>> investors are like conviction one way or another and i think perhaps key to this will be whether or not this comfort does expand. >> when you see rates move at the speed and quantity, you always worry something may fall off a bus. >> i think the mindset and thought process is shifting after years and years of low interest rates. >> companies worry about their abilities to finance >> we are not fully back to where we need to be to say mission accomplished. announcer: this is bloomberg surveillance with john king, lisa abramowicz, and on the thin fire. jonathan: for our audience worldwide, this is number

surveillance on tv and radio alongside lisa abramowicz i'm jonathan ferro. your equity market positive by 0.2% on the s&p come on a three-day winning streak on the s&p 500. if you want to focus on the data, the week starts today. lisa: ppi today ahead of cpi tomorrow. it's interesting whether the economic data is what is driving gains we are seeing in stocks in frank the in bonds was arguably -- which is arguably what is leading stocks. whether it is haven trade or listening to the fed speak or just a blowoff of the tough we saw last week. lisa: we talked a lot about it -- jonathan: we talked a lot about in the past when he four hours. the fed is comfortable with the market doing the work for them and the work -- the market is not doing the work for them. lisa: nikki bowman later this morning. even the hawkish talk seems to be dampening the tone a little bit basically saying maybe one more hike is needed but softening the tone around the edges, it seems like everybody has been taken off guard with

the rise in the long-term yields. there's this question of how much does that do the work for them and then if the market gets ahead of that, and pushes yields down, a rate hike is back on the table. jonathan: she is sounding lonely. ppi late as lisa indicated, cpi tomorrow. then the bank earnings kicking off friday. exxon pioneer talked about it for the last week or so following route or from the wall street journal. reporting at bloomberg they're close to closing the $50 billion deal. $250 a share the offer. lisa: basically it would make exxon the big kahuna and the permian basin which is the most productive shale area in the u.s. and basically this would allow them to act better as a swing producer and could increase reduction more quickly and agile he in response to shocks. i wonder how much the timing of this is because they have a lot of money and what else they will do but also there will not be as much pushback from a regulatory standpoint. given the fact the u.s. would like energy independence more

than maybe in previous years. jonathan: 243 the premarket, close to that offer price, the reported offer price. looking out for a possible announcement as soon as this morning so look out for that. also need to talk about lvmh, the luxury goods producer in europe. at one point their stock was higher by close to 30%. the peak was in spring and then we rolled over aggressively into the end of the post-pandemic luxury brood. it is the end. lisa: who was at the called the topper for quick -- top perfectly and said -- jonathan: clear emu wealth. lisa: yes. that is perfect. it's hard to get my head around this to say this is a softening in consumer trends. this is basically normalization, it is all right you bought everything you could, you are done, go home. jonathan: they said almost exactly that going back to trend and working out what trend or normal is. just a fantastic call. on this program he talked about it read sticking with laszlo of

lvmh. the latest on day five of the israel/hamas war. the numbers coming out of this deeply upsetting. according to the idea spokesman, the overwhelming -- the overwhelming numbers of the fatalities are civilians. lisa: this new cycle has been difficult and anyone that sees the images and sees the stories coming out and as categorically that hamas's actions were horrific lost touch with their humanity. there is a question of what to do next and what the u.s. is role and international role is at a time when everyone is concerned about this escalating away that becomes protracted and difficult broadly. jonathan: print -- plenty of states from the u.s. side. we had a passion address from the united -- president of the united states and antony blinken will travel from wednesday to friday.

the state department said we had in the last few hours. the united states believes 20 american citizens are missing after the attack over the weekend. we still do not know the number of hostages held according to the national security advisor, jake sullivan. still trying to get clarity on a major issue. lisa: which speaks to the fact that the death toll is going up and not necessarily because more people have been killed but more bodies have been found. there is a discovery process that is modeling and horrific for everyone involved but it shows the scope of uncertainty of who is accounted for and who is not in the people who may have been taken to gaza. jonathan: we try to get the clarity and consequences of this. julie norman joining us in 10 minutes time. your equity market on the s&p 500 positive by 0.2%. the rally continues in the treasury market. yields down by another 10 basis points. we were thinking about 5% on friday after the payrolls report. we are back down to 4535 -- 455.

lisa: the drop would be the most for today drop going back to july at some point to may. does the data verify this? this is sort of the true test, 8:30 a.m. we do the september ppi, the precursor to cpi tomorrow. ahead of the 1:00 p.m. auction, a 35 million dollar auction of 10-year note's coming at a time of disinflation yes but skepticism about whether this will stick or whether it is transitory disinflation. this is where people are at. today the feds because continue. chris waller, rafael bostic, boston fed president susan collins and 2:00 and we get the fomc minutes from last month's meeting, though you did mention how are dated are these? honestly. what we going to learn from this? jonathan: the 10 years back to her was so maybe it is relevant. [laughter] lisa: that's true. maybe it is relevant, though i guess maybe people would believe

more from the statements were of some of the fed officials. today is the big day when it comes to trying to choose leadership in the house. i believe the republicans are going to gather around 10:00 a.m. this morning to try to settle on a speaker. they are probably going to hold a vote with the big battle between louisiana, steve scalise, -- louisiana's steve scalise and jim jordan. jonathan: joining us now is the investment director at invesco solutions. ben, you seem to like equity solutions getting closer to 5%. do like them now that they are closer to 450? ben: good morning and yes we do. i'm aware it might seem hopelessly optimistic but our suggestion are these inflationary trends in place, that inflationary pressures are abating can continue, coupled with resilience growth could be a pleasant mix for equities. certainly unease about the

positive and balance. that is where we set. jonathan: in the equity market, what do you like and why? ben: i think, based on as i said that marginal view of being positive on equities, it has to say something of a barbell approach. on the basis we think there is an economic slowdown, we do like u.s. equities and therefore that is considered some of the higher-quality equity market around u.s. equities by proxy liking the loosely defined technology sector but i think we will have to barbell that. heaven forbid you get a repeat of 2022, inflationary pressures resurgent, at least given by what is happening in commodity markets and the energy complex could do well. a barbell between loosely defined tech sector and energy markets. lisa: i feel a little like we are playing whack-a-mole with

the daily narrative and trying to understand how recent events factor into longer-term decision-making and in general people stop process. it sounds like you have not wavered from your views and really everything that we have been talking about factors in not as noise but sort of on the peripheries to watch. is that an accurate characterization? ben: i think it is fair that we are more into a longer-term term view, shorter-term dynamics can really leave you chasing your tail in this cruel world of investing and i think the risk tower view is inflationary pressures return and i can be a function of geopolitics which is harrowing story but also an unpredictable one. i think also we are worried about the resilient growth story, the jobs market in good shape, and these inflationary trends leading to boast -- boost in real income.

lower inflation could lead to higher inflation, real income growth. we are cautious on this view, we're ready to move on it, particularly if equity markets are strong into year end that would alert us to potentially into a more defensive position. the long-term view remains for equities as well. lisa: what would make he would trigger that view? what would you have to see to give you some sort of sense that maybe things are too strong, especially in light of the balance a lot of people are looking toward, earnings that kick off friday. -- friday? ben: i think it is signs inflationary expectations are climbing again, maybe you can see that in elements of the bond market, maybe you sort of see it in commodity prices, and unfortunately -- unfortunate develop its and the geopolitical

framework. so those are the things that give us the greatest concern. we recognize the political shenanigans going on can make hedge funds put whack trades on the short-term but over the medium term we think it is inflation is going to be underpinned market direction and difficult back, that will give us more cautious. jonathan: tenure down by 10 basis points on the bond move. the whole curve, twos out to 30's yesterday, double digit lower. a 10 year yield at 455. i think it was neel kashkari of the minneapolis fed yesterday saying he was perplexed by the move in yields. have you been equally perplexed? ben: i guess these day-to-day moves are quite astounding and sometimes difficult to square as one narrative unfolds based on the following days move. i think we except bond yields moved higher at the longer end

relative to the shorter end because maybe there is some supply demand dynamics there, deficits in the face of inverted yield curve, not much value in the long and but likewise i think it is basically the u.s. economy can probably deal with high rates. not adverse to the move in general for higher yields but when we go from here? we think wants to could be of volatile period, with inflationary trends continuing and abating at the margin, bond yields hover around this lever -- level, move a little lower, possibly, and that is good for equities. jonathan: thank you. let somebody market jargon but essentially what was taking place was the long and was selling off, yields were going higher and i we see a bigger move in the long and what yields are going bigger. the differential drops to -40 and the curve is flatter by nine basis points on the day. lisa: what this tells me of the

long end is swinging around and nobody can really understand where it will settle out and there is more stability in the front-end because fed policy seems more certain the longer term inflation dynamics and longer-term term premium, the idea where the fiscal picture fits in to inflation and investor appetite. jonathan: could not have said it better myself, this is what kashkari had to say yesterday, it is possible rising yield may mean the fed has to do less. what do falling yields mean? that they have to do more? lisa: potentially. if the yields are falling for the wrong reason. the issue is, and mary daly talked about this extensively and others have well, markets of people hate uncertainty. what we're dealing with his deep uncertainty not only about near-term economic data about the longer-term paradigm of where we are going to settle out. as a result you see these massive swings that are contributing to the lack of certainty that you can feel underpinning a lot of investing. jonathan: we spoke to j.p. morgan the last weekend. made the point to that maybe we

should get used to this on the bigger moves at the long and and not trying to scribe too much of a narrative to it. lisa: the problem is this underpins so many instruments. it's one thing to say that about amc but another about benchmark treasuries the under been the -- underpinned the borrowing costs on car loans and everything else. at a certain point it has consequences longer-term. jonathan: -- have it back. it is not a good game to get involved in. lisa: at some point the data will try to go with the game. jonathan: ppi this morning, cpi tomorrow. sebastian page in the next hour. this is bloomberg. ♪ ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. if you're trying to get a view of the

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>> we must be crystal clear, we stand with israel. the department of defense has moved the uss ford carrier

stryker to the eastern mediterranean and bolstered our your aircraft resins. we stand ready to move assets as needed. let me say again, any country, any organization, anyone thinking of taking advantage of the situation, i have one word, don't. jonathan: we stand with israel, the words of the president of the united states, the assistance from america sounds like as follows, support that arrived or would the on its way includes ammunition, interceptors, and the world's largest aircraft carrier. lisa: there's a question about where the u.s. really draws the line in terms of stepping in or not area they said the goal is deterrence, to deter a particular -- in particular lebanon and syria and hezbollah from wobbling -- lobbing some attack from the north. there is a question about where the redline is in the big issue,

when does this escalate to something that draws in more countries and more human lives? jonathan: if you look at the marquis would not have a clue any of this is happening. equities on the s&p, three days of gains, could become day for on s&p 500, positive by 0.2%. maybe a hand from this monster move in the bond market but we are off the back of five weeks of climbing another falling. yields down by 10 basis points on a 10 year, 455 -- 4.5562. lisa: coldhearted and that is an accurate description. people are looking at money which seems like an insignificant concept in a moment of human tragedy but if that is your job that is your job. that is where markets are at this moment. coldhearted markets can change on a dime if suddenly oil is affected in a significant way. jonathan: this comes down to iran. this is what jake sullivan had to say about the iran question at the moment. while iran plays this broad

role, a sustained role in providing support and capabilities to hamas in terms of this particular attack, over the weekend, we don't currently have the information. we will continue to look for it. it is a question in a question in a question we have been asking. when you hear things like that, is that a distinction without a difference? that is what i know you are trying to get into with john kirby yesterday. lisa: basically what's the difference between knowing they orchestrated something and that they financed it, helped with the planning, on a peripheral level. where's that line in the sand and how much is this a lack of willingness to -- and for good reason potentially, go into iran and escalate in that way because if you deem them to have a orchestrating hand in this and don't take that action, that sends a signal too. you have seen the reluctance in the israeli and you aside and how much of this they have decided it is unclear whether we want to take the extra step area -- step. jonathan: joining us now is

julie norman, wonderful to hear from you. let me offer you the chance to answer the question, is that a distinction without a difference? >> i think it's important to differentiate on this and it is interesting that israel in particular is being cautious to pin blame directly on iran. israel and the u.s. have long known iran has funded hamas, provided much of their weaponry, but this operation does look to be different and importantly a direct pin on iran would escalate the region quickly. this would just not be israel and iran as two states, it would include all of iran's proxy groups, hezbollah, proxy groups, and elsewhere. it could blow quickly and i think the u.s. and israel are aware of that and of their goals in the coming days will be containment along with retribution and deterrence.

that is on everyone's mind right now or it it does not mean iran will not play into this but i think, for the immediate future, cooler heads are trying to figure out where exactly to place the blame and act accordingly. jonathan: walk us through the tension in the words you used. what's the contradiction between retribution and containment? are those things compatible? julie: i think this will be a challenge the next few days, the next few weeks. on the one hand of course israel once retribution for these attacks, they want to deter a broader conflict as does the u.s. but at the same time you are trying to contain the conflict as we spoke about whether it is in the west bank in has a lot or throughout the region or over the long-term. israel, if they launch a ground offensive, it will be very difficult. gaza is a highly populated urban area. they would face mass casualties

for israeli military personnel, for palestinian civilians which we are already seeing and the dozens of hostages being held in gaza. this would be tricky, it is also tricky to oust hamas as a group, very tricky to know what would be next for gaza. i think the road ahead is going to be challenging for israel. we have seen i would say israel/palestine has become emblematic with the acts of violence that lead to wars and casualties on both sides. that is the reality of the situation and the tough needle to thread. lisa: given that, what you make of the discussion of john kirby talking yesterday about cutter actively trying to negotiate hostage release, something that could maybe de-escalate in the way you are talking about? julie: it will be interesting to see qatar's role in this.

we have had negotiations around hostages come around women and children, elderly, some negotiation that might happen there. qatar has an an important intermediary i would say between the u.s. and israel whether they can't or won't negotiate directly with and i think we will see that playing an important role. this question of the hostages is very much in the forefront for israel and how they coordinate any operation, it is also on the minds of the u.s. and other countries that have their citizens being held there right now. lisa: what are the redlines? do we have a sense of as israel plans a ground operation in gaza, is there pressure placed on israel to show restraint in certain areas from the u.s. and other allies as well as middle eastern partners like saudi arabia that have previously been discussed with israel? julie: absolutely. i think we have heard from biden yesterday a very committed u.s. response to israel. we are with israel and not

setting any redlines at this point. we are hearing different messaging from the eu, from european partners and allies and of course from within the region calling on israel to stay within the bounds of international law, within the now -- bounds of rules of war and proportionality and targeting of civilians. i think this will be an ongoing conversation. it is a very difficult one. i think many feel a lot of add version to talk about both sides as others feel it necessary to grieve for the civilian loss of life on both sides of the border. jonathan: when you hear numbers like more than 1000 civilians and then we have conversations where we talk about a proportional response, what is a proportional response to what happened over the weekend? julie: i think many in israel will be asking that and this has been a situation that unfortunately time and time again has played out in the middle east and israel/palestine conflict. over the decades we have seen different kinds of atrocities

that are then met with a response that also results in civilian casualties, that escalates for this long-term security challenge of then getting more people involved and whatnot. it is a challenging path. i would say morally and strategically for israel as they try to balance what might be short term necessities and responses with what might be long-term strategic thinking of what does this mean for the long run and what future are we setting up, if we respond in a way that feels this conflict further. jonathan: thank you for your insight, julie norman of ucl centre. it's a phrase we have heard so many times the last couple days, a proportional response. i got no idea what that is to what took place over the weekend. lisa: i think that is well said. i think this is a difficult moment we are in because what is the goal at a certain point? at the same time, what is

personal response mean when we are uncovering the scope of the terror of entire families wiped out in cold blood. some of the stories and pictures are just horrific, and at the same time it is igniting, simmering resentments and anger. at some point, how do you break the cycle? jonathan: truly tragic. the coverage will continue. the coverage of markets continues as well. your equity market on the s&p 500 shaping up as follows on the s&p, three days of gains could well become day four of 0.2%. the contrast between this and what is happening elsewhere could not be starker. equities continue to rally. in new york city, good morning. ♪

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jonathan: the longest daily winning streak going back to august, could become day four on the s&p, equity features shaping up as follows, equities pushing higher on the s&p 500 by 0.2% rate on the nasdaq, by zero point 3%. the sector breakdown, utilities coming discretionary, reversing recent moves, top of the pile yesterday off the back of this in the bond market. it continues, treasuries railing hard. yields lower by roundabout 10 basis points on the 10 year, just to see this at the long end, you talk about this, to see this, tenured on my 10 basis

points, friday, we have been talking about new cycle highs, 10 year, 30 year, 30 a through 5%, tenure pushing 5%, now down to 455 and 4.72. lisa: is there any conviction behind this? that is what i'm curious because we saw people saying things are too volatile to get in with any narrative. this feels like narrative ping-pong, whatever you want to call it, a feeling of deep uncertainty about the longer-term kind of airtime at a time where the data is not helping and there is geopolitical risk that is also creating a deep sense of insecurity. >> the recipe is one part risk aversion and two-part fed speak. seems to be the story the last couple days. lisa: sure. how will ppi factor in and if we get a hot cpi print tomorrow, does a reverse in one-day order people cling to other stories what will be the sticking point given the fact that may be fed officials are saying they will not raise rates again but they are not saying they will cut any time soon. they are not saying that really changes the longer-term view and

if anything, on the margins, that would leave longer-term yields higher if everything else is equal in the u.s. economy. jonathan: we can guarantee the intraday price action of the bond market will set the tone for the following days conversation for the 12 months. then change again. this finish on foreign exchange. the euro like this. against the u.s. dollar, the euro and around 106, seeing dollar weakness in the last one he four hours. a bit of a programming know, tom keene has gone over to morocco for the imf world bank meetings. no doubt he will be chasing down the ecb president over the next couple days. lisa: probably asking for european weakness, stagflation, risk with respect to oil prices and the best places to eat -- >> and drink. i believe dk touches down later this morning. francine got there early, look out for her interview of the international monetary fund. well worth checking out on bloomberg.com and bloomberg

terminal. under surveillance, the death toll from the israel/amash for rising press 2000. job biden providing assistance, 14 americans killed and others held hostage in what biden is calling an active -- act of sheer people. antony blinken heading to israel to show support, and we have not got that much data clarity on the people who were missing, the people who have been killed, and people being held hostage. lisa: we don't have a lot of clarity on how this will evolve or clarity from the zerit -- israeli side about the ground operation in gaza let alone what the role of qatar, egypt, and the united arab emirates is with respect to hostage negotiation and coming to de-escalation. regardless, i think u.s. could question what is proportionate response and we see tragedies unfolding be how do you put this into any framework and say how do we move forward at a time where there is seething hatred

that has led to a lot of this? jonathan: these of the phrasing to get through in moments like this that they cease to have meaning. no idea what proportional response means. if you're calling on israel to have a proportional response, what is a proportional response when you see a thousand civilians massacred over the weekend? lisa: i don't know how you pick up and move on and yet that is what people do. there is a point people are watching, where does the u.s. come into play? they are sending a big military ship that will get there shortly. they say it is for deterrence to deter lebanon and syria and hezbollah in particular which has its space in lebanon. where are the red lines? where are the negotiations? where does this become an international confocal like -- conflagration that percolates in a more significant way. jonathan: did you see the swiss, known for neutrality, a parliamentary committee to label them as a terrorist organization. the latest from the swiss,

moving further away from what we typically associate them with, the neutral stance where they don't get too involved. lisa: all of europe is scarred from world war ii and you can feel that a lot of the response and the solidarity that you can feel over there. jonathan: that's the latest very much more this morning. into ours time, ppi data coming out ahead of cpi tomorrow. later we will get the fed minutes from the latest meeting, early this morning we heard from the treasury secretary at the imf meeting in morocco. >> i'm not saying a soft landing is an absolutely sure thing but i do continue to think it is the most likely path. are there risks to this outcome? of course there are and global shocks are among them. jonathan: i say this on most every time janet yellen speaks, the economists -- was that the economists or politician? lisa: this particular specie was

not only talking about soft lighting but the potential for additional sanctions in iran. the potential for some sort of tax on russia's money that europe is looking to wager. there are a lot of things that are very political that she is talking about and i wonder how she is parsing those two. where oil fits into that in a moment where this administration would like to see oil prices go down and they don't have necessarily the reserves to start really creating that situation so how does that play? how does the economy play in some of these economic but also political decisions? jonathan: here's the latest on eggs on, a pioneer the ark closing the first half of 2024. exxon to buy pioneer for $60 billion. share some of these headlines as they pour out, exxon sees the pioneer deal closing the first half of 2024. companies have approved the transaction. the permian production volume would be over double the deal close. they see the deal creating cash

flow in 2024. all those comments coming from eighth presentation on the pioneer deal. we have known about this for the best part of a week. pioneer and exxon getting together. lisa: exxon trying to be a major player and it will be the biggest by far in the permian basin but also highlights their desire to be a swing player, to increase production in tandem and more directly in terms of demand, really showing the production you have highlighted in the u.s. at a record coming as people talk about the need to move away from fossil fuels so it is this interesting dynamic going on and the reality of the oil and gas face in the u.s.. jonathan: more reaction on that to the program, exxon down 1.8%, the offer price as we reported earlier in and around 250, 253 is the price. we are trading close to it, still some distance, 240 in the

premarket on pioneer. that stock up by 1.3%, more on that story later. joining us is the chief economist and head of global economic research at j.p. morgan. bruce, let's start with fed speak which is during this market around big time. they're talking about outsourcing monetary policy to the bond market. to do the work for them and then over the space of two days the bond market stops doing the work for them. i say this tongue-in-cheek but i guess i kind of mean it. does this mean now they have to do more work because we have had a two-day rally? bruce: i don't think the two-day rally takes out what has been a fairly material repricing of the fed, not to more hikes but to holding high for long as well as other factors which as you see fed speakers talk about determining what that is does matter for monetary policy. in the immediate decision-making, the rise in yields we have seen accumulating the last three months, the better news on inflation, i think that is enough to put them on a pause that extends through

the november fomc meeting and i think more likely than not to the end of the year. they are not i think necessarily done. i think where we go on inflation, how much resiliency economy shows into the new year. if we don't get inflation site -- showing signs of moving below 3%, the fed could be back into the picture in 2024. lisa: is there any economic consequence from the volatility and benchmark rates? i see this at a time where if you are seeing massive swings in the rates people use to determine corporate borrowing costs, mortgage rates, auto loans, credit card debt, at what point does this have an impact on the economy regardless of where the rates set allow? bruce: i think there are two things going on here, one is if you look at the move up in yields and even if you combine it with the move up in oil prices, we are not getting what i think would be a material drag on growth in the near term. we also have to take into account the very positive news we have had in financial markets which was a lag over the summer

will boost growth. at the same time, there is a risk of disruption. when things move this quickly over a short period of time, there are unrealized losses and potential for stress and sometimes stress in a narrow's base can broaden. that is the immediate risk. it does not show any signs of having been realized but i think we have to watch out for it as we move through the next couple months. lisa: ben gutteridge was saying inflation data will prevail and that will be the guiding lie in this little of uncertainty we have seen. when do we get that? we keep talking about how every week this inflation data will be the most important. no, wait until the next inflation data. today we get ppi coming tomorrow cpi, what could move the needle with respect to this bigger picture where we are in the inflation story? bruce: i think that's a little mistake to think any run of a couple months were three-month on inflation will tell you where inflation is going to be in a

year. we have obviously had three months of good news on inflation and we are not looking for a troubling september reading either from the ppi or cpi thursday. however, i would say what is really positive here if you want to take that is the fact we have had an economy delivering strong growth would has not put extra pressure on inflation, not from the weight story and not from the on rate, both of which sent a positive message from the fed in last friday's report. lisa: we were talking earlier and john mentioned the lvmh results they came out does show a normalization as the company characterized consumer spending. we have heard this. where is the line between normalization and rapid deterioration in consumer spending? bruce: i think that is a hard one and i think part of the problem in terms of watching the economy, not just the u.s., is we have had outsized gains in things as we have been normalizing from covid depressed levels. the moderation which often times

his views as a ash viewed as a sign of weakness, in this case may be sending a different message we are normalizing, i think consumers generally have darn good fundamentals in terms of labor income, in terms of balance sheets. i don't think with the consumer we are going to see any meaningful break here, anything that will scare us in terms of the sustained bout of weakness unless the labor market is breaking for other reasons. i think it is businesses that will hold the key as the hall -- how long the expansion lasts. jonathan: that would normalize it. what is normal? are we going back to? bruce: well, we are in business cycle environment where we don't know how long this expansion is going to last. i do think that what we are seeing in the labor market in the u.s. if we want to use that as a guide is an economy that is starting to settle toward something like 150 to 200,000 jobs which if growing at 1.5% to 2% would be consistent with normal.

question is whether we can settle at that 1.5 to 2% growth rate after having a strong third-quarter and there's a hole in the things as you are aware going on that speak to it. fundamentally, the economy is sound, monetary policy is restrictive, but the fed is signaling it wants to take a pause here. i don't think what is happening in terms of energy markets interest rates are probably going to break this thing. i think we will continue to go here with an economy that will be ok, with job markets that will hold in and the issue about how long this lasts is about inflation, it is about the pressure on businesses and when today get enough pressure on them to really think about shedding jobs in a material way. it will not happen the next few months. jonathan: a constructive outlook. bruce, thank you. bruce of j.p. morgan. let me share this quote from the cfo of lvmh after three roaring years, outstanding years, growth is converging toward numbers more in line with the historical average. we are going back to normal, whatever that is.

lisa: that is a great question and you asked is this the reason why there is sort of any -- isn't any stability underpinning younger -- longer-term yields because nobody knows the answer. jonathan: 2023 gains have gone over at lvmh. gains for pioneer. let's talk about that, the biggest deal potentially that closes for exxon 69 -- since 1999. $253 lisa: lisa: per share. how much does this speak to the acceptance that oil is something that will be needed for a long time and the u.s. is going to want to be a significant player in the space? jonathan: there's a $60 billion deal in american oil. more throughout the morning. this is bloomberg. ♪

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...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. >> we have not seen specific evidence that links iran to these attacks. they are complicit because they have supported hamas for so many

years but just no specific intelligence with respect to these attacks i can speak to. there is absolutely no intention or plan to put american boots on the ground in this conflict in israel but we have serious national security interests and we have to make sure we have the options to protect if we need to. jonathan: that's the latest from john kirby, the u.s. national security spokesman speaking on balance of power of andrea and joe mathieu. a passionate address from the president yesterday, support that arrived or will arrive or would soon arrive will be ammunition and interceptors. the world's largest aircraft carriers, some of which the president undressed yesterday. lisa: they are confirming their intention is no u.s. boots on the ground. the key is deterrence and key question is the next apps at a time when people are wondering whether this will escalate or we will see the involvement of nations to the north of israel and how much this will percolate toward iran which is the big question mark.

jonathan: let's have the -- the discussion now, the president of the israel democracy institute joins us, an independent center research and action debt into strengthening the foundations of israeli democracy. fantastic to catch up with you. the next steps, what are they? >> the way to look at the next apps, it is not a standard that would take political conflict with military means. hamas has capabilities with isis-like goals and methods. they are using isis methods to massacre women and kids and in one community they murdered and slaughtered 30 to 40 babies and beheadings and so on. the list of atrocities goes on and on. this is what happenings when you have isis-like capabilities of a state with isis goals and isis methods and therefore the only next step or only outcome is obliterating, crushing hamas

capabilities, hamas leadership, it is not about trying to contain, it is about how to obliterate, and this will be costly, it will be painful, it will be tragic, but essentially by declaring war on israel in this way, hamas created a zero-sum game. if you want to survive, it is either obliterate hamas or suicide and remain a victim and we have no intention of remaining victims of this barbaric and jihadist regime. jonathan: i can only begin to understand where this comes from for you. a deeply emotional place. we're talking about one of the most densely populated areas on the planet. how do you both obliterate hamas without inflicting severe damage on the civilians that live there, that have nothing to do with that group? >> this is exactly the key difficulty and you are asking a

very important question. i will answer it as head of the israel democracy institute. we are the country's premier organization, promoting freedom, promoting democratic values, promoting if you will the western way of life in israel in the region. and as head of the institute, i can tell you if we want the cause of freedom to survive in this region, if we want western interests to be looked after rather than iran and hamas, hezbollah dominating the region, it will be -- it will have a serious price. we will have a tragic price. also with palestinian population. hamas situates its capabilities within the population. there using the as human shields. this is a war crime. they have a dictatorial regime and to be savvy their own

population tries to speak against hamas in gaza. it would be torture, slaughter, immediately area did they captured this population and they have to go. but citizens that will not manage to detach themselves from hamas capabilities, from hamas leadership, will pay a price until we are going to free guys and free them but citizens will pay price and promoting the cause of the west and ally of the west and causal freedom and democracy means tough footage will come out of gaza. you have to stick around because otherwise isis will prevail and we are not going to let it happen. lisa: putting the goal aside for one second, there is a question and there have been analogies drawn to iraq and afghanistan and the u.s. invasion there and this hand-to-hand combat in deeply populated areas that lead to a big toll on soldiers lives as well as civilian lives and not to lesser -- lead to resolution. what makes people think this

could be different? >> president biden yesterday mentioned israel his a secret weapon in his conversations 50 years ago. when we were surprised last time in an attempt to destroy our stay and said we have nowhere else to go. american went into iraq and afghanistan and ultimately pulled out. we have nowhere to go, we are not going to pull out and the gaza strip his less than a mile from communities. we have an isis-type organization in israel's backyard. this cannot stand. this will not stand. there is the more moderate palestinian authority in charge of the west bend and we have a security collaboration and security relationship, so if a moss is removed, the authority can return, i might remind you that in 2006 the authority

control guys as well and hamas took over, killed through the pa people from balconies, murdered them and established a dictatorial regime within gaza. this regime needs to go. it will be painful, it will be hard, it will be costly, but they need to go. lisa: there has been a real difficulty at least in the public discourse separating hamas from the palestinian people. in the arab world there is a question about where that distinction starts to get blurred and support of some of the other nations in the middle east including saudi arabia that was previously speaking with israel. i'm wondering from your perspective how closely aligned to some nations in the middle east are or how much there in communication as this process goes on and as they try to work toward something more peaceful going forward in the future. >> there is a big struggle between moderates and radical

jihadists. it is not only an israeli struggle. israel is a front base of the west in the interest of moderation in this region. if it was not for strong israel in this region, does anyone have a doubt iran would have otherwise become an established dictatorial much like they do to women in their own country they would have done through the region? this is the attempt. hamas, while i'm not saying we don't necessarily have evidence iran planned this attack but iran pours weapons and ammunition, finance, into hamas. hamas is an ally. there is agreement about the overarching mode of killing as many jews and destroying the jewish state. as a matter fact, getting rid of saudi arabia and the emirates and taking charge of the

territory and resources. can you imagine global security if iran implements its oil? it is an israeli interest to obliterate hamas but it is a global and western and american interest to ensure israel does not successfully and then restore the dialogue with the southeast to establish access of moderate states, in accordance with the nato and western allies. there is a big picture here, the big picture is very clear. i'm not concerned about the saudis not understanding because their survival is at stake as well. of course right now it would be difficult to engage in peace talks as so many people are willing to die. israeli policy is not derived from vengeance, it is derived from a clear understanding --

clear, rational understanding that it is a struggle for survival with forces, with evil forces, with evil intentions, and we have to be very strong. i must say, if it is ok to say here, i think president biden understands it. he came yesterday with an historical speech and there is bipartisan support for israel. there is a deep-seated understanding there is shared values and interests. we will do our part and i'm glad the united states is doing its bid -- bit. jonathan: thank you for your time today. a representative from the israel democracy institute. lisa: everybody in israel has seen someone called out, difficult to know how this will progress, how this will proceed, especially given the ongoing violence. jonathan: 300,000 reservists called up erie more coverage this morning on bloomberg tv and bloomberg radio. equity market positive by 0.2% on the s&p 500.

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>>this i did the fed officials

will take a more dovish stance. given the rates had gone up so much and yet if they reverse too much that creates a problem. jonathan: is saying possible rising yields might make the fed has to do less. without real understanding of why they are higher, they are happy to outsource monetary policy to what the bond market is doing. lisa: essentially monetary policy uses the bond market as a transmission mechanism.

if it is going in a certain direction they don't have to understand it if it means credit will be restrictive, right? this is the logic behind why the bond market can do the work for the fed even if you do not fully understand all of the rationale behind it. i would take a step back and say what we have heard from ben goodrich, from others, is inflation data will reign supreme. i what point though? jonathan: the question is whether the market mover is doing too much or too little. if yields are up because the data is robust and fed needs to know more and maybe they can suggest the market is doing it for them, if the yields are a because of the budget deficit and there is concerned about financing the budget, of the u.s. government, maybe yields are rising too much given what the economy needs. they are different things, aren't they? lisa: they are completely different things and there is no clarity on either of them. what is the fed supposed to do? this has been the message, they don't know or control fiscal policy. they watch it and can think about it or have their views but if they are looking at that as a

potential feature, looking at inflation data, determine how much it will go down and how quickly, and are trying to come up with forward guidance. can we say forward guidance has gotten muddied and they are to outsource that to the bond market? jonathan: based on the logic the last couple days, the rate hike is back on because treasurers -- treasuries have rally. 455 on the u.s. tenure. more on that without the snark may be. a little later on this hour, need to talk about a deal, exxon pioneer, the biggest deal for exxon since the late 90's -- 1990's, $60 billion deal. lisa: it's interesting at a time where we were talking about the death of fossil fuels and where people two years ago, three years ago were talking about transitioning to electric vehicles more fully and when gas and crude will become obsolete. no longer. there is this acceptance and desire for energy independence that is new at a time where we are seeing record of production in the u.s..

this gives exxon an incredible amount of flex ability in the permian basin. jonathan: the stock deal, 253, trending premarket at 243. pine europe by 2.3%. let's talk about the price action elsewhere on the s&p 500, equities up as follows on the s&p, three winning streak on the s&p, looking to make it four. up 131%. heels lower, on friday, cycle highs pushing 5%. here we are sitting wednesday, 455 .82. jonathan: how do you -- lisa: how do you create financing based on that level of volatility? we get the latest in real economic data that might serve as some sort of linchpin of a more concrete view, september ppi coming out. the expectation is for some disinflation, will it be enough to create a calm background for that auction of 10-year note's that will be a test of just how much demand there is in the market today.

fez speakers lineup, maybe they will point to the bond market and say check out what they have to say because we cannot a slain a better than that. chris weller and rafael bostic, susan collins and 2:00 p.m., in case you want more information from the fed, we get fomc minutes from last month's meeting. will it be obsolete? will they give a better sense of how they got to that soft landing projection that some people thought was a bit of wishful thinking? today we have at 10:00 a.m. i believe we will start to see some of the procedures to lay the groundwork for the vote for who will be the next house speaker. the contest is between louisiana's steve scalise and ohio's jim jordan. all of the discussion around the u.s. support for israel, military aide, ongoing military aid to ukraine all hinges on having a functioning house. at this moment, what was it that one congressman said, a 2% chance it would come to some easy resolution? based on just how contentious some of these discussions are.

jonathan: is mccarthy making a comeback? [laughter] lisa: some people say maybe he should because there is no coalescing around the others. does he want to put himself out there again? he has not rejected it. jonathan: still on the table potentially. and ore in 10 minutes time. joining us is sebastian page, cio at t. rowe price. i want to start with a quote from the cfo of lvmh, he said after three roaring years of outstanding years, growth is converging toward numbers that are more in line with the historical average. it raises the question when the revenge spend, the post-pandemic boom is over, what are we going back to? >> i think we are not going back to what we used to call the new normal which was the post financial crisis environment with low growth, low inflation, and low rates. we just conducted a study of

historical regimes, and if you look statistically on where we are, given the macro data, which we have to admit is distorted, it looks more like the old normal, so post 80's, pre-great financial crisis environment or maybe even the postwar boom. the bottom line, one of the takeaways is there is oxygen for the economy and markets above 5% rate. the average 10 year for the last 60 years is about 5.8%. so i do not think we are going back to the so-called new normal. this is going to be ultimately a very different regime than any of the regimes we have had before but there is room for growth. we are holding portfolios rally diversified. i know it is boring, it is tried advice but the data is stowed -- so distorted that now it is very timely advice. >> let's get into that.

i find interesting. how can we say the regime has changed but we are back to the old normal with broadly diverse portfolios? should not change too? >> the equity risk premium is compressed but let's look at both sides for a second. growth is surprising to the upside and we are talking about technical positioning 12 months ahead. we started the year with 0% expected gdp growth. we are trending toward 2%. we started q3 with half a percent expected gdp growth. for q3, now we're looking at 3%. growth continues to surprise on the upside. strong demand for services, ism manufacturing are up for three months in a row, fiscal is peddled to the metal, so i think there is no reason to panic and go to cash on the other hand, and i'm huge fan of the show, everyone is talking about the lag effects of higher rates and the speed at which rates have

risen. that is a concern. we have the longest yield curve inversion in history to worry about and you and lisa keep asking and it is the right question, when is it going to start to bite? you look at both sides and take into account the fact the data is distorted by pandemic distortions, the level of money, the love of money in the system, and you sit back and say now is not the time to be a hero. we are 75 basis points underweight stocks but otherwise close to neutral on total risk. lisa: this raises a question about bonds is a diversified feature. how can you make the argument growth keeps surprising on the upside and we have all of this fiscal spending and potentially more down the pipe based on some of the conflicts and then bonds still are stabilizing offset to stocks? >> it is a great question. i am kind of a correlation nerd. i talk about it in my book.

i studied the stock bond correlation going back decades and, in a nutshell, when he you see inflation or interest rate volatility which we are seeing now driving markets, you can expect a positive return correlation between stocks and bonds. in other words, you move together, rayshard, inflation shock, which i think is the spirit of your question but i continue to believe that when you get a growth stock or like you see the last couple days, a geopolitical shock and the fed talk influencing this, the say facet remains u.s. treasuries and you get a flight to safety. a question for portfolio diversification is how much inflation volatility are we worried about and there are other ways to protect against that, to hedge that and how much growth volatility or recession risch -- chris carr we expecting. you have a role for bonds in the

portfolio and high rates means higher long-term expected returns for bonds. but this question of what is the role of bonds is really on investors minds at the moment. it is an important question. lisa: is there a stabilizing feature through a gara -- growth stock and inflation shock or volatility shock as you talk about? >> now you are kind of describing the stagflation environment where you get decent point -- disappointing growth and inflation volatility. i do think there is a role, it is a matter of which variable will dominate. if you want to balance the portfolio, there are things you can do and tactical asset allocation and adding real assets stocks in an overweight to real assets stocks which tend to pop with surprises to the upside on inflation which we think are in the cards. if you have that to balance part of the inflation risk in the portfolio, perhaps some tips but

shorter-term tips, cash, bank loans are really interesting when rates are rising. the credit risk there but you can actively manage them so put it all together, i am an asset allocator and i don't like to make statements that what big asset classes should taken out of the portfolio and we should go all the way to cash or stocks . it is a boring approach but an appropriate approach when so much of the data is distorted. jonathan: sebastian page, thank you, sir. we mentioned kevin mccarthy, here's a quote from him on fox news radio. there are number of members who want me to become speaker again. i advised them not to nominate me. that is the official lisa: lisa: response from kevin mccarthy. you can understand why he might not want to be renominated after what 15 rounds of votes the first time and being the first house speaker ousted from office. it creates a little bit of

bitter taste to the math. jonathan: if you're just running us, welcome. your s&p 500 is posited by 0.3%. yields are lower, down by nine or 10 basis points, 4582. in the next hour, we catch up with bank of america on this equity market. you have in the last couple months upgraded her outlook on s&p 500 for the second time in 2023, a more constructive you from her and an update on the latest in israel. we will catch up with anne-marie in five minutes time. lisa: we have been getting some sense of how it is evolving at least in washington, d.c. in terms of the support pledged, still a question and we keep asking this of where the linking feature is with iran and that is one of the big questions because from a market perspective that does key into oil prices in more significant way. jonathan: haven't seen a massive rally there. they won mande and then faded quickly. lisa: which is the presiding narrative and market seems to be

this will be contained and unnecessarily percolate out. there will be measures that come and de-escalate because otherwise you would see more material move and it has not stuck. the only move that has stuck is in the bond market. jonathan: that is the taking the temperature of whether iran is directly located in what took place over the weekend. to get the feeling based -- based on the moves we are seen? lisa: we need israel and u.s. to build on that coming out to say iran is directly involved. if they are not going to get directly involved, it takes some of the potential heat out of the pressure there. jonathan: more on that question next. annmarie hordern in washington, d.c., live from washington, next. ♪ is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

>> when congress returns, we will ask them to take urgent action to fulfill the national

security requirements of our partners. the united states enforced our posture in the region to strengthen our deterrence. we stand ready to move additional assets as needed. jonathan: the president of the united states speaking on israel/hamas war, addressing the country in the world yesterday. from new york city, welcome to the program, plenty of price action to talk about, elsewhere in the s&p 500, three-day winning streak could be four. up .3%. ppi data later this morning, we will get the information in little more than an hour and then cpi tomorrow. and we can talk about earnings, talking my earnings would have crept up on us the last couple weeks. lisa: do you think the ppi and cpi data will be more important then jp -- jp morgan earnings and others coming subsequently? jonathan: i really don't know. lisa: if feels like there are some questions embedded in some of the economic data backward looking and forward looks from some companies that have been upgrading their estimations for their own businesses by providing more ash might provide more compass than lagging economic indicators.

jonathan: the banks finance the economy and if they are constrained by what has been developing the bond market, that is worthy of interest. i find the interest -- the earnings from bank of america more interesting than jp morgan friday. they have had a terrible year through 2020 three, stocked down by 20% so not talking about regional banks, we are talking about bank of america down 20% on a year where the economy we are told by everybody is doing better than good, better than expected for sure. rates have been higher which has meant to help them but it has been hurting them a time if you're looking at the stock. lisa: rbc capital put out a note saying he is looking for credit deterioration. at what point does that lead to what you're talking about, weakness you are seeing in the share price of bank of america that has not been reflected in the mainstream feeling about where we are in terms of credit retreat from the global economy? jonathan: this is absolutely nothing compared to what we have to talk about next. looking at some numbers, trying to get clarity on certain issues

per me to work through some of this. israel defense forces spokesperson said the overwhelming majority of the 1200 israeli fatalities were civilians. we are trying to get clarity on so many different things. the number of civilians, the number of people missing, particularly from america. the questions being asked of this president, how many are held hostage? in an interview earlier on today, a reference was made by the bloomberg anchor to the mutilation of babies which is a shocking story. we should make it clear these are unsubstantiated reports and we apologize for that error but seeking clarity on some of these reports is a big deal for us over the next few days. anne-marie joins us now, bloomberg washington correspondent. how on earth to be a clarity on those things? >> right now what we are witnessing is this fog of war and a ton of confusion as you do have the israeli defense forces

going in and trying to figure out and going into people's homes, people no longer there, what happened, who is, are they dead, where they taken hostage? there is a number of questions happening, a ton of reports coming out out of southern israel as well as what is going on in gaza and is going to take weeks if not months to really try to understand the devastation and travesty that was done here and when it comes to tracking down these individuals, it will be a global effort because there were other nationals besides israelis. americans are missing, but the u.s. cannot even say how many we think are taken hostage. we do know a number are missing. jonathan: jon and i have been talking about how there has been delegate messaging around iran, particularly from the u.s. and israel and how that will determine the involvement there. we did hear from janet yellen's treasury secretary early this

morning that the idea more sanctions is on the table. where are we in terms of understanding how far the investigation into iran's involvement is from the u.s. and israel? >> it seems like intelligent services are trying to go back and figure out what the direct link was. it is a very difficult line for the united states to walk. because you have to say on some level iran was complicit for their decades of support of hamas's the u.s. designates as a terrorist organization, complicit in terms of helping the manufacture arms, the amount of cash they support hamas with, and the training that they give to this militia that the u.s. designates as a terrorist organization. on one level, the united states has to say they are complicit. at the same time you find a very difficult for any official to, and directly link the weekend

massacre to tehran directly. part of the reason of course is if iran is directly implicated, israel will be compelled to attack iran and are not just talking about deniable missile attack here or there or cyberattack, compelled to attack in a very public forthright way and that of course risks a broader, regional conflict with iran, a major state actor at play. lisa: there's also question, president biden talked about additional eight israel and providing munitions and additional support. where is the financing going to come from if there is not some sort of speaker determined by november 17? >> already the new york times is reporting alongside antony blinken touching down in israel we will see the first tranche of weapons being delivered to israel. there is a number of drawdown methods and money already appropriated the u.s. -- the

president can draw upon to send to israel but yes he did call for the fact that when congress is back, there is going to have to be more money for the intelligence and security of our partners. notice the president used partners. in the moment he was linking ukraine aid with israeli aid. what we know is the senate is ready to move on this. there is a tremendous amount of bipartisan support in congress on the house side and senate side to make sure israel is given the state and the u.s. is standing with israel. of course there is an issue of the fact there is no speaker of the moment but the pro tem speaker, patrick mchenry, did insinuate to politicals -- politico yesterday that if the government needed to ask, he could. there's a way potentially for congress to give him the power to bring a critical piece of legislation on the floor even though at this moment he is acting as the interim speaker and they have yet to decide on the permanent speaker of the house. jonathan: there was a sense

monday morning after the shocking images over the weekend that we would get a sense of urgency out of washington, d.c. that maybe we would even see a change of course, change of approach, to making policy and start to do something about dysfunction that has plagued the nation's capitol for much of this year and a whole lot longer. do you sense that still this morning? >> i think there is this feeling they want to act and get it together. the issue is this party, the republican party, has such a slim majority in the house of representatives and they are too divided to coalesce around anyone. what we heard from congressman tom massey of kentucky out of yesterday's caucus was there is a "2% chance," that today they will know who the next speaker is. today they will be taking a blind vote and when they meet this morning, this is republican caucus. there is a 2% chance so that says this family has a lot of issues to work out and we are

not going to see that anytime soon. even though when you talk to people and here what they say to the press, they want to act, they want to move past this, they want to get legislation to the floor but it is too divided, and the majority is too slim for them to coalesce for any individual at this moment. jonathan: amh in washington, our chief washington correspondent. you think the odds of selecting electing a speaker are harder -- higher based on what we have seen and shut down his likely? you are wrong, he does not think it will change at all. lisa: that is what we saw with the respect to wrangling and lack of coalescing around a particular candidate. one of the key swing factors here is at what point will democrats want to help out in some way and not just vote for hakeem jeffries and try to facilitate the next speaker in some way by cutting side deals?

a lot of people think that might be one of the determining features going forward. jonathan: we have a big deal in the old patch, a $60 billion tie up between exxon and pioneer, 250 three per share. that could close and we can have an absolute monster in the energy patch. exxon with the intensely biggest deal going back to 1999 p i say potentially because we are trading at 243 in the premarket for pioneer. lisa: you can always account for some type risk but it seems like people are making this -- baking this in and then the question is who is next? jonathan: who will strike a deal? i don't know if anyone will strike a deal that big. coming up, charles schwab on a big bond market rally.

♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. jonathan: three days of gains on

the s&p 500 could come four. this is the longest streak going back to late august. futures higher in the nasdaq. russell, small caps doing ok. we talked about sector performance yesterday. utilities, discretionary, the kind of things getting beaten up by higher yields taking comfort from lower yields. let's break it out as follows. the 10 year is down nine basis

points. the cycle high on friday was 4.8852. by the way, we were closed on monday. these moves tuesday and this morning our monster moves two days in a row. lisa: what is behind this? something technical? something fundamental that has to do with haven demand were truly with fedex speak? i do not know. i do not think anyone does. jonathan: last week, double-digit moves two days in a row in the other direction. lisa: what is going on in the bond market that had been the most liquid, deepest in the world. it is going on there? jonathan: i am not meeting -- im

f meeting taking place in morocco. they arrived imminent ago, sent out a picture of a camel. lisa: that is not tom keene. guy: not sure tom could fit on a camel. but she will hopefully catch up with christine lagarde later this week. i would love an international perspective on treasuries. lisa: when the u.s. treasury market is flipping and flopping, the rest of the world moves along in tandem. more fraud for europe right now than the u.s., especially with people saying that the u.s. strength is unique in how persistent it is. jonathan: the euro-dollar right around 1.06. 1.0598.

under surveillance this morning, the death toll from the israel- hamas war rising above 2000. israelis responding to missile strikes in lebanon. leaders in talks to form an emergency government. do those security challenges go beyond the gaza strip? we have to be concerned about what is happening in the north with lebanon and hezbollah. lisa: there have been a number of reports about rockets being fired. it has not moved into the escalation phase. interesting anytime heading into this where there was unprecedented debate and clashing within israel itself about what kind of rule they want. a lot of protest to netanyahu's rule. there is a question of how

coalescing around emergency government factors into what happened next. especially given the dissent we saw earlier. jonathan: and speak over the last couple of days, mary daly saying a 5% policy rate is nothing the new neutral that we may have to live with higher rates than before the pandemic. bond yields have taken it meaningfully. financial conditions have tightened, depending on whether it unravels or momentum in the economy changes. that could be equivalent to another great height. you caught up with mary daly last week. lisa: she also said market take uncertainty, people hate uncertainty. what guidance can she give? uncertainty is a policy choice. inaction is a policy decision. right now, at every meeting, they are taking active decisions given the uncertainty and effect

she is parsing through the different anecdotes, she calls them data. that is part of what is factoring into how she is picking up where we are in the cycle. jonathan: they are anecdotes. lisa: totally. she went off on this. she said it is different. [laughter] jonathan: we will skip that today. some fed minutes at 2:00 p.m. eastern. big deal for american oil -- exxon mobile agreed to by pioneer natural resources for nearly a $60 billion. this is exxon's largest acquisition since merging was mobile. positions exxon to become the predominant producer of oil in the permian. an interview with their ceos,

alix steel catching up with both of them later. darren woods one and something to buy, stop sheffield was retiring, perhaps looking for something to sell. lisa: the timing is interesting, especially when oil is such a focus when it comes to where that will play with respect to inflation as well as the u.s. and their independent, given some of the concerns internationally. the fact that you have one major player in the shell catch some late-night -- shale patrick may be more amenable to regulators than two years ago. jonathan: looking forward to those interviews. with us at the table here in new york is kathy jens. wonderful to catch up with you. we spoke to charles cantor yesterday who said that bonds are contracts and equities are stories. i want to talk about race action. the first two days of last week,

we had double-digit moves, yields higher. the first two sessions of this week, we have got double-digit moves, yields lower. what do you make of that? kathy: liquidity is not what it once was, but we are on the cusp of how high is high. we keep hearing from the fed that we might be there, might not be. we have had mixed messages, but a lot of narratives going around that it is supply, which i think is not a good explanation. we always have supply, always know when it was coming. i do think anyone woke up yesterday and said we have a rising deficit. we had strong economic data, blowout jobs report in terms of numbers but low wage growth offsetting it. you are talking about uncertainty, that drives up the term premium. it is highly correlated with

volatility. a lot of questions, 11 stories, and a lot of people trying to get an explanation. lisa: two ways to interpret this -- on the one hand, volatility might mean something could break, makes things more vulnerable. or volatility has been incredible, nothing has broken, which highlights how resilient the market is. which do you take? kathy: i would be concerned there are some things that could still break, not a big explosion, but you cannot have this rapid of an increase in rates and tightening of conditions under the surface. you look at the spread data maybe not so much, but under the surface with lending standards, what is happening with bankruptcies in smaller firms, you start to see some cracks. that is also what is being

reflected in the fed speak. one of the things i do when the fed's reports come out as i read the comments. it is a treasure trove of anecdotal data. they are probably reflecting a lot of the comments from the businesses, saying enough. commercial real estate is a problem. finance is a problem, our sales are a problem. we are running into those sorts of things. i am guessing that some shift in the fed speak is a reflection of what they are hearing on the ground. lisa: if the fed does hold off on raising rates and additional time, is that good or bad for long-term bonds? if you believe in the economic data, wouldn't that mean that longer-term yields can go higher? kathy: it you leaves that the lagged impact is still working, which is what we are hearing

from various fed speakers, saying we have not felt the full impact, then you do not need a long and rally that much. rates move up at the long end that much to continue this constraint, that the question is have we hit peak? if we have, as the curved disinflation? -- does the yield curve disinflation? jonathan: what is a signal of weaker growth, the both latin or? traditionally i was told it was the all flatten our. -- bull flattener. does that make sense to you? kathy: no. when it is averts, you want -- when it is inverts, he wanted to be because rates are coming down at the short end. you do get this flattening out of the peak, but it is usually with short ends coming down.

it does not make a lot of sense to me that if you are going to make a weak economic growth call that the steepening is consistent with that. jonathan: i am with you on the anecdotes. we spoke to patrick of the philadelphia fed. he says he has been hearing from people who are saying they have gone far enough. he hears those complaints all the time. when we get the fed later, how do you read them? do they mean anything? kathy: type read them because any small changes in the wording will be significant. i have plenty to find out several? a few? a lot? how many of the people at the feel this way or that way? but it is somewhat dated at this stage credit three days out from the fed it is over. jonathan: or dated based on the moves we have seen in a few hours. lisa: one in a session that

tends to be volatile. jonathan: kathy jones of charles schwab, thank you. ubs, banking update on how some businesses are responding to tension in the middle east. ubs has imposed a work-related travel ban for the middle east. ubs imposing a work-related travel ban on its staff within the middle east. lisa: there are probably adjustments across the board. israeli staff all are being called up to the army in mass numbers. you have to think about a whole host of different ways that different companies are trying to rearrange their plans. jonathan: we will see how financial institutions and businesses respond over the next weeks and months. welcome to the program. s&p 500 positive by 0.3%.

yields lower by 8 or 9 basis points. let's go through the numbers again. what was on friday and what we see in the screen right now, friday, high of the cycle 4.8 852. we are back down to the 4.50's. and on the 30 year, 5.05%. that was the high on friday. we are down. lisa: kathy jones says this is volatility and term premium when you get this sort of uncertainty. all these moves have been driven, not by inflation expectations, but by term premium. it raises this russian of, if we are in a prolonged period of uncertainty, couldn't we get higher yields whether or not you have economic justification for them? jonathan: i have been looking

forward to this conversation. he has been talking about the loss of predictable demand in the market. are we talking about the change in the nature of where the buying comes from? lisa: that is what people think. you have japanese investors who can go home and get yields. the idea is not just are there enough buyers. are there enough price insensitive buyers? that is the distinction that needs to be drawn. jonathan: that is the major change in the last couple of years -- qt, china pulling back. daleep singh just around the corner. new york city, equities higher. good morning. ♪ et lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments.

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conflict and that causes prices to go up, that does have an effect on the economy.

if prices go up by 10%, 12 months later, inflation goes up by about .4 percentage points. global output is lower by 1.5 percentage points. it can have these effects, but it is too early to tell. jonathan: she was speaking with francine lacqua at the economic impact of the israel-hamas board. francine lacqua at the imf meeting in morocco. tom keene will get there, get settled, do a couple of panels, flyback, and maybe have a vacation along the way. lisa: i would like to see whether he really starts to observe the culture. jonathan: agree. we will get a phone interview with tom. lisa: we need video. jonathan: national security

experts debating whether the u.s. has sufficient capacity to back the u.s., israel, possibly taiwan. this underscores the likelihood of a period of fiscal dominance in which deficits are mostly disregarded an interest rates must adjust to a higher equilibrium. daleep singh joins us now. wonderful to catch up with you. 20 difficult time. -- wasp a difficult time. we caught up with the regional communities network in the last 24 hours. this is what they had to say. he has never seen this kind of geopolitical tension in the last 50 years with the budget position of the u.s. this week. how important is that?

daleep: he's right. we have returned to the most intense period of competition in three decades. that will mean more demand on fiscal spending. it is also the reality that we are seeing a surge of yields driven by term premium because investors do not know whether we will grow fast enough, whether tax revenues will be high enough to service the rising cost of capital. they do not know whether washington, d.c. can exert enough fiscal restraint. that is why you're seeing this repricing. lisa: you of this column that we found fascinating about the lack of price insensitive buyers questioning the ability for the u.s. to borrow at past rates. bring this forward to today's moment.

how does that make you double down on this idea of borrowing regardless of where rates are order to finance nationals he another concern? daleep: three fundamental dynamics -- what is the's that the fed's function? what is long-term and neutral at the premium? and israel, i think lori logan said it best, when you have a higher term premium, all things equal in place a softer economic outlook and greater likelihood that the policy rate has pe aked. we are seeing that something really positive is happening on the supply side of the economy. that is how you get above trend growth. long-term neutral rates higher. then the balance of risks is still moving higher. if the house is in disarray, no

durable fiscal consolidation is on the horizon. you have a durable risk of a supply demand imbalance. fed no longer showing up in every treasury auction, either because their savings balances have fallen or because they want to diversify their holdings will -- holdings. the second israel is another injection of uncertainty. you get another drift and long-term yields. lisa: based on what you are saying, do you think the move we have seen, barring the past couple of days in long-term yields makes sense, not high enough, or has it gone overboard? daleep: annmarie hordern the senate we are in -- set it right. we are in the thickest fog of a tragic war. over time, as market participants think through the

effects, the forces that i've mentioned will cause it to retire. the front end is where i have the most conviction. the fed has said we will let markets to the work for us. if data continue to moderate, both on growth and inflation, we can watch rate. jonathan: i want to finish on a potential policy response. what kind of sanctions response should we looking out for? what would you expect to see from the administration and white house? daleep: the leading edge of any response of the administration will be a military route. you see two aircraft carriers, ever to shore up israel's iron dome. there will be a sanctions component because money is fungible. to the extent that iran is seen as directly involved in the

banning and execution of the attack, you will see these rooms of sanctions take. that will be a global effort, but that is second to the military response. jonathan: much has been said about sanctions and the fact of this administration turned a blind eye toward iranian crude. what is your view on that? daleep: i disagree. there is a lot of hype about the $6 billion. the administration has spoken clearly. not a dollar has been sent to tehran. i would be shocked if they dollar ever moves to tehran the aftermath of this attack there is going to beat less and less iranian crude oil on the market. the question for the administration is can they get an offset from saudi, other sources. that will be the challenge. lisa: you just said that you think re-freezing that $6 billion is a certainty at this

right. is there potential ramification? does this have any kind of play into the accusations of using a dollar as a weapon or any of these toxins have flared up a couple of years ago? daleep: if we are talking about the barbaric invasion of ukraine or the city's attack on israel there have to be consequences. when you stop short of deploying your military, economic tools already second best resort. i did nothing we are seeing a threat to dollarization. we will move with our allies and uphold the principles that underpin peace and security across the world. that is good for the economy. jonathan: do not be a stranger. great to catch up with you. on that $6 billion, back to what secretary blinken said, it is

regulated to make sure it is only used for food, medicine, medical equipment. are they ever going to allow a single dollar to leave that account? lisa: daleep singh saying he cannot imagine that they will. even if it is going to aid, that is money they do not have to spend four that a. -- for that aid. john kirby said yesterday that no determination has been made, but given how much pressure there is on this administration, regardless of what they find in the details of iran's involvement in the attack, seems there is enough that they will be free -- re-freeze that $6 billion. jonathan: day-to-day business for psych ubs and what this means after the weekend's events

covering ubs imposing a work-related travel ban in the middle east. i find it interesting, not just as well, but this includes qatar. lisa: what point does this escalate? why would a company put people in the potential of harms way? and you have to imagine that there are people who are canceling. -- we have already seen a whole host of airlines canceled flights to israel in particular. but if you are that region, there is probably some hesitance. jonathan: next hour -- ppi data, 24 hours later, cpi data in america. write a, bank earnings. at the moment, equities higher by 0.3%.

nine basis points on yields on a 10 year.

>> the market picks out the human factor and looks at this in a much more coldhearted waving. >> the much bifurcation beneath

the market. >> it is a generationally levered system. higher for longer is not good. >> this is bloomberg surveillance with tom, jonathan ferro, and lisa abramowicz. jonathan: he is a favorite. good morning. this is bloomberg surveillance. alongside lisa abramowicz, i am jonathan ferro. s&p 500 positive by 0.2%, three date winning streak on the s&p. he could make it day 4. removing the bond market yesterday. yields lower by double digits this morning. 457 on a 10 year. this hour, inflation data, ppi

at 8:30 eastern time. lisa: this may give more of a compass for underpinning these moves. typically, we have voice sa -- i would argue the tail is wagging the dog. what we have seen over the past few days, even on days when stocks were less volatile, bonds get open in terms of the market. jonathan: trying to figure it out. lisa: probably the bonds are the dog. jonathan: tk is not here. someone has to screw this program. 30 year yield down by about 10 basis points. yesterday, we saw double-digit gains, treasury yields lower.

lastly, the opposite, the total opposite how much has changed in between? if anything, we had strong data on friday in payrolls. lisa: kathy johns said it is a lack of liquidity, lack of uncertainty. typically that increases term premium. when we get more certainty? with ppi? with cpi? with jp morgan earnings? the picture is muddy. it is a difficult moment to capture. this is typically what happens at tipping points in the economic cycle. if you get this whipsaw action in bonds, those that lead to a consequence independent of some of this other economic data? jonathan: lvmh delivered yesterday. post-pandemic luxury boom is over. a look at exxon and pioneer in

the premarket -- exxon delivering what could be its biggest deal since 1999 with mobile. now we're looking at pioneer at 1.i percent. they will pay 253 per share. a $60 billion agreement. lisa: it would be the largest corporate takeover deal announced this year globally. just to give you a sense of what we are looking at it comes in one of the hottest areas for investors of -- after so many years of people shining the oil complex. it is interesting that this is where we are seeing massive deals. the biggest questions are not why is this happening now but who is next at a time when people would like to see more consolidation? jonathan: coming up, alix steel catches up with darren woods and scott sheffield. you do not want to miss that.

price action -- s&p 500 positive by 0.3%. a lift equity market. equities gained on friday, gained on monday, again on tuesday. let's see if they can gain this wednesday. bond market yields lower by 8 basis points. israel-hamas war continues. anne-marie joins us. annmarie: we have an update on the president's schedule. the white house wants to make sure that the president is outspoken when it comes to the atrocities over the weekend. now as we see a war on the israeli side, the president will be stopping a roundtable of jewish community leaders, delivering remarks. yesterday, the president talked about how this attack brought to

the surface painful memories of genocide of the jewish people. you will continue to see this outreach to the jewish community. the president will talk about what he calls unwavering and ironclad support from the u.s. to israel. lisa: how much are his hands tied based on the lack of a speaker in the house? annmarie: the president is able to use other methods to make sure israel is getting some support immediately. there is reporting that the first tranche of ammunition is arriving in israel today. the first thing will be to replenish the interceptors that the iron dome needs to function. also, they swiftly moved to the uss gerald r. ford to the eastern part of the mediterranean. we heard from the joint chiefs of staff saying that that was to

deter iran. we should make no mistake how big of a force that is any statement that is for the wider region. that is already with the president has done. yesterday he came out and said when congress is back in session, he will make sure that the national security concerns of our partners are addressed. "partner" links ukraine a with is really a. it is difficult when the house of representative is without a speaker. but patrick mchenry did allude that if the government needed to get something done, they would be able to do it. lisa: help united is the democratic party behind president biden's view? annmarie: for the most part, very united. you are seeing broad bipartisan support when it comes to aid for israel. there have been fractures in the

past regarding support for israel, especially amongst members of the progressive wing of the party. i am thinking of the squad. many have condemned what happened over the weekend but also noted about some of the devastating living conditions that palestinians have had over the decades and also poking holes at the current far right wing of the israeli government. jonathan: and rick, thank you. let's continue this conversation with the senior fellow for israeli affairs of the middle east institute. thank you for joining us. i want to pick up upon a story been discussing, the relationship between israel and saudi arabia. are we getting closer to some kind of packed? there was a sense on monday the

what took place over the weekend would set us back. do you share that? nimrod: with what we have seen, and off stepping of the saudi's, engagement, [indiscernible] then it's athletes. there is an interest in the saudi's. engaging with israel, going towards normalizations. what is happening now will probably slow down the process, but the interest is still there. lisa: you have studied the peace processes that have been in the middle east for so many years. a lot of people are saying this feels different than what we have experienced in the past. can you put it into perspective

in terms of how you see a potentially evolving based on the signaling you've heard from people in the region? nimrod: what we see casa is [indiscernible] which has recognized israel and the two state solution. it has a position that does not support the two state solution. -- to inflict as much damage on jews and israelis as possible. i think the goal will be to have the palestinian authority [indiscernible] also on the gaza strip. then we would have leadership that could negotiate.

currently we do not have that. lisa: that is where i was going to go. there are a lot of questions about what the israeli government knew before the attack place. what do you think the legacy of netanyahu is going to be? what are you think the trajectory will be at a time when people are coalescing around an emergency government now but this has been a point of contention? nimrod: the government needs to focus on the war, not beyond. netanyahu has failed. after the war is over, the government should pay the price. it may take time. we know the tendency of israel. but we did see a government in the previous term coming together for the national good.

i think that is what israel wants of the moment. eventually, when the discussion returns to politics from security -- jonathan: do you believe that the division domestically led to those security failures? nimrod: it would not have led to the intelligence failure but it did lead to the government not being in the right position in terms of where forces were allocated, resources were invested. what happened saturday -- there was something happening. but definitely the overall context did not bring israeli society to confront its challenge. jonathan: thank you for your perspective. if you are just joining us,

welcome. s&p 500 positive by 0.3%. get you set up for the next 20 minutes, economic data at 8:30. we will get ppi data 24 hours before cpi. this is what we heard in the last couple of weeks -- equities kent still work in a higher rate environment. bank of america provide out in the last week or so. lisa: sebastian page said the same thing. if higher yields are coming and him with strong economic growth, that will overwhelm the hip to borrowing costs but that if is a big one. jonathan: a lot of lovers in this system. higher grades are not good. lisa: people are flummoxed.

deutsche bank saying that in the u.s., the reaction function of the fed policy has been dampened and unpredictable. jonathan: perplexed. bank of america coming up in five minutes. later, the ppi report. we will hear from torsten slok of apollo. equities up by 0.3% on the s&p, yields lower. from new york, good morning. ♪ to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. >> bond yields have tightened,

financial conditions of titan. that is an indicator that financial conditions broadly

obtained. then maybe the fed does not need to do as much. depending on whether it unravels or momentum in the economy changes, that could be equivalent to another rate hike. jonathan: fed speak. lisa: different parameters. we do not know what is going to happen. jonathan: higher yields might mean fewer rate hike. on thursday, they might say i never said he would not hike anymore, i just said that theoretically we might not. lisa: [laughter] is that what you are saying? will jonathan: san francisco fund money is good money. mary daly makes good money on the west coast. regional fed presidents can earn a multiple of the afford see --

f1c. lisa: you want to attack the best -- attractive most of and the brightest, so either you do it with pain or jobs on the other end. but it is the use-lose when you have a situation where public pay is often the/friend of animosity. people criticize the speeches but it is partly because they are not paid much. jonathan: let's take italy. the bank of italy governor would earn more than the ecb president. if you s&p, swish national bank, that is where it is at. lisa: seriously? are you trying to get me to apply elsewhere? jonathan: constructive.

i read your note from the other week that this can work. we can see equity returns in a higher rate environment. >> there is too much focus on the short end of the. the long end of the curve probably matters more for stocks. when i think about why the long end is moving higher, one of the reasons the supply and demand. there is also this growth story, the idea that companies are now focused on what they should be focused on. we are in an environment where it a lot of the levers for margin improvement from lower quality sources like globalization or financing are behind us but ahead is this exciting new thing, which is efficiency, productivity,

replacing labor with ai or automation. i think that those are the drivers that could move the market higher. so far, this ai theme has only an rewarding tech. but the story is broader. we found that if the s&p 500 has the opportunity to become even lighter than it is today, that translate into stable margins and a bump up in the multiple. investors are willing to pay more for efficiency gains than just low polity fed money plus globalization. lisa: are you saying that the ai boom spin priced in accurately for tech companies but inaccurately priced for the rest? >> that is a much more eloquent way to say what i just said. but that is the idea.

we are in this environment where the old economy is terrible, do not buy anything that is not taxed, we will get money from ai. the idea is that while economy companies that are labor-intensive have more tools to get labor like. -- light.we found that companies that become labor light always outperform companies that do not. lisa: part of surviving long enough to get there, to be able to make investments, which requires money that potentially you have to borrow, it raises a fundamental question about at what point the rate structure makes this prohibitive for old economy companies to come up to the new world. was the tipping point for yields? savita: for the s&p 500, we can see higher yields. a lot of these problematic companies was floating rate risk

that are unable to handle higher rates have dropped out of the s&p 500. there is abundance natural attrition into the russell 2000. twice as many companies have fallen from the s&p to the russell that have risen from the russell to the s&p, compared to an average year. that is telling us that it is basically a story of the losers dropping into other indices. i do not love the russell 2000 right now. it is riddled with small-cap, zombie companies like health care, tech -- ocmpanies that not handle this rates environment. the s&p 500 has seen problem stories drop out. looks healthy. i love the equal weighted s&p 500. probably a lot of this good news has been priced into the mega cap tech cohort, maybe overpriced.

there is not a lot of buying pressure if you think about who is next to load up on the magnificent seven, but there is a broader array of openings that look healthy. if we do not going to this forecast recession that we are all bracing ourselves for, the market could rip. jonathan: what kind of upside is rip? savita: it is all relative. what we are forecasting through year end is 4600 for the s&p. equal weight of s&p could go -- do double those gains. over the next 10 years, buying the equal weighted s&p 500 on evaluation races suggests you could get more than 10 percent price returns per year from the equal weighted s&p. this is not an environment where a lot of other asset classes promised 10% returns plus additional dividend yields. jonathan: stripping of the

muscle of big tech and giving financials a bigger presence or during want to do that right now? savita: financials is tricky. i like large camp -- cap financials. already regulated and they the bad news is behind us. and there has got to be a shape of the yield curve that helps the banks. every phase of the yield curve has been cast as bad for banks. i think we are moving into an environment where if the fed is closer to being done on the short end of the long end is potentially higher for longer. that has historically been good for lending. financial companies have the opportunity to get less labor intensive, which is good for margins of financial companies. lots of levers are underappreciated, as well as the fact that they should have the

multiple of a regulated utilities company. lisa: is your view predicated on the idea that we will not get much of a recession? savita: this is predicated on the idea that the reason it is taking longer for the fed to control this economy is that a lot of that leverage risk has been taken out of consumers and corporate and moved to the public sector -- the government balance sheets and the fed's own asset base. while that all sounds nerve-racking and terrifying that we are sitting on levels of debt to gdp that are similar to emerging economies, we found that high levels of government leverage are not an asset for stocks. this is interesting. i have always been worried in the background about this looming debt to gdp for the u.s. what is it going to do to us? seems awful. the truth is the market does

better during periods of higher leverage ratio in the public sector than lower. leverage in the public sector is not necessarily what we need to worry about. maybe it makes bond funds attractive, which u.s. treasuries may be the riskiest asset class. jonathan: that is associated with coming out of bottoms in the economy. savita: exactly. we grow our way out. jonathan: ubs earlier banning work travel for middle east staff. see you. live from new york, ppi up next. ♪

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♪ lisa: here comes the data moments away from ppi that comes off heading off what we can see as a one-two bonanza. heading into that, we are seeing a bit of strength in the equity market driven by a bit of strength in the bond market. yields lower although down as much as 10 basis points earlier but the two-dia de klein is a quarter of a percent. we are getting that data. let's head over to michael mckee. mike?

>> half percent increase for ppi. it's down from .7 in august. however, that is almost double what is anticipated the core rate comes in, up .3, which is .1 more than from the prior months. and trade services is up .2. that's a slight improvement. year-over-year, we're up 2.2% which is unfortunate we were 1.6% in august. so going the wrong way and back over 2%. up half a percent from the august number. and the food energy and trade number is 2.8%. that is down from .3. some improvement is in the retail and wholesale sales side. the trade figures but the rest

of the ppi coming in a little hot. lisa: just taking a look at the market response. it's not massive. not a lot of drama but you are seeing bit of a giveback that yields rising just a touch. you're seeing in the stock market, a little bit of the reversal of some of those gains but not a lot of action which actually is exactly where i want to go with you, mike. are you surprised or is this pretty much typical because it wasn't that big of an upside surprise because ppi isn't as significant as cpi? >> i think that last line is the most important thing in terms of the market because the ppi doesn't necessarily lead the cpi in the way people might think. and the cpi's is what everybody's been focused on. goods prices are up .9 while services prices is up .3. that's the second month in a row

while we've seen a big increase in goods prices. it is the opposite of the trend we had been seeing over the past six months or so. tomorrow, everybody's going to be focused on the skip and if we get a different type of result, markets might react more strongly. lisa: there's a question how much companies can pass along to consumers. with the disinflation, that was leading to bigger margins because companies were passing along price increases to people and they were absorbing them. do we have a sense of whether these price increases that we're seeing actually reaccelerate, that that is going lead to higher prices in the cpi or that companies are just going to absorb it and that means margins coming down? mike: we don't know exactly but you can separate out the trade services component of ppi which is basically retail and wholesale margins. the government doesn't have a good way of measuring prices in those areas. so they look at the difference

in marches -- margins for companies. so that's what the fed officials say c.e.o.'s are telling them we're getting a little bit of evidence in this ppi here. but it'll be the cpi and then pce will be determinant for the fed. lisa: thank you, michael. i imagine you'll be looking at the data as some of the details and we'll catch up with you in a few minutes. we did get that equity data coming in hotter than expected. x food and energy. 3% pop. final demands,.5%. bonds retracing a little bit of their gains. you can see yields down now six basis points earlier in the

morning, 45891. s&p 500 futures up. somebody's been tracking this push-pull towards inflation and potential weakness. i want to thank you and your team because we always use them as talking points and hot topics. so we appreciate that. but i want to start with your impression of a reelevation that we're starting to see on the -- reversion on the margin sites. >> goods inflation went up when we were ordering online and then goods inflation went down and now as mike was just pointing out, goods inflation is reelevate -- re-evaluator. -- reaccelerate.

there was no service inflation. now we are all going to restaurant, hotels, basically flying, consumer services and that's why it's been very high. that cycle difference has been an important feature. lisa: what we did see during the immediate aftermath of the pandemic was that people weren't as sensitive to price increases because they accepted that inflation was happening and they had huge bundles of savings that were left over from the pandemic. is now different? are you seeing consumers push back, spend less, not actually spend when they see prices going up that much? >> what was the distribution of consumption on goods and services before the pandemic, we have not normalized back to that level in terms of the share spent on services. we still spend too much on goods so that means that services still have some upside. so you're right. people are going to taylor swift ticks, u.s. open and queens because there's savings and as we talk about all the time, we

have this issue that savings are running out combined with stay tuned payments coming back. lisa: how much pushback do you get from people? because everyone is so discerning to the type of data and the way that it's being framed that a story painted in data can be disucceeded in five different ways by five different people. torston: that's right. it's about the big picture that the fed is trying to to cool the economy down. we are seeing already in the data consumers are seeing high rates on credit cards and auto loans. corporates are seeing default rates go up and the loans, we're seeing interest ratios start to dip and on the banking side. we're seeing a slowing in loan growth and the weaker data allows banks to take in consumers. the fed is succeeding. this is what they would have

predicted that we're seeing a slowdown on consumption, on corporates and on banks and that's why this will result in most slowing over the coming quarter. lisa: more slowing is not the same. and there's a question of how much slowing is necessary to truly put the horseback in the barn as you said, to use your analogy. and this has been one on the conundrum. do you have a sense of what it requires a greater slowing to get that horseback in the barn than people are currently using as a base case? torston: i do think we need more slowing because pederson today is at 3.9. so we are still running around after the horse out there and trying to get it back into the 2% range and we're not there yet. that's what every member is telling us. with that backdrop given what's happening to the delinquency rates. default rates at the high yield are going up. so the result of that is that we are seeing the effects on the fed tightening every day.

there are companies that cannot get financing. there are consumers who cannot by buy a new car. so in that sense, tighter policy at 5 1/2 is way, way above the 2.5%. so policy is working exactly as they would have predicted. it's the savings making it taking longer time but we are moving towards a faster slowdown. lisa: we will leave that alone for the remaininger of our time. i do want to know why we are seeing upside surprises to the economic data in such a significant way if there is this material slowing. this has been some of the conundrum who are seeing all of the slowing and yet, each economic print coming in, stronger, stronger, stronger. torston: i know the labor market is upside on the headline but under the hood, you'll see that in terms of job openings, peaked

literally in marge of 2022. and you're seeing an increase in permanent job losses. so a number of the labor market are showing more signs of weakness and we are moving towards that we will get that increase in unemployment rate. lisa: given the unrest in the middle east, there's a lot of focus on oil prices and what would happen if oil prices do have a sustained rise. how do you factor that in to your concept of harder landing than people are accepting? torston: oil prices have gone down a bit but it's the case that the move in oil prices is critical and for headline inflation. so from that perspective. the second-round effects are going to be more limited. they have become more limited over time because the economy is less sensitive to oil prices and less energy intensive. but the sort answer is for headline inflation and also for

the fed, it does become important what oil prices are doing. lisa: where are you, where is your thinking in terms of the long-term neutral rate and how much shifted upward given some of the paradigm shifts? torston: there are some important arguments of why the rate is going to be higher. we have more degloballization globally. that's putting more pressure because of increased cost in production. and we have that transition. it is going to be costly. that is going to put upper pressure on the production of energy and people pay more for energy including the adjustment cost. and finally, we will have globally less immigration. and if that's the case, that means that we will see higher cost of production not only the u.s. but also in europe and abroad. so the conclusion is both deglobalization and also what might be having with immigration all argues that the long run rate is going to be higher.

the if the risk-free rate is going up, we need to pay attention. lisa: thank you so much for being here with us. just want to update you on the figures well. did get ppi final coming in .5%. you can see what you would expect auto muted because the relevance of ppi to final prices not necessarily that correlated but still, the 10-year yields lower by seven basis points versus 10 basis points earlier. s&p futures up .2%.

let's go back to michael mckee. what are you find something. mike: in the overall ppi for final demand, goods prices prose.9. three quarters of that was energy. 5.5% rise in gasoline. this is at the wholesale level. when you look at the retail level, we did not to see major rise in gasoline prices. so the cpi may tell us a different story tomorrow. may not be picking up energy. when you subtract energy and food out of the ppi, you end up with just a 1% rise in the foods category. it was an energy story there. on the services side, services rose .3 but a lot of that was banking and deposit services. a 13% increase. and that is something we've seen in the cpi as well where banks and brokerages are making more

money on commissions and that is coming in as an increase in inflation. not something that the fed is going to particularly worry about. lisa: so just putting this together, mike, not a lot of correlation for tomorrow but expectations for tomorrow are for a similar cooling, correct? mike: that's correct. they are thinking we're going to just see a small increase of.3 in the headline again. and that's not going to push up the year-over-year number too much. lisa: michael mckee, thank you so much. coming up, alix steele on the exxon pioneer deal as we parse through what the potential biggest deal announced globally means for the permian basin as well as oil goebelly. this is bloomberg. ♪

>> what we know is that financial market conditions have certainly tightened. that's not even a question. i think the important to note there is that allows us a little

bit of patience that we can continue to watch as economic conditions and financial conditions continue to evolve. lisa: that was michelle bowman speaking at a panel at the world economic forum -- excuse me at the imf at world bank meetings. our own colleague of course, tom keene is heading that way. and we will be catching up with him soon. we've been talking about a whole host of issues of course, the conflict in israel as well as the economic data that just came out in terms of inflation and how much it's coming in. maybe not as fast as people would like. you can see that playing out in the markets. although not really that significant move given the fact that we got an upsize surprise to inflation. right now, we are seeing the s&p up by now just .2 of a percent and bond yields lower than they were lower earlier in the morning. big discussion point around oil, not only the price and where

it's headed due to some of the unrest the middle east but also exxon, close to a $58 billion deal to buy pioneer natural resources which would be the biggest deal that exxon has done since 1999, the biggest global deal of the year, making them absolutely the dominant player in the shell patch. we're seeing pioneer shares up 1.7%, 241, quite a bit waste from $250 a share price tag that would be in this deal. exxon shares off just a touch. joining us now, bloomberg's alix steele and julian lee joining us. alix, why is this deal so important? alix: an 18% premium for pioneer. this is an enormous deal and the broader context is that could unlock shell 3.0. big deals, big spending in the permian and really long laterals

which is basically the technique that you use to get a lot of oil out of shale where it was very much reducing capital spend. many analysts say buying pioneer is sensitive because longer term, it will cost less and have an increased capex to keep production level lower. lisa: last question about whether part of the reason why this deal is happening is because regulator would be more ok with it that this is going to be more amenable to both investors and to regulators because of this emphasis on energy independence and just generally focusing a bit more on the need for fossil fuels rather than the move away. alix: yeah, i see it twofold. it is going to gives a lot offed toker to the greens in doc say you're spending $60 million on fossil fuels and on carbon

solutions. so there's that part. but in terms of why now, i wonder and i'll ask the c.e.o.'s this in the next hour. is this a schott sheffield thing? pioneer natural resource is the holey grail of the permian. he is retire agent the end of the year. there's been some productivity questions for pioneer and it just means you've gotten all the good stuff out of the rock. there's more there but the juicy stuff has been drilled and can you get more out? many say that problem has been solved but a productivity question that was underperformance that pioneer versus its peers and i wonder and i'll ask it if that played more of a role. lisa: where does the u.s. play the global oils sphere and how much deals like this and just generally looking for more efficiency and record production this year plays on the global stage at a time or saudi

arabia's trying to control supplies that much more? julian: the u.s. is playing an important role on growth and output the permian. it's going to be important. i don't think this deal changes the outlook for oil prices in the short term. but potentially over the longer term, it may do it. it certainly brings together contiguous acreage next to each other under a single owner. that allows for longer horizontal wells to be drilled, greater economies of scale in terms of that investment in new drilling that could boost the prospects for permian production and u.s. production in total. but that's probably two or three years away at least. in the short term, i think it doesn't change anything. but what it does do is mean the

shale basins of the u.s. are going to be important contributors, not just to production but to potential production growth in the four to five years ahead. lisa: julian, how much are deals like this made possible based on oil prices being higher and if you have the feeling that they're going to remain so in the longer term? julian: well i think, you know, there are many things i think that will factor into this deal on why now. and i think as alix said, the scott sheffield question is potentially one of those. and as to oil prices, i mean, the moment they are very much being dictated i think by saab's oil policy -- saudi arabia's oil policy. and they from prepared to make

the production sacrifices at the moment to ensure that happens. the big question is going to be over the longer term whether they can continue to do that if demand growth starts to ease off as people are expecting next year and we get additional supplies coming in from places like the u.s., ghana, brazil. so that's going to be a challenge for saudi arabia. the immediate question is how this terrible attack by hamas on israel is going to play out. we saw a jump in prices follow over the last couple of days by something of a retreat. very much is going to depend on whether this conflict spreads and starts to suck in oil producers in the middle east. iran being the big question

mark. lisa: alix your idea in terms of the pricing and how that factors in. alix: pioneer has 6300 of inventory. when you get a 20% return fifth year or lower. so the last barrel produce may increase. you might need $80 a barrel for that kind of floor but you're buying stuff that you can make money and have a nice return sub 50. lisa: which is the reason why people are doing this. alix, what are you hearing in terms of other deals come downing the pike to either compete with this or just that it have been to the works and people are finding the reason to get it done? alix: it's going to have to happen because if you're a mid tier player, you will not be able to compete with this. so the oxies of the world, you have chevron, they're going to be just fine, but the smaller guys, i don't know how you're going to do it. there's a lot of private companies that are pulling back

and the theory is that they're doing that so they can clean themselves up to then be bought. so we'll see how quickly for that to happen. lisa: julian, no to pivot too much but i like to get a final word from you on what you're hearing out of iran and how much further crackdown of sanctions would influence the price. julian: well i mean, we're hearing relative little out of iran. there's been political support voice for hamas as they often generally is from teheran. we're not hearing anything yet about action against iran or any action to try to restrict their oil exports. we've seen a fairly substantial increase in estimates of production on exports over recent months. that's been an important factor in holding oil prices lower than they would otherwise have been. and there is a challenge here

that if you start going after iran's oil exports, that is going to have an impact on the oil price. and nobody wants higher oil prices in the consuming countries. lisa: julian lee and alix steele, thank you so much for being with us. and tune in in boum television for alix's interview with exxon's c.e.o. and pioneer c.e.o. to answer some of those questions. also coming up on bloomberg television fat 2:45 p.m., a harvard professor is speaking in the economy. we did get that ppi print leading into tomorrow. we will get cpi. we are seeing bit of a response in markets but no drama. we are still seeing s&p futures up .3. we are seeing bond yields lower now by almost ..8 reversing the early bit of a pop. this is bloomberg.

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