>> welcome to bloomberg markets, i'm john no carmen. at: i'm matt miller. the s&p is almost completely unchanged. it has been swinging back and forth between gains and losses. it is at .50. we do see the two year yield rising about nine basis points, 4.80 is the level on two year u.s. debt. the dollar is up, 1227 and oil,

a wild ride, below $70. $69.52 for wti. jon: as for some individual stock stories today, within the dow, boeing has been the worst performer, down 2%. we have been watching the spirit care systems, a key supplier to boeing. we will keep tabs on that. we are seeing a nice move higher for energy, up 4% -- for nrg, 4% up. they responded to shareholder friendly actions focused on stock ibex and changes to the board direct -- buybacks and changes to the board directors. we are continuing to get a picture of the economy as measured through different industry players. you have accenture, a big consulting player, with a worrisome outlook. shares are up about 3% right now. a similar decline in garden, olive garden -- darden olive

garden's parent, some concerns raised is what people are willing to spend at restaurants. people are being more cautious with cash when they are dining out. matt: let's get back to the fed because in the second day of testimony, jay powell told senators that the fed has a long way to go on inflation, and the fomc is aligned on the number of rate hikes appropriate for the rest of the year. here is what he said. chair powell: the committee broadly feels that monetary policy has gotten to an appropriate restrictive level, if the economy performs as is expected, it will be appropriate to rate hikes again this year and perhaps twice, a strong majority of the committee feels it will be appropriate again, assuming the economy performs as expected. jon: let's bring in bloomberg's kailey leinz with more context from washington. kailey: this, in some ways, is a regurgitation of the commentary

chair powell already shared in the house financial services committee yesterday. the idea that, yes, the fed could hike rates two more times as it continues to get inflation down to 2%. he has received questions and push back on the idea that that could cause pain in the u.s. economy. he said inflation really hurts everyone, and that everyone will be benefited by inflation getting back down to their target. one asked if he saw for a path for inflation slowing without doing harm to middle-class families, he said that he does, so this idea perhaps still of a soft landing. i spoke with senator j.d. vance from ohio outside the hearing room. he said "the fed should not be fighting the inflation battle so hard that it ends up destroying the american economy." he things they are on the edge of going a little too far. german powell said the -- chairman powell said they are trying to avoid the mistake of going too far on rate hikes. yesterday, he faced a lot of questions around bank regulation on the idea of stricter capital

requirements. he was asked by senator kennedy about reports from earlier about a month ago that the fed could raise capital requirements by 20% for some banks. chairman powell said, yes, that could happen. he has been briefed but no proposal is final. he said that likely will be focused on the eight larger banks, although others could raise capital requirements. they would not focus on banks with a $100 billion asset, and there was a lot of comment on how this could have a detrimental impact. of course, there was always the fiscal question. powell reiterated, as he said yesterday, that the budget is on an unsustainable path but not wanting to engage on some of those fiscal policy questions. matt: he is a little tentative there, indeed. kailey leinz, thank you. we will hear you later on. sound on and then see "balance of power." powell and policy, let's look at financial conditions with our cross asset reporter katie

greifeld. katie: if you look at financial conditions, a way to measure the rate hikes effects on the economy, looking at this measure, it looks like we are in easier territory. green is easier and red means more restrictive territory when it comes to the economy. it is interesting to hear the comments from powell on banks because if you look in march, you can see we spiked into the red there. since then, you have seen conditions loosen up a little bit. we are back in green. i remember at that time in march, the thought exercise on wall street was how much of a tightening impulse is this worth? the stress we are seeing in banks and the idea that credit could become less available? i'm just looking at this chart, it seems that at least judging by financial conditions, it is not too much of a concern so far. jon: really helpful, thank you. as both katie and kailey

mentioned, jay powell highlighting the need for higher capital on wall street. chair powell: the capital requirements will be very skewed to the largest banks, the gcib's. there may be some capital increases for other banks. i think none of this should affect banks under 100 billion. jon: let's get additional context on all of that, former fed governor and former wells fargo chair, betsy duke, kind enough to join us. great to have you with us. let's start with the banking turmoil, which we all watched earlier this year, which it would appear influenced the direction the fed went on rates. what has been your assessment of the banking turmoil and subsequently but that has meant about the rate strategy we have seen from the fed? betsy: i think you are exactly right to, the fear of what would happen is a result of the turmoil and expectation. it would cause a reduction in bad lending, really driving the decision in the meeting.

i think prior to the svb collapse, you might have seen some projections of the meeting that looked a lot like the ones they produce this last june meeting. so far, you have not seen the pullback in bank lending that we are expecting, so some of this pause or skipper waiting may have to do with waiting to see if that is still going to develop. the difficulty when you look at bank lending is it is hard to tease out what is the effect of lower loan demand, what is the effective deals that would have been financed just on work anymore? what is the effect of caution on borrowers? what is the effect of loans that should have been temporary, construction loans, for example, that are now not getting taken out and are still on the bank books. so growth may not be coming from new loans but rather from loans that ordinarily would have rolled off that have not. jon: do you see a significant drop in loan demand?

i saw a chart earlier from persons like apollo that boggles my mind, which is the average payment for a new mortgage. it has doubled from the average over the past 20 years to about $3000 a month. that seems like the kind of payment that most people would not be able to make, and, therefore, will not even bother. betsy: the demand for residential mortgages in particular is the most sense -- rate sensitive loan there is. that has definitely fallen quite a bit. matt: in terms of other loan demand, is there a problem? we always think about on the bank side, they tighten credit restrictions, but, clearly, when rates go from near zero to 5% to 7%, the demand side should be affected significantly, as well. betsy: for example, commercial

real estate, talking about financing new apartment construction, which we can use because residential construction has not kept pace with household formation for more than a decade . if you look at that now from where interest rates are and where rents are, even though they come up a bit, those deals don't work right now. not only is the bank not going to finance them, but developers themselves are not willing to go forward with those projects. you are going to have some of the same sort of information with existing apartment buildings that come up for refinance. if you get into some big credit event there, you will have the prices on those apartment buildings being written down because of the cap price going up, and somebody will buy them cheaper or rent them cheaper, and that will do a reset rents.

it is not going to be enough to offset the lack of supply of housing compared to the demand for housing, so that is something to keep an eye on. jon: let's tie it back to the consumer because throughout all of this, and there is data constantly changing, but, generally speaking, the resiliency of the consumer is something we have talked about that in terms of that savings bad that is available, as rates continue to rise, what are you going to be watching closely? betsy: i think two things that are coming up. one, the excess savings left over from the pandemic is beginning to work its way down and be spent down, but, also, the pent-up demand for travel, just doing things you cannot do during the pandemic is still out there, so i think that has got a way to run. the second thing is coming up probably this fall is going to be the question of student loan payments. if you have a resumption of student loan payments, i am not

sure, i don't have research facilities for that, but all of those payments are going to be a drag on consumer spending because money that those consumers can spend today will have to go to student loan payments whenever they resume. matt: i wanted to ask about drivers of inflation, messaging back and forth with john authers about what is ultimately responsible. and a lot of people have pointed to greed collation -- greedflation and supply issues, i wonder about stimulus, how much of the massive stimulus in this country that started under president trump's administration and continued with strength into the biden administration and still has yet to be spent is driving the inflation? betsy: stimulus payments definitely strengthen the balance sheets of consumers, as well as of small businesses through the ppp loans, which a

lot of the businesses actually never spent that money. that has strengthened the balance sheets of both and have enabled them to spend. i think that has been a big, big piece of it. i think the big driver of inflation right now is labor and the supply of labor. right now, there are not enough workers for the jobs that are out there, and some of it may be matching workers with specific jobs, but it is really a shortage, and i don't think we will increase birthrates and i don't think we have a lot early to go and participation rates. it does not look clinically like you will have any immigration. so absence and productivity is going to be really difficult. you will have to bring demand down to the supply of labor rather than increasing the supply. matt: it has been a pleasure having you on the program. appreciate your insight. betsy duke there, talking to us about, well, the fed and

economy. i want to mention that we are monitoring the bilateral news conference that is going on now. you can see president biden, live, and if you want more, you can type livego on your bloomberg terminal, speaking with modi of india, on really important economic cooperations that the two have established. go ahead and check it out on the bloomberg terminal with live go. this is bloomberg. ♪ advancing flight for future generations. ♪ welcome to a new era of flight.

>> no one person should be trusted here.

i don't have super voting shares. i do not want them. i think that is important. i think the board over time needs to get democratized to all of humanity. there are many ways that can be implemented, but the reason for our structure and the reason it is so weird and hence the consequence was being no equity, we think this technology, the benefits, the access to it and the governance of it belongs to humanity as a whole. jon: comments from openia sam altman, i'm jon erlichman, with matt miller. he is speaking at the bloomberg technology summit taking place now in san francisco, which brings us to our stock of the hour, nvidia shares started to stall out read we will continue to track with the buzz around ai names looks like. stocks made its way back into the green today, and the strategy team at barclays is saying, look at pullbacks as opportunities. yes, this year's ai rally has

drawn comparisons with the dot-com bubble, with our players evaluating companies like nvidia valuations not as rich as it was during the pandemic rebound. ed ludlow joins us now from the summit in san francisco. what is the buzz their own ai? ed: the buzz is the long-term. sam altman is talking about the existential threat that mankind faces from ai. how that leads to nvidia is interesting because if there was a consensus among analysts, including read lockman of greylock, or microsoft, it is that the curve of where we would get to in order for ai to be a threat is years away. how sam altman phrased it is atp four generation does not -- gtp4 generation does not pose a threat but gtp9 does. we are years away from that and

billions of dollars of investment to start worrying about it. it has been an intense but wide conversation here in san francisco. matt: it is interesting because billions of dollars of expected revenue, as well. microsoft with all of its various copilots that are going to use the technology. google surely will bring out its own challenger in search, which is one of the killer apps a lot of people would agree. to me, one of the most fascinating stories is the rebirth of san francisco so soon after it died. is it san francisco back? are you getting the feeling that people are excited in that city? ed: there is an incredible list of panelists here at the bloomberg technology summit. follow along throughout the day. there is energy here. i think seriously, they all acknowledge that talent is still in silicon valley from a software engineering perspective.

the ai innovation is happening here, and the vcs that are finding it at the lower level startup level are still here. but we acknowledge that microsoft up and redwood, washington state, is doing that. i just came off the stage of the qualcomm ceo. we are so focused on the big picture, nvidia gpu is going to servers and data centers and power the compute and training in the cloud, their picture is different. they are trying to build better processes that mean you can read large language models and ai models with billions of parameters on the smartphone. in that interview, they went some way to explaining how they are achieving that. i think everyone is basically having a different interpretation of how generative ai tools will impact us as consumers, citizens, in real terms. for the qualcomm perspective, it is on our phones. it is not in these massive models that pose an existential threat. matt: it is fascinating stuff, ed. great to have you at the bluebird technology summit. thank you for joining us, ed ludlow, the host of bloomberg tech.

coming up, we take a look at the record of canadian pride minister justin trudeau as he makes some progress in areas or really massive progress in areas like immigration and employment. canada could be a role model for the rest of the g7. that is next. this is bloomberg. ♪

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jon: this is bloomberg markets, i'm jon erlichman with matt miller. whether it is higher interest rates or the recent wildfires, canada has been navigating high winds. they are playing a role in the fueling economy, and that is the priority for prime minister trudeau. matt winkler has done a deep dive in diversification efforts in canada and joins us with more.

great to have you with us. we are talking with the former fed governor, betsy duke, about productivity challenges in the u.s.. you have to and a deep dive on canada, what are findings on your end? matt w.: the most salient point is that with trudeau's prime minister, the canadian economy, with his encouragement, making it more diversified than it has been in its history. the reason why that is so important is canada was historically more has been historically limited by if you like natural resources and finance. those are two relatively hidebound industries, and canada is now much more of a technology leader, and is very much embracing 21st century industries. that has really come because of policy change. matt: it is interesting to me that this growth and emigration has been welcomed, celebrated by

the population. at least according to a recent poll. you don't see that here, for example. the media in the u.s., i think, or maybe some politicians, kind of demonize immigration. even if it is what we need economically. matt w.: the two economies are rather similar in that respect. the biden economy is booming, but you would never know it from our profession. we do not write about that or talk about that. the canadian economy, it is booming, and they do talk about it, so, it stands to reason that people in canada would appreciate the reality that the canadian economy has been since trudeau really got to office in 2015, been a leader in the g7 and growth, gdp growth, a leader in investment, stock market has been a leader. matt: the stock market has done incredibly well and at the same time shrinking the weight of banks' financials and the weight of oil energy stocks on the

market. as you pointed out, and expending more in technology. matt w.: technology as a waiting in the stock market has on most double. energy has declined significantly as a weighting and so has finance. what that tells you is just that where there is more diversity, there is greater opportunity and greater productivity. and immigration boom, which is unprecedented, you have never seen so many people increase in population in canada so fast, as we have in the past several years. matt: very interesting. matt, thank you for joining us, matt winkler, our editor-in-chief emeritus here at bbg. you can find the column by typing ni winkler, and sherrod is an open as well. this is bloomberg. ♪

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romaine: romaine bostick could you also close on this thursday afternoon. the s&p coming off three straight days of losses. not very bet -- not faring better on day four. hockey's policy. depressing. european equities right now logging their longest daily losing streak of the year. sovereign debt yields edging backup and short-term treasury years at the cheapest le