jon: welcome to bloomberg markets. sonali: we will get a quick check on the market because we are looking at an s&p 500 that is a little bit under pressure today, down 0.4%. we are looking at the philadelphia semiconductor index unchanged. we are not seeing the same type of red in the tech heavy indices. the nasdaq 100 is up about 0.3% and the nasdaq composite is slightly up.

then you look at the rate story. if you look at it, you have a six basis move on the two-year but it's along the curb. the 30 year and the 10 year yield up about 8-9 basis point. the market is still grappling with the inverted yield curve. jon: it's interesting on a day when you see weakness for broader equities to have tech outperforming after the nasdaq's recent weakness had left it moving towards a possible correction. why is tech doing well today? individual stories have been helping like nvidia shares moving higher. goldman sachs with a conviction call on nvidia helping out today. we have seen bitcoin with a strong showing. crypto shares have been rallying in general today with going best

-- coinbase getting a lift with this singapore license. analyst concerns have been weighing on the stock which is down 12 percent but nothing like smile direct club. we saw the chapter 11 filing we will see you if they continue filing with the possible liquidation being reflected to this 60% selloff in those shares today. sonali: investors are continuing to weigh on whether the fed is on the path to a soft landing. jimmy diamine spoke with emily chang in london earlier today about the rising yields. >> cannick go to 7%? the answer is yes. are there factors that would drive it higher than where it is today? this is the 10 year bond, yes.

could supply and demand push out? be prepared for it. jon: bloomberg economics is a u.s. recession seems more likely that a soft landing. let's bring in our policy editor michael mckee for more on the bloomberg breakdown. for those trying to figure out where the bloomberg team is telling investors to brace for a recession, what to the data points say? mike: they are looking at what has happened in past recessions that say the conditions for a recession or falling into place. one of them is that the federal reserve rate increases are just now going to be starting to hit the economy. they argue it was slower this time because the housing market sort of froze and because people had locked into low mortgages and low interest rates. they think the risk is that unemployment is going to rise more quickly and they point to

things like student loan debt and the uaw strike, saying things could go wrong in the economy. they admit there is another side to it. there are defenses to it but looking at past performance, they think it might be predictive of future returns. sonali: the uaw strike, the student loan repayments, this is outside the control of the federal reserve. how much do these external forces complicate rate hiking story? mike: they will not complemented -- complicated too much. we are talking about maybe another rate increase of 25 basis points. will they have to cut rates in 2024 because the economy is going into recession and slowing down? fed officials don't think so. the argument is that they probably will have to do that. one of the cures for high interest rates is recession. whether interest rates status high or not is kind of unlikely that we would see jamie dimon's

7% unless we get some sort of massive change in the trajectory of inflation. sonali: michael mckee, we thank you. jim milstein is a cochairman and joins us to talk more about what we hear about the fiscal picture in washington. even though we have heard so much from the fed already in of gotten past the worst of it for now, the reality is, the canned was just kicked down the road with 45 days or so of securities. with this looming over our heads, how much concern do you have in terms of volatility moving forward? >> i don't think it's over in washington by any means. one caucus of the republicans led by matt gaetz said they will move to vacate the chair which is to replace speaker mccarthy or cut a deal -- for having cut

a deal with the democrats. it was to avoid a shut down and they garnered 139 republican votes in all of -- and almost all but one democrat. it seems as though there is a small but vocal chorus in the republican caucus that is unhappy with the speaker. they moved to vacate the chair. under the house rules, until that motion is decided, nothing else happens. you need a speaker to run the house and work on budgets and whatever they have going on. i think we have to see what happens with matt gaetz and whether he can garner three or four more republicans to his cause which if he does, means the republicans cannot reelect speaker mccarthy on their own. sonali: all of this is behind

the fiscal picture of the united states was was created by both sides of the aisle. the numbers themselves, you have the 10 year at 466 and government borrowing costs rising by the day. what does this mean in terms of an investor point of view compounded by the fact that the fiscal picture is getting worse? >> michael mckee just reported the possibility of a recession in 2024 and if he's right, the fiscal posture only get worse. the federal budget has automatic stabilizers where spending increases to deal with unemployment insurance, food stamps, aid to families with dependent children. spending automatically increases in a recession. the fiscal posture of the federal government will only get worse. if we have a recession.

today, interest costs are growing faster than the economy. debt and excessive gdp, gdp to federal debt -- federal debt is higher than gdp so if you're interest costs are growing, the interest and debt is growing foes -- faster than your economy, this is a classic recipe for a debt crisis. i'm not saying we will have one, the treasury market is deep and we may be the strongest of the week sovereigns out there. the treasury market still has enormous demand. it doesn't seem to be a problem of funding the federal deficit but the fact is, there is a supply/demand imbalance potentially coming in the treasury market which could drive rates higher. jamie dimon could be right that 7% isn't out of the question.

particularly if the fed doesn't change course. if it's higher for longer and the deficits remain unresolved, because of an impasse between republicans and the democrats, we could see much higher rates. jon: what does that mean for the borrowing costs for individual companies? you've got to be watching the landscape right now as to whether we see cracks in the system as a result of this new interest rate reality. that seems to be one of the other market concerns. if the borrowing costs of businesses and it -- is moving up quickly, which companies can handle it and which can't? have you view that landscape? >> there was a surgeon bankruptcies in september and august. that really is a result of higher interest borrowing rate environment. a lot of companies levered up when the rates were cheap over the last 10 units -- 10 years

and that bill is now coming due. most companies can't pay off their debt, they are refinancing their debt at a much higher interest rate environment. 40% of those companies cannot beat their fixed costs today. those companies are facing maturities and have to refinance in a much higher interest rate environment. those refinancings may not occur which occurs -- which result in the bankruptcies that has started. i think it's going to swell over the course of the next few quarters. there is a huge wall of maturities in 25 and 26 of leverage loans and high-yield bonds. auditors generally look a year out so 24 will be a period when

companies have to either refinance or restructure. sonali: what else breaks? it's not just the bankruptcies, useful -- saw a spate of banks failed under this environment and we are talking rates going higher. what else has to break as this process makes it through the system? >> there are all sorts of banks to backstop the banking system. the fact that you got some mark to market losses on bank balance sheets is something most banks don't have to worry about. i think the bigger issue is in the private credit market, not because their funding is unstable but again, because if the economy weakens, as it may, as your economists are predicting it might, the inability of their borrowers to

refinance their loans may lead to a wave of defaults in private credit and across all credit providers. the banks will not be immune from it but bank capital is largely very strong. there are backstops to the banking system. higher interest rate environment, the fed policy is intended to slow the economy down. and to reduce demand to moderate inflation. you are going to see some consumers. we already see this in low -- in the low credit segment of the auto loan market that default delinquencies are up. the same for credit cards. you are starting to see weakness in credit quality as these interest rates funneled through the economy. sonali: thank you for your time

at such a critical juncture in the market. coming up next, tesla investors just missed delivery estimates and it's our stock of the hour next. this is bloomberg. ♪ somebody would ask her something and shuld just walk right past them. she didn't know they were talking to her. i just could not hear.

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jon: this is bloomberg markets. time for our stock of the hour. we've been tracking tesla shares today. it's been a choppy session. we are usually lower and moved into positive territory and investors reassessed at this hour at the companies third

quarter vehicle deliveries came in about 10% below wall street estimates. the sales figures were about 30% higher than last year. some analysts felt production pickups could get smoothed out this quarter. if tesla were to hit the current expectations for deliveries in the fourth quarter, that would get them to more than 1.8 million deliveries this year. that will be a record but it wouldn't be the 2 million here that some thought might be possible earlier this year. sonali: ed ludlow is here to us play more. what do you make of the reaction by investors today to thism miss of house estimates. ed: tesla had telegraph that production talking about retooling for gen3 and their cyber truck. consensus was around 456,000 units by close of day friday but it had been trickling down.

the chart on your screen shows the first quarter on order delivery to line in more than a year since the second quarter 2022. they reaffirmed guidance at 1.8 million this unit which means they need to do 475,000 final months of 2023 but that's within the realm of possibility. the analyst reaction is ok, production was shut down so that's more of a factor than tesla said it would be. jon: the other factor to watch over the next three months is what happens with the autoworker strike how that possibly factors into the tesla story in the home stretch of 2023 ed: analysts and investors in industry people say it could be great for tesla because frankly, if there is production impact for gm and less so for forward on these

negotiations, consumers will say tesla is more readily available and i will go there. elon musk has talked about this issue about assembly-line workers. tesla is comparatively an attractive place to work area i guess the big umbrella point now different to a year ago was there are many more models on the market available to consumers. that availability of supply in terms of model variation is more of a factor than perhaps it was when we previously had mrs. for tesla. jon: on the pricing we've seen with tesla throughout the year, this steady strategy of reducing the price per vehicle, do we have a sense on whether that will continue to the end of the year? ed: elon musk has been consistent they are willing to sacrifice the bottom line in order to protect unit growth.

profits to be sacrificed at 50% annual you're on year and retracing guidance was important today. they have to do 475,000 and it's in the final three months but they seem confident they will do it area what's more, it's made their competition follow suit. based on a past track record, is likely they will continue that way. jon: thank you for the breakdown. coming up, jamie dimon's take on the fed interest rate, this is bloomberg. ♪ that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place.

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i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. jon: this is bloomberg markets. jp morgan sherman jamie dimon spoke earlier today in an exclusive wide-ranging interview with emily chang on the

sidelines of the jp morgan leadership forum in london. one key part of his comments were about a potential 7% fed funds rate area >> cannick oh to 7%? the answer is yes or the fact that it would drive it higher from where it is today. i'm talking about the 10 year bond, yes. supply and demand could push out. i'm saying be prepared for it. the worst case is stagflation. higher rates happen in a booming economy but it's not the same and stagflation. emily: what are the ripple effects of that? >> i'm not worried about jp morgan. we are prepared. we can handle 7%, we can handle 2% again. emily: 8%? >> risk management is not the same as guessing the future. when you look at the range of

potential outcomes, you want to make sure you can handle this. i think all companies do that. every company has different exposures. you have output prices in some industries it doesn't matter and some of the price of mozzarella. your business is different. we don't know the effect of these things on the economy. we may have a soft landing and we may have a mild recession or a hard recession. there are potential bad outcomes in the worst one economically would be stagflation. you have low growth, high interest rates and if that happens, you'll see a lot of people struggling. emily: regulators have said they will impose laws that will make it difficult what will have the biggest impact? >> it really matters deep the rules about mortgages and business loans are in general, what i don't like about it is it

punishes diversification. diversification is one of the true free lunches for the bank that protected. i don't understand why they would do that. we will be responding and it will hopefully be modified and thoughtfully done for international purposes. america's got the best financial system rules ever seen. that includes private equity and private capital and things like that. private equity hedge funds are dancing in the streets and they are being public about it. this will push a lot of stuff through the banking system that's with the regulators want so be it. is that good for america? i don't know. sonali: intriguing ideas behind the 7%. we are looking at 509 on the two-year and a 10 year that is looking to be about nine or 10 basis points higher on the day. 467, the highest level since

2010 on the 10 year and the 30 year. the direction is higher for longer. what damage is caused? jon: it's interesting jamie dimon's comments on opportunities within the san francisco market. we were watching what was happening with interest rates early this year and ultimately saw the collapse of silicon valley bank and have jp morgan sees an opportunity there. also seeing an opportunity in ai. in the full interview, he says he sees a possibility for ai to be incorporated into all aspects of their business. you highlighted what's happening in the bond market but if you look at the stock market right now, most sectors have been under pressure but nvidia is outperforming so investors are still showing some conviction with those ai names that have ruled 2023 and ultimately, we will see where investors take us during the balance of the year

is helping to outperform the canadian market which is negative for the year. this is bloomberg. ♪ fabulous surroundings... but everyone's looking at their phones for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home. so they're talking numbers with their merrill adviser. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive your money never stops working for you with merrill. a bank of america company.

romaine: government shutdown averted temporarily. why from bloomberg headquarters in new york, i'm romaine bostick. katie: and i'm katie greifeld. not seeing much materialize when it comes to the s&p 500, the big markdown about .4% on this trading day of october. sadly more action to the upside, the nasdaq 100 up .3%.