative scale of debt. that's what's historical. it's just a huge amount of debt. can we handle it as far as gdp? some say we can but even 1974, they said deadlines for the debt ceiling. yesterday was the traditional deadline, do or die. basically the house and the senate met the deadline under ronald reagan. somehow that deadline like everything else in congress has gone away. right now, they are facing continuous raising of debt and continuous deficits. at some point, somebody has to cut something. it's been more than 10 years from a major commitment to cut the budget. if obama couldn't do it and biden was his vp, i think biden recognizes they will have to be some cuts made and they are looking for a short-term window

and get a clean debt selling and hammer out a longer agreement. tom: i've got 10 questions here and no time for it. the cliché kick the can down the road, translate that into modern political theory. >> most people, given the size of the government act in the budget itself cannot trace or track what their member of congress does or their house member does and the impact it has on their lives. we hear doom and gloom in the stock market will crash and nobody can buy a house but people don't quite grasp it and politicians know people don't grasp it so they can take it down the road and use gimmicks and keep spending and the other dirty little secret is republican members of congress benefit from discretionary spending in their district. they say they want to cut but then cutting agricultural spending cannot get done. this is the conundrum between the size and scope of the budget.

lisa: it is said this will ultimately play out like 2011 except with a more clumsy kind of legislative result. do you agree? >> i do, 2011 and 2013. they shut down the government on the republican side and the republicans doing well and getting the senate back. the republicans do not see a downside of shutting down the government or seeing an interruption in the flow of federal dollars for a little while because they want to show the world can still go on and given that the mentality and more so now that it was 10 years ago, that's a huge town for democrats. where is the senate and all of this? they said we will not take the house bill. that's not responsible. it's the same balance of power 2011. i think that's the big problem. they know they need a temporary claim because they will not get it done in two or three weeks

and mccarthy needs to get that through his caucus. lisa: you said this has played well for the republicans if you shut down the government. is this how we can understand the difference in tone between kevin mccarthy and lael brainard , one saying there is no progress in one saying talks are constructive? >> sure, the rhetoric has to be that the situation is bad. that's the gop and they want to give more power to the states and scaled on the federal government and to do that, if you shut it down, people will realize they don't need it but it never happens. once you shut it down, people realize they needed very badly. the republicans then k but they get political credit for trying to control spending. this is a playbook that has been successful for them and keep an ion the 2020 for how selection because that's where kevin mccarthy's attention is. can they keep the house and protect those new york and california republicans newly

elected and he stays speaker and that's all he cares about. understanding what deal he cuts come from that motivation. . jonathan: have you got in mind what you think the practical deadline actually is going through all of this? >> it seems to me and of june/early july. that's symbolic and they also go on vacation on july four. i think that's symbolic and if they haven't reached a decision then, there is a lot of political price debate -- price to pay because they going to the district and had to hear about it. jonathan: do you think they will pad things out from the treasury? >> you hope with people this smart they would be strategic about the deadline and giving those just themselves some room there. this will be another test of mccarthy and his power over his caucus. jonathan: wendy schiller, thank you as always. you thought we only had a couple

of weeks of this, maybe six weeks. tom: what happens after six weeks? in wikipedia, they have the debt ceiling raised by president obama and the debt ceiling raised by president trump and you go down three paragraphs and they have the debt ceiling raised by president biden. why is there any other trend? i don't see any other available outcome other than to do this. while wendy was talking, i looked at the kentucky public disbursements from the federal government. it's norma's. do you cut off the checks to senator mcconnell's kentucky? jonathan: from the investor perspective now captured by the fund managers survey put out this morning, the global fund manager suggests that it's overwhelmingly the consensus view. most people just assume this gets dealt with. lisa: if it does happen where you get a shut down, people will

simply by treasuries because the short-term disruption that will cause things to go the way they always go. how much does this increase the risk if there is not market pressure. tom: it's a massive fissure dropping into a toxic brew. the massive debt ceiling fissure. we've been here before. jonathan: big tech and short banks in short the u.s. dollar and we will come back to that. andrew holland horst joins us next. ♪ rate and move the energy that our world needs. ♪ welcome to a new era of energy.

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jonathan: bramo romanticizing about freshly cut grass during the break, it's amazing. tom: i was tearing up. jonathan: we will come back to that another time. lisa: we will not come back to that. jonathan: the pollen count is high today in new york, just so you know. lisa: thank you for the psa. jonathan: the s&p 500 slightly negative by 1%. but today losing streak on the s&p 500 but check out the bond market. the average on the two-year over the last month, four .02%.

the average on the tenure over the last dirty days is 347.58. the equity market is not done much for a month and the bond market is not done much. it's like the bumpy road to nowhere. something to break in the last week, the euro dollar. this currency pair was the biggest move going back to september of last year. trying to bounce back from that and reclaim $1.03 but the data is turning in europe an interesting way. the german investor confidence read comes later. it's another one on top of a few others that i think we have to pay attention to. maybe things in europe are not going in the right direction. i throw in the data from china as well. lisa: this is the tailwind that maybe is already getting a sense of not being as strong as people previously thought. there is a belief that europe

could somehow emerge dominant and stronger than the u.s. and people are checking earnings and they're usually coming out better than expected. jonathan: this is pushing back against the consensus view. you start to see a change emerge the tickly with jp morgan dropping overweight europe. they say they are likely -- unlikely to transition in the second half. let's get to home depot. in the premarket, it was down almost 5% at one point but it's negative for right now. it came out in the last 30 minutes cutting the outlook for 2023. retail sales onto tomorrow with target in the day after his walmart. tom: widely anticipated we will see some form of slow down greater than expected at every

level. as you mention, the outlook was tepid to be polite. jonathan: a slew of fed speak. you will hear from the following today and chairman powell friday. there is some splintering in the fed speak in the last 24 hours. tom: we've been wonderful to have richard clarida and the debate about the above 2% rate. let's go to andrew holland horst now. i want to go to the unspeakable

which is the three-month treasury bill has gone back to 2007/2008 level so what is the ability of the three-month treasury given what you see it citigroup to go where it was in 1999/2000 to get up to a 6% load? >> it is interesting that we've seen these rates that have gone up quite rapidly as the fed has responded to inflation. that's where i would take the conversation back and it depends on inflation. we've had some different views and i think it's a healthy thing. the debate is whether it will be above or below 2% and markets are expecting a rapid slowing in inflation and investors are little bit more cautious but you if you look at the forecast, they have core pce inflation around 3% so they see it slowing. you will see the short rates that won't go higher than where they are now.

inflation will stay higher and you can start thinking about hyo -- higher rates. tom: people look at different inflation measurements and goldman sachs published a trimmed core cpi number. should our viewers and listeners be looking at fancy economic inflation metrics or should they just be looking at core cpi and top cpi? >> i think you want to look at all of it. that's the approach we take. there are so many different measures of inflation. the atlanta fed has an underlying inflation dashboard and those metrics are running quite high. you want to be careful. if we start getting into the game of let's throw out this component or adjust another, you can get any inflation number you want if we just look at the monthly core cpi readings, they've all been, for the last five months or so, right around

four or 5% reading. you actually have some ability on average and indicators and core cpi's one of those indicators where's consistently coming in around 5% annualized and that's a problem for the fed. jonathan: do you think this effort is time sensitive or does the federal reserve have the luxury of pushing out the appropriate time horizon to get inflation back to target? >> it's not going to make a big difference to the economy if the fed hikes in june or waits in june or maybe hikes later on. the on the economic fundamentals, that time is not crucial. on the communication, the timing can be extremely important. if the fed does not hike in june, if the fed guides that they will be on hold, then the market will price back in cuts and that's what the fed has been dealing with. the market prices in cuts, then

you get a lower 10 year yield. the housing market has bottomed and it's coming back now. that kind of communication is what the fed is managing more than anything else while they decide what to do. economically, they are in a situation where i would agree with president bullard saying policy rates are at the low end of a reasonable range of what could be restricted so they want to look at the data and that's what they are doing. depending where it comes in, that will determine their next step. jonathan: we are seeing subtle signs that we are seeing some splintering on the committee, different range of views. subtle shifts over the last 24 hours so does the chairman have a role to play to take hold of the narrative? >> the chairman has a big role to play. the question is whether he will play that role this week or that's something we will wait later for.

the issue with this week is we have a core cpi reading it and were waiting for a court cpi rating and a jobs report and waiting for another cpi inflation report that will come out right ahead of the june fomc meeting. if you are data dependent, it will be hard for any fed official to push hard toward being on holder hiking. they want to see the data so that's what we will hear from chair powell. at some point, he needs to bring the committee together because we have very different views on inflation. some fed officials call a discouraging and some call it encouraging. ultimately, chair powell will have to bring it together. lisa: they think of disinflation can g10 use at the current pace, cpi could be three or 4% by christmas. stocks seem to be buying into this so how do you pushback against this. the housing market is rebounding

but some of that has not factored into the weakness. how do you pushback when there are signs of disinflation? >> no doubt you have goods prices that have slowed and shelter prices that are slowing. i look at forward indicators and it's not as clear that slowing will continue. the important thing to keep in mind in analyzing inflation is that this is a dynamic process. we had shelter prices running very strong and they are cooling in goods prices were hiking in april this is sheltered -- this is shifted into non-shelter prices and that's probably the worst case for inflation to show up where has the potential to be most pernicious and most persistent and most long-lasting. i would really be concerned if i were a fed official about what's going on concerning inflation. i wouldn't take it too seriously but i would be a little bit concerned about university of michigan 5-10 year inflation

expectations. i think that's more qualitative but that's the highest reading we've seen in some time. that tells you these inflation expectations are becoming embedded in the economy. lisa: are the debt ceiling debates and the likely fiscal cuts that will probably follow disinflationary? >> if there were going to because to spending, that wouldn't be disinflationary. as we hear about the negotiations around the debt ceiling, the caps on spending will probably not apply to overall spending. things like defense spending will continue to grow in that could be inflationary. i'm not sure what we get out of this will be that deflationary. jonathan: looking for hikes in june and july, thank you for being with us. your equity market is negative zero point 1% on the s&p 500. 8:30 a.m. eastern time, u.s. retail sales later today and we

we are from speaker mccarthy and president biden in the debt ceiling negotiations. tom: when is it this afternoon? jonathan: target and then walmart coming up wednesday and thursday. it's 3 p.m.. by the time that's concluded and they do the press conference, you get in the driveway and get in front of the microphone. lisa: i think wendy schiller said it was -- said it was fascinating and there's no incentive for republicans to say there is any progress. how do you read the democrats coming out saying it was fantastic? tom: they will not say that today. they will say they are making progress in the staff was talking but they totally disagree because they are playing to their constituencies. jonathan: i don't have a crystal ball about this. i can tell you what they have said.

kevin mccarthy coming into this has basically suggested there has been no progress. does he stay on repeat later? lisa: how much will we see? jonathan: did we ever find out what that was about? tom: this was saudi arabia -- jonathan: i still don't know what that is. lisa: it was the golden globe and the experience of connecting. tom: i think there is something serious to it that was lost on western minds. bramo gets me going but i'm trying to help mayor adams and i have the mower out. i'm trying to help home depot as well but for $82 you need a push mower to mow central park. jonathan: is that how much it is? they are really $80?

i used to work the petrol one as a kid. tom: we call that briggs and stratton, american-made. lisa: it takes a lot to get it started in a puff of gas comes out. tom: i take it down to get it sharpened, madison in the 70's somewhere. jonathan: then you go into central park. i cannot see that. every afternoon in central park you can find tk with a cigar. equities are slightly negative and retail earnings is coming up next. lisa: keeping you up-to-date with news from around the world with the first words -- the white house and congressional leaders are headed to another session of debt limit talk today. they are trying to avoid a

default and president biden has said he was optimistic a deal could be reached while house speaker kevin mccarthy expressed that ongoing discussions were not productive at all. leaders are nowhere near reaching agreement. the former of silicon valley bank says the fed and social media contributed to the lenders collapse. greg becker testifies before the senate banking committee today and is expected to blame the fast-paced of hikes from the fed. he also will point a finger at negative social media sentiment. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

you know doug, ever since switching to workday 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! >> in today's environment where there is so much uncertainty in the economy, i don't think we can rule out anything. if i had a vote right now, i would probably vote to hold. as you noted, we've got two more

inflation readings and have a jobs number in the jobs report will come up and there is more information we will have as to what's going on. jonathan: a great conversation with michael mckee and rafaela bostic. tons more coming from the fed this week including chairman powell friday. your equity market is just a little bit softer this morning. a whole lot softer, home depot in the premarket down by 5%. comparable sales could decline between two and 5% this year. they blamed a whole bunch of things. they blamed lumber deflation and social media? tom: there is a wide set of ideas and night -- i'm that has always been true but they are up 17% for the last few years. whether debates have always been there. jonathan: have you noticed it's

only affects when it's bad. when it's good it's us. lisa: i was going to say the exact same thing. that seems to be the new fx trade. tom: let's talk to an expert. lisa is an expert because she is at home depot three times a week but we are clueless. someone who is competent is charles grom. what's cool about this out of the college of holy cross is this is one of the coolest things in the securities research side. this gentleman is a cpa and a cfa and that is bulletproof across wall street. combine the two with accounting and the financial analysis of the cfa designation, is home depot a different company than what we have known for 20 years? >> no, not at all. there is a lot going on with the consumer now and you touched on

it in terms of the weather impact. the key line at of the home depot release was demand starting to normalize. i think that something we haven't heard from home depot in quite some time. i think that's the big issue in understanding how long that will last will weigh on shares in the near term. march was very unfavorable from weather perspective but april wasn't. we don't know the exit rate for the month of april but we suspect it was weak. you cannot hide behind weather right now. tom: one of the distinctions they have is they own the pro-market. do they still own the pro-market and is that the home depot distinction forward? >> 100 percent, nothing structurally has changed with home depot and the stock is down a little bit and they didn't have a great first quarter and they are cutting guidance for the year. they still dominate that part of the market. loew' iss way behind so that

hasn't changed. lisa: how much of this is a housing-related issue because there has been so much investment in people's homes and prices of gone up so much? >> i think it's all of that. demand normalization is the key here. when rates are this high, people are not moving. people have job so they are still investing in their homes. we are seeing category demand normalization across the board. i think their seasonal business was also soft because of some of the issues with weather. lisa: we are seeing shares low in sympathy, almost 4% so people seem to believe this is a sector specific issue. moving ahead to target tomorrow and walmart thursday, how much will we see a similar trend in retailers at a time when many different stores say they can pass along price increases and then some? >> i think retailers will have a harder time taking the price from here.

i think we are seeing the consumers pushing back and trading down. we are cautious on target and more optimistic on walmart. the key thing is we are starting to go through a discretionary recession across retail. i think we are already in it and i think we will hear that from a lot of companies over the next couple of weeks. we have heard from costco and their business has been softer which is typical for them to have that volatility in their business. volatility is there and home depot businesses softer so it's happening everywhere. tom: one of my big things is management's adapt. how does retail adapt to the slow you described? is it layoffs, protect the margin? what is the prescription looking at history? >> the number one thing they need to do is protect the balance sheet and control inventory levels.

if anything good happened in 2022, demand started to soft and and inventories started to get in better shape. they are not really there yet but they will start to get there. for home depot, their expense control was very good in the first quarter. even with softer business, they came in with earnings of 382. the first thing is earnings in the second is cost control and the third leg would be job cuts down the road it business continues to deteriorate. -- if business continues to deteriorate. jonathan: is the volatility up and down income brackets? >> i think it's more goods and services. you look at the travel industry and if you been on an airplane, they are always full so people are definitely shifting on spending toward services. i think it's the categories that might companies sell into. we are seeing substance across

the board whether it's consumer-electronics or home furnishings or home improvement. all three of those are starting to see weakness. lisa: how much will this challenge the fact that companies have been raising prices beyond their input prices? the profit margin has to come in more than people expect? >> that's a good point and that's what we will have to watch, elasticity across the board. we are starting to see it in discretionary areas which are normalizing on the price front and we start to see it in food areas in the coming months as inflation starts to pull back. just traffic across retail has been very soft over the past two months. that's always a harbinger of things to come. it doesn't look good. the consumers pulling back and none of this is really a surprise into the past couple of years of splurging across the consumers face. tom: i'm looking to buy the american push mower from $82

from home depot. where is their perfume section? what part of home depot is where they make the margins? >> it's pretty even across the board. in the home furnishing area, that's for the margins tend to be the best. the gross margins are actually pretty well protected and inventory levels are in good shape. it's not a great print from home depot but it's also another world in my opinion. jonathan: this was great, thank you. that phrase, discretionary recession. i'm making notes, consumer-electronics, home-improvement, home furnishing. are we going to see that later this week at target and walmart? lisa: he says yes, traffic has been light and that's a leading indicator and he thinks consumers are pulling back.

the fact that this is the leading sign at a time when the consumer is king and that's what's been driving the upside surprises doesn't bode that well. tom: i think it goes back to charge card usage. we've got productivity coming out. it's about charge cards and what people are actually doing with credit in this time, not only small but individuals as well. jonathan: we started to see signs of that but becca drowned out by the bank failures. credit is starting to build. it's the kind of things you see when weakness comes through. lisa: we got the survey yesterday from the new york federal reserve and they said credit card receivables, the outstanding balances have not gone down the first quarter for the first time in 20 years. normally, people pay off their bills from christmas time. they did not do that this year. that really raises some flax. tom: when do you have the time

to look for that data? are you waiting for the charge card data? lisa: i am. it's really interesting. tom: hold up on homework, the fed is coming out with data. lisa: i say that to the kids in their eyes start to glaze over. tom: i'm watching the new pitch perfect3 at home. it's just great. lisa: jonathan: this is important stuff. doug cass said this is a classic pull forward into demand. we pushed out demand during the pandemic. it came back to vacation so how long before we see this go from goods to services? lisa: people are expecting a disinflation.

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>> i'm leaning toward the bond market view that we are in for volatility. >> we are bouncing into the ceiling at a floor effect. >> the fed has done a good job of continuing to support the economy while raising rates and taming inflation. >> we will not go back to 2% i think there is another upside surprise when it comes to inflation data.

>> this is bloomberg surveillance. jonathan: live from new york city this morning good morning. for the audience on tv and radio this is bloomberg surveillance. alongside tom keene and lisa. later this morning retail sales in america. and other earnings after that this week. blaming lumber deflation, disinflation, take your pick and also the weather. people this morning looking a little further than that for home depot. it down 4%. tom: it is about buys with retail. you have to get them through the door whether it is physical or online. that seems to be the problem. i should say this is a well

executed machine. the apple computer of retail.. home depot is struggling, what are the others doing? jonathan: maintaining margins. with this phrase got the attention of all of us. winter recession. home improvement, home products, we have a big pool forward of demand in certain parts of consumer spending and this is why. lisa: this is why am looking at market -- target shares down 1%. the sympathy trade points to something that is larger been the home depot story. perhaps this is people jumping but any forward look up demand that is cooling at a rapid pace is concerning for people who are leaning on the consumer to defy expectations of we. jonathan: -- weakness.

jonathan: we talked about airline right now and things are booming. does that start to fade as well? lisa: that is the issue for a lot of people. there was a disinflation that is inspected to happen in an increasing pace. the banks are counting on it so that we have a soft landing. tom: i don't know we can do static analysis. disinflation will lead to lower nominal gdp rushers inc. -- pressures on retail but there will be other advantages there. i will not go with optimism of someone who says less inflation is better inflation-adjusted incomes across many areas of america. it cuts both ways.

i do more dynamic analysis. jonathan: where does that leave the fed reserve? we have a long way to go before we get inflation down. but the president -- in chicago speaking to abc in the last 24 hours. we have a long ways to go in chicago. i think we need to be extra mindful. tom: it's really important. i've made a joke yesterday there is 432 fed speakers this week they got traction but they are all different. goldspy is looking at a war holistic analysis rather than the algebra of the login of our start. lisa: the bottom line is everybody is pushing back against rate cuts before year end. i think your point about what role did jay powell have to say putting a cap on this we don't care what happens we will cut

into we reach 2% is a -- jonathan: it is really subtle. i wonder if this is one of the week where the chairman has to come out and get hold of the narrative. compare and contrast of this. brainerd formerly with the federal reserve and now with the administration over the weekend. he says the staff are very engaged and they characterize the engagement as areas and constructive. kevin mccarthy came out saying that we know what we reach a conclusion. the meetings are not productive at all and they have not lose -- not produced an agreement on anything. that is a groundwork of how the stage is set between the speaker and the resident. tom: looking at the -- president. tom: looking at the republican side they will say -- you can to

get to the left as well. the catalyst that i have witnessed is social security. jonathan: retail sales negative by not even .1% and i can tell joining us right now is ed yardeni. he joins us this morning. are there reasons to be bullish this morning? >> the economy is proving to be resilient. we have had a recession and it is a rolling recession. but consumers continue to spend with family housing to be built and then we have a lot of infrastructure spending that is ahead of us and actuals. putting it all together we have an economy that is faring well. tom: you have a resiliency to be

in the equity market given your economic analysis was grim last october and november. you said this is not applicable. is it a likable now or can you still say stay on board american equities? >> i thought in october we may have made in -- hello -- made a low in october 12 of last year . things are not nearly as bad as they were in 2009, that was a banking crisis, but i doubt that we are close to that. in the movie being there, they said in the spring there will be growth. economies were forecasting a widespread recession by now and

the economy is doing fairly well. lisa: when you think the idea of a recession the earnings we have from -- home depot and throughout the remainder of this year? >> i believe we have had a recession where consumers pivoted from buying goods to buying services. as a result of that retailers got caught with inventories they did not expect they would have to hold. they discounted and stopped bear ordering. there is -- they are ordering. --their ordering. and the issue suggest that they are not out of the woods yet. the people traveling and airports are busy and restaurants are packed. a lot of baby boomers are retiring. they play golf and they go out to eat. lisa: [indiscernible]

[laughter] as they travel around some see this as a area that supports the economy and others that does inflate. how do you draw a distinction? when you say that people are retired and playing golf and traveling all day when will they reach a degree where they boost inflation where it is uncomfortable? >> i think that inflation is somewhere between transitory and persistent. we have ran the script for durable goods and other areas like food inflation. people thought that would persist. but other commodities and goods has come down dramatically. we are still stuck with services

inflation which a lot of it is rent. we know rent inflation is coming down on a three-month annualized basis. we have a core super inflation rate whatever the fed likes to call it which i think will moderate. i think once you have disinflation in one area it will diss inflate as well elsewhere. tom: i have a question right now on monetary theory. can a central bank have as part of its management financial stability? that seems to be a primal call for central bankers to do more than the u.s.. inflation and jobs. can they actually manage financial stability? >> i wish that the dual mandate was only one mandate which is central banks should really focus on financial stability. if we have financial stability

it implies they have to keep patient down -- inflation down. i think the dual mandate that we have does not have its priorities straight. the other syndrome -- but other central banks have the priority is bringing inflation down. they did not seem to be face it all by the banking crisis -- fazed at all by the banking crisis --phased at all by the banking crisis. jonathan: thank you for joining us. what is that he said about golf all day? that sounds great. lisa: that sounds great what we get to retirement. why do we call it financial

stability when markets are going down. but when markets were going up in a consistent way nobody said that. jonathan: wasn't there a whole institution of permit bears that said that. lisa: [laughter] yes maybe that was the issue but why are people calling on the fed to respond to that? i am just saying. tom: it is tough to be permanently bearish. every 10 years you are brilliant. jonathan: true i agree. equity futures on the s&p negative by 0.1%. isaac bolton ski coming up next. >> keeping you up-to-date with news from around the world with the first word. i am lisa mateo. kevin mccarthy meeting with

congressional leaders today trying to find a default. they say they are nowhere near reaching debt limit. and investors are concerned whether an agreement can be reached. economic uncertainty is pulling back on a -- on home spending. home depot is down in earnings. and they think that their earnings cabal is much is 13% this year. it's a sign that former vice president mike pence is preparing to run for the nomination for president. his supporters have made a committee to support him. he says he will announce in late june of whether he will challenge his former boss, donald trump. an exceptional russian missile let's overnight in ukraine. they were aimed at the capital city and ukraine says it

destroyed 18 russian missiles. u.s. regulators will challenge the 27.8 billion dollars deal to horizon therapeutics. they argue that they would hamper the pace and slowed the production of drug development. global news 24-hours a day on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> the staff is very engaged. i would characterize the engagement as serious and constructive. when i talk to ceos and business leaders around the country they tell me things are going well. >> we are a couple weeks away but when we think about the house and senate, we are nowhere near any answers. there is no move. jonathan: kammerer and contrast -- compare and contrast.

they are saying very different things about travel and how it is going with the talks between the speaker and the president. that will be around 3:00 eastern time today. and we have a flavor of what is happening in retail from home depot earlier cutting their outlook. the stock is -3.2%. trading at 279. in the broad market, yields are coming in as well. on the 10 year we are down by two basis points. tom: we see color action -- correction but a lot of the correction is wrong. the lows outperformed home depot --lowes outperformed home depot. i would not have guessed that. we are in washington trying to take a different spin.

isaac joins us with btig. first question, the morning after this is fixed, what happens? >> we go on to fight about other things. the morning after we will refocus on whatever the next big legislative deadline is. maybe the spending bill at the end of september, but when we get this off the table i think the market can go back to worrying about everything else. the debt ceiling is so important. tom: this goes back to pete peterson the gentleman from nebraska who called me he was elderly at the time and we talked about the ageless concern where the former secretary of congress made it clear that he was forever worried about the debt area the peterson foundation public sinners --

publishes that it may go from $640 billion to 1.4 trillion dollars. that is the interest expense. every american knows that that is nuts. why should we be concerned? >> we should. but d.c. has an ability to focus on the long-term. and even will we have the discussions regarding the debt ceiling and spending, we have already taken off the table the talks about addressing long-term reform which is what we know is one of the larger drivers of the debt. so we have taken off the table spending and other items. when you start with so many things off the table and is impossible to get anywhere for the long-term. the most we can help from on these negotiations is not shooting ourselves in the foot with the technical default and having to go through the messed

of them issuing whatever else they may not due to do their basic job to lift the debt ceiling. lisa: brown university individual was speaking about this earlier, she said in a polarized world she expects it to be a repeat of 2011 with less satisfying solution. she says the republicans tend to want the government to go into some sort of default or nonpayment because it takes -- plays well with them taking a hard line on spending area it is that true? >> i do not think we are there yet. i am still operating under this and the things in d.c. are impossible right up until they are in evitable. i hope we will get congress today were we are able to move forward. president biden maybe needs to have a g7 meeting early or to

skip some of the other stops and have a one-on-one meeting with kevin mccarley -- mccarthy as early as next week. by ideas to push the debt line to the end of september and it gives negotiators more time. they are trying to solve thorny issues when in reality you have to have something starting it way through the legislative obsessed by the beginning of next week. lisa: we will have the hearings with respect to what happened in silicon valley bank and all the regulatory oversight. we already got a look at the relay -- he released conversations with svb blanking -- blaming the fed and social media and regulators. what do you expect the response to be? >> these hearings very rarely change the framework. we know that the regulatory framework be tightened for

banks. we will have debt resolution requirements and then we will deal with things like a oci. but i do not think the banking crisis is over and that it will flare again. what was the logic behind us tying the hands of the regulators on the front line to address the pricing? the fbi see --fdic has nothing they can do to address this. so they are unwilling or unable to act on the matter. that is scary. jonathan: let's see settable bit more what about the tension the last couple months that you think has the potential to tear up again? >> we have not addressed the mismatch. in the banking system.

we can all agree that when -- we spoke about the federal reserve mandate, they are also going to take flak here. there is a hearing about federal reform this week in the reserves. with the idea that it is a policy that leads into default down. that is still out there. and i'll listen to jamie dimon and he also says he is concerned. i put it all together and i put it in to the mix that we still have some policymakers talking about the shortselling on: and outlook insect -- on banks and outlook and there is a -- it is similar to congress passing legislation. tom: thank you the brutal honesty at the end. on the debt ceiling.

this is a closes the u.s. government comes to behaving like european government. it is not a compliment. the idea that you have a crisis to get a solution. it seems to be the european way for a long time particularly with the eu. with crisis we are talking about market tension that was not there. tom: in the last number of days there was a tweet on some research, but the bottom i'm is the polarity of america between the right and the left is something unique even compared to the european nations. i know that compared to france was greater. lisa: we got to the point where isaac comes out and says that we need legislation. that is the sin of the dysfunction that everyone is talking about in washington. it's becomes legislative by those who work with the fed,

treasury, and these departments because of an agile -- absence of legislation. tom: i take real issue with the people that say this is new. there was a period but i will open my 20's i realize how dumb i was about american history. teddy roosevelt it was like this. it was tight with battles day to day and week to week. jonathan: he makes his point. you get two points for passing legislation and the reefer fighting. the life of a politician in washington dc. lisa: i think that is fair and what keeps happening. there is a slight shift. this is bloomberg. ♪ the first time you connected your godaddy website and your store was also the first time you realized...

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jonathan: let's work through the market action. good morning welcome to the program this is bloomberg surveillance. the s&p negative .1% on the s&p 500. and down less than that on the nasdaq 100. in the bond market the yields come in three basis points on three year. basically the average of the last 30 days. the average of the 10 year around 350. we are at 34775.

a note to the morning goes to tony we catch up in a few minutes on bloomberg tv. here is the note he has been speaking with climates -- client saying there is it -- nervous to become overly negative given the damage that is already done under the surface on the essence the 500. tom: it's a good note because national the s&p 500. tom: it's a good note because -- on the s&p 500. tom: it's a good note because -- the newsletter frying. lisa: insecure and emotional. there you are. [laughter] tom: and it is on point with

behavioral characteristic. it is not just about sales and depot. jonathan: policies adjusted from zero a year ago from 3.5% but they declare that they are done now for perhaps. with the damage done was at last year the price we would pay for a visit 30% on the nasdaq. do we need to see the product go up for them to get to inflation numbers at 2%? this is the issue you are nervous at the moment to go along but at the same time hesitant to go short. lisa: it is an annoying market. people are not that bearish. they are looking at the market seeing positive signs. they do not believe they will get rewarded is much as they get cash for 5%. tom: i think it's incredibly important this -- percentage of

people that participate in recovery out of october and for huge number of people that are not in the game right now and just the recovery. jonathan: everyone sounds like the classic two-handed economists one hand this will the other one that. you can see the glue and the optimism as well. in the glue the globe -- global health expectations growth. defensive. you could see this across the board but the most crowded trades right now. but the hope has the majority of investors hoping for our soft landing. the vast majority have investors expected that ceiling discussion to end by mistake. lisa: this is what is keeping things supportive. why people are getting burned out of barry -- every bearish

trade the can. they raise a question about the consumer. you take a look at home depot and they are cutting the outlook. the shares have called back losses. at one point we were almost 5% now we are down 2% as we parse through the lows. it is down 2.3% in sympathy. and is this specifically housing area or is this rob retail business -- weakness? you have t.j. maxx and target reporting tomorrow as well as walmart thursday. all of the shares down are in sympathy but not that much. target seeing the biggest declines that they had a lot of volatility in the results over the past few years. tom: was it last may i think it

was? lisa: yeah. tom: lisa went through the earnings from retail this week and it is coming up on thursday we get retail sales for the united states which is a data point for the previous month. later this afternoon at 3:00 biden and house speaker mccarthy will be meeting later today. this is a kink in the t-bill carve around the x state with 100 basis point of extra yield. if we don't get a resolution we are kicking the can down the road and not illuminating the problem. this makes the t-bill market and challenging ways to be area tom: really good set up for someone to speak with us about this is lindsay rossiter. --rosner. we look at the opportunity out there. what is the opportunity when it comes to the dysfunction in that

t-bill, how do you plan? >> the answer is you do not plan. there is so much talk about getting the basis points -- 100 extra basis points. but if you get a default with a 5% probability that is is not a good upside downside analysis. or as it is get the front end of the curve and get in the intermediate spend. tom: what is so important here is the responsiveness to the belly of the curve five-years. what is the opportunity? how do you play that? >> i think there are a lot of opportunities. you can go anywhere you want. if you want to be more conservative say more investment rate. even with mortgage backed securities if you say

high-quality there is good stuff to do in the investment-grade space. but if you want to see more risk and go for more yield very idiosyncratic opportunities. you have a menu of options in the middle of the curve and you do not have to get stuck in the noise and aim zaidi you were speaking about -- anxiety you are speaking of. the problem is with the debt ceiling if the solution is prioritization that is kicking the problem a few months down the road. they will be right back in it. if you bought t-bills two months out you may be back before you know it. it is not a game worth laying. lisa: that said, if it gets resolved to you get more risk on? or get more aggressive in other areas? >> we go back to your prior question, resolved what is next.

what is next is we go to what we are concerned about still have central banks fighting inflation. parts of the globe's we still have double-digit inflation. this battle is not ever and we need to think about how does the curve respond. there's a lot pricey and for the u.s. at the end of the year. how does it work out moving forward? we go back to inflation watch and figuring out is a recession happening, will it be a soft landing? in that scenario it is not a green risk on. lisa: we've been talking about the american fund manager survey and one of the problems is going back to 2009, this is the latest one since may. how does it give you the idea that long-term there is a confidence that there will be low inflation low rate trading in the same way we were over the

past few decades? >> i think what we've got our big shift in asset allocation portfolios. there's a discussion of 60/40 if you have a move to 50-50 or global fixed income that tells you that these flows make sense and they are stickier than what they were thinking. and what we have been saying all year with fixed income if you just park it because you are scared there is a lot to own here. i think fixed income is founded. i am bias as a fixed income manager bet that makes sense now and it did not make sense for a long time. lisa: do you think allocations are increasing in a structural and there are two fixed income do you think it will be a 50-50 kind of new portfolio? >> time will tell but i think it is moving in that direction. jonathan: thank you lindsay.

we enjoy your insight. wendy offering her opinion and lindsay on the bond market. tom: i think everybody in the media is struggling to go from the emotion of he put his elbow -- elbow down on the oval couch. lisa: we do that too. just kidding. [laughter] tom: we have a long-term concern about this. like we have been trying wolf on this. jonathan: i am with you but that is not the consensus view. tom: no it is not. things are starting lower and it is wonderful it is a miracle. jonathan: we talk more at 3:00 eastern about this. tom: this is unusual we have to

make sure this is important to listen to jon ferro on this call. the sales side is saying the call matters not just for home depot but seasick own at citigroup said the language of the guys are using pressure. they have the updated orderly margin k. jonathan: what does that mean? tom: i have no idea we have to ask him about it but that is the language ec at 7:40 a.m.. i'm looking at the broken heart glam cheetah outdoor water resistant -- lisa: we were talking about margins and how long they can expand. we have the first expansion on the s&p 500 reported going back .5 years. how long can it continue if consumers are wishing back.

it is looking less good now. and some less regulatory issues that we see may not be as warranted. jonathan: next up for this conversation u.s. retail sales. imagine you are running a bank and you have a team around you but fed speak is the thing that you rely on. it is like whatever they say that is what we will build around it. transitory and low rates forever. lisa: there will never raise rates and they do not have to hedge duration that will be their argument. jonathan: david george coming up on the banking sector. he is coming up shortly. this is bloomberg. >> now keeping you up-to-date with news from around the world. here is the first word. i'm lisa mateo. the white house leaders are having debt limit talks today.

president biden said he was optimistic about reaching a deal but kevin mccarthy said ongoing discussions were not active at all. leaders are nowhere need -- near reaching an agreement. silicon valley bank fall they say that the -- there was a contribution to the collapse. they are expected to bring the -- according to the reports -- remarks, there is also negative social media sentiment. the fbi and justice department probe into whether john will trump and pain can spur russia in the 2016 election. they failed to recommend significant changes to the procedures. and they think that he will reveal a conspiracy to undercut his presidency. oil demand will rise more than

expected this year. because of the china rebound. that is according to the iea. they say the world consumption will rise this year. the agency inspects the demand in china to hit an all-time high. of of senior officials are in india this week from tesla they are expected to talk about the expanding of supply in china. the elon musk has criticized india's high tax and be electric vehicle all lessees. it is political adversary. global news 24-hours a day on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

-- we have not only the financial statistics and the studies but also with the executives of the bed bank says. the senior research analyst -- i want to go to the behavior of the information we are getting from failed bankers. it is clear on air that they were basically marketing experiments wrapped around the calls and protection of your

banking system. are you put back by the comments we are hearing it is the fed fault? >> yeah. it is hard. good morning thank you for having me. it is hard to buy into the commentary area it is easy for me to say of the sales side. clearly bank management team cfo and treasury departments are paid billion's of dollars to manage risk for shareholders for the customers and constituents. i think that is a soft excuse. tom: i will go to quoting someone who says all that matters is there is skin in the game. this goes back from a million years ago david george and these guys were compensated with the growth of the income statement rather than the growth of profit . is that correct? >> that is correct we do not

cover silicon valley to be clear but one common denominator is the -- they have grown quickly. banking is not a growth business. it will grow typically at the gpd -- gdp rate at 200 basis points. the common denominator is that they grew quickly. there are regulator issues that operably need to be addressed but the deposit mechanism for these have a chunky deposit base which poses a lot of risk when there is fear in the system. i think that was another common theme of the banks that have failed. lisa: is it over? >> i think we are close. from my manage point -- vantage point, we do not manage those. they return on your station and they get a lot of publicity but it appears the liquidity

situation is pretty good. from my perspective, if you change banks by now you operably are not going to. more of the view of the vast majority that the deposit movement is behind us with the updates we. so far in the second order with that were established regional banks has been pretty good. the core prevails through 2023 and we feel good about where we are. we think you're in the later stages of this. lisa: this gets to an existential question of what the crisis is is this an issue of the system or is this an issue of rfid ability when you have to pay up or deposits. how far away are we from building the confidence? you cannot only put your money there but also get good interests and the company will deliver in terms. >> i think what has happened in

the last 6-8 weeks is what we expected to occur over the next six-eight quarters. i think it is good to have an intermediate context about the to be -- about liquidity. if you look at bank deposits with total funding the last 50 years it is around 20 cents-30%. -- 25%-30%. the number got up to 40%. as we view the sector through the normalized lens, you have to do that as a replay -- relates to credit and we are seeing a normalization. with the bank deposit, they are not going zero over $17 trillion. companies have significant opportunities to stay in the banking system. that is something that happens weaker and i think of the debility will get weaker over the next 6-8 quarters.

tom: deb -- dave baird is involved in the milwaukee investment. i am so interested in your connections with them across wisconsin is there an urge to merge among bankers or are they comfortable with the status quo? >> it will be interesting to see what happens. we are of the view over time that you will get more deals. i think the banks are sitting here today thinking about the future and this episode and the risk that the m&a of what we live through the last couple months. with janet yellen she has expressed but openness to the deals. it would not surprise us to see moe's or larger: deals over the next few years. i think we need clarity when it relates to credit.

and there is the trend for more m&a which is in front of us. jonathan: you started this conversation saying these people -- do you think people will continue to work in this area to -- they somehow flighty deposits are. as it changed much with the proliferation of internet banking in the past 10 years or so? >> i think it is sticky but not as much as it was 30 years ago. at the end of the day it is for small and medium-size companies. commercial -- commercial banks and regional banks in particular are the lifeblood of their capital system. and it provides significant liquidity with payroll, cash management, treasury services to all these companies. they provide a valuable service i believe they should be paid for. it is a relationship business in the corporate side.

that is something to remember whereas in silicon valley and moocher and others they be or transactional and where you have more risk. jonathan: thank you for your insight. a voice in a difficult conversation. i get that things have changed and we understand that over the past 10 years. svb is a bad example of it. if you have more than 90% of your deposits uninsured by definition they have a massive size. you see money going out of the door really quickly how many hands full of money you see running out the door with the big customers. tom: it is a debate i have a different view. jonathan: will have a debated a different time. it is the financial institution. tom: right under here it says a banker told me this years ago and i was broad and -- i like to

go to lunch. that is what the guy said. so much of the lack of mergers in david george's world is luring all who like to get up in the morning they are bored and they are golf buddies and they like to go to lunch or maybe breakfast before. it is a hugely behavioral thing in america. jonathan: i'm sure -- i'm not sure that that is the same. tom: is it the same in england where there is a lot of little banks? jonathan: get used to be that way. they are going to lunch him playing golf. tom: small banks have been dotted all over england. jonathan: jonathan: most of them have closed down. about 20 years behind when you said that basically. with the u.s. banking particularly in europe countries. that is a different topic. the s&p 500 negative 0.1%.

retail sales 30 minutes away. this is bloomberg. ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall.

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>> i am leaning towards the bond market view that we are in for some volatility. >> we are bouncing into a ceiling and a floor. >> we think the market is

generous in terms of fat cuts coming. >> the fed has done a good job of supporting the economy while raising rates and trying to tame inflation. >> i am in the camp it will not go back to 2%. i think there is a surprise waiting in the surveillance -- in the inflation data. >> this is global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: the productivity of america, retail sales front and center. jonathan: home depot is lighter, softer under the premarket. chuck grom of golden casket, discretionary recession is his call going into results -- retail sales later today. tom: we are still modeling numbers. the idea of 2% real gdp is not what we see here. january booming, february come i

don't know. into march and april, there seems to be a mystery about the state of the consumer. jonathan: captured by the rotation of the equity market. the bankamerica -- the bank of america fund survey out later. long technique, short banks, that has been the rotation. single stories toward the big names. tom: tony dwyer with jonathan ferro on the 9:00 hour, that is important. we have a fabulous guest to get us started in this hour. i look at all of this and it is almost a joy. the debt ceiling trip to side, we had slower data in china, slower data from home depot, and there is a stew in the trade we are in. lisa: and a slower sense and a germany. we saw the server they came out earlier that shows that suddenly people are more concerned with a negative read on this key gauge.

how much are we looking at that being a china story, recovery not as strong as people thought filtering into the strength everybody thought was shockingly surprising that ness seems to be fading? -- that now seems to be fitting? tom: go back to the numbers we had from the big shipping company saying things weren't great. jp morgan has been asking the question, when is it time to drop the overweight europe story. the time is now, granted them. the activity of swing scene at the start of the year was marked by the fall in europe, china reopening. the problem a lot of people are going to have with this take, the weaknesses here keep pushing out. tom: pushing out but then there is home depot as one proxy. it is finally here. i want to emphasize the sell side saying this call at 9:00 a.m. will be important.

i am going to begin with the vix because dean kerner told me to. 17.49. he could clearly -- he could care less until we get the gloom of a 26. -- 20 vix. tom: dean kerner shown this -- dean curnutt joins us now. with also the backless, particularly out of the university of chicago ages ago. you go like the dynamics of the variants where there is a microeconomics, a supply and demand. you equated to after brexit when there was a supply strike on volatility. take that complexity and translated into where we are right now. >> there is a little variants on a day-to-day basis.

if you look at one month realize volatility, it is in the 25th percentile. you mentioned the word caller, we are just chomping within a range. without large enough swings, it is difficult to justify a vix higher than now. i like to call it the earnings engine of long volatility. that engine is sputtering even as i forward-looking basis there is so much uncertainty with respect to the debt ceiling. he mentioned brexit, as i think back to that period, in the months of 2016, options on the british pound got incredibly expensive. the reason they got expensive was not because british pound volatility was high, there was a dearth of supply. the folks that would sell his options were being tapped on the shoulder by internal risk police saying you do not be short, volatility on the british pound at any price.

as i think about that as an analog of what might come, you see potentially where the sell side trader who is asked to selldowns at puts in the s&p is told by his internal risk monitors, don't sell it. without that supply, you can see a jump higher in implied volatility. jonathan: i cannot believe it is almost seven years since brexit. time has gone so quickly. i can't believe how much people ignored it. on the morning it felt so big. tom: starting. jonathan: then it became a european story and then a local one. tom: i have the clearest memory of you working an 18 hour day and i was trying to find a restaurant in mayfair and the streets were in shock. jonathan:'s second point, the memories of 2011 -- the second point, the memories of 2011. what are the lessons and what are you advocating for clients? >> there is a saying that those

who don't remember history are doomed to repeat it. try to look to the past to learn. there is always some contamination in terms of what we are trying to isolate. in 2011, there was the euro zone crisis trying to flareup in august or september of 2011. we cannot fully disentangle the massive moves in the s&p 500, the spike in the vix. there was a big growth shortfall in the u.s. however, we should look at it anyway. i was coming here this morning and i decided to go on youtube and i said tim gardner 2011 debt ceiling. i saw him come on camera and say the impending disaster, the u.s. doesn't default. i said this is the exact same phrasing we are seeing, it is just a different person.

chuck schumer was standing behind him, he is still there. tom: chuck schumer was standing by for eisenhower in 1953. dean: exactly. it is going to take some flareup in market prices to motivate this. you are not seeing that flareup. we have not gotten to the point where people are actually getting nervous. each side is motivated to be the aggressor in terms of trying to get a better deal on the side -- on this thing. jonathan: the at risk maturities , where would you expect to see it beyond that? dean: i love gold. going back to 2011, you saw gold absolutely spike on a spot basis. there is a gold vic's -- vix, it

went from 17 to 40 during that period. there is a good case to be made for gold because it has this concept of limited supply. i think from a pavlovian standpoint, people are going to look to that to position in terms of expressing a view that this is his functional stuff. lisa: is there a sense that the benchmark vix index is dead in terms of volatility supplied? dean: i don't think so. it became a muted last year. the s&p goes up, the vix goes down. that is why people would characterize it that way. it is taking in market prices. it has started to normalize in terms of his relationship to the s&p. it has been more reactive at the failure of svb. the vix beta to the s&p started

to rise to a level consistent with history. 2022 was an anomaly for a number of reasons, but it is starting to be more reactive. if you look at june interest in vix, it is externally high. people are position for vix. lisa: we were talking about people hiding in--, hiding in gold and being conservative even though there is this bifurcated risk, is this supported in valuations? is this showing a lack of some catastrophic outcome as being potentially more painful for fish for markets -- more painful for markets? dean: markets are never sent never. you can never say what is going to happen. i think you think about how do you stay long through this. they will probably figure it out that there has not been devolved into so probably markets get an upswing. you try to stay long in an efficient way.

there are to use upset calls. money calls had cheapened since the beginning of the year. on a premier basis, they are down 70% from the end of last year to now. i think that is a great place holder to stay long risk and be able to walk away. through options, you are renting the market. you don't pay for the plumbing problem. there is a plumbing problem for the united states. the option allows you to pay the premium and thanks to go awry, you walk away. i think that premium is quite cheap. jonathan: i will never forget what you said in 2021 when you said transitory was the new sub premise. i remember thinking that is pretty powerful. lisa: it was right. jonathan: it was dead on. thank you, dean. distracted by this message i just received, "the best thing i ever did was ignore the brexit debate back that. what a waste of time."

just for the record, that is a u.s.-based listener. tom: i think we will know in five or 10 years. people i listen to of all persuasions in the u.k. say there is some import-export dynamics here that have changed. jonathan: perhaps some labor supply dynamics as well. 8:30 a.m., timothy -- tiffany wilding of pacific investment management. home depot trying to recover, down almost 3% in early trading following a cut to its outlook. more retailer next to come through the week. lisa: president biden meets with kevin mccarthy and other leaders today to try to avert a default.

the two sides are nowhere near the think the debt limit. investors bet whether an agreement can be reached. there is a sign that economic uncertainty is not leading to a pullback in home-improvement spending. tom people cut its outlook for the first year after first quarter sales dropped more than expected. comparable sales were down 4.5% the first three months. the company says earnings could fall as much as 13% this year. airline reservations are pointing to strong demand this summer. according to the international airport association, bookings for the may to september period are 35% higher than a year ago. asian-pacific experience, the largest job with a 135% increase. ukraine says its air defense system defeated an exceptional russian missile lists -- let's. can included top sonic missiles aimed at the capital of kyiv.

another sign that mike pence is preparing to run for the republican nomination. his allies have formed a political action committee to support him. he said he will announce before late june whether he will challenge his former boss. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> the recovery has been stronger than expected. indian demand is also robust. we are also seeing demand in the middle east. this is contrasted with the economic gloom and concerns we are saying for the world economy for national activity and especially in -- where demand has been a week. jonathan: is difficult to reconcile those comments with what we saw in the data overnight from china which looked much weaker than expected . they are talking about oil demand specifically better than expected. crude at the moment, wti, up and

on brent. 70 5.35 on the day. wti, $71 per burial -- per barrel. jonathan: this is -- tom: this is like the debt ceiling. jonathan: u.s. is preparing to buy three millions of barrels to refill is depleted petroleum reserve. they sold $200 million last year -- $3 million is a start. jonathan: does the german have a strategic petroleum reserve? jonathan: i don't know. i am sure our next guest does. tom: on china's slowdown, one thing that intrigued me was property.

in china, property matters. it was -5.8%. it is just one statistic, one little tea leaf, but there it is. jonathan: youth unemployment got people's attention. i am not sure what kind of a read you can get on that. but it's got people's attention. tom: he has been with us not enough recently. will kennedy drives all of our hydrocarbon work. we are pleased to catch up with will kennedy. the bloomberg commodity index is not pretty. we had a pandemic boom, we have rolled over. can we establish a bear market in commodities in general. will: it seems like we are close and i think the reason is a lot of the data from china is very weak and what we're saying is

an -- will economy that is not demanding like people expected to. when you look at the price of base metals and iron ore in particular, that demand is not there. the industrial recovery seems pretty weak and that is partly because they're not building property. it does seem to be us that the different picture in oil demand. tom: will kennedy has the most romantic job and bloomberg, running our hydrocarbon team. the romance is you are in singapore, exhausted. tell us about the singapore dynamic. oil is through the straight and up the pacific rim. all of the back-and-forth between australia and china, what is happening in southeast asia. will: there is a lot of oil heading to the streets of singapore. that trade in russian, around

africa, into asia. it is happening in china and india are buying a huge amount of oil and upping their forecast for oil demand. what that tells you is another story about the two speeds of the chinese economy. the industrial economy is struggling but you have hundreds of minutes of people who are flying again and driving again. that has boosted demand. there has been weakness in diesel. when we look at gasoline and jet fuel, that demand has been there. persons to be a mismatch between the demand figures, they expect oil demand to reach a record of this year, and what people are pricing. we have this week market for the rest of the year. sitting on the ground in asia is not quite gelling with what we are sitting on oil contracts. lisa: we have heard this a couple of months now that will markets are not trading in tandem with fundamentals, it really a much tighter market. will: it must come down to a

couple of things. one, people are trading the future here. it reflects people's anxiety about how the economy develops. it also reflects supply. we are all very focused on demand. it is with telling people that supply is running ahead of what people expected. particularly out of russia, there are weekly tracts of russian exports. soil was 10% higher than a couple of months ago and that is not what people expected to see because russia had proclaimed to cut back. we are not saying that on export numbers. there is oil coming out of iran and venezuela. there is plenty of oil meeting in the uncertain demand picture. let's talk about supplies. if you put those things together, that is one reason. and then there is the way that people have treated oil --

traded oil which is inflation hedge up. now that people are less worried, they may be getting out of that. lisa: the fact that the u.s. may be refilling the strategic petroleum reserve as early as august, not feeling, perhaps a drop in the bucket. how is that going to it the market given how much people thought as did the other way when they were suppressing presses? will: i think it is important the u.s. is taking that step. it is only 3 million barrels, not a huge amount, but it is something people have been looking to happen. it is going to take a long time. i don't think they're going to rush or feel they need to refill having this old. i think it is something that traders are to factor into their thinking when i think about the downside for oil and how low it

can go. clearly you have to buy into the market. tom: is it beneficial to watch the -- of iron ore right now? will: i think the iron or market is telling us something important about the state of the chinese economy. as the data on the industrial side comes in weak, i think you would say the iron ore market has been telling you that for some time. it has been on the downward move and clearly it is sending a signal about how busy steel mills are in china and the demand for steel. jonathan: brent crude, 75. wti, 71. thank you, will for what is happening with chinese data. we wager you on bloomberg tv in

25 minutes coming up on "the open." cassie barrow of jp morgan. quite a lineup this morning. tom: it is good. jonathan: tony is fired up. tom: i have to give you credit, i wish we had relegation and american sports. right now is the prime season where the three teams at the bottom of english football are going oops. 21 years old from nigeria and ireland, a cup of coffee ago, someone played -- someone paid $420,000 for him and now it is $12 million. the kid was 16 at $400,000 and that he was 12 and then to southhampton -- and then he was $12 million to southhampton. jonathan: because southhampton

have been relegated. you have to sell some of your crown jewels because you cannot afford them. you have to try to maintain the core of a team to try to get promoted again. it is really difficult. tom: i love this. is like the changes in the rules to baseball. this kid is a perfect example. jonathan: what right reynolds did with wrexham is awesome. tom: they went up in the? jonathan: yes, they got promoted. wonderful. retail sales, coming up next. ♪

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tom: signposts on their way to retail sales. ms. abramowitz and tom keene, jonathan ferro preparing for the next hour. two years, -- the 10 year yield, 3.49%. that ought to do it for the pulse of america as we look at productivity and the many series of retail sales. michael mckee will join us as the data comes out. how is the consumer doing? michael: it looks like the consumer is hanging in there.

we have a stronger than anticipated growth in the control group which is what feeds into gdp. the forecast was for a rise of .4% and contracted .3 percent before. not quite as strong. transportation is up .4%, -8 --, that was -.8% less time. it looks like the consumer is hanging in there which is what the fed was hoping to see. if you are going to do this all finding scenario, you need the consumer to hang in there. i will get the market reaction and see what i can find out about what went up at what went down. tom: the market reactions higher yields and i would suggest is dramatic over the two to three days. the data has cut us out on the three year mother.

there is a tangible lived here in higher yields. bond prices are lower as well. equities, like dean curnutt said. lisa: better than expected but still on a real basis, negative. this is the question, that the general trend is lower. even though better than expected , on a non-inflation-adjusted level, an actual headline, retail advance is 0.4%. still, in real basis, still negative. tom: this need some adjustment. michael mckee looks at 85 lines that come out within this report, he will have all that. michael mckee, inflation is really a significant dynamic here, isn't it? michael: it has been.

that is one reason we are looking at the control group, some things are cap for in gdb. it also takes our gasoline and gasoline has been a big mover for retail sales numbers because it has been going up and down. it is one reason we saw a decline last month and a reason we saw a rise this month in retail sales. gasoline station sales fell on the month by 4%. that makes a big difference out there. the other categories that move significantly were general merchandise stores. between the april and may numbers or april and march numbers, rather, is the easter affect. easter was earlier in april this year so some of the spending effects in march were moved over to april. overall, inflation is still playing a role. you have to look at the fact

that consumers are still spending and we are happy seeing necessarily a sense of recession in retail sales figures. tom: you are going to get in your holes helping at the atlanta fed and you will be in conversation with the mckenzie height bargain and the academic from chicago, two different important conversations. let's focus on austan goolsbee who is president -- who is reticent to raise rates higher. michael: that is correct, he is worried the fed has done so much it would not take much to tip the fed -- did the economy into recession. he thinks a positive good idea. we will be asking him what would change his mind because we have a couple of inflation reports before the next fed meeting. tom: thank you so much. we appreciate that. it is important to look at the retail data, repair part --

retail data, rip it apart. lisa: this is the question after talking about a discretionary recession. are we seeing that in the data? joining us is someone who focuses on this all day, tiffany wilding at pimco. thank you for waking up and keeping eastern time so you can partake. from your vantage point, are you seeing signs of discretionary prescription -- discretionary recession or is that premature? tiffany: some of the momentum in consumption has decelerated since the beginning of the year. the first quarter was extreme is strong in terms of consumption growth, over 3%. a lot at that, if we look at the sequential monthly data was boosted by warm weather in january. we saw a deceleration in march and it looks like we are getting a pop back. there is probably some noise

around mother's day here. we would suggest you are seeing some decline or growth deceleration in consumption. the consumers are hanging in there. that is going to be a function of the labor market. it is still reasonably strong. lisa: hanging in there and willing to pay the prices are two different things. is there a sense there really is starting to be some pushback to the inflation being borne out in consumers' pocketbooks and in the name of profits in companies? tiffany: we are definitely starting to hear more of that coming from the various earnings releases from consumer companies. they are saying consumers are more price-sensitive in various categories. when i look at the macro data, i don't see it as much. we need more macro data. we are starting to see these trends at the company level.

overall, i would say inflation is still reasonably robust. at 5% or more, is over the fed's target. we expected to come down but it continues to be stickier than expected. tom: i need to ask you this. on the equity market, i have been looking at the slow-motion convergence of averages down to a snooze fest. if i look at the two year yield, there is a teensy differential in the three moving averages are used. does jerome powell call that a success to see the lethargy, the board of within the bond market described by the two year yield? tiffany: i do think the bond market does listen to the fed. commentators like to look at

just the forward curve which does suggest significant probability rates will be lowered by the end of the year to suggest that markets are not listening to the fed. i do think the markets are listening to the fed, but i think the markets in terms of distribution of risk assigned more downside risk to the economic outlook. if you take a historical look at banking sector crises and stress is defined by 30% drops, you tend to see the economy decelerating. that will come with tighter credit conditions with consumers and households. tom: what do you hear from your managers? what does pimco say about the dynamics in this banking crisis in agency paper? tiffany: there are some banks that failed, they held a lot of treasuries and agencies.

we think that is probably priced into the market. there is a pretty good understanding of exactly what that is in terms of how much it is. the federal reserve is also stringing -- training is prefer the -- shrinking its portfolio. interest rates are so high. we actually agency, we think they provide pretty good value right now because volatility has been high and the level of interest rates has been high. lisa: as we prepare for retail earnings with respect to target and walmart, do we get a sense that perhaps people are too bearish? perhaps home depot was an outlier and consumers are still spending and can keep borrowing to do so? tiffany: we got credit data from the federal reserve which did look like there was some reduction in credit card -- a

deterioration in credit card loans and things like that on the first quarter. i think there are consumers out there that are feeling pain. i think banks are tightening credit conditions. the other piece of this is demand for credit. demand for credit is also falling because rates are so high. it is more extensive due to goblins -- more expensive to take out loans. all of this is proof that monetary policy is working. the consumer is getting squeezed, lower income consumers more than others, and you are seeing deceleration in credit growth. lisa: is inflation decelerating enough to get the fed where they want? or are we looking at higher inflation but also a higher growth area for a longer period of time? tiffany: i think that has it to be seen. we do think the banking sector

stresses are going to impact the economy. it is going to slow things down. higher interest rates take their time to make their way to the economy. inflation even lags activity momentum. i think we are seeing these lags start to play out and you have seen inflation decelerate, it is probably going to continue to decelerate. the federal reserve is to be patient, as do markets, to see that. we think inflation does decelerate to 3% by year-end. but that is still above target. there are still some sticky trends on inflation but ultimately the fed will probably be successful in getting it back. the question is how big of a recession do they need to do that. tom: greatly appreciated. we are going to drop into the brenna world -- brama world.

i took apple computer and went to the 10 year benchmark. i am picking up 76 basis points over the treasury. that is the real world of all of our guests, they are trying to make that out over treasures. lisa: and a lot of those companies are selling debt because they not having to pay that much of a margin over treasuries because they are saying you guys are going to be fine. tom: we cannot emphasize enough how much the world has changed. there is a coupon out there. a total return and coupons matter. futures at -11. this is bloomberg. lisa: keeping you up-to-date with the news from around the world, i'm lisa mateo. the white house and congressional leaders headed into another round of talks today to limit it to fall.

president biden is optimistic a deal could be reached alchemical expressed that discussions were not productive and leaders are nowhere near reaching an agreement. saudi arabia is moving closer to another stock offering in remco. any deal would be the world's largest sales in years. proceeds will be transferred to the saly sovereign wealth fund. the former ceo of silicon valley bank says the fed and social media contributed to the collapse. he testifies before the senate banking committee today. he is expected to blame the fastest rate of hikes and against. he will also point a finger at negative social media sentiment. special counsel faulted the fbi and justice department's probe into whether trump's campaign conspired with russia. john durham failed to issue new charges or recognize changes to investigator tutors instigated

procedures -- investigative procedures. a group of senior officials from tesla are visiting india, looking to expand its supply chain beyond china. it is it could represent a thaw in the relationship. elon musk has criticized india's high import taxes and electric vehicle policies. they advised tesla to not sell cars in the country made in china, it's adversary. "bloomberg surveillance -- global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> it is very clear the consumer is on fragile footing. but, they are proving resilient.

consumers are willing of that -- and accepting of that level of inflation, but it is going to come down to the stockpile of wealth and the ability of the consumer to make purchases. at some point, that wealth runs out and businesses want to be able to pass on that cost increase without a significant loss of market share. tom: very valuable. lindsay on the state of the american economy. she was talking about the run rate at 2% and you wonder why -- you wonder where retail sales will settle. lisa: you have residents in growth, does that also meant resilience of inflation? it creates a conundrum for the federal reserve. tom: productivity is higher, 4.02% on a five year. 10 year, 5.2%. equities have vacillated today. maybe not as gloomy as the shock of home depot, but there is a

little weight to the tape. lisa: you get china with data that shows that growth is not even. it is not going to persist without government support. tom: i think you are dead on. i think you move the markets and we are going to get a brief on that. enda curran joins us with years of experience in hong kong and living with the chinese. he is our global economics correspondent. i looked at the nuance for property market worser. what was worser for you in the report of china? enda: disappointment across the board. youth unemployment, of toys 24%. 12 million graduates coming through the marketplace in china

this year, that is going to be a concern for china's recovery. you have retail sales, missing forecasts. there compared against a weak base from a year ago. you have to say probably disappointing. a few months ago, we were talking about how china is reopening, let's see where these rocket boosters go in terms of consumption. how does it spill over? how does it impact global inflation? all legitimate questions. here we are now and it is looking like something of a -- fisher. lisa: unless there is investment by the government, support or stimulus, how much discussion is there about the communist party coming out and injecting more cache into the economy? enda: there is discussion around public support, for sure. one of the takeaways will be what is happening with youth

unemployment. we are dry creation is the modus operandi of the government. we had comments from the official sector reporting on making it a point that they will be making steps to ensure jobs are created. some economists making the point that the economy favored low-end service workers rather than more educated workers, those are the ones losing it this time around. that want to be an easy story to fix given the difficulties the technology sector is facing given tensions. i think there might be support coming, but any interest rate cut is going to turn this around. youth unemployment needs to be addressed and a government spending will be needed to pick up the investment side of things. lisa: if anyone is waking up and hoping we get clarity on the data and storylines we have been getting, you are wrong. we have not only got this data out of china that shows some sort of slow down, but a choppy

recovery. you get the iea coming out saying chinese oil demand is increasing and is going to support oil pricing. how do you square this circle? enda: this is the talking point of the year. china comes back online, they are the biggest purchaser of oil. chinese travel, business and consumer, would have any impact on global prices. is offering some support in that market. we can say china is offering a major fresh impulse to the global inflation story, at least not yet. tom: i want to go to your wheelhouse coverage in hong kong of the fears that the west has through hong kong over all of china. this president begins a three nation indo pacific tour. it is japan, annmarie hordern will be there, papa new guinea, and australia.

one of the major goals is to contain technology placement in and out of china with our allies. can we do that? can we actually control the technology movement of our allies into a nation that we fear? enda: there is no doubt that the u.s. export controls restrictions on investments have been have been part of china's economy, especially the semi conductor sector and some of those caught in the crosshairs. huawei was one of them. u.s. allies have been on board for that story as well. at the same time, others are reporting that there are reports of resilience in high-tech sector and some of those individual companies. the question about whether or not the u.s. can cap china's investment remains an open one.

tom: the distinction tends to be a recovering china versus an industrial china. do you buy that? is that the dichotomy we should be looking at? enda: the biggest surprise has been is the rebound of consumers. the western story was pent-up demand after they moved past the point of restrictions. that has not played out in china. maybe it was because it was a different dynamic. people were out and about is the normally would. perhaps we should have never expected that rebound. nonetheless, i think the slow recovery doesn't bode well for china's economic recovery and doesn't bode well as pulling over for the rest of the world in terms of global demand. china's slow down coupled with the noise out of germany's side points to slowing momentum in the second half of this year. lisa: you're getting headlines

from the cleveland fed president as she speaks at an event in dublin, ireland. she is talking about how data shows us rates are not at a sufficiently restrictive level. she talks about how monetary policy must consider long-running trends. not yet at a level to hold given the severed inflation -- the stubborn inflation, given that we have heard of something of a break in views on the federal reserve and from an economic perspective. is that the case that it is not necessarily clear? 's monetary policy and a restrictive level? enda: the u.s. has a lot of balls in the air when you consider what is going on with the baking shock at how that may or may not impact landing, especially for the small business community. we have had interest rate increases here, there plenty of

economists who say that experts say it is going -- that ducks are going to come down the tracks sooner or later. and then we have the debt ceiling debate, there is a sanguine view that that will be navigated. it is a pretty serious debate we are having for any government. some fed officials are saying interest rates are still not where they need to be, they need to go higher. there are people warning that the fed has gone far enough and they are strung up trouble for down the road. either way, i think it is a big cough above the fed in terms of how to balance this. tom: thank you so much. futures are -11. there are fed speakers and that there is loretta mester, she is differently -- i am going to treat her differently. there is the mathematician who has a concession the other two

don't. lisa: it flies in the face of market expectations. the's is about to graph an end that they are going to keep going. it also shows a not ready to pause. we heard something different from raphael bostic. he said he is ready to pause. this real difference, do we see that in dissents? tom: the common ground of austan goolsbee and jim bullard is the art data dependent. lisa: they are each looking at different data. tom: far more importantly, they have got to get out and after the fact get in the data and by definition be after the fact. i can go to fomc, some camesa. -- so can lisa. where are we going to be? i have no clue. june 14.

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jonathan: a little bit of it up, what more could you want 00 -- a little more economic data, what more could you want? the beginning of the open starts right now. >> everything you need to know over the beginning of u.s. -- know before the open of u.s. trading, this is the open with jonathan ferro. ♪ jonathan: live from new york, views are beginning to splinter at the federal reserve some cracks beginning to show and retailers and yellen