♪ jon: i'm jon erlichman and welcome to bloomberg markets. matt: let's check some markets. equity indexes rising for the last trading day of september. they are now lower. the s&p 500 down .25%, still set to be the worst months of the year, as september typically is, and the worst quarter of the year as well. the 10 year yield coming back down still at 456. five significant digits.

the bloomberg u.s. dollar index also coming down but still from a high level. 1265, 1260 six on the dollar indexes, around the highs we have seen for the year. nymex crude off the highs, 76 per barrel now at $90.99. yesterday it briefly went through $95. this is for west texas intermediate not brent. jon: the fact oil has been higher ultimately is something that will factor into fuel costs for a range of businesses this fall including carnival. we are looking at weakness for the cruise operator because of concerns. on the consumer side today staying with that theme you have nike shares up about 7%. it was a show me story to investors. but they showed them with good results. eating into the inventory helped a lot of retailers tied to the nike story. staying with consumer themes, we

will get into ski season, ahead of ski season, vale resorts through the summer tried to benefit property through mountain traveler demands that were not as robust as they had hoped. stocks down today. then a bloomberg scoop on the possibility of tim wentworth formerly of cigna joining walgreens as the next ceo. shares up now 5.5%. matt: investors monitor the situation in washington, d.c. as congress inches towards a government shutdown this weekend. this is what blackrock chairman and ceo larry fink had to say about the standoff. larry: i think a shutdown for a country that has $33 trillion of debt is not a good outcome. when you have that type of debt, what are we telling the lenders? imagine you go to your bank and say, i am not paying my mortgage. i mean, that is what we are

doing. it is not about the new debt. it is about what congress has already approved. i mean, it is irrational from my vantage point. it is wrong from my vantage point. jon: we will monitor their reactions. kailey leinz joins us live from capitol hill where the latest budget told far -- talks are playing out. we will see where the movement is over the course of the day. what can you tell us now? haley pop right now members -- kailey: right now members of the house of representatives are streaming up beside me to go vote on the passage of the house is continuous -- resolution to fund the government through october 31 in theory giving them time to get remaining appropriations bills passed and in doing so cut domestic spending dramatically including several border measures as well. it is unclear now whether or not this will pass. a number of members of the republican party said they are a

howard -- a hard no. congressman tim burchett says he is a no and says five or six others are with him and that would be enough to tank this thing assuming no democrats vote to support it. if it does past, wins into the senate it would likely be dead on arrival because the senate is in the process of working on its own continuing resolution controlled by democrats that are very unlikely to take up what the houses attempted to -- attempting to pass now as we speak. matt: it seems matt gaetz essentially wants to throw out kevin mccarthy as leader. will that happen? if so, who would replace him? kailey: that's a major question. matt gaetz is another individual member of the body likely to vote down this continuing resolution. he has been threatening a motion to vacate speaker maccarthy for some time now. we have yet to see if you will actually follow through on it. several other members of the freedom caucus i caught up to

today including chip roy, eli crane, and others suggested it would be a mistake for mccarthy to turn around and try to craft a deal with democrats. mccarthy is painted into a tough corner here. if you cannot get enough republicans to vote to keep the government open in theory a bipartisan compromise would be another solution but that might risk him his job as a speaker. i spoke with a number of democratic members of congress this week that suggested if mccarthy were to work with them they might act to save him if there was a motion to vacate. we have yet to see if that will happen. a lot of it will come down to the results of the vote today. jon: bloomberg kailey leinz settling in for a long weekend of work. i can see in washington, d.c. we are expecting the shutdown to go into effect tomorrow night at midnight. let's talk about all this and ask, what effect will it have on markets with apollo global management chief chacon us meant

-- economist torsten slok. obviously, a government shutdown is no good for the u.s. economy, though, not terribly detrimental at first. but if it goes on for a longer time, we are told it's a real problem. how do you see it playing through in the markets? torsten: with a backdrop of rates going up and a lot of discussion about the overall very significant increase in rates. the short answer to the question is if this is temporary, the average shutdown has lasted eight days. it happened to be the last one we had lasted 34 days. so you can spend time thinking about, well, if it lasts eight days it may be more manageable. if it is 34 days it may be more problematic. but the biggest issue, as you have also talked about, is for us in markets as a number one indication is really on the data releases. most important lay the m -- employment report next friday,

the cpi report. there are a lot of uncertain things not only in the macroeconomic impact but also in the darkness that might come if we do not get the data that we all look so much at when it comes out. jon: we saw the 10 year yield yesterday briefly touch 468. obviously, the highest level we have seen since before the financial crisis. you put out a list of reasons for higher yields that i think got a lot of play at least you're on bloomberg tv. the u.s. sovereign downgrade. japan exiting yield curve control. fed qt. fewer dollars for china to recycle and the following exports environment. the u.s. budget deficit and the large stock of t-bills and treasuries. intention to increase option sizes. you add this to that list? or, do people actually buy treasuries pushing the yields lower when they are worried about the u.s. government? torsten: good question. because, we are sitting here literally the last trading day

before the shutdown might arrive sunday. the market reaction, just in the last few hours, it does not seem to be there is too much worry about this having any negative impact on the economy. if you add the headline we just got from john williams where he basically said, quite different from what the fomc said at the last meeting, basically saying at a speech in long island, maybe we are at the peak in rates. remember, the fed said at the last meeting, we will need another hike this year. maybe, even the fed is getting to signal they are worried about this spike we are seeing in rates at the moment. so, i agree with what you are saying, matt,. it is unusual. maybe markets are just not paying too much attention because they think it will soon be over. but as we know from the last shutdown, if it lasts more than one month, it could certainly have other ripple effects. the most important ripple effect might be people will begin to hold back on consumption. a lot of things will be shut down not only on the data side. that will have negative consequences.

if i do not go for lunch because i am a government worker for the next several weeks, we will not get that gdp back on a number of different fronts. the bottom line here question is, there is still uncertainty added to little worrying that rates are not moving lower on the back of all of the things that you listed and the things going on at the moment. jon: let me ask you about the inflation outlook from here. larry fink earlier painted a picture of a new inflationary environment that is may different than we anticipated. i had a conversation with longtime economist david rosenberg this morning. he does not buy into the idea we are in a sticky inflation environment and we will be in for a rude awakening for next year. can you give us your current assessment about how the fight against inflation is going and whether that is something we have to be giving more thought to at a time when we are trying to determine if rates will be

higher for longer? torsten: the data this morning on pce speaks for itself. 3.7 and a 3.9 on headline and core inflation. said target is through percent -- is 2%. so, we are still substantially above the fed's 2% target. that is why it makes sense for the fed to communicate clearly we are higher for longer. in my view i think the cost of capital permanently higher. we are in a situation, not necessarily where inflation will be a problem for many many years. but we are showing the last mile in terms of getting inflation all the way down to 2% will be very difficult. remember last summer, inflation peaked at 9.1%? today we are at three point 5%-4%. but getting all the way down to 2% is going to require potentially rates to stay higher for a very, very extensive time. and the invitation for markets is the fed is clearly saying, we

need to slow the economy down. we are not seeing it yet. we need to make sure we get inflation back to 2%. that is why the downside risk to growth continues to be fairly substantial over the next several months. simply because, the fed is telling us, they are just not done and therefore the consequences are, as we seeing, default rates for high yields that continue to go up. delinquency rates for credit cards and auto loans go up. to summarize, interest rates are biting harder and harder on consumers. they are biting harder on corporate. those are the consequences of what the fed would like to see. we should expect to continue to see that over the coming months. jon: as we prepare for possibly a lingering and looming question around uncertainty in washington with a shutdown we continue to navigate labor that we see with the auto workers strike as well. how closely are you watching these pay disputes play out?

how does that factor into your inflation expectations? torsten: absolutely everything you listed is a very critical for thinking about markets. when you add rising oil prices and rising rates that we just talked about i think the list of worries and potentially these rising rates and the speed with which rates have gone up it's a bit of an ominous sign for not only the economy, but maybe also for financial stability. of course, everyone can conclude that it seems very is unsustainable -- seems very unsustainable that rates are going up with this speed at the moment. i would not say something has to break, but something has to move now. where rates have gone up so quickly it is having consequences for consumers. it is having consequences for corporate. therefore, from an inflation outlook come up for a long time the economy was "doing fine". the question is, over the next several weeks, and the next stop is payrolls friday, will the

economy still defined in an environment where rates have gone up so quickly to such a high level? the risks are this will slow things down. and then, that could impact slowing inflation down. matt: i have been following your work for many months. the consumer is a concern, today, for you. what is the aha moment when we realize we will go over the cliff edge finally? do we need negative payrolls? do we need lower gdp revisions? do we need is something external from asia, from china, or europe? what pushes us over? torsten: this is important and a good way to end the discussion. on the screen, look at consensus from upfront payrolls next friday. the answer is 170,000 jobs created in september. that sounds ok. remember when the fed started hiking rates we were creating 600,000 jobs. 12 months later 40,000 jobs. now 170,000 jobs.

if you ask the question, what is the consensus telling me job growth will be first quarter next year, january, february, march? the consensus tells you it will be at 12,000 jobs created only every single month in january, february, and march. so, the speed of the slowdown is in the pipeline. we as investors should expect the fed to step on the brakes. 170,000 is good for now. what is most important is the lag effects on consumers and corporate's is expected according to the consensus and also in my view to continue to slow employment. therefore i think the answer to your question is the most important data point to watch is we know inflation is gradually becoming lower, but not only do we need a soft landing in inflation, we need a soft landing in employment and that is what we will find out next friday. matt: right, if we get that bls data. with the government shutdown those people are no longer paid. thank you so much.

apollo global management chief economist torsten slok. coming up, the uaw expands strikes at ford and gm. this is bloomberg. only the new sleep number smart beds let you both sleep at your ideal level of comfort.

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jon: this is bloomberg markets. i'm matt -- jon erlichman with matt miller. it's time for the stock of the hour. monitoring auto names seeing weakness from ford, gm, and a stellantis as the uaw strike spreads to 7000 more workers at a ford plant in chicago and a gm factory near lansing, michigan. stellantis was spared from additional walkouts after a

last-minute breakthrough. we are hearing from ford saying battery workers benefits are slowing negotiations as well. there's a lot of moving parts. matt: absolutely. the question is, how bad is this for the economy? either way, mike wall is the s&p director of automotive analysis. i figure if they strike for too long it will be inflationary in that it drives up the price of cars. ford is worried about a shortage now. if they get the raises they want it will be inflationary in terms of wages. how do you view this? mark pop we are -- mark: -- mikey pop we have seen some release in commodity over sometime. as we see this shift towards more electric vehicles and the ancillary costs as it relates to some contracts, there will definitely be upside pressure to

pricing on that front. jon: you have done a lot of analysis of the current state of the supply chain. in the early days of the strike everybody was trying to figure out what it would mean for the industry overall. beyond what we are watching tied to the strike, how would you characterize the state of the supply chain now? mike: the state of the supply chain is tenuous and it is the biggest risk in my mind when using about what suppliers have had to go through the last 3, 3 .5 years. the immediate hit of covid. the knock on effects of supply chain shortages. the commodity cost run-up. just as we are getting our feet under us, from a production standpoint, the rug is pulled out. we have to keep our eyes peeled on that because it is something that is not easy to track in objective numbers because it is happening below the surface. we are seeing distrust in the supply chain accelerate. it will continue to accelerate as we see more work stoppages.

matt: what do you think is the ultimate demand for electric vehicles? i heard anderson consulting on surveillance this morning saying, look, wealthy people that need a second or third car are early adopters. total climate dedicated climate change fighters. yes. but for the rest of the population they are still far too expensive and we should not be putting all our eggs in this basket. mike: you hit on it from a cost perspective. you are right. that is the big wild card here. if we can get lower cost vehicles to market, tesla has talked about it with the tesla model two or what have you. certainly, general motors, ford, and others have talked about bridging that gap and bringing the price points down. that's the biggest factor. i should say one of the biggest. certainly pricing then educating the consumer, structure that

sort of thing. jon: in terms of labor negotiations themselves that we were just talking to torsten slok about the inflationary effects there. if we look out two or three years, how competitive can the detroit players be with whatever their cost structure ends up looking like at this time of transition matt was just talking about? mike: that's a key consideration they have to be mindful of. it is just not the detroit three competing against each other like 40 or 50 years ago. it is across-the-board and they are competing against traditional ford automakers coming to market or in the market. also the ev upstarts. some are not even upstarts anymore if you look at tesla. they have a significant share of the ev market and at some of the ramifications across the broader auto industry. that is what the automakers are trying to juggle now. to balance the cost of escalation that you will see from these contracts. the contracts will result in

higher cost. it is just a better of how best -- a matter of how best to manage the cost among the product portfolio and that is what the auto makers are talking about now. matt: mike wall is the s&p director of automotive analysis. coming up, u.s. student loan repayments due to restart this weekend. details next. this is bloomberg. this is bloomberg.

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jon: this is bloomberg markets. i'm jon erlichman with matt miller. we were talking with kailey leinz about the last ditch plan to keep the government open. that seems to have collapsed, making shutdown almost certain at this point. we will watch closely. it's a story everybody is watching around the world.

we are watching it in canada because of our trading relations. liver going to talk this hour about the situation with student loans payments coming back. the white house had an update on that story today, $1.6 trillion worth of debt now on the table now. outside of that we have to figure out what happens on orchestrating that return to payments in a government shutdown. there are so many considerations so we will continue to watch washington. matt: it does look like we will see this government shutdown. one of the questions will be, how will we get data? a lot of the economic data points we rely on come from places like the euro of late -- of the bureau of labor and statistics. they won't be paying their workers anymore. in that case we are not likely to get non-foreign payrolls. it still up in the air. you mentioned that infrastructure needed to accept the resumption of student loan payments is also in question.

though, they should still officially restart the repayment of those this weekend. for jon erlichman i am matt. this is bloomberg. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh nice footwork. man, you're lucky, watching live sportsh

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romaine: i'm romaine bostick. katie: i'm katie greifeld kicking you off to the closing bell in the u.s.. we looked at gains earlier in the session. not seeing them now. the s&p 500 off by .5% snapping a two day winning streak to end of september on a soggy note. the nasdaq 100, big tech slightly better but off by about .2%. relatively quiet in the bond market.