>> those recessionary signals are all over the place. >> we haven't gotten the point where people are actually getting nervous. >> markets are expecting a pretty rapid slowing of inflation and fed officials are little more cautious about that. >> it's somewhere between transitory and persistent. >> we still have double-digit inflation so this battle is not over. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: we are having a wonderful time and things are going well. the actual words from the president yesterday. i feel the same way. from new york city this morning, good morning, good morning and

for our audience worldwide, this is bloomberg surveillance. your equity market is positive by 0.3% on the s&p 500 and the retail story dominated things yesterday. a little bit later we will get target and walmart tomorrow. tom: the currents are going back and forth in the trade is everywhere and there is a distraction of what's going on in washington but you have to look at retail and the huge impact of 70% of our gdp. nothing like the japan numbers but the answer is after home depot, walmart is important. jonathan: and the resilience of the u.s. consumer. let's talk about western alliance where we got some good news. deposits are moving in the right direction since the last quarter. lisa: a billion-dollar increase so release your deposits and the balance every week to basically show resilience and then people

come back in and say we've got confidence again. is this the playbook going forward to engender confidence in the banks? jonathan: i hope we get more of the same. the last thing you want is for this to continue and change into something more serious like the credit crunch that some people and -- still anticipate. lisa: the lack of clarity is exciting to wake up to every morning but the lack of clarity in the hearings yesterday on this issue really underscore how much we really don't have a sense of what's going on. suv ceo said i'll discuss my bonus later and people trying to play the blame game but no more clarity. tom: i have yet to see pac west or anything capture the trade. they go up and then they tease away. i need some proof. jonathan: bankers were yesterday

in front of the senate and today they are in front of the house? lisa: it's the regulators but because it was exciting yesterday, they will do it again with silicon valley bank. i read some of the comments. at one -- at what point are these hearings a mockery of themselves because you know they will come out and basically eviscerate people and sit there and it's like a reality television show. we've got some economic data to start. can we stop for a moment and look at the resiliency of the american economic experiment compared to japan, compared to italy, compared to all of europe, frankly? all the things we are getting wrong including washington is killing it. jonathan: is that a program decision?

lisa: i am glad to hear everybody but it's true. jonathan: are you glad to hear from the fed for the rest of this week? lisa: bostick is on a daily basis partly because of its on his conference. austin goolsby said i think mocking the immaculate disinflation is a mistake because there was a large component that was immaculate disinflation -- immaculate inflation and he said some of this was pandemic induced shock and the rollover effect is what we are seeing now. tom: austin goolsby is a great guy out of california originally. he was on the academy debate team and he still doing that. he just loves the back-and-forth of verbiage which is why he's done so well. jonathan: the stimulus out of

washington has nothing to do with any of that. your equity market looks like this. the s&p 500 is positive 0.3%. the 10 year is 351.70. lisa: target releases their findings 5:00 and tomorrow we get walmart. so far, year to date, you've seen modest gains with target and walmart up 5% so can they continue or are you starting to see a discretionary recession feed through the retailers? 8:30 a.m., the housing starts and building permits for the month of april. have we seen a bottoming out in housing because of a dearth of supply? also today, president biden is departing for alaska and then hiroshima, japan and is cutting

this trip short because of the debt ceiling debate. he will come back to try to finish up some of these talks. jonathan: the talks continue every day. and it was super constructive yesterday. lisa: even kevin mccarthy said it's possible to get a deal by the end of the week. jonathan: the senior portfolio is with us now. tk talked about the resilience of the u.s. economy so do you expect the market to surprise to the upside? >> yes, i think so because there is nothing wrong with the economy before the fed began to raise rates so there is no spark that would cause the economy to slow down. once the fed stops easing, we will see the strength return. it's pretty well-balanced even now. tom: i know you are skewed to equity but for bonds, are you managing for coupon or total return? >> i think for total return you

have to look at high yield bonds because they offer pretty good value 6.75% to 8% and $.90 on the dollars that you can have the income with defaults only around 2% so that looks pretty good. that's baking in that we will not have a big slow down or a jump in defaults for -- for a real recession. lisa: we talked with lindsayrosner yesterday and said perhaps the new playbook is probably 50-50 because fixed income is giving yield. in a time of such incredible uncertainty, why shift the mood at a time a number of companies will fail if you can get real income in the credit space? >> if the economy's really slows down, bonds will get hurt as well. they are not impervious to economic activity.

when you look at equities, if you exclude the top 10 stocks trading at high multiples, the average stock on the s&p 500 is only 15.5%. that translates into a cash flow yield around 6.5%, in other words bumping into high yield bonds. that still says equity will be the better choice even if we have a restructure in volatility. lisa: the dividend paying stocks have underperformed this year. i was shocked by that. it's not working for many people as a number of companies increase their payouts. is that an opportunity or a flashing red sign that something is amiss here? >> i think it reflects that trading money is focused more on the macro what the fed is doing and the uncertainty over having a recession and how bad will it be so we've had money flock to the guaranteed growth stocks, the fang stocks and that's where their performance has been. if you take at the performance

of the top stocks, you find the markets are only slightly positive so that reflects an uncertainty of having a recession or not and where should you put your money. those look like havens and that's why we seen that the economy -- seeing that dichotomy in the market. jonathan: yesterday we talked about the anxiousness to go short at the same time of the nervousness of going along and trapped between two emotions, can you speak to that? >> emotions don't help you much in investing. i'm sure tom can back that up. if you look at the market fundamentally, we look at it in good shape not only absolutely but relatively with still some modest growth and once the fed takes its foot off the break, you will see that return. what you had as a contrast between the fed not only raising rates that they are also easing on the other hand fed expenditures are going up and

they pumped money in through the fdic to help the banking system so we have a lot of support from the government while nominally they are trying to tighten. tom: we can't have someone this optimistic in the 6:00 hour. she's way too optimistic for the 6:00 hour. jonathan: not every morning. lisa: what was the experience? tom: i need more medication. jonathan: there is nothing stoic about it. thank you so much. the emotion of the moment. tom: let me explain -- in boston, there is money management that goes way back with historical constructs. in the high-yield space, there is a guy named felix smith at putnam and he enjoyed the high ground. his get a be 10 or 15 years

ahead of me and then there was his whole bond buildup between boston and capital guardian trust in l.a. so what do you do with a balanced fund and she has had the courage to be in bonds but she will go to equities in a heartbeat. many people won't do that. they are wedded to the coupon and she says she has the kurds to load the boat on dividend growth, equities when the blood is in the streets. jonathan: 75% of assets in equities she has. lisa: many people went to equities who were high in bonds back in the day when the entire market was elevated with free money. now everyone is shifting back to bonds. the idea she's pushing against that and saying there are number of stocks that have totally been left as everyone piles into the ai trade, is this the new playbook for a number of managers seeking outsized returns. jonathan: weird moments in the

bond market over the last decade. tom: the u.s. aggregate total return fund is -17% which is never been a framework and we bounced up 6%. that's off that trend, the feel-good trend, we were down 17%. jonathan: the good old days. it felt ridiculous at the time. everyone knew. coming up in the next hour, amy lou silverman on equities and your equity market is positive 0.3%. lisa: keeping you up-to-date with nusra around the world with the first words -- president biden and house speaker kevin mccarthy are expressing cautious optimism that they can reach a deal and raising the debt limit. that would potentially avert a

catastrophic default and negotiators want to come up with a framework agreement by the time the president returns from a short trip to asia. one of the federal reserve's more hawkish policy makers suggest it will need to keep raising interest rates. the comments were from the cleveland fed president contrasted those of other fed officials and one was your fed president john williams who says he is comfortable with a wait-and-see approach in the fed meets again june 13. in japan, the economy expanded at a faster rate than expected in the first quarter, gross domestic product rose and annualized pace of 1/8 of 1%. that will likely keep speculations about possible early election and a potential central bank policy change. ubs season estimated 4.8 billion dollar gain as a result of its takeover of credit suisse. the swiss bank warns that it faces billions in potential

legal and regulatory costs from the rescue of its former rival ubs stands to benefit. theranos founder has lost her final request to stay in a prison while she if it -- appeals or fraud conviction. she will have to report to prison soon and was sentenced to more than 11 years behind bars for defrauding investors at her blood testing startup. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> to make sure the presidency is addressing any of the critical matters at once i'm confident we continue to make progress toward avoiding a

default. i'm cutting my trip short. i want to be back for the final negotiations with congressional leaders. jonathan: the president of united's states heading off to japan and cutting his trip short because talks will continue. that's a better town but beyond the tone, we don't know if there's progress. lisa: the change in tone but kevin mccarthy was significant area jonathan: whatever agreement he has he has to get it through his house. tom: i think the drama of the president cutting short his trip, maybe it helps at the

margin but is it an identification that they weren't doing this at 11:00 a.m. yesterday? jonathan: it's optics. tom: the optics used to be very clear. there was people who committed huge time to this. carrying the torch to a new generation of debt responsibility is the president of the committee for responsible federal budget. he has been consistent and clear to both sides of the aisle, saying the realities. we welcome her this morning. it's been way too long. my deepest sympathies on the mess you caused in washington. let me cut to the chase. you as the follow on from peterson and paul tsongas, say lose the drama. how do we lose the drama in the coming days and weeks to get this fixed? >> i've seen much less drama at

this point then i thought we would. the read out from yesterday's meeting was highly positive and highly reassuring. that almost makes me nervous because i feel like there needs to be another round of drama before they come to a resolution to show that both sides fought it out. i would say getting to this point to the debt ceiling is far too much drama than what it should have been. we should have looked at this months ago but i think it seems they are becoming aligned on what they will be able to do to have a reasonable package of savings while also lifting the debt ceiling. that is great news because our political process can function enough to get this done hopefully in the next few days or weeks would be reassuring at a time when we need reassurance from them. tom: my historical memory is whether massachusetts or kentucky, the bottom line, things get fixed when they realize the check is not going out to grandma on wednesday. will we have to wait for

something silly and immature like that? >> i don't think so. there has been a lot of speculation that we would have a small default or we wouldn't able -- be able to pay social security benefits but i don't think that's the case. i think it's a problem we have to wait to the absolute last minute to get a deal done where not only at we hit the debt ceiling was was in january but we run out of extraordinary measures which is juggling from different trust funds. we should be able to get deals done without waiting to the last minute but to your point, i don't think we will go beyond the last minute. that's important. there's a huge distinction if we cannot make some payments which solidifies the brokenness of the situation we are in. i think they will avert the crisis. lisa: do we actually make progress? one of the reasons i was excited to speak with you as you study the nuts and bolts of what needs to get done of the actual debt

sustainability of this country. how sustainable isn't how little progress has been made over the past decade of debt ceiling debate and political wrangling and not perhaps as much discussion about the real issues? >> this entire discussion has diverted from the actual issue which is our federal debt is on an unsustainable path. we are on track to borrow $20 trillion over the next decade and our debt to gdp will be at the highest record of all time in this country eclipsing world war ii in just five years at which point we will be spending more interest -- more on interest payments than we do on defense or medicaid. it's not a good story. the amounts we are talking about are really important symbolically and somewhat fiscally. the house was to save almost $5 trillion but it would be far short of that. it will not change the debt

trajectory but it will be a change to switch from close the borrow more to bills that save. if you look at the three times relit to the debt ceiling under president trump for instance, each -- you hear some people say they were clean debt ceiling increase but that's not the case. each one of those increases actually had bills attached to them that made the debt worse. that was our habit under president trump. keep borrowing while you lift the debt ceiling so if we pass anything that saves 3 trillion, that will break the habit of almost all the legislation passed in the last decade which has made the debt worse. just changing her muscle memory to know what it's like to reduce the deficit will be an important symbolic start. the most important thing we can attach to a package they talk about is some kind of task force commission that would look at the underlying long-term issues, social security, medicare, taxes and with a really need to do is also reform the debt ceiling so we don't keep going through this every couple of years.

lisa: which party do you think is more responsible for the lack of progress? >> there is so much fiscal irresponsibility on both sides. the demagogue and on social security and medicare which is something people thought democrats were doing and president trump started doing that and both parties are promising not to touch these programs which are headed toward insolvency. republicans often have tax cuts that are not paid for and there is a surprising amount of democratic support and extending them. democrats have done a good job on paying for their spending recently but when you put so much money -- i shouldn't say, they borrowed for their spending but for some of the bigger bills, they had pay as you go -- when you put that much more into your spending before you fix the fiscal situation, there is no money left to fix the fiscal situation. they tend to find fiscal responsibility when they are the minority party. jonathan: funny that.

>> nobody wants to raise taxes or cut spending that the conversation we have to have to get a handle on this situation which weakens us economically and in terms of national security and their position around the world. jonathan: thank you from the committee of responsible budget. that last point was not lost on anyone. everyone is a deficit hawk until they get into power. tom: she was from the brookings institution and she's been consistently on and it's outside the government purview of the congressional budget office. she's been someone who has garnered instant respect in washington, the understanding the politics including minority policies. jonathan: how many days left this month for congress to be in d.c. to talk this out? lisa: i think it's three days. jonathan: it's very little. lisa: that's what people are concerned about bumping up against that date in the reason kevin mccarthy said it's possible to get a deal by the

end of the week. let's be honest, they never go home. the rank-and-file staff do not have intact home lives for the time they are in office because they work so hard. jonathan: you know who says get back to work? lisa: elon musk. jonathan: blackrock as well, four days a week. tom: in our little world, i detected a change in the last three weeks. there are more people coming in and there's more movement in midtown manhattan. what is the date on this labor day? jonathan: career development happens in teaching moments between team members and it it is accelerated during market moving months where we step up and get into the mix. all of this requires us to be together in the office. kumbaya. lisa: elon musk said it's a moral issue.

you can't have some people coming in and not others. it was basically an order. tom: there was a chart the other day of tech people working from home and ceos working from homes right behind them. it's got to be a team effort. jonathan: a lot of time for people of a lifetime. why would you give that up? we are not going to talk about that. oh look the time is running down. ♪

what do you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

jonathan: target earnings are coming out shortly and walmart tomorrow, another read on the u.s. consumer and tjx reports a little later this morning. that's tom's favorite. the equity market on the s&p 500 is up by 0.3%. yesterday was the biggest one-day drop since may 4 on the s&p 500 and the nasdaq is positive by 0.5%. -- 0.15%. strong data on industrial production and also retail sales looking resilient with a nice

chunky bond deal from pfizer. the 10 year is 35226. getting earnings now from target, second order adjusted -- that's just shy of estimates. what else do you see? lisa: they're full-year adjusted earnings-per-share is $7.75- versus the estimate of eight dollars 29 cents so the lower end of that range. talking about perhaps cutting their full-year profitability by $500 million in looking at the potential issues facing them including not buying back any stock and seeing comparable sales flat. tom: there was a spectacular chart last night showing retail sales but the idea is when you

adjust for inflation were retail sales flat? they were flat, flat, flat. there are important social headlines from target, they saw an increase in theft and a decrease in profitability by $500 million. theft, organized retail crime were drivers. it's something mayor adams is working on a new york city and its nationwide. jonathan: particularly the west coast which is much more pronounced as we've heard from retailers. lisa: they are making significant investments to strategize against this. that's what we've seen in san francisco. jonathan: they will be closing stores there. tom: that's the first round but it's one of the reasons that society needs to do something

about this because it's everywhere. it's coast to coast. i'm sure that will be expanded on on their conference call. jonathan: yesterday was home depot talking about softening sales trends and i we have another one. a different kind of market at target but some similar things. they cannot blame the weather and lumber inflation but clearly, there is a story in there somewhere. lisa: target is also dealt with the competitive angle with walmart. this sets the drumbeat to walmart much greater because you have to wonder what they are seeing is the same crossover. the idea of theft and the fact they highlighted it so prominently will be a really big question in terms of the footprint and where they stay and where they go. jonathan: first quarter comp sales were flat. looking out to the second quarter which is what many people are doing and they are looking at adjusted eps a little

bit shy. the initial move after these numbers drop, negative by 2.5% on target. we will going to tjx numbers in the next hour or so went on to walmart tomorrow. we heard from a ton of fed officials and you will get a ton more. the numbers of fed speakers we've heard so far this week shows something interesting. policymakers are not all on the same page. >> when you have financial stresses like the bank stress and when you have big rate increases, you at least want to take those into account when you are looking at landing the plane. >> we know it takes a while for decisions. >> i want to learn more about what's happening with all these lag effects. i also want to reduce inflation and a more increases are it's necessary, i'm comfortable with that. >> if we voted now, i would

probably vote to hold. >> when conditions are uncertain, you may need to travel more slowly. tom: paul donovan there -- the fed officials there this morning with michael mckee. now we go to paul donovan, chief economist at ubs global wealth management. he has been at ubs for decades and he has studied many different types of inflation. there is a lot of slow-motion talk at amelia island about price change. i know it's not the inflation of the 1960's or 1970's, what kind of inflation is it now? >> i think what we've got at the moment is a quite complex situation. we have had not one continuous inflation episode, we've had three totally different distinct

inflation episodes and we have had bad luck that they come one after another. we have the demand led transitory inflation of 2021, consumer durable goods. that's over and consumer durable goods prices in the states have been an outright deflation since the end of last year. then we had the supply shock inflation with the ukraine war and now, we have moved on. now what we are seeing is in certain sectors you are getting expansion of profit margin which has led to the inflation we have had over the last months. tom: what is that history of how the expansion of profit margin is reversed? the fed officials cannot affect that. how does that reverse? >> fed officials can affect it because what's happening here is essentially companies are passing on costs which is legitimate but then they are using that as a cover story to

convince their customers to also accept a profit margin expansion. there are essentially two ways you can tackle this. you can reduce demand in the economy and any company will find it difficult to raise prices when demand is weak. alternatively, you can make conservatives and politicians aware that this is about margin expansion but not a legitimate cost increase. this is basic margin expansion that can ignite a bit of a consumer rebellion. once consumers stop spending and start saying we are being ripped off, the company will start to change their policy. lisa: how does this relate to airlines and going out to eat when everybody is doing in people still have money to spend? why do you think we haven't seen more of a rebellion at a time when prices are going up double

digits on a year-over-year basis? >> partly it's because in the year of social media, the stories are going viral. you tell a story of the war in ukraine causing wheat prices to go up so we have to raise the price of bread and everyone hears about this and every date you see on your twitter feed or whatever pictures from ukraine and the terrible things that are happening there. he sort of nod your head and say i can see that. economists say what does the price of wheat have to do with the price of bread? it has to do with labor prices, not wheat prices. you might hear the avian flu is causing enormous problems and all of a sudden, the price of eggs are trading at the same price as crack cocaine. all of a sudden, you have to pay more for eggs but actually, there was a chunk of profit margin expansion there, too. the fact that the narrative is so powerful has enabled companies in certain sectors to

expand their margins. but we are starting to see the consumer fight back. like in the u.k. in the last few days and a continental europe and we are starting to see it at least in part in the united states. lisa: this is important at a time of the bank of england has, their heat by saying you guys need to stop spending as much and not demand higher wages. is this mainly a profit margin driven inflation at this point or is it driven by the multifaceted variables people keep talking about that makes it so complicated to fight? >> in the u.k. specifically, we've got energy pricing so there is some lingering from that energy supply shock that came from the ukraine war. that will dissipate very quickly. i would imagine about half roughly of the u.k. inflation can be attributed to margin expansion and the bank of england chief economist has

acknowledged that. perhaps not as articulately as he should have done. what happened last week was the u.k. parliament announced an inquiry into food prices. food price inflation in the u.k.'s about 19% and they looked at profit margins from food producers and supermarkets. the competition commission is investigating competition in the food retail sector and you will never guess what happened this weekend. supermarkets have started to cut prices. it's absolutely remarkable, weird coincidence. jonathan: wonderful to get you on the program. i'm not meant to have favorites but paul donovan is absolutely brilliant. he wasn't exactly diplomatic. he started talking up to the idea that we have to accept these prices. tom: they are still living a keynesian theory that we can

jawbone the poor into acting like responsible citizens. if you did that in the united states, you'd last about 20 minutes. lisa: he subtly said it wasn't perhaps the clearest message. the way he said it, consumers have to start pushing back at some point and not just accept the prices can keep going up as much. it's not necessarily an exogenous event, it's simply they are lining their pockets and that's what you are seeing with expanding profit margins in six quarters. jonathan: i see that on the corner of soho all the time with drug prices. it's organic. free range. tom: lumber is back and eggs are back. is it true that eggs are back to normal pricing? jonathan: they have been less greedy in the last month. tom: that's the smartest

foolishness today. lisa: also the black market for eggs was rough. they had to crackdown. jonathan: let's get back to target and home depot from yesterday. tjx later on and target coming out with numbers but they are still turning positive in the premarket. we will get to that in a moment. coming up, mike shoemaker as we wait for chairman powell to speak later this week. from new york city this morning, good morning, this is bloomberg. lisa: keeping you up-to-date with news and around the world with the first word -- a smaller group of negotiators will head back to the table to hammer out details on the debt limit after president biden and congressional leaders failed to come up with an agreement to avoid a default. biden leads to date for a g7 meeting in japan and hopes to

resume talks when he's back in the country next week. the president and lawmakers say they are hopeful that teams can find a bipartisan middleground. former vice president mike pence is calling for an end to the fed dual mandate. he says the central bank should focus only on fighting inflation and leave jobs creation to congress and the president. he told bloomberg the fed should return to its historic mission of ensuring sound monetary policy. he is considering challenging donald trump for the republican nomination next year. the white house doesn't plan on asking congress for more money for ukraine the rest of the fiscal year. a spokesperson said thanks to bipartisan congressional support, the u.s. has the resources it needs for ukraine for now and that will be reevaluated. it's a major shift for a company that is largely avoiding traditional marketing, the tesla ceo says the electric carmaker will dabble in advertisements at the company's annual shareholder meeting, he said we will try some advertising and see how it

goes. tesla has long relied on word-of-mouth to market its cars. in pro basketball, the san antonio spurs were the winner of the nba's most anticipated lottery drawing in the last two decades. the spurs have won the right to draft french teenage star who is seven feet, four inches on the most highly acclaimed young prospect since lebron james. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent.

>> i think retailers will have a much harder time. i think we are starting to see the consumer pushback and the consumer starting to trade down into companies like walmart and we are going through

concessionary retail. this is a harbinger of things to come. jonathan: the ceiling of retail opinion and looking at home depot yesterday. we are looking at target this morning. it was negative by two or 3% but this morning it's about positive and turning lower again. schrank is an interesting term it's about whether you have fewer items in stock than your inventory records. when we talk about that, we are talking about theft. this is what they had to say about theft now -- it will impact profit by $500 million. that's real money. tom: we rip up the script when we have to and it just it helps to have a guest usually qualified on this. jennifer joins us. she is extremely experienced in

big-box retailing and holds court at intelligence. i will not mince words, i can read the math and you can read the math. pre-pandemic, targus net margin was 3.8 cents on the dollar. let's call it four cents on the dollar. schrank used to be 1.8 cents on the dollar and two cents on the dollar. it has now exploded. is there foundational profit now walking out the door because of crime? >> that's a great set up. it is an actual problem across the retail industry and target is no exception. as economic times get tougher, theft goes up. we have even heard kroger talking about this. there is theft of fresh meat. with target, because they are in that middle range where they have accessible discretionary items but also staples, they

kind of sit in that sweet spot of offering everything customers want and it makes it easier for them to take it out of the store as well. tom: is this an advantage for online? the coast-to-coast phenomena of theft, is that enough to push people to the digital world? >> when you talk about higher end ticket items but if you were talking that your regular run and somebody needs a bottle of shampoo or they need a t-shirt, those type of things probably are not moving as much online as people go back to did stores and they pick things up in person. there is probably more temptation on lower-priced items in terms of theft than what would offset lisa: lisa: sales online. do you expect them to close stores in response? >> i don't think they will close stores. the retailers can do a bunch of

things. there's things like digital monitoring in terms of video, they have scans they can do in terms of goods going out the door so there are a lot of technology solutions but it takes time to deploy them and utilize them to their full capacity. lisa: how much is this the dominant narrative at a time when there is a complicated picture underneath that they are not talking about. how much of the results point to a general weakening in their strategy and structure and sales that goes beyond something that is very much a policy issue? >> target does have greater exposure to discretionary spending than some of the other big-box retailers. there is a concern that the underlying consumer behavior, as it shifts, it has a larger impact on target. as we see consumers shift into more consumables and shift away

from discretionary, because of targets product mix, that naturally has a bigger impact on them. the real question we talk about earnings today is margin. all of this conversation about schrank and a move away from discretionary really comes down to what will happen with margins today. lisa: do you think they will say that margins will keep shrinking not necessarily because of schrank or organized crime but because consumers are pushing back? >> i think the margins will stay under pressure. if you look at consensus, they are calling for a slight expansion and gross margin. that has to do more with internal efficiencies and supply chain versus the actual product mix. if we get a flat margin, i think we will be lucky. if with expanse, that will be positive news. the current environment would suggest that there might be a contraction. lisa: putting together home

depot in the preliminary look at target, what is your expectation for walmart tomorrow and generally for retail sales going forward? >> for walmart, you are talking about a company that has been pulling more customers in. when we look at data and things like retention and bringing consumers back to stores, walmart is performing quite well. people used his shop at walmart every once in a while seem to be coming back more often. walmart has talked about bringing in more people so there may be a more positive story there. tom: of all of these iconic names of american retailing, which is best positioned for the next five or 10 years? more like they have a strategy or a game plan, which company is it? >> if you talk about the

long-term strategy, you have to give walmart a lot of q does. kudos. walmart is bringing in fintech and they are creating a whole environment for consumers whether it's health care and the store experience, online. when you take all of those things to gather, it creates a very powerful growth story over the next few years. jonathan: wonderful to get your perspective, thanks for being with us. the stock is just about negative by 0.6%. this issue is highly political as well. they sate we are facing tuffy can i times in the argan from conservatives is look at what's happening in these democratic cities. these organized groups just going into a store and just cleaning it out and walking out without much resistance at all. tom: we let our audience know

what we are doing. it's a simple thing, i won't eat on the sidewalk. jonathan: in new york? why is that? tom: there's been enough incidents where it isn't worth the stress. lisa: i might push back a little bit. i dined frequently outside when i eat out and i haven't felt a real increase more broadly in violent crimes are crimes in general. retail theft is unique and i think it goes to this organized crime aspect really send people in who just clear off the shelves. they have bags and a literally take things and put it into the bags and then they leave. there are police officers right outside a drugstore near me and i went to one of the police officers and i said what will you do about it? it will take us six hours of our time to process him and released him and released him in 24 hours. it will take us off the street so something that's fundamentally an issue.

it has gotten better i will so there --so i will say that. jonathan: how so? lisa: they are locking up everything. tom: mr. arnaud is at the top of the food chain but i don't think in his model there was a lot door to get into one of his stores 40 years ago. they unlock the door to let you in and they locked the door after you've gone in. you do what you do which is usually just look because it's so expensive and they locked the test unlocked the door to let you out. lisa: jonathan: you are suggesting that for cvs? jonathan: i don't think so. tom: these are sensitive issues and i take your point that there is a partition between an analysis of restaurants and retail. there is a distinction there. what target has done here, this

will reverberate this morning throughout all of retail america. jonathan: looking forward to the conversation on the equity market. your broader equity market on the s&p 500 positive by 0.3%. similar on the nasdaq with not much big moves. more euro weakness, breaking down to a doubt -- to about $1.08. we just had a list of missed data points in factory orders and investor confidence at germany as well. at the same time, the u.s. is showing some resilience. production yesterday, retail sales yesterday and some hawkish voices in the mix from the federal reserve as well. more that still to come. for new york city for our audience worldwide, on crime watch in new york. bramo's tour of new york.

things are getting better. ♪

(jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real.

why not give it a try?

♪ >> those recessionary signals are all over the place. >> we haven't gotten to the point where people are nervous. >> there is slow invasion and -- inflation and fed officials are cautious about that. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa. jonathan: good morning for the

audience worldwide. this is bloomberg surveillance on tv and radio. your equity market with this session -- high of 5.35%. -- up to .3%. and then there was disappointment with home depot yesterday. tom: everyone of the stories is different. i believe walmart is leading the way. particularly after the headlines from target on theft, walmart is important. jonathan: walmart up by a little more than 1%. lisa: they say the not -- softening sales trends -- have strength longer-term. they are looking to move away from discretionary items. yesterday we were talking about how much we see discretionary

items. and that gives us clarity around the stocks. lisa: and how long it takes -- jonathan: and how long it takes from the fed officials and the splintering. lisa: and we also ask how much they have to keep adjusting to fight inflation. tom: they are data dependent but they will not act until the service of inflation is well and place and we are not there yet. jonathan: that place ways on different indicators. tom: absolutely. jonathan: it drives me nuts at the moment we had a guest on the show yesterday with a catchall phrase that doesn't mean anything now with data dependent. lisa: he says it is too soon to

make any call of where i will be in the next meeting. i kept thinking to myself of win is the moment where the evidence will turn. tom: when they get out front of the data set in the monetary politics in theory, but they just don't. jonathan: they did in 2021 for the whole year. tom: there were coming out of the pandemic. jonathan: where they data-dependent been? tom: well it worked out. jonathan: how that work out? tom: they worked out great in theory. [laughter] jonathan: on the 10 year yield 3.5320 this morning. lisa: we get walmart and ross earnings tomorrow. it is interesting to see the gains on target and walmart. is this an issue of discretionary spending and

people trading down in terms of price for walmart. that is what i'm watching. 8:30 a.m. we have a housing market bottoming out, there are signs of a stabilization with mortgages coming down. there isn't enough housing and people are staying where they are living. the prices are not going down as much as people would expect. tom: same thing in britain. there is an article as simple as this orchid rates are low in people are moving out of mortgages. period. jonathan: i couldn't agree more on on the same page. anybody who is locked into a 30 year program they will hang onto that like their life depends on it. that's a greatest trade they ever made. lisa: the willingness to move for a job has gone down to the record of of -- because why would people move in the time of

remote work and mortgage flexibility. president biden will come back early from the g7 meeting and they have to discuss the debt ceiling. jonathan: in the first republic taking a jump on the mortgage 30 years. whoever did that, congratulations. right in. lisa: [laughter] jonathan: absolutely awesome. amy wu silverman no idea if you went to first republic when this happen. but great strategy. you're here with rbc captial markets you said the paddling duck market. what is that? >> that is the market we are in right now we have a cool duck hanging out on the surface and furiously paddling underneath. we do not see it in the vix headline it is very low.

but the demand for volatility going higher is at all-time highs. tom: we speak with an individual in a few weeks, you make it clear in your note that there is a tale the regularity here and everybody is focused on the left tail tell me about the right tale of optimism. >> detail of optimism does not exist. i've been visiting clients in europe, canada, the u.s.. consensus bearishness across the board. it is overwhelmingly so. you get to a point where you have to ask the right tale is underpriced is there a possibility of a rational -- congressional miracle? nobody knows. with the debt ceiling if it comes in easier than we expect the right tale is cheap. lisa: this is going against consensus in a way people have come on the show saying nobody is pricing a debt ceiling debacle where you have a default

-- are you saying it is not true and it is aggressively being christ in the equity world? >> yeah. here is the nuance. the volatility market is saying the tail has to wag the dog first. we have to see action in the equity market before we see action in congress. does that mean default? maybe not. but it will be 2011 type style. if you plot the vix right now against what it looked like in 2011, it was right around here in 2011 and then empty around 50 in august and was sustainably above 30. that is what the bets in the market are saying now. they think will get back. lisa: 11 people in the market are not willing to make a move to sell what they own but they are doing get through derivatives. what is underpriced reality right now? is it the upside surprise or something else?

>> the underpriced reality right now is that the debt ceiling situation gets resolved quicker and easier than we think. that is not what is priced into the market. individuals are prepared for a debacle. if we do not get it it would be interesting to see all the hedges rolling off. that is not priced. jonathan: there's a different idea between idea and execution. you speak to those people in the market. before i get the downdraft in the tension, we are acknowledging that we need to get the crisis before we get the solution or close to it before we get a solution, can you talk about how you execute the trade? do you way to position to capture the upside when you see some of the drama taking place or can you is issue for it now? >> that is the tricky part. it becomes if we get the drawdown and the market move happens, then the up crash

becomes a little more because we've already taken the dow hit -- down hit. the good news is it is inexpensive. the reason vix look so low is not because s&p puts are cheap is because as an calls are cheap. -- s&p calls are cheap. if you own it the right tale and owning snp calls -- s&p calls that is cheap. and there is a resolution and biden flies home and they get their feet on the ground and do something. that would be interesting. tom: every crash in the past is that people could not it coming. such as 1987. what is the biggest mystery to you right now? >> the most fragile part of the market is the problem of breadth.

one thing i looked at that is interesting when you look at the s&p consensus on apple it is negative. you are better off in cash assuming better been expected rate of return on the s&p. the breadth of the market is heavily weighted and fragile. tom: is that because of the risk-free rate? there was no risk-free rate for three years? do you have an as. free -- an accurate risk-free rate for those moving forward? >> we are assuming a risk-free rate right now of what we get on cash right now. i can obviously go down, but if take him last year to this year it goes from 1% to almost 5%. it goes across the board. and your forward-looking price targets are declining. lisa: i want to follow-up on what you said you said it is

fragile because of a narrow depth. how much does that suggest to a downside shock versus an upside shot? or does it matter? it could be a break one way or the other and significant? >> the one thing to watch right now is if the market decides the mega cap tech is not the safe haven you could get industrials ripping and it would not matter. on the s&p level you can either index level trading down because the heavyweights are selling off. that is what is interesting about the market, you can get a term because the recession fears are not as bad as expected but the reality is the market is selling off. jonathan: that action happens beneath the surface. in what case of the sure banks of tech -- sure banks and tech the talk to rated on the s&p. tom: i cannot run a

institutional portfolio because you have to have x number of ideas in the portfolio, there's not enough ideas out there right now. lisa: i think this is fascinating that you could get a better been expected economic shift whether it is the debt ceiling or data. you end up with index level losses because every thing floods out of the narrow range of stocks that have been driving all the gain. tom: we will talk about the scenario coming out of this 2.8% inflation. no one was prepared for that. jonathan: no one told amy about that. lisa: you can tell by her face. [laughter] jonathan: thank you for joining us, amy. everyone is back in the studio. it is nice. lisa: it is so good to see everybody. jonathan: this is part of our sponsorship from blackrock to get back to the office four days a week. there is no blackrock sponsorship. i wish.

we have debt limit negotiations coming up shortly. from new york, this is bloomberg. plex keeping you up-to-date with news from around the world. with the first word i am lisa mateo. president biden and individuals feel that they could reach a deal on the debt limit. it could avoid a catastrophic default. they want to come up within agreement by the time the president returns from asia. the softening sales trends are likely to hurt short-term results. the discount retailer critics the earnings in the fourth quarter will fall short of estimates. it is standing by its profit forecast, target is. in japan the economy expanded faster than expected in the first quarter. it rose at a pace of 1.6%. a easing of pandemic regulations led to an increase of can option and it will likely --

consumption and it will likely keep speculations of an early election and potential policy change. ubs sees a $35 billion grain -- gain as a result of taking over credit suisse. it faces potential regulatory costs for rescuing his former rival. global news -- 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. ♪

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!

>> the nature of the presidency is addressing many critical matters all at once. i am confident we will continue to make progress toward avoiding default. >> the president agreed to

appointing a couple people from his administration to sit down and negotiate the regulations with my team. i found that to be productive we have a lot of work to do in a short amount of time. it is not that difficult to get to an agreement. jonathan: constructive language used by president biden and house speaker kevin mccarthy area concerning the debt ceiling meeting. they will continue every day and maybe through the weekend. and they wait for the president to get back from his chip -- his trip from -- to asia. the g7 meeting. no drama here at the moment up about .4% on the s&p. the euro weaker. yield not doing much. 3.5282. and the profit up a little more than 1% in the early trade. with target. lisa: you see first quarter

performance exceeding and a look out further. that perhaps could be underscoring the positives. normally the shares move on the forward-looking projection. we will dig through and understand what has been priced into this. lisa: -- jonathan: and later biz morning we get earnings from walmart. tom: it will be a big deal it will be fascinating to see how they address it. i am amazed with the headlines on target with theft. every single ceo today is meeting with their teams saying how do we address this could -- address this? jonathan: it's not new it has been going on for a while and you're right it is a problem. tom: it is one of those issues and may be a falls into the politics of the nation as we move into the election of 2024 area right now that is out there somewhere and more immediate is

the debt issue. and the goalpost is that the cliché, i think the -- jonathan: i think you can say that. tom: can we get a partial score on the game yesterday. jonathan: can we not? this is cruel. tom: they move the goalpost yesterday in milan and they are moving the goalpost on the debt ceiling limit. jonathan: the intensity last week i can feel it. tom: what do they do now? jonathan: they will plaintiff after -- favorite the other half of the final around madrid later on this evening. massive game. and i think the overwhelming favor will come out at that time. we will see what happens. let's talk about the debt ceiling with terry haines with evercore. weighing in -- with pangaea

policy weighing in. there still a 40% possibility of default and it gets more stubbornly longer with the impasse as it continues. tom: it is interesting to speak with him and the tapestry of a history of this college. you are a student of this. things get done in the offices and were talking about sam rayburn figuring out his presidency after the loss of fdr. great. what is going on in the hollowed offices right now? -- hallowed offices right now? >> good morning think you for having me on csi midtown and football report. jonathan: [laughter] >> one thing going on is you have staff from the president,

with the debt ceiling they selected the right guy to move things forward. the member team led by -- the leader of louisiana, trying to figure out and put together a framework. i have been hammering for a while that there is no framework and it turned out to be true. coming up with a framework and putting meat on those bones in time for the president come back sunday. and i think what you will get is a model from washington over the next few days as they try to do that. that's number one, number two, i think you will get framework that as a lot of people in washington expect that include some sort of debt ceiling increase or suspension, probably an increase for a period of time, and a general idea of what the spending cuts will be. and then they talk about whatever the details are in time for buying to return.

-- in time for president biden to return. tom: right you have lived this. to the politicians listen to their staff? >> yeah. but if anybody tells you that staff is running the game that is missing the boat. there are two kinds of people in washington that will tell you that staff are all important. one are former staffers and the second are journalists who rely on current former staffers to try to come up with these things. my response to people always was and is, do you have a badge? do you have a voting card? those are the important people. everybody else is not as prominent, and then we have staff working through the next couple days and we need principle but that has not happened yet. lisa: they said it is possible

to get a deal by the end of the week but it is not possible -- not that hard to get an agreement even though they said it was impossible a few days earlier. >> i think both of those days -- both of those things are true because it is not hard to get an agreement if the other side capitulate. but the other side will be on the democrat -- the other part will be on the democrat side, and i think it has already started, that what biden and democrats wanted originally with the debt limit with no conditions is something that will not happen. there will end up being a bipartisan solution that will end up with the spending cap or break. it is up to the white house staff to start breaking that difficult news to a lot of democrats. you will see the democrats get squarely over the next few days.

lisa: we were just speaking with amy wu silverman of rbc capital and she said this could go to the end and breach it and create volatility that will force people to come to the table. is that still the most likely outcome to you? or have you shifted based on what you heard in the rhetoric recently? >> what i always thought, you all put my position out there entirely accurately, i am so 60% that the thing gets done. but i think the most likely scenario is that we come up to the x date and there is some framework for agreement. the principles will still be in the middle of trying to commit the various votes to get there, internationally vote in favor of the thing, and been you get like you get with a lot of spending bills, you get temporary extensions. somebody will say at some point

look, we have enough faith in this we are all hands together we are taking the leap together so let's do the seven day debt ceiling extension. to get us through that. i see that as a much more likely assess -- process for this rolling out. jonathan: thank you for joining us this morning terry haines. north italy, the northern region of italy the former race has been canceled after floods in the country. this stretches to venice as well and we see thousands of evacuations across the north of italy area some people were pushing for this and that is the grand prix canceled. i think the next round is in monaco. tom: yeah there were five dead and many thousands of people have their lives adjusted. to venice, how do you keep the c

out when it misbehaves? they have barriers that i have to say are a 30 year project of success and failure. they are literally activating them today. jonathan: and the logistics effort around the race is huge. i am surprised. tom: it is an intelligent decision. jonathan: i'm surprised it has been canceled. any more information on the flooding we will keep you up to speed. and that we speak with mike schumacher coming up. this is bloomberg. ♪

♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase.

that's why we just boosted speeds for over 20 million xfinity customers, on us. so you get more of the speed you need for day and night streaming. more speed you need when you're work from homeing. and more speed you need as your family keeps growing. check in on your current speed through the xfinity app or upgrade to the speed that's right for you today. we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. (announcer) enough with the calorie counting, a literal ton. carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day

has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo.

jonathan: two hours away from the opening bell let's get you the latest on the essence 500 positive by percent. on the nasdaq positive by .2%. -- on the s&p 500 index positive by .3%. on the nasdaq positive by .2%. on the 10 year 3.5 two 45. a shift tire across the curve with the yields. and they have a debt issue with the likes of pfizer pushing things higher. a little bit of euro we is out

there against the dollar the euro-dollar negative by .2%. we still have had speak, tomorrow we get the likes of jefferson, williams, and powell to round out things on friday. chairman powell has to get hold of the narrative. tom: i strongly agree with that. in his defense, it is not his fault. everyone is talking. i am sorry, he is the one that matters. i believe. jonathan: we hope. should be. tom: i would love to speak with mckee about this. he is too busy. listening to these people. lisa: that is literally his job to listen and also be something to them. tom: what is a value out of 15 presidents talking versus a year ago where there was a collegiate side. they would talk to the chamber and had a rotary meeting in little rock. lisa: we all pay attention and

it gives us a sin of -- sense of which day-to-day gives us a preview. and i want to thank you mike mckee for all you do i just want to say. jonathan: with the role that they have over the economy now in the last seven decade it has become highly financial. they ultimately have more power. this may be controversial to some but i think you can make the argument that in some degree of the economy they have more power over the elected officials in washington. lisa: did you hear the slogan yesterday, it was basically that they should have that. you're not alone in that school of thought. i've been enjoying this. mike mckee thank you for all of your work. i want to give specific names and we talk about retailers with target coming out with shares up

went 2% gain. i was digging through the data and if you take out, i do not want to talk about that yet, but if you take out the other trend you see sales and food and household essentials and beauty remain strong. profits got a boost from lower freight cost, fewer discounts and fewer digital sales. they were able to pass along price increases. tjx is supposed to come out any moment now and we are awaiting those results but the trade is up .5%. walmart is reporting earnings tomorrow. and then we have bank earnings it is good news for western alliance seeing inflows over the past week and pac west up about 9%. is pack west the same as western alliance? they were in hearings yesterday

and they blamed the failure of the other: on their issues. we heard from first republic as well. i'm wondering how much people are drawing a distinction from the banks and wholesale. and the sentiment shift that is moving like the tide. jonathan: deposits are rising which is good. but you can make the case that there may be a story where you may want to take a position in the equity market that is not for me to say. but if you can move in the right direction for the institution that is good. -- good news. lisa: pack west is going up and is this something that they all have to show to get real moves toward that? tom: tjx we were making jokes about it but they are out front on shrink. this is a note before the earnings announcement from tjx that they have been very clear about the issue.

this is a major issue as well. jonathan: we will get the numbers in just a moment. we cannot wait to talk about this. and also the debt limit talk between president biden and mccarthy. mike schumer has to say our economics team is skeptical that a sweeping debt ceiling agreement will be reached over an month to suspend the debt ceiling for the next 1-2 years. and a short-term plant that buys more time for an eventual sweeping agreement by the higher probability outcome in their view. tom: it is american football when you are down three downs. jonathan: is that the kind that comes on just to kick the ball? tom: just to kick the ball. they used have a rule that you could be hit by the people coming in but now that has been -- been protected. jonathan: now it is just kicking the ball. tom: the planter we call it.

jonathan: goalkeepers would find that so easy. tom: the sports reporting continues in this block as well. we have macro at wells fargo from mike schwaber -- mike schumacher you are saying yield will move lower. discuss given the debt ceiling debate in washington. >> the debt ceiling is tiresome but it is not going to weigh quickly in our view read we still look for the market to panic a little bit more. you talk about a market but it is the markets here with treasury bill markets in full panic mode right now. and then you have june hills around the medium five. the enormous gaps there. 10 year treasury bond at the 3.50 area has been there a while. implied volatility currencies

are low. it seems like the treasury market is the only one that is really panicking and the rest are saying it will get worked out. tom: what other your -- yield basis long duration is it five years or 12 years or more. what is long-duration? >> [laughter] we are not going austrian here. let's call it the 10 year. when people want to move the risk globally that is where they go. there is tons of liquidity. 3.52 and change on the 10 year right now. if things go badly and they cannot figure out where the cliff is and go over it maybe you are looking at 3% or something like that. i hope it doesn't happen but it is low cost to ensure the risk. lisa: i think of the paddling duct market that amy silverman was talking about because it is

difficult to get our hands around with the debt ceiling and company office that are coming out. as we get retail sales, i am wondering if you could weigh in on paula donovan's weight that companies are really expanding their profit margins. and they are only starting to push back and out as a driver of inflation. how much of that is what you are seeing as well? >> it's really interesting because we characterize inflation as stubborn globally. country after country canadian data came in hot yesterday, recently australia hiked and surprise the markets, u.k. inflation data is on present -- unpleasant. in the u.s. make a similar argument. inflation has come down but has a come down as quick as central bankers would like to see? no. to your point, we have pricing pressure for companies. what is it mean for markets? it means that they get priced out. maybe the central banks have another hike and there's other

surprises. the idea of another rate cut does not make sense to us. long-duration flies in the face about argument but it is a timing thing. long-duration until the debt ceiling is resolved in then you focus more on inflation. lisa: when you go into the companies with the pricing power, it doesn't matter the other potential issues because they are able to make bank because consumers are not pushing back that much. >> i will leave more of the earnings discussion to my colleague chris harvey, but when you think of a macro perspective there is inflation concern. that is a big takeaway that we are focused on. tom: i look at where we are in may and what it comes down to is we are all baffled in the tight colored range -- tight collar range. how do you know when that's over and what is your experience on that? >> we can see gap certainly

around silicon valley bank we have seen it. the dollar-yen is 136 or something like that and then it went to 1.30. call at 4% or 5% move. that is a big move. something like that happens in a week or two in a liquid market tells me that we have hit a willing point. we are not there yet that i think it could happen. i think the price points are about right. the debt ceiling really goes astray and moves another 5% and moves the dollar that is a kind of thing i look at. jonathan: we got the results from tjx. let's look at them. mike schumacher from wells fargo securities thank you. tjx first quarter performance sales come in at 3% positive. estimated 3.1%. and a full year outlook for

sales and eps as well. let's do sales first they are at 2% positive-3% positive and that as a -- estimate was re-.1% positive. and then they had a range -- details on margins as well. lisa: the actual sales on comparable store basis are going down. they are able to pass along the price increases and somewhat the profit margins that are expanding and with input prices that are coming down in certain areas, they can capture the difference. basically companies keep in prayer -- improving prices based on their base cost. that is why they can support the earnings-per-share even if the sales volume falls more. jonathan: initial reaction of the sales when the premarket we are down 1.9%. tom: they are all the same.

no they are not. the net market -- net margin and the shrink are different than pre-pandemic. we make jokes about it but this is a profit machine for decades. double the net margin. they are working in 2019 with the 69% net arjun double -- with a 6.9% margin double. jonathan: walmart still in front of us. the numbers come out tomorrow. 8:30 eastern time we catch up with mike kaplan -- mike ga pen here in a few moments. and then -- tom: she works from home six days a week. jonathan: i think she is here today. from new york. this is bloomberg. >> now keeping you up-to-date with news from around the world. here is the first word. i am lisa mateo. a small group of negotiators

will head back to the table to discuss details on the debt limit after president biden and congressional leaders failed to come up with an -- avoiding default. they hope to resume the talks next week when the president comes back. the president and lawmakers say they are hope will that they can find a bipartisan middle ground. former vice president mike pence is calling for an end to the fed's dual mandate. he says the central banks should vote -- focus on inflation and leave job creation to the president. and they should return to their mission of ensuring sound policy. he is considering challenging donald trump for the republican nomination next year. and bailey says he is unwavering to the fed's 2% inflation market. but he warns higher food prices and a tight labor market could cost a -- because a cost-of-living crunch to persist.

he spoke at the british chamber of commerce. in a major shift for the country that has avoided traditional marketing, tesla ceo you elon musk says electric car will dabble in advertisement. the company's annual shareholder meeting they said they will try advertising on see how it goes. tesla has relied on word-of-mouth to market its cars. 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. ♪

go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson. >> i promised to cooperate with leaders -- >> are you planning to return a single nickel to what you cost? >> i know there will be a review of compensation. >> i will take that as a no.

you're planning to return how much? none. >> the answer is we are not willing to do so. no. jonathan: another productive meeting and capitol hill. what are you make of this? tom: it is rare to have politicians and have a domain knowledge and wheelhouse ability in a certain place. this is where senator warren is most comfortable in the university of houston. she was truly definitive of bankruptcy law in the study of is this collapse in america. when she opens her mouth on this, it is like paul krugman on international trade. take note. jonathan: and that was a youtube clip for the next campaign -- campaign, wasn't it? how do you make these hearings actually productive? tom: we call the united kingdom. that is the grandstand -- grand

statement. jonathan: is there anything more than grandstanding? lisa: there are ongoing hearings in the house. i assume that it is grandstanding that ask real shift of policy that could be discussed better more controversial of how to create a better landscape for regional:. -- regional banks jonathan: blackrock had vista say get back to the office four days a week. 11 happy talk from corporate executives on this. the redevelopment happens in teaching moments from -- to accelerate market moving moments when we step up and get in the mix. this requires us to be together in the office. tom: the team effort to get the three of us back in the building in the heart of the pandemic was really something. it was really something, this involved 40 people top to bottom and serious worry about the illness.

we lived in real time. now everybody is climbing on board and it was a language derby yesterday with the call and pushes to come back, the orders to come back and work in the office. senior correspondent should nelly bostick joins us right -- and ali bostick -- sonali basak joins us. >> they want people back. jonathan: we see days -- this in a range of financial institutions. what is the struggle? >> i do not understand it so there are companies laying people off. there is a frustration of going back to the office and not having the flexibility you had before but you also have a lot of anxiety because it is not like business is as booming as it was a couple years ago.

when you look at the bank, you have a lot of private equity firms putting money at work and they aspect valuations to come down more to do so. with a conversation that i have with the vista president he said he wants to get three more takeovers done for the end of the year. they are buying public companies. you need money to get that done and people to be at work to get that done. lisa: how much is the change in rhetoric what jane fraser was talking about. she was not subtle about it and it did not work in it a lot of people were not that productive when they were working from home. they would bring them in for retraining or whatever euphemism she put out there. the field right now in the c-suite across wall street, is this the field? jonathan: -- these feel? >> yeah, i think they put a lot of work into help to make people feel together in zoom. they said at blackrock you can

work from home two weeks of the year. that is standard for a lot of companies such as citigroup. jonathan: -- tom: this get solved instantly when there is a two-tier pay structure to get people come into the office? >> is and it just as simple as being in front of your bosses? tom: over the one-year, two-year, five year cycle -- i think we are heading toward a -- if you work from home, great hugh can work from home and make less money. >> the people that are coming in are in front of their bosses they are in early and they are late. there is another dynamic that travel is coming back. people are in the office. i was with somebody yesterday who had been in i've countries in three-weeks. people are very active right now.

again, that is a sign of things coming back and be banks and asset managers pushing things back when it is so muted. tom: that is the romance out of it. flying to five countries, forget about it. what is the staff doing? i am fascinated if the staff at blacklock -- blackrock, goldman, or others if they will come back. >> and i think there has been a discussion for a long time about a move to miami. i think a lot of people are moving back. a lot of companies and headquarters are still in that. that will be an interesting tension. jonathan: i think the language is important. we keep saying get back to work but what we need to say is get back to the office. there are a lot of people saying i work fine at home and i am doing well, i can get things done. i do not need to come in and get

disrupted and struggled to find a dance -- a desk at some financial institutions. >> that is a frustrating situation. how telling desks. -- hotel-ing desks. it is very frustrating. people are asking for it to go to different desks. tom: sharing desks? really? >> that is a thing now. tom: i had a giant norma's desk and i came in -- i had a huge desk and i came in one weekend and it had shrunk down. they got me a tiny desk. >> people have homes in different states and that is the difficulty in bringing people back. lisa: it is hard to get our hands around this because there is a difference in the boss perception of how productive people are when they work from home and people's perception of how productive they are.

executives do not trust they do anything and individuals say they are not seen and heard. how much is this becoming more of an issue because banks are looking to cut head that is not an uneven demand and supply issue in the labor market? >> people need to play -- pay close attention to that because they have mass headcount reduction last year from the likes of goldman sachs and other banks and you see a second round of job cuts occurring. that continues if the economy remains weak and the environment is weak, fundraising is really tough for a lot of firms right now. i think it is really tough out there and until that turns around there is no evidence that things would get better. young people as well, they have different jobs than they used to have. if you are an m&a banker at a bank, they may be moved to n go

structure firm. you may not have learned that during an internship at your same bank and you need to be there in front of a boss to learn that. jonathan: regardless of what i think about whether you should be able to work at home or the office, if you want to progress, i think to get the edge be in the office in of management. that makes sense doesn't it? lisa: how would you elon musk say it yesterday? people building and servicing the cars, fixing houses, making the food, it is messed up to assume that they have to go to work and you do not. it is not a productivity thing and i -- i think it is morally wrong. that's what he said as well. jonathan: assuming some desk jobs are or high-paying drops -- jobs and sometimes they are not. we are having a conversation about high paid banking jobs.

they create $150,000 a year. lisa: what about childcare as well? >> that is something the banks have been doing that is new. they have been doing things that are so often buying things from local restaurants to make sure the look economy is still supporting the needs of the staff that they are trying to bring back to the city. jonathan: my favorite story of all of this in the pandemic, there were two, i like the report of people bumping into others in the hamptons. it is like set the example here. and i also love the story of the first year graduate who had a powerpoint presentation and talk about turning -- some of the institutions during the pandemic he had a powerpoint presentation of what needs to change and they took it on or area and they made changes. here we are two years later i dare you to make that powerpoint presentation to goldman now and see how it works out. thank you and we love it as always. in fact ended to me.

[laughter] -- in fact send it to me. [laughter] good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

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

>> the economy has proven to be resilient. >> central banks around the globe trying to fight inflation. >> is not going to make a big difference to the economy if the fed hikes in june or waits in

june and hike later on. >> we are seeing the lags lay out. inflation decelerate. >> recession is still unavoidable. >> this is "bloomberg surveillance.". tom: good morning per year -- good morning, everyone. that was a great debate there. i hope he saw that in the last hour. the pandemic is over. jonathan: the keyword is work. lisa: can i take issue with the open? they were working from home at 6 a.m. to join us. thank you for joining our show. jonathan: you are fired up this morning. tom: the pandemic is over. we have a lot of people coming in.

we are still talking earnings season, its impact on the fed. is there an effect in economics of what we are seeing from retail, which 70% of the american pie? jonathan: interesting is how few members wanted to commit to a pause. only one who's come out especially was goolsbee of chicago who said it was a close call for him in may but for others you might expect hawkish tone. williams talking about wait and see approach. we are done a lot, let's see what happens. thomas barkan turned around and said we can wait and see but also inflation is too high if we need to do more, we do more. tom: january was buoyant across every think we talk about. february less oriented. truly your march -- trendier march. i do not have a handle on what gdp looks like. lisa: it is not just an options,

derivatives, trade is with respect to sectors in the economy. yes some accelerating. you have some decelerating and then it shifts and the end is hard to get a handle on if inflation can go down in a material way if you get cycles repeating independent of one another. tom: let the president of united states saying the pacific rim south japan to papua new guinea to australia is off of the market. it is about the debt ceiling. that is trying to slow down tension and i think it is interesting to complete the two stories together. jonathan: socgen talked about this morning there were starting to see the currency shift and if that is the direction of travel, it it bring life into the u.s. dollar? we are seeing a little bit of that last week against the euro. we came to the week and it was all bull on europem rest of the world,

china driving that up in the reopening. tom: dollar-yen rounded up 71 per dollar. jonathan: s&p 500 positive. equity futures slightly positive. there a euro weakness's. dollar strength on the screen. euro-dollar 1.082 seven. we're negative on the currency pair by 0.32%. tom: alicia levine joins us with mathematical and quantitative finance ability around the stock market. link your two worlds together. the dynamics your cse in quantitative financing over to what tjx is doing. put the two worlds together. alicia: the chaos is that not just monetary policy having long invariable lags but fiscal as

well. the message from earnings season is there still inflation in the system because ultimately we think about the big box stores, what is happening, the gross revenue is lower reflecting lower pricing possibilities and goes inflation rolling over altogether but still inflation in the system on services and that is what you are seeing in earnings. not exactly surprising. we have other big box this week's breed of there is food involved, food has double-digit inflation and i'll make a difference on the top line. we are in watch and wait. the market is waiting. the bond market is saying recession. deputy market, even though -- equity market driven by seven stocks which are defensive in nature. cyclicals are weak and under the surface is week. even though i need index of looks like the market take soft landing, the actions defensive.

jonathan: can you make the argument equity market pricing a slowdown in u.s. economy? alicia: what is working in the market is sectors that should do well in a slowdown. looks like equity market starting to price it in but the message has been away from the bond market and the data in the real economy has been better-than-expected. the slow walk to the recession is not a slow crawl. however, i find it hard to believe the fed hikes 500 basis points in 13-14 months and we do not get impact on the credit side, contraction in credit down the road. lisa: the idea here economic data coming out better-than-expected and people are defensively positioned, could you see a scenario where people actually have a rosier outlook revised up their ideas for gdp and growth and that leads to a selloff on the index

because of a downgrade in the big tech valuations? alicia: absolutely. when you get a divergence with top seven names outperforming and the other 400 -- 490 three underperforming in a huge way, typically that gaps closes. either large-cap lower or other stocks move higher. i expect lower because -- some of these stocks were cheap come into the ear. no longer, the stocks are up. that is no longer an easy place to put capital because they sold off so much. lisa: how significantly could you see a down job in big tech? alicia: is going to be centered on what is happening in real economy. the extent cyclicals look more attractive on very interesting on the dollar, that discussion

is interesting, but the dollar weakness has helped a lot of these companies. the dollar stabilizes or re-strengthen's, that is where you see the head. cannot put a number on it but i think the gap is going to close. going back to the dollar, the move in the dollar lower it happens mostly the fourth quarter of last year. the dollar is only down 1% this year year to date. that is what it is stabilizing global equities, the weakness in the dollar. china is a little bit weaker. u.s. is a little bit stronger. the fed conversation is fascinating because what it means is they had to act like june is alive but if june is live. the assumption is june is not live. that is because june is live. tom: i will say they are overcome by events. like the pacific rim.

want to go to math. you have risk, uncertainty, ambiguity. is this a jump condition we are in of interest rate moves? we were uncertain. or is a discontinuous function where we are in control of ourselves right now? alicia: i do not think anyone is in control. everybody isn't happy, bears and bulls. it is not make sense. there are people in the market is that it is most confounding market. tom: can you invest in a risk away or reinvesting uncertainty? alicia: investing amid uncertainty with the market stronger than anyone thought coming into the year, our portfolios are neutral on equities, neutral and fixed income, which is higher numeral reward last year -- higher than

what we were last year when we were underweight. if this with the s&p hanging up to 4100 it is not great for adding the risk today. but that does not meet you and the ear higher. we think we end the year more or less here even with difficult moments in months to come. jonathan: remember the consensus for the year ahead? and we said way until march and you have outlook in march, but i missed the bank failures if you knew the makes -- the banks are going to fail, it probably wouldn't miss the equity market rally. lisa: you can say there was a dip except seven stocks may be the seven stocks ripped by the dip happens in second half but ripped underneath it. it is why it is so confusing trying to make sense of something that cannot be generalized.

tom: we ended the year here so that means we can work from home take the rest of the year off. jonathan: that is appropriate conclusion to that conversation. thank you. it is good to see more and more people in person this morning. told to get into the office and go to the studio. tom: are you working from office, home, airplanes? alicia: i work from airplane and office. lisa: what she said about what the fed about hiking in june they actually do and to raise and it causes a massive increase in dollar valuation is everything else and that upends all of the trades. tom: i cannot emphasize how that is one think people are not looking for. jonathan: citi just publish activity data for april

including solid retail sales and industrial production suggest growth accelerates in q2 rather than slow as the fed intends. also inconsistent with the slow down housing activity bouncing back from low levels. this is alicia's point going into june. they are trying to make it live. but maybe it is live. up next, libby cantrill of pimco on the debt ceiling. this is bloomberg. lisa: keeping you up-to-date with news around the world. with the first word, i am lisa mateo. president biden and house speaker kevin mccarthy are expressing cautious optimism to reach a deal on raising the debt limit. that whatever essentially catastrophic default. negotiators want to come up with a framework agreement by the

time the president returns from a short trip to asia. in japan, economy expanded at a faster rate than expected. a further using a pandemic regulations led to increase in consumption. that wiki speculation simmering over a possible early election and potential central bank policy change. target says softening sales trends are likely to earn is short-term results. predicts earnings in the current quarter will fall short of estimates. target is standing by its annual profit forecast. sees consumers buying fewer discretionary goods. ubs sees an estimated 34.8 billion dollar gain as a result of his emergency takeover of credit suisse. still the swiss a bank or as a basis billions in potential legal and regulatory costs for

the rescue of his former rival. ubs stands to benefit the combined firms negative goodwill. broadcom is trying to get european regulators to approve is $61 billion takeover of cloud computing company. all comments offered antitrust commitments in an effort to alleviate concerns about the deal. meanwhile eu has extended its deadline to roll on the transaction of july 17. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> the nature of the presidency is addressing many of the critical matters all at once so i'm confident we're going to continue to make progress to avoiding default. >> the president agreed to

people for his administration to negotiate with my team and i found that to be productive. but we have a lot of work to do in a short amount of time. >> is not that difficult to get to an agreement. jonathan: constructive language used by the president and house speaker mccarthy. those talk to be ongoing at staff level for the rest of the week. maybe there is a framework for agreement. tom: for those not to speed on this, there has been a shift. it is more conducive tone. jonathan: a shift in language. get into an agreement between the president and others is another thing. tom: we are not talk about this but is the x date nudging closer because of the tax receive dynamic.

jonathan: this is how i frame it. treasury secretary said early june. you imagine she was being conservative and may be having a couple of weeks in cushion bank into the projection. even with that cushion, i think people are putting things forward based on the tax receipts. i think that is the right way of looking at it. tom: i thought maybe it has something to do with -- jonathan: x-files. good time. different decade. tom: the markets is not giving us anything. 407. jonathan: stock is up 0.7%. futures positive. no real drama just status quo. we have been talking about this with amy wu silverman. prefer a swan, slightly more elegant.

nothing happening and aggressively paddling beneath the surface. tom: right now, to drive us forward in washington, if i were to say all of this come over to be comments of the market but when libby cantrill writes about peril clutching in washington, pay attention. i love how you do that. pearl clutching in washington. libby: i think there's been quite a lot of hysteria regarding the debt ceiling. our view into your earlier conversation, the mood music is positive. we would argue it has been positive for quite a while. the contours of a deal or absolutely there. the details need to be filled in. the fact that they have young, these people are serious adults in the room.

they're going to be the president's proxy while he's in japan. i would not be surprised if we see a deal by this weekend. i think a deal -- i do not think it is necessarily going to require equity market. jonathan: that seems to be the conclusion of so many people on wall street. why taking a slightly different? libby: i have been looking at the political incentives and nobody has clinical incentive to get that close to default. if you look at speak mccarthy hand he does not have a very strong hand going into negotiations. he only has a four seat majority many he can only lose five members in order to stay along with the deal. very importantly here, president biden has been not open to negotiations. if you look at the clinical landscape here, the bottom line

is that the deal will get done. in advance of the x date. and at the x date israel here. secretary yellen has corroborated her earlier estimate of june 1. tax receipts are week because of disaster zone dynamic, particularly in california where a lot of folks are not having to file their taxes. that's good to be delayed receipts to the government. we think the date has to be taken serious. this all along the way of saying despite the pearl clutching, as one staffer said passing the debt ceiling is like passing a kidney stone, we all know it will pass, it is just a question of how difficult it will be. sorry for the analogy. that is our operating assumption. lisa: one of the reasons why a

low speaking with you it's because you have an on capitol hill. understand political wrangling that goes into getting this done. what you think contours of this deal look like? libby: president biden will characterize this as a budget deal associated with fiscal 2024 spending where a speaker mccarthy will characterize this as a debt ceiling deal and say is a distinction without a difference. we are expecting there will be -- unspent covid money -- duration of unspent covid money that house for my deficit perspective. -- helps from a deficit perspective. importantly some sort of spending cap. this is going to be ready devil is in the details because if you remember 2011, there was a budget control act related to the debt ceiling, and the market

sold off because they were expecting big spending cuts. we do not expect big spending cuts to get associated with the deal but we can see slower growth of spending and that could help with the deficit forecast. lisa: at the market is expecting volatility and have to respond eventually and not expecting a deal, do you expect market volatility to do you see this weekend? libby: we have to talk about which market were talking about. fixed income market has reacted. there has been a dislocation in treasury bill market, a big risk aversion around the bills expired close to the date. most recently in the yields. we are seeing some dislocation in fixed income market but the market most people refer to come equity market, we have not seen that. it is also bit of a relief rally

even from here. the anxiety and uncertainty has been priced in to a small extent and the deal sooner than folks expect, i think you can see a bit of a relief. tom: the idea 5% general statement on short term paper, do you guys believe we are coming in, yields will come in and benefit washington as well were 5% becomes 3.8%? libby: our view in the fed and the economy is that the threshold for the fed to cut is going to be high. we need the fed is going to have to see sustained economic slowdown before they start cutting. we disagree a bit with where the market pricing is. co jamie dimon said today. we are expecting mild slow at the end of this year at which

point we think the fed will likely respond but again the threshold for them to get around five is going to be quite high. they're going to see sustained economic slowdown. a couple of bad job numbers as well. jonathan: when was the last time we got to do this, sit around the table? libby: it is nice. jonathan: i have said it a few times this morning. it is happening. lisa: people getting back to the office there? jonathan: never left. libby: that is correct. jonathan: coming out, i catch up with matthew maskin saira malik we talk about retail happening with target and home depot. then peter joins us at 9:30 eastern time around the opening bell later this morning. tom: i think it is a week to

reframe. there's a lot going on. i would allude back -- you get jay polaski on here. i want to know what jay plus get things about specific rim. it is a mystery to me. jonathan: maybe the cracks in the data in europe, in china. but i suppose it mohamed el-erian yesterday. he can come back if he wants to. tom: -- some get the mic, turn it off. jonathan: thank you. this is bloomberg. ♪

tom: "bloomberg surveillance." jon ferro in preparation for the 9:00 era. we have not moved in weeks. lisa: pettit linked ducts. -- peddling ducks. people are coming around to the feeling that the banking crisis is almost over and the an upside surprise in economic data is what people have to be focused on the. tom: looking at the economic data right now. michael mckee reporting from a fed meeting where everyone spoke. good morning. michael: we have good news.

it an upside surprise in housing starts up to .2% after falling 20% in march -- .8% in march. voting permits down 1.5% but better than negative 8.8% we had a scene. one of the things being discuss in allen's a fed conference was whether the housing industry was taking it on the chin. interest rates have gone up the rates have gone up by the general consensus is fed officials buildings in their districts telling them they do not have a problem because there's so much demand for housing they can put holes in the ground. tom: you are traveling today. what was a lesson you learned from the 222 speakers? michael: the important thing for wall street to realize there is not a consensus yet for they do

in june. there was a feeling a pulse was -- a pause was baked in. they have been expecting an appointment to go up and have not done it that. they want to wait to decide what they're going to do in june. tom: thank you so much. safe travels and terrific coverage. these are important conferences. all the different regional banks have these conferences and frankly, all accommodative were it was easy to accommodate to somewhat restricted, where it was less easy, and now it is excruciating to go comment the comment from fed officials. lisa: even within their for the

sake market we just get a read on how people are -- even with the retail market we set a read on people are starting to build and potential risk to some of the regional banks. incredibly difficult to get our overarching narrative. tom: that narrative always happens at resort like amelia island running about the last resort, michael gapen joins us now. i like the idea of the last resort. they really do not want to cut rates. what is history tell us about when they do cut rates? michael: history will tell you the housing sector will bounce back quickly. all the sectors in trouble recently will bounce back struggling. history tells you the fed is cutting rates for a reason. they're either achieving their goals or a stronger downturn in the economy and policy shifting

towards helping activity recovered. when the fed cuts there is a reason for them to be cutting. lisa: they keep pushing back on market expectations for cuts. saying the fed is underestimating how much the inflation is out there they need to keep hiking even in june. you see that as increasing likelihood rates and the data we have been getting? michael: yes. there's a lot of hurdles we need to get over to make that decision but i will still put a hike in june or july. the data on that is still strong. the fed hasn't outputted bias -- the fed has an upward bias. june is a pause at the moment but i think you can get to a hike in june. you can get the one in july if you felt you needed to. lisa: as tom described the

market as excruciating, he is not wrong to per home goods seeing a downdraft. people are not buying a home goods as much. the get make up, food -- if you look at make up, food, it continues to blossom and companies pass along price increases. key role in recession different industries prolong inflation we have seen far beyond people are expected? michael: yes. we know that that is not out there saying we need to engineer a recession to break the back of inflation. they're saying we need to lean against the wind. it is not all up to us. where trying to put policy in a modestly restrictive stance. you can get rolling slowdown across certain parts of the economy were any downturn will look more u-shaped than a v-shaped. get a wide dispersion in the data were some spending lodging looks like it is pete.

airlines are a bit makes -- mix. travel abroad is still strong. reopening phase, normalization of spending makes the data look at odds at certain points in times. it is possible you see that continue. tom: you study the modern age started in 1947 and one of the series we have on the bloomberg was the all in augmented unemployment rate which is 6.3%. is a gloomier statistic and he speaks a lot to the tension of unemployment. where to .2 standard deviations so fully employed on that statistic going back 60 years. it is a fully employed america. statistically, where fully employed. what are we talking about cutting interest rates? michael: we are not. i do not think the fed is

either. you're in a situation where some land this right and you get a higher for longer outlook but in general the need or the desire for cuts sooner than later is misplace. there are pass to get the cuts but i'm not sure they're close to baseline as people are thinking. tom: what is so important about the identity of a pandemic -- oddity of the pandemic is people with huge credibility looking at quote other factors involved and we want jerome powell to fix our other factors involved and he does not have the tools to do that. lisa: there's that issue and the other factors involved when it comes to pricing in markets for rate cuts which include most people saying probably they're not going to cut rates this year but if there is a crisis you could get dramatic cuts. is the economy you're watching

with labor market as high as it is with the feeling that consumers are continuing to be able to spend less vulnerable to the shocks that people have been worried about all year long? michael: the economy is showing great resilience. there are spillover from debt limit's. there are concerns about regional bank funding models. those could propagate at a healthy -- unhealthy and hurt the economy. that is unlikely. the data shows that. to your point, i would like to affirm or of what you said, the fed is not here to fix anybody's problems. fed hiking cycle's call pain in certain parts of the economy. you need that in order to bring inflation down. in some ways we are bipolar. what the fed to raise rates to

moderate activity to bring inflation down. we know it is good for the economy in long run. but when the pain of that shows up we want the fed to run to the rescue and fix our own individual market. that is not what the fed is therefore. lisa: want to bring something to you by the mike lee -- immaculate disinflation. people are perhaps fling themselves because there was immaculate inflation so there could be medically disinflation. -- immaculate disinflation. what would you say to that? michael: as a part of the story. the immaculate disinflation can come from cleaning up the supply shocks and resumption of normal supply. that should help bring inflation down on his own but the labor market is as tight as it is been in my lifetime. the labor market has cooled down, it is cool down from exceptionally hot to as tight as

it was in the past the prior cycle highs. you are not -- it is unlikely to get immaculate disinflation when you're trying to reverse that. tom: i want you to look at the global purview of bank of america. ics ultimate. the turkish election -- i see argentina. you have done this as well, this morning we have ecuador dissolving their parliament. there seems to be the early 1998 tension out of their. little butterflies flapping. do you sense that at bank of america? michael: not yet. the election in thailand. there is a series of elections where there has been a some

surprises and still some momentum in populist candidates. the message there is still one of potential change. an unsettled political environment, we have some of that here at home. i would not say we are that moment yet but there are undertones where some patterns today repeat what we seen in the past. tom: jerome powell is central banker to the world? michael: whether he likes it or not, yes. tom: the actions we are looking at in united states, including the death valley were going through. -- debt ballet we are going through. lisa: how does it disrupt the road and economic policies? tom: they said he cannot talk the debt ceiling. michael: apparently it is like passing a kidney stone.

[laughter] that was a great comment. tom: we've don't law and order. we have done sports shows and i were doing dr.. -- now we are doing doctor. i'm not going to quote the ecuador currency. argentinian peso 231, a point of international tension. vicks comes in 17.67. this is "bloomberg surveillance" with -- good morning. ♪ lisa: keeping you up-to-date with news around the world. with the first word, i am lisa mateo. a smaller group of negotiators will head back to the table to hammer out details on the debt limit. as an inviting and congressional leaders fail to come up with an agreement. president biden leaves today for a group meeting in japan and

hopes to resume talks when he is back in the country next week. house speaker kevin mccarthy told cnbc he is confident there will be no default on the debt. for vice president mike pence calling for an end to the fed dual mandate. he says central bank should focus only on fighting inflation and leave the job creation to congress and the president. he told bloomberg the fed should return to his historic mission of ensuring sound monetary policy. he is considering challenging donald trump for the republican nomination next year. bank of england governor and jubail he says he is unwavering in his commitment to u.k.'s -- andrew bailey says he is unwavering in his commitment to u.k.'s target. he spoke at the global annual conference of the british chambers of commerce. india lodging to billion-dollar plan to attract makers of laptops and other hardware.

prime minister capitalizing on the early success of apple's iphone assembly operation in india. tech companies looking to expand supply chains beyond china. in pro basketball san antonio was the winner of the nba's most anticipated lottery drawing in the last two decades. that want the right to draft french teenage star victor. he 7'4" and the most highly acclaimed young prospect since lebron james. global news powered by more than 2700 journalists and analysts in over 120 countries. this is blue. -- this is bloomberg. ♪

if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity. [ cellphone vibrates ] you'll get proactive alerts for market events before they happen... and insights on every buy and sell decision. with zero-commission online u.s. stock and etf trades.

for smarter trading decisions, get decision tech from fidelity. >> are promised to cooperate with regulators -- i promised to cooperate with regulators. >> are you promising to return a single night going? i take that

as a no. you're planning to return how much? the answer is none. tom: signature bank at -- with senator warren as the guest questionnaire. this is one area where she has massive credibility. lisa: she staged drama that will play on repeat for a lot of people. tom: christopher marinac join us. it is honored to have you on and thank you for your coverage through the crisis. we are all watching. it is theater. you know these people. let's talk about mr. shea at chinext -- signature bank. are you surprised they went down the tubes? christopher: i was surprised because i think they had enough

liquidity to stay off the first couple of days. it was a challenge to understand how many more deposits behind that monday, tuesday of march. the regulators had little patience actors seeing silicon valley failed the previous friday. signature it was a surprise but there may have been more depositors lined up behind the scenes. tom: i do not want to dwell on this because i think it is theater and it is not the purpose of the show but there is a large part of the america suggests senator from commonwealth of massachusetts onto something that the suits and ties should return the bonuses. should they? christopher: in my opinion, the bonuses were made in 2022 and 2021 from normal business. there could be penalty for the lack of contingency planning for liquidity.

banks are levered 12-1 they do not by there was see deposits walk out at the same time. that was a mistake made. at the end of the day, it was a mistake on many fronts, including the regulators. that incurs blames to go around everywhere. lisa: i'm looking at western alliance of more than 11% in premarket as people get a sense deposits are coming in the door. pacwest shares also up about 11%. do you think this is right that deposit strength in one bank suggests stabilization in the entire regime? christopher: i think that is accurate. we have seen more stable deposit flows from weekly fed data throughout this saga since march. deposits are down 4.5% year to date.

the reality is we are normalizing in deposits and funding in the industry. i do not see -- it is only a short-term indicator that money market funds are often deposits are down -- up and deposits are down. i think there is opportunity for deposits that left pacwest and western alliance the come back. i think the market is trying to ascertain that and i think there are positive days ahead for those companies. lisa: let's say things have stabilized. talk about the massive distortion that occurred when you see deposits, trillions of dollars flood into the system at once. there's a question of where the deposits were deployed. was it commercial real estate? was it loans the company that might be faltering at this point? how much, even if there is stabilization is still big problem on the books at the regional banks? christopher: we sought loans grow little in 2020 and 2021.

it was only 2022 long started to growth in mortgages and commercial real estate. i think it is been muted in the pace of growth in the past year. we have seen over all up 17% during this timeframe and to use deposits. that compares to long-term average since the early 70's of 82%. we were around 76 prior to the pandemic. where still coming back. -- we are still coming back. tom: you have a double or more than double on some of the selected banks. they are going to go into this year, next year, and the following year and meyer --

smaller institutions. describe how they share price is a double off of the bank they'll be smaller at the end was in 2019. christopher: it starts at tangible book value per unit -- book value. pacwest trading at a woeful price a book today. we think it is going to rise. that ratio comes off of 25% level and heads towards 50% visually 60%. western allies slightly higher. that is why we think they can come back as well. this mirrors 2009 when you had to stocks that are trading less than 50% then end up raising capital at a higher level and they traded at much higher at the end of 2009. we have. seen this movie before the volatility is very high

today but it comes -- works both ways and we think and continue to put one foot in front of the other, having profitable second quarter. it is not going to result itself all the way because the fed is not -- lowered rates yet. tom: are they going to be smaller institutions? christopher: pacwest and western alliance will shrink a somewhat because deposits were lower than at the end of march. for the rest of the banks, i think you see more flat to growing in 1%. if we have a recession in gdp contracts, i think you will see a little bit of contraction but it is modest. liquidity in the industry is high and is better today than it was march. the banks are in a good despond. there are still credit demand.

inflation tends to be good for business because customers need to borrow more as they have a higher price level for goods and services. lisa: i do wonder, if you put blames what regulators -- blames on regulators they did not show stress test. you see this delineation between u.s. banks, region banks, midsize banks move away from some of the others and leave the others in a bit more world of hurt. christopher: i disagree with that because i think there is opportunities across the spectrum from community banks that serve the customers well and a key piece of the puzzle for -- you should boot up to midsize and larger companies that can do the same. all of the banks have good capital and good reserve. if you use more as you go through this cycle. -- you can use more as you go

through this cycle. i think i could be done for a position of strength. it is not the be forced on the company's. you're still going to see them land and expand. there would be ultraconservative. there's no question there is a credit crash today. i think i'll be a measured approach -- there will be a measured approach. tom: thank you so much and for the many appearances 30 crisis. -- through the crisis. lisa: people seem to be less interested in the banks which i guess is a good sign. the debt ceiling discussion today i thought was really interesting that perhaps the biggest risk is that we do get some sort of deal by the weekend and that seems like it is more possible based on the optimistic language we've heard. tom: in pacwest closing early

yesterday four dollars 57 sent. -- four dollars 57 sent. i do agree that this odd week with so many different trends, the debt ceiling trend on this wednesday is different than it was a monday. lisa: the rito story is perhaps disappointing on the headline level but underneath -- rito story is perhaps disappointing on the headline level but underneath -- not again not a lot of clarity but still resilience. tom: claims tomorrow for all of us and on friday we have annmarie hordern reporting on the president travels in japan. futures up 17. at the 10:00 hour a former vice chairman of the federal reserve system richard derrida. this is bloomberg. good morning. ♪

bridgett is here.

she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small, and once-in-a-lifetime.

jonathan: equity future is just starting to turn a higher into the opening. equity futures positive .4%. "the countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: coming up, debt limit talks intensifying as biden heads to japan. deposits rise. fed