>> you can't have lasting prosperity if you do not get price stability first. >> people are looking for opportunities to come back into equities. >> corporations are doing better navigating tough environments. >> no matter what, that has got to slow over the course of the next year. >> this is "bloomberg surveillance" with tom keene jonathan ferro and lisa abramowicz. john: test, 1, 2.

just practice. it still works. this is "bloomberg surveillance" on tv and radio. your equity markets slightly negative on the session. this equity market is up big time on the week. s&p 500 closed out 5% so far over the previous four days. tom: while you were gone and before the fed meeting, the blinking on the bloomberg terminal, i have never seen a market get out front with a fervor before that announcement and before that press conference. jonathan: how many times am i going to hear you say, before you were gone? we can get five more frozen? tom: we will skis -- squeeze them in. jonathan: every time we tune in, you say it is a beautiful thing. jon is on assignment.

my voice is on the cover remote. apple on deck with earnings after the close yesterday, apple in the premarket a little softer. i know where you are going with your commentary this morning. i will offer up the opposing view. tom: please. jonathan: four corners in elk grove. problems with the iphone, struggles in china. you are going to talk about margins, record service revenue and foreign exchange. tom: our first guest is expert on this today. the way we use for accounting statements with economics. we are addicted, revenue and somewhere down the income statement dynamics. cupertino is running this thing for profit. they had a record third-quarter gross margin with massive cash generation. lisa: a lot of positives. one of the biggest negatives is a fifth of their sales in china.

tom: valid point. lisa: the fact it came in so much lower than expectations, the political headwinds, the uncertainty of whether this is lack of demand whether from cautious consumers in china or this is actual, true up edition from huawei. this is one of the biggest existential risks for the company. tom: they have had the competition before. lisa: that is existential. tom: i would notice it in many of the paragraphs i read were parsing 89 point billion versus 89 point why billion. what they are doing is looking at the operating leverage of the system. as i said yesterday, from the pandemic they are up 47% sales and 71% in free cash flow. jonathan: wasn't this the objective for this company? ultimately, they would transition to more services revenue and maybe margins could improve from there?

tom: the margins is what the adults look at. they are looking down the income statement in comparison of the bit data revenue. they are staring in the right direction as a cash machine. jonathan: for the bears i understand confusion. if we sat here 12 months ago and i sent next four quarters, forget it, no growth. and then, a stunning selloff in the treasury market and yields fly. and you have to listen, stocks are going to be higher. lisa: it is how far we have gone and how far this is going into future earnings and revenues. how much can china -- at a time where enough revenue keeps decreasing? tom: the cook is slacking off. they have only made 25% for the year. jonathan: i knew where you would be going with this. haven't you already bought the new phone? tom: i am still on the old phone. jonathan: you know where this is going.

does that work when you call and say -- thanks for being with us. s&p 500 index slightly softer, estimate 180,000. previous number, 336,000. 10 year up 4.66. equities up big time. tom: it is the way they are up. there is a massive bid, a massive recovery. the huge question is now with the vix and 15.71. these banners on radio are absolutely phenomenal. the vix from a 13 level -- you would have thought we were at a 30. fear, blood in the streets, bramhall fired up and back to 15 today. jonathan: they do not work on tv either, just for the record.

this morning, 4.66. lisa: which brings me to payrolls, nonfarm payrolls come out at 8:30 a.m. everyone is looking for the number to be half of what it was last month. 157,000 is what bloomberg economics puts it. i am watching the response in the 10 year yield. to me, that is more important than what we see with respect to the actual number. two we see a new balance of risks with respect to a selloff continuing after the reprieve we got over the past couple of weeks? secretary of state antony blinken does head to israel, he has a press conference with -- what is more important is that the head of hezbollah is going to be speaking in lebanon around 9:00 a.m. eastern for the first time since this october 7. people are looking to see whether he indicates they are going to enter the war. fed speak is back. we have fed i's share of

supervision -- vice chair of supervision. minneapolis fed president neel kashkari and the key event, 3:30 pm, atlanta president raphael bostic. jonathan: take a break. i do not think we need it today. wasn't the message received from chairman powell? lisa: was it message received? did he want to deduce some equity? tom: come on. he is on the phone to fidelity or schwab. can you put me on with apple, please? lisa: maybe they can start saying, the market received at the wrong way and we could see some reaction. jonathan: i got a call from rachel yesterday. tom: rachel who? jonathan: the manager. she said, are you sure you want to come back? i said, and miss this? the chief economist at city global now. steve, good morning.

what are you in the team looking for on payrolls later? >> it is about half of what it was last month. throw out the covid period shut down and the reopening. in the last year and a half or so, the range on unemployment data, even after the revisions, has been from 105,000 to 904,000 on these monthly numbers. there are deviations from the trend. the trend has been moderating. we have 30,000 less, those will be back the strikers in the november report. there has not been any collapse in the labor market. it has been stronger than we thought going into this, yet we still managed to take inflation down from 9% to 3.5%. that is good news. there is acknowledgment you heard from chairman powell that if everything is overheating, why is the on plymouth cost index celebrating? how did we manage this disinflation?

how did we manage against supply and demand but come together in somewhat better balance without knocking the economy into collapse? jonathan: what does bad news look like today? steven: bad news today would be some job number like 400,000. jonathan: lots of jobs, higher wages. lisa: [laughter] exactly. steven: for the financial markets. for the economy, the more the better. jonathan: we still live in this upside down world in financial markets. steven: the fed is saying, we will drop the economy into a contraction if we can't align supply and demand. we must moderate. that is what financial markets need. tom: i am looking at productivity yesterday. i understand off two quarters, you can't take a productivity steps not -- snapshot. are we misjudging the technology overlay and the productivity it leads to this more buoyant american jobs report? steven: i think this is a big issue and it is going to play out over.

last year -- our labor market out -- the labor market has been outperforming the economy. there is all sorts of readings below the surface, 12 months of contraction in manufacturing. housing, single-family housing construction has collapsed over 20%. the labor market has been growing pretty strongly. i think we are going to reverse that trend. we are going to start to see cyclical industries start to grips. gdp growth will firm, not quickly put into 2025. the labor market is going to stall. that is going to mean improvement in corporate profits. it is not collapse recovery that everybody can clearly see, but i think beneath the surface we are going to see that profits are going to outperform labor if we look at the next two years. that data point is what it looks like. lisa: soft landing, you are in that camp. steven: no, i would say this.

do we need massive unemployment to stabilize in placement -- inflation? i would say the answer is no. a couple of years of blueprint economic growth and stalling out future job gains is not paradise. lisa: the problem a lot of people in markets are grappling with is, is this a slow-moving story of what will be an markets are bouncing around? the 10 year treasury yield at astronomical levels. we thought 35 basis points in a couple of weeks based on not a lot of new news gives you a sense of that. where's the bias in terms of the violent reaction in benchmark yields in stocks today? is it the upside surprise or downside surprise in terms of rally? steven: if you take a look at a lot of investors, there has been a negative view of how much further tightening need, how much the economy must suffer to get inflation down.

we are biased to see a little bit of improvement. we had a nice, big rally in the bond market. it is not going to be a period where we are going back and suddenly reach to again and growth should take off and inflation is zero. but, there has been a tremendous amount of negativity and we are finding again enough reason for us to move more favorably. for the first time since 2020, to incrementally at risk in the equity market and say this bond yield -- by the way, global bond yields developed market bond yields sexy u.s., 3.2%. there is -- governments and reports together, for us outside of the united states to put money to work. tom: jay frazier went to know to -- once to know what to do with portfolios. steven: i will tell you, it is

not just large-cap tech. we need to outperform whoever is going to be -- >> regional banks. lisa: all in. steven: 40 year lows in stocks on a relative basis? interesting, but we are taking a lower risk approach on that. small-cap -- 15 times trailing earnings. the long-term history 25 history is 21 times. that is trailing eps bonds a piece on the piece of the small and mid-cap stocks. jonathan: i do not expect direct answers. carry on, please. steven: the thing about companies that are not trillion dollar companies, may be some have been left behind. jonathan: small caps have been battered since the highs earlier this summer. steve over at citi, thank you. a fantastic lineup later this

morning. sarah house of wells fargo, we talked to her about the on inflation push. lisa: who is calling for a slowdown, something that can accommodate softening labor market without a big recession and still disinflation. do we still see inflation continuing to go down even with the strength we have? jonathan: i want to get away from the upside down world wherein. treasury yields lower. the fed's backing away from hiking. that is not the world that was described to us 12 months ago. tom: it is a different world since you have been gone. jonathan: it is a whole new world. tom: ♪ a whole new world ♪ ♪ at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management

are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

>> the requests we submitted contains four critical maximum security urgent needs. israel and ukraine, our indo pacific resources when it comes to manufacturing of submarines and border security. the president wants to see all of them acted together on congress. we would not have submitted them that way if we didn't believe they should be acted together. the president will veto a israel only bill. jonathan: it is a push for more

aid, that is john kirby there. if you are just joining us, good morning. price action on the s&p 500 index heading toward a big weekly gain. yields coming in a touch, down aggressively on a 10 year maturity. 10 year right now, 4.65. tom: just as importantly, the inflation adjusted yield came in off this new accommodation, away from saying market somewhat restrictive. 10 year real yield, the answer is 2.62%. that got as high as 2.0%. inflation adjusted yield is again changing for america. jonathan: is this a drinking game? are we playing that this morning?

ok, good to know. i think the treasury market bulls had good news. it was not just chairman powell and the data. the treasury supply, we will not be going into year end. lisa: two me, this was the story and everything else was gravy on top. it showed the treasury is in tuned with what is going on with market dynamics and they are going to cater to them. are they playing the market? i do not know. janet yellen pushback on the idea they are longer duration, they haven't in decades. what this highlights is, this treasury market does not want to see dysfunctional treasuries. tom: it is simple. can we say it clearly, tom was wrong? bramo nailed this. jonathan: bramo often does. you look lonely. lots of people did. it is easy to say that you are wrong. is janet yellen wrong, as well?

to sit down with peggy collins and say this selloff this year has nothing to do with additional supply when we have heard from the imf we did. we have heard from the national economic council director that to some extent, it matters. we can agree to some extent, it matters and disagree over the extent. ultimately, that treasury announcement came lighter in what happened to bonds. clearly, someone thinks it matters outside of secretary yellen. lisa: i would argue the implicit message is the treasury department understood how much it mattered, which is why they did not extend some purchases and increase them by more. tom: why is 20 years so different? lisa: less liquid. tom: less liquid, nobody owns it? lisa: it is a smaller portion of bonds outstanding. jonathan: there is this kink in the curve around the 20 year maturity. to wrap things up, stock stone -- stocks down by .1% on the

s&p. tom: founder of pangaea policy -- terry, with exhaustion for the secretary of state, doesn't shovel diplomacy for lincoln work like shovel diplomacy worked for kissinger? >> it is different for a couple of reasons. one of which is, you had a bubbling under. blinken's mission this time as opposed to the last few times is designed to try to get and convince the israeli government of some kind of's or humanitarian pause, something like that. it calls into question a couple of things. it calls into question the degree to which the united states continues to support the current israeli government. biden aides are running around washington briefing against that now. it calls into question whether or not and to what extent the u.s. supports israel's war aims in gaza.

that is a concern. all of this also complicates the israeli aid package. congress is not going to pass the israeli aid package if they do not clearly understand what administration policy is. we have got a lot of problems here that complicate blinken submission -- blinken's mission. tom: you were there with lori kitchener and mark sykes when they divided up the middle east after world war i. you are talking about a partition of gaza. we saw a partition of vietnam, a partition of korea. is that the easy way out? a partition of the gaza strip? >> there is partition and international administration are the phrases that go together. these are phrases that go back to post-world war i league of

nations mandates style governments. they tend to bury the harder realities, which are the nature of the terrorist organizations, the nature of their funding and what sorts of proxies they are. they tend to bury regional responsibility for the problem. all of those are going to have to be dealt with. we have not even started with any of those yet. lisa: what do you make about the strife with the republican party stemming from senator to prevail of alabama, to reveal -- tube rville of alabama saying he will stall military promotions at a time of stalled conflict overseas? />> i will give you two points about that. one is that it is obviously

providing some strife within the military. at the same time, the senator says directly and to my knowledge has never been countermanded that he wants to have a dialogue with the department of defense about this stuff and come to some sort of resolution and he has not got it. what i think is going to end up happening is this gets resolved somehow in the defense spending legislation that comes up about the end of the year. one way or the other, this is going to get dealt with in the next two months. lisa: the resolution that passed the house offering solutions to the -- resolution to israel and .-- to the irs it would reduce tax revenues the u.s. government.gets does this progress the issue or push it back in terms of debate? >> only in washington with the irs get 80 billion more dollars

and have it cut by $14 billion and have that be considered to be a cut in irs spending. there you are. secondly, the bigger problem that we have right now really is this. you ran admiral kirby in your lead in. admiral kirby says the administration has four priorities and they have to be dealt with together. these are biden's policies. biden is going to have to get this stuff done in a way that is funded properly. right now, whatever else secretary blinken is doing, the apparent change in biden policy towards israel is making that more difficult because now congress does not understand what biden's foreign policy is. jonathan: a reference thereto secretary blinken, he speaks in

about 90 minutes in tel aviv. tom: i would say this is a shockingly changed affair that he flies into, that it was on the first trip. it is in real time. i do not know where we are going to be at 5:00 p.m. new york time tonight. i am saying -- seeing face-to-face, hand-to-hand combat. lisa: i would agree with that. one of the most underplayed evens today is not :00 a.m. eastern, discussion from hezbollah's leader where they could potentially say they are joining a world war or not and that will mark a key moment in this particular war. jonathan: those comments moments away. we will catch up with sarah house of wells fargo pushing ahead to the payrolls report. good morning. ♪

♪ be ready for any market with a liquid etf. get in and out with dia.

the power goes out and we still have wifi be ready for any market to do our homework. and that's a good thing? great in my book! who are you? no power? no problem. introducing storm-ready wifi. now you can stay reliably connected through power outages with unlimited cellular data and up to 4 hours of battery back-up to keep you online. only from xfinity. home of the xfinity 10g network.

jonathan: equity market higher every single day this week. monday through thursday, let's see what happens friday. equity market this morning negative by0.1%. trimming gains this morning by .3%. tom: david sowerby, expert on mid-caps was with us yesterday. he said everyone is starving for growth. it does not necessarily have to

be apple, but everybody has got a bad case of growth-iness. jonathan: this bond market is in search of slower growth. 10 year yield moving back away from 5% to 4.65, unchanged this morning. lisa: mohamed el-erian came on yesterday and was talking about how this is not normal, it should not be normal, this is disruptive to give people a sense of confidence. i have to wonder, what the positioning is behind this? tactical start to matter when you get.whips like this does this have anything to do with data or is this the refunding agreement? tom: i look at a fancy chart in the two year yield. it is now 1, 2, 3, 4, five times made this move. do we have to pull back from

here to the gloom we have had recently or can we break through technically to some new regime? jonathan: 25 basis move on wednesday. big moves this morning. let's round things up with foreign exchange. euro against the dollar, 1.0644. currency pair is a snooze. lisa: a bit of a snooze although we have a since we are going to maybe see a reprieve on solid dollar strength. tell me the day and i will say 1.06. jonathan: average the last 12 months, 1.07. under surveillance this morning, secretary of state ankeny blinken -- antony blinken meeting with benjamin netanyahu after house republicans passed a package to cut funding. the senate preparing its own package. this battle is going to be going

through the weekend potentially. lisa: it leads to a question, how are we viewed aside from the u.s.? we can't get something passed in the u.s. but the second question is -- how far will u.s. involvement go? this is why i am so keyed into the speech from the hezbollah leader today. four u.s. troops to get more intimately involved -- involved as warships are being piled up in the mediterranean. tom: i will put it on twitter. it is robert gates, former secretary of defense with a primal scream against the isolationists of america. it is without question the relive moment. jonathan: very cool, looking forward to that. we have hardly talked about it this morning -- if you like the. estimate, here print -- our estimate looking

for 180,000 print. we will catch up with wells fargo in a moment, 175,000. tom: where is the normal run rate here? jonathan: i am hoping it is not 336,000. lisa: let's say it comes out at 230,000. let's say treasuries do not sell off and yields stay where they are. the take away from me will be the refunding announcement was the most important thing of all of this because it is not responding. i am talking about yields to the economic -- >> what is the skill set required without crying every day? lisa: you can do that too, just not on camera. tom: we are doing bank of england. lisa and i do not know anything about it and do not care.

lizzy burden saved us. jonathan: bramo was not here yesterday, tom. lisa: i went down in flames yesterday, to. jonathan: let's talk about apple falling in premarket trading after reporting weaker than expected revenue out of china. sales. that stock has dropped. tom: eric mele put out a 2026 apple view at citigroup. the idea is they go 10% growth -- grow 10%. jonathan: the shift towards revenue from services, terrific. i understand that. the fact of the matter is, the bulls out there have no doubt we can have potential -- he has been talking about this massive upgrade cycle on the iphone that is not materializing.

it is not happening. tom: the upgrade cycle is materializing but the unit growth particularly in certain things like ipad is not happening. that is true. overlaid with bramo's concern about china. lisa: let's be clear. i went to the apple store. i saw people lining up to drop $3000 in one pop. i understand free cash flow. what i am questioning is valuations when you are making it growth at a higher yield regime and whether it is already up, the stock 37% year to date, i am good at this. [laughter] tom: is it time for a nerd banner? citigroup, apple, free cash flow. they looked up three years, pre-pandemic, $55 billion in free cash flow. they are estimating 18 months out, 180 -- $128 billion. it is a terrible billion -- it is a terrible business.

sarah house does not own apple. she is a senior economist at wells fargo. what is the run rate of nonfarm payrolls between we are fully employed and it is terrible out there? is it 100,000 or could be less than that? >> roughly 100,000 is what you would need if you are seeing the participation rates stable to keep the unemployment rate where it is. the fed is projecting the unemployment rate is likely to inch up over the next year or so and if you look at its long projections, suggests it needs to inch up. in that case, we are looking at lower rates, sub 100,000 unless we are to keep seeing the rebound and participation that has been so strong over the past year. that is going to push it up a bit back to 100,000, maybe higher. tom: who are the people to get

us from 100,000 rate to we are actually 170,000? what kind of americans are those people that are getting the jobs now where we say, they should not be? sarah: well, we want americans to have jobs. but, we think of who is driving that rebound in participation -- it has been concentrated in the prime age workers. women's prime age participation is at a record high. a lot of that has been driven by mothers, particularly young children as they are leveraging this remote work environment. we have seen a very nice rebound in prime age men's participation linked to some increase in immigration as foreign-born workers have higher participation rates, but also the strength of traditionally male-dominated industries in this cycle. construction, mining, transportation and warehousing,

even manufacturing holding in their. tom: you read my script. here is a chart. this is the miracle chart of the american labor economy and fiscal stimulus, this is the prime age 25 to 54 employed percent in america back four decades. the answer is a huge plunge off covid and pandemic, and with that stimulus, with public policy -- it worked. lisa: the question is whether we are going to see some sort of rollover that a lot of people are saying is required in order to get inflation back down to 2%. do we have any information to answer that conundrum which is one of the biggest debates on wall street?right now do we need sub trend growth but negative growth and a real drop off in the labor market in order to get inflation back to the fed's target? sarah: we need to sub trend growth.

hopefully not necessarily negative growth, although we think that is still on heightened risk in environment. we have seen help on the inflation front from the supply side. the labor supply which we were just discussing, but also from the goods side of things. as we have seen supply chain issues improve, you have seen goods inflation come down from over 12% at its peak to flat now. we are seeing that improvement, but i think in order to get inflation all the way back down to 2% as we have seen some initial help on that supply-side improvement -- it is likely to take weaker demand. that is where sub trend growth comes in. lisa: do you think fed chair jay powell is pleased with the remarket -- pleased with the markets reaction to what he said wednesday? sarah: i do not think he is aiming to guide the market one way or the other in terms of its actual reaction, but just trying to give clarity on where he thinks the that is going as best

it knows or to what extent it does not know what their next move is going to be. he knows sometimes, markets interpret what he says perhaps differently or can run away with things. lisa: [laughter] sarah: that is not his primary focus. lisa: let's reframe this. that was politically correct and sounded very much like how the fed would respond. the question is, weds his speech more dovish than you thought it should have been considering the labor market you just described? sarah: it is not overall that it was dovish in the extent that, yes, they left the door open for future tightening. but, i think they are more cautious on what is ahead. now, they have held at three of the past four meetings even as had seen strong job growth in the most recent reading, nearly 5% gdp number. they are getting to the point where he says they are still

debating whether they go once more, but really, it is becoming more about the duration of how long this hold is and the financial conditions excite has played into it where they are acknowledging they are watching that more closely by putting that in a statement and financial conditions have eased since the statement. it is back and forth but that is where that duration comes in. it will have to hold longer if they are not seeing that pass through in financial conditions. tom: for the in the jobs report today with trends we have seen in claims of 220ish per week. it is more weekly data and it still shows a wonderful job economy. link those two reports together. sarah: when we look at claims data, it has creeped up a bit over the past couple of weeks. overall, still behaved, still low levels consistent with the run rate of job growth and in recent months, still being very strong. also important, we think about

where hiring goes from here. we are still not seeing a lot of layoffs, that means if you are going to see that slowdown in hiring to get something that is more sustainable especially if you are trying to tamp down wage pressures to cool inflation, it is going to have to come from more of that demand for new workers. we have seen that a little bit, but as of yet, still seeming -- seeing behaved layoffs leading to this gradual cooling in the labor market, rather than that wholesale collapse that was feared when the fed was hiking so aggressively last year. jonathan: sarah house there of wells fargo on a payrolls report. 180,000 is the estimate for today. for unemployment, looking for that to stick at 3.8%. tom: not that long ago, 4%, you start getting sweaty or. it is a whole new regime.

i do not pretend to have answers on what to make forward of the regime other than i have got immense respect for people -- i use this with care -- guessing about the nation's productivity. we do not know. coronado has been brilliant about saying, what is going on? jonathan: i am with bramo on the federal reserve, the second paragraph. on tighter financial conditions. whether that persists and based on the move of the best -- past couple of days, it could unwind quickly and that statement looks dated. if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people.

it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪

>> i would not say the chinese are into --but we know in the

past, 20 million phones were selling as huawei. that market seems to have moved straight into apple's hands. that is a concern. jonathan: apple softer, stock is down by something like 3% so far this morning in the premarket. following numbers after the close yesterday, in terms of revenue growth, there has not been any for the past year. tom: tim forte has been the most right on apple. i quizzed him late in that conversation. it is simple. he is not blooming on apple but says, does not tread water for three or five years. a huge part of the apple fan boy or fan girl community. jonathan: are we describing

bramhall as a fan girl of anything? lisa: [laughter] jonathan: i am not sure that works for bramo. tom: that is a fear to a lot of the -- >> one of my favorite notes comes every friday from michael hartley at bank of america. zeitgeist after talks about the zeitgeist. so much anger, so much hate, yet unemployment is so low. can you imagine the social disorder if unemployment hits 5%? that is why his view is the punchline -- policy panic comes early in 2024. that is the zeitgeist in his mind. tom: the wonderful twitter feed bar chat, they were down with the goldman sachs chart which shows the gloom in the hedge fund business over the equity market. that was part of the cover the other day -- are you moving my

mic? jonathan: i didn't touch it. i do not know what is going on there. missed this. equities right now on the s&p 500, negative by 0.1%. biggest weekly gains potentially of the year so far on the s&p 500. s&p 500 this week up 4.8 7%. nasdaq 100 through thursday up more than 5%. that is a solid week of gains on the s&p. are you making up points in my absence? tom: i am making it up. anna rod is expert on the cloud and as a partial interest in apple computer. i want you to explain to the audience how a tech company runs their company for profit versus running it just at the top line. to me, apple is a cash

generating juggernaut. why is that so strange? >> i think it goes back to the formulation of the company. it believes in having high margin products, it does not believe in getting market share. even after all of these years, it has 80% of the unit market share of smartphones in the world. it can change that overnight if they dropped the price of the phone but they will never do that because they believe in roe's margins more than anything else. over time, they will get enough market share in every market. this is not something to do for the sake of it. jonathan: before we start talking about lower prices, can we talk about the absence of higher prices? have they lost pricing power? >> i do not think so. the problem is, people are keeping their phones for a longer period of time. you are probably keeping it closer to four years. it elongates the time it takes

for you to refresh your phones. i do not think it has nothing to do with the pricing power. the promax is unbelievably expensive compared to older models and it is doing extremely well. jonathan: growth shift is moving toward services. how does that change your approach to evaluating this company? >> still in double digits, i expected that way back in the high single digits by now. it is a high gross margin, a 70% gross margin compared to products. when you see the revenue make shift toward services, you can expect the overall company gross margins to trend up inch by inch. we have seen that in the last few years. lisa: do you think over analysts are overplaying or underplaying the declines we have seen in china? >> you have to think what kind of company this is. this is evident and i have

discussed this with tom many times. this is not a company that is going to grow sales in double digits. this is at best a mid to high single digit company. people are getting used to that. yesterday, the estimate was it is going to grow about 5%. that is when the stock dropped. we need to come to the point where refresh cycles are going up and it is going to be a time before things are going to grow at that same pace. lisa: how much growth, how much future growth is baked into the valuation of the company that has seen a 30% rally year to date? >> valuation is something we have talked about with investors. sometimes, you have to ask yourself, is this a technology company or a consumer staples company? if you believe the heart of a consumer staples company, something like coca-cola or costco, those companies are not going 10%.

tom: i want to look at something beneath the radar this week. it is a friday. in the world of microsoft, it is a different friday. it is a copilot friday. what is the importance of this announcement that microsoft is making where we actually do ai with a model marketed program for global corporations? what does copilot mean to microsoft? >> copilot is a ai tool that goes with your software package. in the case of microsoft, it is launched with their office suite which started yesterday, $30 per user per month. they are hoping the serious worker in the office that is probably somewhere in the 150 million 200 million people around the world that currently use the office suite will opt for that particular feature to help gain productivity. copilot can be used in writing

software. it is a tool everybody has. they are the first to come up with such aggressive base. tom: what is your prediction on this? you nailed the cloud, you got a cloud view. what is your prediction on how copilot will do? >> in our view, it is going to be slow and steady because that $30 per user per month is a steep price. we think adoption rate is not going to be more than 5% in the first year. perhaps a 3 billion-dollar upside are not. in the software coding side of that, we think the adoption rate is going to be very high, close to 75%. i do not see development out there that can afford to deny code with this tool next to them. jonathan: stock negative in early trading, apple down by 3% this morning. lisa asked about china, john

forte, the difference in making three points is .1. negatively affecting sales. we see apple is caught in the middle of escalating tension between the u.s. and chinese governments. the company is still over dependent on china on a supply chain standpoint. three points and we did not get to competition in the mainland. tom: that gentleman from da davidson has been the best performing analyst over the last 12 months. jonathan: catching up with him later. this price target, 166. lisa, 172 right now. lisa: there are a number of big risks right now. tom forte nailed it, we can't understand why there was a bigger decline in the china region than we expected. it was an 11% miss relative to expectations. is it because of competition, slower growth? what happens with iphone

manufacturing in that region at a time where that is massive when it counts for 80% of production? tom: in the reports, it is not just a routine shift from china to india. a lot of people studying this is problematic. how do you execute moving manufacturing to india? jonathan: -- tom: is it available in america? lisa: it sounds like it is not nearly as advanced as the iphone. jonathan: hang on a second. hang on a second. i will tell you about it. hold on. hang on a second. lisa: cheers. i am brutal. jonathan: coming up in the next hour, the former fed governor, jeff rosenberg of blackrock, still to come payrolls friday.

your estimate 180,000, the previous, 336,000. live from new york city, this is bloomberg.

i don't want you to move. i'm gonna miss you so much. you realize we'll have internet waiting for us at the new place, right? oh, we know. we just like making a scene. transferring your services has never been easier. get connected on the day of your move with the xfinity app. can i sleep over at your new place? can katie sleep over tonight? sure, honey! this generation is so dramatic! move with the xfinity 10g network.

>> you can have lasting -- can't have lasting prosperity. >> the look is for equities to be rallying into year-end. >> corporations are doing better navigating tough environments. >> we have been swept up in this -- no matter what, that has got

to slow over the course of the next year. >> this is "bloomberg surveillance" with tom keene jonathan ferro and lisa abramowicz. jonathan: payrolls friday. good morning. this is "bloomberg surveillance" on tv and radio alongside tom keene and lisa abramowicz. i am jonathan ferro. equity markets negative on the session, up big time on the week. employment number, 180,000 is the median on our survey. tom: we are data dependent, it is not only from nonfarm payrolls but the president and chairman of the fed, it is about the unemployment rate. jonathan: your favorite piece of this. good news or bad news? what does this market want to see this morning? does it want to see 300 again? lisa: no, that would be the worst case scenario.

maybe it is good for the american economy. they would like to see not too low because that indicates cratering. they would like to see if it is 120, there is an incredible rally. that would be a real rally inducing number. jonathan: thanks stocks have had a massive week, that is the upside down world we live in. softer data, the fed backs away. we do not live in that world anymore. bank stocks this week are up big time, take a look at regionals. tom: when you work on your cruiseship, i use the word grim. it was a grim chart. i would suggest it was pop and dare i say a short cover in the banks off of that grimness. gerard cassidy was on yesterday and he was not willing to say that. boy, was he optimistic four

years in the banking industry. jonathan: i would love to do a survey and find out if anyone believed i went on a cruz in the past two weeks two weeks. even if carnival picked up a phone right now. royal caribbean. we will pay you to go on a cruz -- cruise. i will never get on that boat. what do you think that price is? lisa: [laughter] jonathan: let's talk about apple and premarket, down 3%. softer in early trading. four quarters revenue growth absent of the company, can they turn it around going into 2020 for? tom: forte at davidson has got a cautious view. his target is below the -- others go the other way. china is a problem but will get fixed above $200. jonathan: margin is good. tom: the service sector overlay,

it is a nice, straight vector up 20%. the answer is, that is all profit, like 70%. jonathan: equities -.2%. this bond market has turned around. this morning, 4.65. lisa: my take away from the fed meeting, strategic patients. all eyes are going to be on the labor market. my eyes are going to be on the mann -- bond market's reaction. what is the sweet spot to lead to a further rally as people expect the fed to be done? today, secretary of state antony blinken is it israel to give a press conference around 8:00 a.m. i am more interested in what we hear from hezbollah's leader in lebanon. he will be speaking at 9:00 a.m.

eastern time and could give some indication of the contours of escalation or not to come. today, fed vice chair michael barr speaks twice. atlanta fed president rafael bostic sitting down with michael mckee, do they echo with what we heard from jay powell? which is not indicating they had a need to go further, they are strategically patient. jonathan: rafael bostic, absolutely. i think he would have a few months ago. let's see what mike mckee thinks. he does not get a vote. the portfolio manager of jp morgan asset management. two mondays ago, 5%. here we are, 4.65. >> the last month or so, it has

been a technically driven move. once we broke at 4.40 level, it was short positions being put on, this narrative built there is no demand out there for treasuries. what we saw this week was softer data. we saw the treasuries essentially responding to the treasury that cut back that login supply. we heard from the fed the bar to hike further is high. there is cautions from the fed. they are bringing up this lag story again. they are waiting for the long and variable lags to play. we need that narrative to come back there is no demand. i would argue the highs are set. how low the 10 year is going to go will depend on how the economy will fare with those lads coming back. tom: the difference between the two year and 10 year, you called the magnitude of inversion.

where are we now? have we this inverted to, this is wonderful, or do we need to disinvert and go to a positive difference between the 10 year and the two-year? >> for it to be positive, it has to be driven by lower rates. the economy needs to show signs that monetary policy is extremely restrictive. that results in the next 100 points of steepening. the two year, the stock about the market pricing and significant cuts, we are only pricing in 30 basis points of cuts. with the market is telling you is they are pricing some easing which will be consistent with a soft landing. the market is not at all pricing the risk of a hard landing. it is a 15% chance there is a small percent chance of a hard landing. in that scenario, the fed is not just stopping at 4%. the fed fund curve is telling

you the market is pricing in the fed funds rate to be above 4% as far as the eye can see. that is what the bond market is telling you, no hard landing, the fed is never going to cut rates below 4%. that is highly optimistic. when you look at tightening and financial -- there is a chance the fed has to cut. they are not thinking about cutting rates. at some point, they are going to have to acknowledge they may have gone too far. lisa: we are seeing people pointing to the refunding announcement driving reaction on the long end. the front end might be more tied to what we heard from fed chair jay powell. has the action in benchmark rates in the long end been tied to supply? >> i would argue the narrative is there is too much supply. the issue is demand, the demand side went back. we know the u.s. has unsustainable fiscal trajectory.

if there is demand, what happened in the last month or two is the demand side pulled back. if the fed is going to hike more , if the data remains resilient, where is that clearing price? if the fed is done in the treasury is responding, the bond market spooked the fed, spooked the treasury, spooked risk assets, that is normally a sign the move is done. lisa: is that a side to give you confidence to go in? >> yes, the market is spooked enough to give confidence we may have around 5%. to say we are going to 4%, for that we have -- we might stabilize between 4% and 5%. if it turns out the economy is a lot weaker, we could move lower. we could essentially -- for some time. tom: how do you unfold the events with the distractions of euro-yen out to 1.60?

how do you fold the confidence of japanese will show up at the margin to buy our full faith and credit? paper, given the failure of why cc? >> i am glad you bring up global rates. the boj was a big deal. central banks this week in october have been essentially -- i was militant on the boj. if they dropped league of control, that would inject volatility into the market. the boj said, not so fast, we are going to be slow in terms of control. that reduces volume. u.s. sector, october was the first month in many months no sector had bad rates. now, we look at global divergence. we think other countries like canada, the u.k., with a transmission mechanism of lags are shorter. they are already weakening. the u.s. has been more resilient, the lags would play out as well. this divergence or u.s.

exceptionalism that we have been dealing with last two years, some of that is going to go away. that hedging costs goes down and brings foreigners overtime back to the treasury market. jonathan: you said the bar for hikes got higher as the bar for cuts got lower? >> i do not think so. i think the fed is traumatized by what happened in terms of inflation. i think they have lost credibility. the bar for cuts is high. that is going to be tricky for the market. we have been used for the last 20 years for the fed to respond right away. financial conditions tighten, they may not hike more. at what point do they ease? i do not think they want to ease financial condition significantly. we may be in a period of high volatility where we see that strike price for financial conditions. jonathan: going into next year, what am i looking for? >> if the data holds up, the fed is going to be extremely reluctant to cut rates.

even if financial conditions ease, if the data falls off the bed can say, actually, the unemployment rate is rising significantly. which is why they may have to start to ease. it is going to come back down to the data. i think the data will drive data dependence will come back in terms of when the fed eases. it is annoyingly for the fed staying sticky. if it stays above 2%, that bar to cut remains high. jonathan: something has changed, the fact we had close to 5% gdp in the third quarter and not get a move the federal reserve. lisa: they seem to indicate the risks are balanced and they emphasized the need to remain cautious. tom: where does strategically patient come from? it is a new phrase. jonathan: proceed carefully, strategically patient. tom: wait for data. jonathan: strategic ambiguity. lisa: a strategic pause.

jonathan: thank you. tom: thank you so much. jonathan: if you are just tuning in, welcome. s&p 500 index negative by .2%. yields going nowhere. 10 year, 4.65. crude, 82.66. you can guess the world and get the market wrong. crude in the month of october. lisa: one of the most interesting things is what am rita said, we have not seen oil prices pop and she had been expecting $100 a barrel on brent into halloween is because of demand. it is not there in the same kind of way even though you might get supply constraints based on what is going on in the middle east. jonathan: crude down 11% in october, down 11%. tom: while you were gone, i was looking for a 79 handle on west texas. could i have said anywhere in

october we would get to 79 on american oil? jonathan: if you are playing a drinking game at home, you are drunk at 7:30 eastern time. how many times are we going to do this? tom: warily does michael mckee come out and say, guys, this is important. he things detroit and dearborn are important. the on strike statistic for mckee today is 48,000 workers. lisa: i got a message saying they thought you joined the autoworker union based on contract negotiations. jonathan: what is more believable, i joined the autoworker union or went on a cruise? from new york city, good morning. ♪ (sfx: stone wheel crafting) ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> israel does not need a cease fire. it needs is analyzed to cease with the politics and deliver support. house republicans plan to do it in short order and provide israel aid it needs to defend itself and eradicate hamas, which it needs to accomplish. all of this while we work to ensure responsibility spending and reduce the size of the federal government to commit our pay. jonathan: that was house speaker mike johnson.

we will be talking about those comments with annmarie hordern. equity futures on the s&p 500 negative by 0.2%. the shipping company down about 15%, this line on subdued demand. not just into next year but may be the next few years. job cuts are going to continue, a subdued environment over the next two to three years. stock down 16%. tom: this is basically fedex on steroids for our american audience. with the heritage they have of shipping worldwide, think of the logistics of ups and fdx. this is a global statement on what is out there and alludes to what the imf has said about global growth out to 2020. jonathan: these are the opposite headlines we were reading moments ago. overcapacity, that gap is growing in europe.

lisa: that was the right point to pick up on. what this highlights is a shift from 2021 and 2022 with record profits on the heels of demand for good the pandemic. there is a larger question. i do not know the answer. how much is this an unusual below trend trade due to the supply chains versus, is this normal? jonathan: data coming out of apple on china, demand softer. ism manufacturing earlier this week, was not a pretty print this week. lisa: that turbocharged they move we got from that refunding agreement. that move you are talking about is right on. we are seeing diminishing growth, but to what level? what is the new normal? how far do yields go down, how slow do we see this slowdown escalate? jonathan: plenty of reasons to worry in the fourth quarter.

two mondays ago, 5.01% on a 10 year. 10 year now shaping up as follows, back to 4.6512. tom: to be clear, the equity markets do not pull back. up one day, down two days. futures negative seven. jonathan: given the weekly move we have had, the snp up by 5%. tom: to the jobs report in an hour and 15 minutes. on a war and conflict is the right to focus on the hezbollah and what here from northern israel, southern lebanon. we get a brief from annmarie hordern, this was the secretary of state in israel. and murray, i am going to use these words with great respect for the nuance in horror we are seeing.

in your world of the beltway as we heard the speaker of the house, is this perceived as a war? is it perceived as a conflict? is it perceived as something i can't make up? >> it is perceived as a war at this point. this goes to show that congress yesterday, the house of representatives passed this bill more aid to israel than the president had requested. a lot of politics attached to this. even though you did have a dozen democrats vote heavily jewish districts, definitely want to send aid to israel. it comes with this rescinding of cash given to the irs, the cbo says this will add to the deficit. maya mcguiness said this does not check out. it is dead on arrival in the senate. the president has said he would veto it. it does give this speaker a win to show he can work with his

caucus, this is the first test for him. at some point, they are going to have to figure out how to pass this bigger package the president would sign. tom: january 1942, did we link world war ii defense department funding with what we are doing at the irs? this is a whole new world for washington, isn't it? >> this is why democrats specifically are saying we cannot set this president -- president every time there is a need for an urgent request for money, whether it is to help national security partners around the world or to help with a hurricane in florida, we cannot set this precedent there needs to be and pay for and the budget to offset this when there is an emergency request. that is why there is a ton of pushback from the white house, from senate democrats, from hawks in the republican party on the senate side that this is not

the path forward when he won to send money to your ally. lisa: a real shift in tone and president biden the past few days, emphasizing humanitarian efforts but supporting lives. that is the key point antony blinken is going to emphasize with israeli leader should a. what is driving that shift in town, how much is that tied to divisions in the democratic party? >> it two things. everyone is seeing these horrific images of civilians, especially children, that are dying by israeli airstrikes in gaza. what the president says, he wants a pause because these palestinians living in gaza are suffering in terms of not getting humanitarian aid. i read the un reports every morning and the situation is dire. the president is calling for a pause. what is the difference between a pause and a cease fire?

cease fire means a into fighting on both sides. it usually means a path toward political resolution. a pause allows for depending on geographical location, the scope, the timing that there will be no fighting so that humanitarian aid, food, medicine can get in. that is the message secretary antony blinken is bringing to israel, he is meeting with the war cabinet, benjamin netanyahu. israelis saying there will be no cease fire. ms tickly, the president is under pressure at home and constituents in places like michigan. the palestinian diaspora muslim americans who do not want to see more aid to israel, this is why this is an incredibly difficult thread for this president to try to needle through. lisa: when you talk to advisors to the president, to the democratic party, how worried are they about the fragility of his ability to be reelected

based on some loss of support over the past few months? >> everyone will tell you it is way too soon. we are about a year's way almost, a few days left to marking the one-year year into the presidential election and they will say it is too soon to start talking about how this is going to impact next november. obviously, we have heard there are concerns when you talk to congressmen and women that represent these districts. it is a long way off. where are we going to be with this conflict november of next year? no one knows right now. what antony blinken said before he got on that plane to head to tel aviv is they wanted to do everything they can to deter a wider conflict. if they can do that, they are in a better position next year. jonathan: thank you. difficult to project things out to next year, but let's make a judgment on where we are now. the world coming toward nikki haley on the republican side over the last few weeks. tom: i would agree with that.

it has joined in a way from the actual war news we are seeing in the eastern mediterranean. she has had a better october than many is how i would put it. jonathan: remember that moment in 2008 when the financial crisis hit and the world move away from senator mccain in that race against obama? it became about a financial crisis and no longer about his foreign policy. things could change quickly. tom: they could change quickly, but it is such a long campaign process. jonathan: six weeks, over and out. alan zinn of morgan stanley coming up on this payrolls report. jobs are pulled -- jobs report, estimated 180,000.

the chase ink business premier card is made for people like sam, who make- everyday products, designed smarter. like a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more. plus unlimited 2% cash back on all other purchases. and with greater spending potential, sam can keep making smart ideas- a brilliant reality! the ink business premier card from chase for business. make more of what's yours.

jonathan: as things stand the biggest week on the s&p 500 going back to november of last year. up over the last previous day. down on the session this morning we look at .1% on the s&p futures. so far the nasdaq up more than 5%. a weekly gain through thursday of 5.2%. tom: the lift has been tangible

and persistent. spx negative six right now. and we are data-dependent. we will be data-dependent. i cannot make any kind of guess about what will happen at 9:30. jonathan: the jobs report. coming out today. the 10 year 4.6 0 --ish . tom: nice ish. jonathan: thank you. there is a lot of ish in the market right now. lisa: and that makes me think how much we need to get a downside on the payroll surprise. it is the discussion of good news is bad news. it is fun to explain why it's a good thing of why people are not

getting more jobs. it seems counterintuitive and against everyone's instinct. jonathan: everyone that the bulls wanted to see they have gotten it. so far so good. let's talk about the fx market and the euro at one of 615 -- 1.0651. tom: you mentioned earlier there's not much movement in the euro. all the focus is among global wall street. we remind ourselves bank of japan and institutions have until sunday evening to make a decision as they stagger into next week. jonathan: surveillances morning is randy continuing overnight in gaza. the military says a cease-fire is not owned the tape -- not on

the table. and secretary antony blinken make in second visit since this started. and maybe this is putting a damper on risk appetite a lot of this is on if there is escalation we will get a better sense of that. the first time they will speak going back to october 2. jonathan: that is a little less than 30 minutes from now. let's talk about payrolls report. payrolls will slow half of september's blistering pace. the u.s. is supposed to have had 180,000 positions in october which is above the pre-pandemic trend in job growth. been spoiled with numbers of 336 in the previous month and 180 is still solid. tom: post-pandemic, literally

everybody was making it up as they go and the answer is do i have a guess here? do i have any comments on my guess? absolutely not. you sort of get the number out of it. may be. jonathan: jobs report about an hour away. sam bankman-fried in trial for his -- facing decades in prison after being found guilty on seven accounts of fraud and computer -- conspiracy. he perpetrated one of the biggest financial frauds in american history. jonathan: this is wild for me. i was taking a nap and i woke up and it was still going on. it was a four hour deliberation. in modern people talk about how

much longer this is, but henry fonda in 1957, they argued three days. they did not even get their pizza. tom: -- lisa: there is the question around the trial and if this is good or bad for the crypto industry. people are seeking legitimacy even with product looming greatly over it. tom: he has the right to appeal -- repeal. jonathan: the timeline it is amazing how quickly it came together. how quickly they collapsed, they got the case together, and then they made a decision on that. tom: we begin with ellen sat in her chief u.s. economist of morgan stanley. in our guests with us the other day spent most of the time talking about your research. how hard is it right now to take

excel spreadsheets and guess? ellen: it's better been a guesstimate but you can stick your finger in the air and figure out which way the wind will blow. thus the surveillance way. it is a big number even though it's half the pace of the prior month and that is without adding in strikers. when you are back to strikers it would be a bigger number. this is why it could be a perfect report. payroll number slower job wage gains and higher unemployment. that is the way chair powell and other fed policymakers describe the september blowout number. in the labor supply better balance labor market. based on what we've seen over the past few weeks and the data that has come in a soft landing is more or less likely? ellen: it is just as likely as

we have seen before but we see pockets of wheat this. credit card delinquencies are up for younger households. that's normal as you get labor in the cycle. i watched to see if that does not spread. while we see job -- jobless claims are low but higher rate is down. people are not getting employed as easily. it is all anecdotal, but the fed knows and we think we know it will show up in the data. lisa: and we have the backward looking labor market report -- which is more important the backward looking labor report or the post from aaa that people are paying seven dollars for burritos and so on. ellen: yes with labor income it matters for most americans and it's been slowing.

slower wage growth with robust job games -- gains. but discretionary spending and the bill for wealthy households is strong. when you have jobs that demand for coffees we used to follow coffee and sugar over the business cycle and when it got we you knew that we were at the end of the labor market cycle. it is good news that we have the in to this but were willing to work for that specialty item. tom: if we had a demographic shift we would have to get used to a reset and the unemployment rate lower. look at topeka, kansas 2.9%. the number was higher before at 3.5% or something. we need to shift down.

-- do we need to shift down our own rates? ellen: there's plenty of argument of why full employment can be had at a lower rate. full employment, our potential growth, these are made numbers almost. how do you know you are a neutral for the industry? you don't. the fed believes it is around 4% and -- we are still below that. tom: 4% is normal, says who? ellen: is it as goofy? again, with the numbers is trying to put economic theory and practice. theory will tell you the demographic shift in the

company's labor hoarding you can have an unemployment rate that is lower. we are not as tight as you think but it's in theory. in practice you know if it is a tight labor market wage growth is spiraling out of control for instance. a lot of people talk about ai -- a lot of people talk about ai. -- lisa: a lot of people talk about ai. -- do we see this in the labor demand? ellen: it is difficult to pin weight in real time. we are encouraged that we can alleviate pressures from the shortage of workers in the semiconductor industry. we just do not have a pool of

manufacturing labor. the support to biltmore manufacturing seville -- facilities are higher. it will create a lot of job opportunities in the area and you will alleviate some of the shortages in other areas. i think of ai as a technological investment similar to the past where there is a temporal problem. you will have displaced labor they were to the short and medium-term and in the long-term you will see labor increase in other areas. jonathan: you mention theory, does chairman powell have one? and is that a good or bad thing? ellen: his plan is a little more tangible and basic economic theory and -- i am never bold. i can move quickly. i can bother with the data when it comes in.

so it is something that i believe he felt confident he achieved in 2018 going into 2019. it looked like things were stabilizing and then covid hit. you have a chair that is confident that i've done this and i can do it again. and you do it again in order to maintain a soft landing in the economy. jonathan: thank you for your review. if you just joining us we are at the payrolls report. the survey is 180,000. the price action looks like this, what of turnaround we've seen in the last couple weeks 5% moving back on the 10 year to 4.6387. we are negative by point 1%. the equity market is up big time.

and we see this in the treasury market as well. tom: a lot of people are positioned here. i have different readings. i don't have a strong opinion. there select charts showing people do not want to be in the market. i wonder how it changes the tone. lisa: it has to do with the positioning and new slate is for whatever is to come. michael who you're were talking about earlier said it looks like we could get a rally. he's been bearish all year but he sees the underpinnings of the year and rally. not a lot of bearishness i'm just saying. tom: and they are forced to break out reporter resilience based on which way you go. maybe the reading will give color on that in the jobs report.

my basic -- bulls look awfully good. jonathan: it's amazing to see the tone shift with 35 basis point with the 10 year yield lower. that catches my i. -- my eye. you get a 30 basis point move. lisa: yes we have always seen peaks for now. jonathan: ok i am just catching up because i've been away for a week. lisa: we will talk about that quite a bit. jonathan: payrolls just around the corner. from new york, this is bloomberg. ♪ : stone wheel crafting) ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> the labor market is in balance. workforce growth is picking up.

this is all played out. the story is where the fed has not had to do much to bring inflation down. there saying we do not have to do much from here. jonathan: that is the former new york president bill dudley honing in on the case that the fed has done a lot of changes for citigroup. we count you down to the payroll report in 40 minutes. we are negative by .8% and yields are lower by basis points. the dollar is weaker and the euro is stronger. in our survey 180,000 payrolls are as demented -- are estimated. tom: we will see how they play that at 8:30. there's a little bit of a lift, a fractional lift of the tape

right now. jonathan: if you look at apple, in premarket look at the charts session high we are down about 2% after the numbers yesterday. tom: this is a raging debate. tom is with us and he's been spectacular on apple. jonathan: 9:45 eastern time. tom: he is at nine? i cannot believe this. jonathan: we can make that happen. tom: that will be good. looking at the number of lower than 170 level. it was the fed day and john was not with us. lisa: [laughter] jonathan: you can tell by his voice that i have been off sick. tom: oh i did not know. anyway bill dudley was here.

can we continue, thank you. bill dudley has that essay out due to dovish tilt. and they say we need to talk to and along. the chief u.s. economist for bloomberg economics. no one with magnitude moved to higher interest rates no one and i thought of bill dudley and i did not mean to say that this is what will happen, but he worries about being terribly wrong if we pause or cut rates. can we screw this up that bad? do you agree with dr. dudley at the new york fed that we could this wrong? ann: yeah i agree. when the 10 year surging a couple weeks ago i put out a piece saying if the fed ask -- act like a risk manager they

have to think about whether or not they are confident that the surge will be sustained. whether a substitute for this depends on whether they believe this surge will be sustained. just when powell was speaking a couple days ago the 10 year yield fell. i think what it means is that if they are acting more like a risk manager they probably should be doing more hikes. and if inflation does not increase again and it falls, they can cut sharply. that would be a cautious central bank move. rather than pausing. tom: in the financials on the y axis we look at the cuts, accommodation, and restrictiveness.

if you take is to the 12th meeting of next year will that solve this for everyone? looking for a longer period at these levels? anna: june 12 of next year. wow, it depends on the swing factor. especially in the labor market. the jobs market is weaker than what many economists are saying. today look for arise and unemployment rate. it will happen in the next two months. i think were close to the drop off in unemployment. by june of next year, we may have unemployment that is higher than the forecast 4.1%. the fed would be cutting.

recessions art -- will definitely put a damper on inflation but you cannot count on them for doing all the work. in that time we have a middle east war and price increase you will face stagflation air he economy. lisa: we hope we don't see it but when you talk about the potential job losses in the move up in unemployment. where in the labor market do you think the cuts will be felt strongly? anna: manufacturing. in literature, many have found that even many manufacturing sectors less than 30% of gdp, the layoff drives business cycle. we are already seeing in the ism report what shifted as a

manufacturing report. we saw this week people are using layoffs is a headcount management. in the past, comments were like using attrition as a headcount management strategy. i think once again that just like another recessions the path 50 years ago there's manufacturing will be taken away with layoffs. lisa: we saw a report this morning cutting jobs because of decline in the trade they were operating. we seeing a return to normal or something more with manufacturing that was boosted but it's in a recession now. anna: you are right. manufacturing has been suffering two years.

and last year it was due to pullback of consumers that was pandemic driven. but the story is different now with potential recessions in europe, canada, and china. the manufacturing powerhouses are slowing. there's a second leg to this downturn. this is truly a reflection of demand disruption caused by central bank rate heights. tom: are we a fully employed america? anna: we are. tom: thank you so much. jonathan: we are wrapping things up right. tom: i cannot say enough about

the magnitude of her call. jonathan: you expect payrolls to put -- lisa: yeah it has been like that will morning. very good, yeah. great. jonathan: but in some weight there. tom: it's one thing to make a call but to be as lonely as an was with bill dudley and others i cannot convey how alone they were when they said forget it rates are moving up. lisa: now she is saying we do not see the labor market we miss that was going to happen. in the jump up booth still on the way. that's the unknown hovering over the market. what will the news be at that point. jonathan: it's actually it matters why the fed might be done and it matters what happens with economic data.

i know you do not want to talk about the soft point for the week in china. but we have the best news out of europe today on shipment. tom: with lee having -- we have wars about. -- productivity for the markets not for the fed -- david rosenberg says that productivity is the think of beauty for the markets. jonathan: we catch up with nadia in five minutes and then we count down to play roles -- payrolls we are looking for one adk. that's the medium estimate. unemployment at 3.8%. job stated just around the corner. yields are lower by a couple

basis points 4.6367. from new york city, this is bloomberg. ♪ ♪ fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating

that focuses on optimizing insulin levels. we tackle the cause of weight gain, not just the symptom. when you have good metabolic health, weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

>> were not out of the woods in.

>> it looks like a transition. >> as long as we get the economy right we will have a recession next year. >> everybody wants to know who will ring the bell on the soft landing or recession. >> this is bloomberg surveillance with tom, jonathan ferro, lisa abramowicz. tom: good morning. we are both in today. and jonathan decided to show up. we have many mysteries out there. do we go up another 200 out wings on the jobs. jonathan: we start with payrolls with the estimate for the number dropping in 30 minutes time. when 80,000 is expected. so far so good.

we've had everything we wanted. when you look at the data it came in softer. mooney get a queen -- clean sweep -- when you get a clean sweep. tom: as a general statement nominal gdp third quarter was a blowout. it helped corporations amend and adapt. allen sat in her of last week her decline of real gdp in the fourth order gets you to a job report of 50,000. jonathan: that's an easy call to say the third quarter is as good as it gets. and slower from here. but it is how much slower. if the good to be economy will be held up by who? europe puddle think so.

we have real difficulty in china. tom: and that goes to not just does this jobs report but the others. lisa: if you put it together there's a question of what does goldilocks look like. when is it not good to lose anymore. when we have a sense of long -- nonlinear increase in ointment or we see them cut 10,000 jobs. you see the potential for cuts with manufacturing. people working longer workweeks and assign they need to finance the grocery bill that's gone up the past two years. tom: this is important and we saw the cumulative monetary policy. lisa and i did a study of cumulative grocery inflation.

but frequent 5%, up 3.5% public good 11%. that is part of the jobs report today. jonathan: we can sit here and tell everyone how things look good unemployment has a three handle. we can sit here and say those things but so many people in the country do not feel it. this confidence does not show up in the way the white house with blanket to. tom: it goes to what we will hear from the department of later labor -- later. you've got to adjust here by 48,000. lisa: because of the strikes and these are the uncertainty of how

fungible the numbers are. people are coalescing around the idea that this is a lastgasp ahead of the last opportunity. tom: the real you will go 2.25%. jonathan: and it's been a big move in the treasury market and equity. stock market poised for the biggest gain on the year so far. we are negative by .1%. nasdaq 100 this week up by more than 5% money through thursday. high every day this week. tom: and we have senior u.s. strategist joining us. i've seen this off of the october low and then you have the breakout, no. can you signal the way we have gone up this week where we get

an equity surge to any level natilie: yeah we thought the dip was viable and there is more upside in the market. we do still think that sentiment is bearish we look at the indicators is the highest level since this year. and earnings is coming in better than expected. we think the outlook continues to improve. tom: how much of this does the two year yield have to come in is a cash proxy? how much should we go from 5% to a lower yield to signal where

equities compete with cash? nadia: you have to see the two-year come down to a four handle rotary more attractive. but we do not think the higher bond yield will come back. it's not sustainable because the cost will come down on it. long-term you want a bond duration and you also want exposure to equities. lisa: we are in this awkward position where it lower than expected job creation will lead to a rally likely in stocks. what is the two low point where bad news is bad news for risk asset? nadia: job numbers under 100 thousand will signal the economy

is slowing faster than expected. we are looking for a slower growth but we have gdp slowing down over the next quarters. and you have a job market that rolls over quickly there is concern about consumer spending. lisa: when building on your point, of the fed cutting sooner than expected, how much is your bullish view and those in the market thinking about the idea that the bar to cut rate is lower than it used to be based on jay powell's words this week. nadia: we have a broad slow compared to what it used to be. -- the fed continues to try to participate and avoid a

recession. they will be quick to respond to any thing in the stock market but it has to get close to negative. tom: how do you measure growth right now? -- some are cautious on this growth. including apple. how does your strategy measure how a company is growing? nadia: topline is important in maintaining margins drive that online growth. in terms of support -- the leader of soft -- smartphone seeing softness given what is happening overseas and from a regulatory standpoint we think that outlook has improved.

even though to remain neutral we think there's opportunities. they see stabilization in i.t. spending. you are starting to see some of the errors and pcs our servers. we are more cautious on that as we think the growth remains intact. we have larger names also. lisa: we've seen a rally in big tech. it was one of the industries that was announced as a job, last year. going forward, do you think the announcement of job cut is good news or bad news in terms of the signal?

nadia: we know tech and diversifiers have access coming out of the pandemic. is that the market will be cautious. you see a wide range of in other sectors the economy may be slowing down. that might feed into the areas if we see weakness. at the end of the day of companies cut aggressively it's an indication the top line is thinning and they are cutting headcount to preserve margins. i think that is a positive indication because it's unlikely to be accessible. jonathan: is that the next phase? thank you. but i was the view on the equity market going to the opening bell 20 minutes away.

and before we get there we have the payroll report 180,000 is the estimate. tom: it will be fascinating. people will email and say would you like to be in the pool to guess where this goes today? and i can't even do it anymore. i don't play the game. what i know for in certain is i went down in flames the analysis. lisa nailed it. you should've heard us doing this interview. jonathan: despise the fact that you make this about me. this is what you are responsible for i was not here when you announce this. tom: [laughter] they are far apart geographically.

but they are invigorated teams. jonathan: and we were visiting grand prix this week. tom: and then he played soccer they are. jonathan: i did. tom: and is it on a big ugly track? jonathan: it's like old-school in its is great. it will be great look out that update. this is the sports wrap if you're joining us were back on track apparently. -5.0%. payrolls around the corner. there was a young lad playing and he turns 18 next year. he's already been purchased by madrid. he will complete the season and then go to madrid. tom: is it rick carlson for the tots? why is he struggling? jonathan: he's not as good.

you know it's interesting with the games the facial recognition to get into the game. lisa: that makes sense to prevent violence. tom: you just scan your face and walk in. lisa: there is a reason for this. jonathan: john does not know this for for the 2024 surveillance budget we will have facial recognition for our guests to get into the studio. lisa: can i say i'm getting trolled on my emails and one of them is support for football supporters. jonathan: one of those pre notes. lisa: yeah people are targeting it now. [laughter] [laughter] ♪

♪ be ready for any market with a liquid etf. get in and out with dia.

>> we want to see slowing in the labor market.

and seymour slowing in the inflation components. eci looks like wage gains are too brisk to be consistent with 2% inflation. jonathan: we get another breed on inflation growth in 15 minutes time. and that is going into the payrolls report. it's just around the corner. price action looks like this s&p 500 never did -- negative .07%. 4.6 325 on the 10 year. 5% on the 10 year and then all the way back down again. tom: we changed worlds in the last week and we have equity markets. there is a constructive bid to the tape after festivities we have seen over the last number

of days. you come out of north dakota you are an engineer. someone says you want to write a microeconomic textbook you say i would like to do that. randall crossan knows what i am talking about. he is the expert on productivity in america at the chicago booth school. joining us now the former governor of the federal reserve system. you have a cup of coffee with jeff syverson this morning on the mystery of productivity. has it changed? we underestimate the jobs data the productivity of america. >> it's one of the key things trying to get the measurements right. when you're in an unusual situation, there's a lot of questions about the number of hours correctly because so many are working at home and as we move to services it becomes harder to measure productivity.

it's easier when you're turning out pieces of machinery. it generally takes for people to turn out two machines a day but when he provide services it is difficult. i think were in a good position with respect to productivity. tom: the chart i had earlier we do not need to show it for radio it is too much stress but the idea is a huge 25-50 for the covid rebound is spectacular. is that because of stimulus? randy: i do not think it was because of that but coming back naturally because you had lower participation in the workforce after covid. people were worried their health situation coming back into work. now we have more flexible situations. a lot of people working from home allowing them to come to the job market comfortably.

we are fully backed in terms of labor force participation except for older workers which makes sense because they are the ones most wary of coming into the office. even if they do not have to come back they said they have seen too many people not make it through and they want to spend time with their kids and grandkids. lisa: we see the workweek lengthening the little bit with those working longer to make in's meat. especially with groceries and everything going up. and we see a plan of cutting 10,000 jobs with decline in the world. how much is this a foretell of what will happen in the next couple month with manufacturing? randy: as i mentioned before, hard landing, soft landing, jay powell talked about a soft landing and i am talking about a

hard landing. i don't see how the economy can continue in this way with strong job growth and get inflation down to 2%. it's likely we will see softening in the labor market. that's one of the key ways we have less wage pressure and overall price pressure and getting back to 2%. lisa: what surveys are you looking at? holiday hiring is not as big as some were expecting. what tea leaves are you tracking to understand that a hard landing is the most likely scenario with jobless rate increasing? randy: it looks like -- let's not go too far be it may be a hard landing but i don't think we go off the cliff.

it will be above 4% relatively soon. i think you can see your job openings and more concerns about that firms are discussing muc workers feel less confident. less quitting than you have before. that gets to a normal labor market situation and work situation. we will probably see an increase in unemployment before we get wage growth to come down of what will be a sustainable 2% inflation target. lisa: this seems like chair powell is on the same page. in addition to the inflation backdrop. do you think the fed will be more willing to cut rates more aggressively next year if what you expect comes to pass?

randy: they will hang tough more than people expect because they know they may need to take a risk of a softening labor market and even a mild recession in order to get to the inflation go. the 2% inflation target is what they are sticking to and it is there goal. and if it means the unemployment rate may rise, they will hang tough on that. tom: ok i'm going to treat you like a market economist, where is the chip point on the unemployment rate in your head for where you say we move beyond full employment or where we are right now. is it 4.5 or a statistic higher? randy: in the environment we are in it is low fours. it's been astonishing to see the

rate below 4% for so long as labor force participation has come in. it's likely we will move above that into the upper force or five spear he and not the best for the labor, but compared to best slowdowns -- past slowdowns it is good. tom: when i look at topeka, kansas it is like 4% right now. it used to be 3.5%. do we have to r-star hours unemployment rate lower over what is normal? randy: that's one of the things debated along with the neutral rate. has it fundamentally change? most people think that during the slowdown that we've had over the last pre-pandemic and into the beginning that the rate was

lower. a lot of discussion about the unemployment rate now and they think it is higher. the question is what is the benchmark rate for unemployment? i don't think it's move down as much as people think it may have into the threes, but it is difficult to estimate in real time. it used to be seen as constant and now there is a fair amount of estimates. jonathan: stay close we need to catch up with you in a moment. we are five minutes away from the payroll report. mike mckee joining us to get a preview. there is an expectation of 180,000 on our survey but i know you expect more than that. mike: yeah we look to the unemployment rate. -- it went up from 3.5 percent so a move a couple months ago but it is locked in at 3.8%.

if it goes up to 4.1% is a key question. in the fed is asking what happens with hourly average wages. does it slip more given relief on the wage front? one thing to mention, i told you about it earlier, the strike situation. 48,000 workers off of the job. mentally at in the 180 anti-e.u. are looking at 220 or 228. keep an eye on that as we have this explanation of if the number comes in blow. lisa: we talk about data dependency and this is a data dependent fed. are we looking at continued acceleration or do you see the signs that would give you pause and the deceleration side?

mike: you can make a list of the indicators any come out half and half. some suggest it will go the same pace and others suggest a slowdown. you would expect a slowdown. we used to be worried about whether we would slow to fast now are worried about whether we slow at all. it will be interesting as we have been data dependent fed. we have a lot of indicators and another reporting before the next fed meeting. this will carry out in a lot of ways other than just the market. tom: what is your thought on distribution in of fully employed america? how geographically distributed is this? mike: it's been pretty homogenous generally it is interesting. we did not see a lot of migration.

we ask economists of what happens to the idea that america has picked up to move? people are more tied to their communities. we see the effect of bok choy move to china. some play out now and you're in a situation where jobs do not move as much the infrastructure spending is interesting they award contracts to areas where under event is high and people have lost jobs. trying to even things out. we will see how it works. jonathan: you know how this gets filtered when the data drops in about two minutes. you asked what is it mean for chairman powell? and then you trade accordingly. what is your recommendation for this committee? mike: it will be relevant in

wall street for the reason you suggest. i think we will see rates move around a lot between now and the time the fed meets on december 13. we have inflation report, jobs were, spending report will not be a lot of attention paid to what happens in wall street and then they look for a collapse on wall street. in december they will be on the sidelines. jonathan: stay close. and they take note of the tightening financial conditions. lisa: that's why they said it has to be sustained. you wonder if they are concerned about the whipsaw in the wrong direction. jonathan: i did not mention this but in months the revisions are a huge deal. i still want to use the number

last month and i am fascinating -- fascinated on how it is revised. jonathan: i really missed you. over the past week. you sounded better when you are you coming back? just admit it. tom: i have to have a therapy. and the tissue. jonathan: how is therapy going by the way? tom: it is great. here's the numbers 180 k and the estimated median survey. 336 is the previous number. for an limit 3.8% is the estimate previous number 3.8%. slightly negative on the session but up on the week. we are negative by .1%. yields are lower by six basis points.

removing in the way the fed wants to see it in the numbers. down in august as well. they force ticks down a bit. some are higher. will see how the market reacts.

the loss of 35,000 jobs in manufacturing. maybe that is what is playing out. jonathan: it is a clean sweep for the bond market bulls. 10-year right now 4.57%. bonds rally, yields drop. the euro pops. 1.0694 currently. equities rally on the s&p 500. futures higher 0.54%. the bond market bulls have had everything they wanted. tom: if you are out, you have got to get in. you heard that with michael mckee's data. this was not about one data

point indicating a softer labor market. it was 1, 2, 3, 4, even seven. jonathan: it is early days. lisa, it is not too hot, not too cold. what do you call it? lisa: goldilocks. jonathan: did that hurt? lisa: it did. i want to piggyback on what anna wong was talking about. is this a leading indicator of more cuts to come? it looks like a soft landing until it is not. that is where people are going to be focused. i want to see whether the move in the bond market sticks but what about risk assets? is it still good news when people are not getting employed as much if it leads to something more significant? jonathan: mike mckee, i know you want a second look at this. mike: we had a big drop in the

labor force size. but the employment level in the household survey down 348,000. the level changed for unemployment up 146,000. a lot of people like to look at the difference between the surveys and this would give those people ammunition in terms of the number of people who are unemployed or lost their jobs. there will be talk about that. the other thing that stands out is in terms of job creation. private service jobs 110,000 but those are across the curve. health care workers are always the leaders. leisure and hospitality 19,000 jobs. where you really see movement is construction, up 23,000, and government up 51,000. maybe some seasonal factors that

have affected government spending have petered out. looks like an evenly distributed between losses and gains in no particular area that stands out. although i do need to check -- and i will do this right now -- on the autoworkers. tom: i guess the question is, is this a first month move? or can you take three months of these numbers and say, we have a vector in place to a weaker jobs market? mike: i do not think you can because manufacturing, for example, we lost 35,000 jobs but gained 14,000 the month before. it does not look like there is any one category that screams we are turning around. we have a number that you could keep an eye on. you are going to need more months of this to discern any

trend. jonathan: thank you. looking forward to talk with you in 25 minutes. it is not amazing, it is not terrible, it is in between in between and the bond market likes it. 10-year yield down nine basis points. two-year down to 490. raphael bostic at 3:30 eastern. you will find out what the fed thinks later on. tons of fed speak still to come. rick rieder, mike collins, anastasia amoroso, mohamed el-erian all to come. downside surprise on the payrolls report and an equity market that is positive 0.4%. tom: it will be fascinating to see how we get to your conversation with mohamed el-erian. the vix, i cannot fathom a 14

vix. the bond market is extraordinary from the peak just above 5%. good bloomberg mathematics. it is a standard deviation move from +2 down to=2. -2. lisa: i am watching the two-year more closely. this feeds into the fed's reaction function. people are viewing this as keeping the fed on hold and employing more cuts than they are signaling. tom: randy kroszner, one of our good financial economists. what is the second derivative of the jobs market? when it moves, does it move?

randy: that is the key question. what does this portend for the trajectory going forward? we have seen a slowing pace, downward revisions, and will this be nice and smooth or will this portend something that is non-linear? difficult to predict any non-linear moves, but i think it is consistent with a somewhat softening labor market. i think the fed will be heartened by the wage growth coming down over time. i think this takes the wind out of the sails of those that wanted to go further. i think it makes it more likely we will hold where we are. so far, there is nothing in this to suggest the fed is eager to cut or even talking about cutting anytime soon. lisa: some are pointing to manufacturing as a point of weakness. that that is a leading indicator

as it has in previous times because of how many were hired during the peak of the pandemic. randy: it is one area there is a lot of bounce back because people wanted things. now people want services. the services part is extremely important. i would not put too much emphasis on anyone sector. i think you have to look overall and as mike said, we are seeing slow down broadly but not enormous amount of slowdown. i think this is consistent with where the fed wants to go. they want to see the unemployment rate go up a little bit. they want to see wage growth come down a little bit, but not too much. until a few months ago real wages were not growing. they were actually negative. now real rates growth is positive. that gives less incentive for firms to hire. real interest rates are

positive. they had been negative for a long time. that combination is going to lead firms to be less eager to hire. tom: this is an important jobs report. this november report of the october data. randy kroszner, thank you. professor kroszner with the university of chicago booth school. lisa: i am looking at the five-year yield and it is coming down but 4.5%. also getting color from viewers who i want to thank for this. the tone has changed materially for companies looking to sell debt. suddenly, they are ready to go back to market and lock in some costs. just some stability in that

buyers are still going to be there is enough to bring people in. there is still a tone underneath of strong risk appetite and a sense we are going to get a soft landing. tom: my number one advisor holding court in a cafe in paris right now. i said to him last night by email, when does apple do a bond offering? i wrote it out with this market moving. lisa: and we are still looking at higher borrowing costs. but the strength of the consumer and the balance sheets, to your point, is giving people confidence even at these levels. tom: as lisa speaks, we have the 10-year yield lower. we have gone from 2.20% to 2.19%. it is hard to look at the bloomberg screen and frame it out from where we were two weeks ago, which gets us to when the facts change. jeffrey rosenberg studied at

carnegie mellon. he is blackrock portfolio manager. for all of us, are the facts changing? jeff: the narrative is changing and the facts are driving that. lisa asked the key question. how do you rally in front of a slowing labor picture? that is because it is where we are. equity markets were weaker while the economy was strengthening and that was about the rise in the denominator, in the discount rate, the interest rate. as you ease off the pressure there is a window here where the narrative changes. there is a because the discount rate is expected to be lower and you see it in the bond market. but that is about horizon. the near term horizon will shift but the longer term horizon about that hardish landing will

be for future conversations. right now, the market is pretty excited. tom: people would say blackrock is part of that wall of money. we have got a short cover here, short cover there, futures of 18. are we underestimating how many people here are offsides and need to get in and play now? jeff: yeah, we talked about this after the fomc. the near term volatility is all about technicals and positioning. you are going to have that. you are going to see those moves. the longer-term positioning is going to be about trajectory and fundamentals. certainly, after a report that, you know, convincingly across the board, this is a report that helps support the narrative of slowing in the labor markets, slowing wage inflation -- even though that is a mixed shift --

but especially with the revisions it looks like this is coming in slower. that helps to feed the near-term narrative that you get to the soft landing. as randy said, whether it is soft landing or hardish landing is yet to be seen. lisa: if you assume bad news will be bad news? jeff: it is a lot about what is in the price and how much cushion you have against the consensus move and where the asymmetry lies. i think right now the sentiment around soft landing is going to be hard to push back against. but as we see in successive waves of data -- we have more in terms of the december fomc -- there is a little bit of momentum around the easing off

of financial conditions, the easing off of tightening from the fed, and i think that will provide a tailwind. lisa: the momentum tends to overshoot and there is this feeling that this sets the market up for more fragility heading into a print that could be a surprise on the downside. how much of that is to lean into the momentum, soft landing, you can celebrate but the music will stop? and each one of these are going to have that much more importance. jeff: the main issue here is about long and variable lags. tom hates when i say that but it is where do you see that pressure coming in? randy talked about the pressure in terms of easing off of hiring because real wages are no longer negative. you talked about funding costs. maybe there is an opening up in terms of the bond market, but i think you got to remember these

are much more expensive funding costs. you do not have to issue that debt because you have termed it out. even though the market may be open it is at a higher cost and that lagged affected something the market is going to have to figure out where are the vulnerabilities? there are vulnerabilities to that impact. tom: bloomberg television and radio, jeffrey rosenberg with us of blackrock. we thank him for his fed work as well. he is going to stay with us. i cannot do a complete data check because jeff rosenberg is too important, but futures up 19. can i get to a vix of 14? i am not there yet. two-year yield in 13 basis points. we continue to see lower yields and higher prices. 10-year in 11 basis points. outside the box i got weaker

dollar, euro through 1.07, yen dynamics, but what are the japanese institutions doing off what jeff rosenberg says? if they are not going to act now, when are they going to act? lisa: good question. jeff, to that point, does the move in the u.s. open up possible monetary disruption elsewhere, hint hint, bank of japan? jeff: that is a big global story and when we have been talking about for a while. we got a little bit in terms of changing the definition of yield curve control. there is an expectation there will be more. there is an incredible amount of fiscal stimulus coming out of japan that is going to push the boj further. that has been a global impact. it is dampening term premium.

it is part of the steepening story. the refunding has pushed back on that and positioning offsides for that somewhat surprised refunding. but the big story is global term premiums steepening and that is going to come back to the u.s. near-term this is about softish landing. lisa: we are looking at two-year yields tanking. 15 basis points from top to bottom as people parse through this. i want to finish up with the fed's reaction function. the concept of what it takes for the fed to cut rates. right now, there is baked into the markets a sense they will be cutting rates much sooner than they are saying. do you think that is accurate? that the bar to cut rates has come in as a result of the general feeling in the public and lack of willingness to

tolerate higher unemployment rates. jeff: i think the reaction you are getting right now, pricing out the probabilities, the limited probabilities of the last hike, you go back to wednesday and you remember the question. we are not even talking about cutting rates. the market is because the market is looking forward. i think you got to see a lot more development on the inflation side for you get there. the other problem we are going to talk about is the reflexivity. the fed can do less because the market is doing more. but when the market does more in terms of easing financial conditions, the more the fed has to do. you are chasing your own tail around that story in terms of whether they can cut. it will come back to does the inflation fall fast enough to that 2% level that he gets real

interest rates high enough that gets them concerned they are too tight where they need to deliver those cuts? i think that is way into the future. tom: where do you get a show where jeff rosenberg channels george soros? there is nowhere else in the world you can have as much fun. jeffrey rosenberg, thank you for joining us. to get you to the weekend and the jobs report -- and a great not neglect our coming up on television and -- 9:00 hour coming up on television and radio -- these are enormous moves. give me your one data point. lisa: i keep watching the two wl-year yield. he was talking about that days ago. how many others had massive leveraged bets on the two-year

yield? tom: you set up where i wanted to go with ira jersey. this is so twisted he is in his memorization. ira has named his kids after the greek letters. ira jersey, gamma is in play here now. bramo nails it with the leverage bet. what is the character of the short cover, if you will, lend to fixed income space? ira: if you are going to have a levered long, you have to have a lot of conviction. the carrie lam to that trade is negative. -- the carry in that trade is negative. the overnight rate is higher than the yield on that treasury or in that swap. it is working out really well

now. the question is how much further can this go if the fed is going to be on hold for a long period of time? i agree with jeffrey. the front end is firstly taking out the possibility of hikes. secondly, pricing in for deeper cuts further out. tom: lisa this weekend open housing across the upper eastside looking for something with two wood-burning fireplaces. can you say we reached highs in the 30-year mortgage? ira: it is very possible. i suspect at some point -- especially if we have a no landing scenario because we wind up getting good numbers on retail sales or something like that -- you could wind back up at that 8%. but we are probably at or near the highs in yields across the board. whether that is corporate, treasury with a decent rally off of 5%.

that is going to draw mortgage rates lower as we continue to rally. we still think over the next 15 months or so we are going to see lower 10-year treasury yields. lisa: looking at the five-year yield as well and that is some indication of how many cuts are being baked into the system by the fed over the longer term. it has gone down quite a bit but it is still at 4.5%. are we looking at a scenario of higher for longer that suddenly people are saying, it is a good thing. because even as it is going to be higher borrowing costs are stable. at least the fed is done. ira: that is part of it and a big part of what is going on with the vernacular is the sticker shock. when we go to the 1990's or early 2000's, form .5%, 5% yield was fine -- 4.5%, 5% yield was

fine. i think eventually we will get used to these types of yields where 3.5%, 4.5% is the norm. we just got used to the last 15 years interest rates being low. that was not a state that was going to persist forever. i think once we get used to this -- a year from now we are going to say, 5% is high-yield, but at the same time, for percent is normal. tom: thank you so much for your work. you will publish today for bloomberg intelligence on fixed income. equities advance up 23. the nasdaq does not participate as much, up only 0.4%. maybe exhausted from the last couple of days. on the equity space, i really need to listen to this. gina martin adams, chief u.s. equity strategist. i got the buy ticket for the triple leverage fund. is this a sea change moment?

or is it another day at the optimistic payroll races? gina: i think we had our seachange in october 2022. this is sort of a mediocre moment but a moment. certainly, earlier this week we had another sentiment washout occur in u.s. equities. it was not has deep as the october washout, but we were prepared for interest rates to remain high for a very long time. as earlier this week the equity market was priced for the two-year yield to stay at 5% through the next 12 months, keeping us on hold in terms of valuation expansion. this at least unlocks some of that constraint on the u.s. equity market because if we are in an environment where yields can rally or inflation pressures potentially continue to decelerate, we might flirt with

recession but the equity market has been talking about flirting with recession for two years. this is about unlocking that inflation constraint, unlocking that fed constraint, and that allows for some side lift and equity multiples. lisa: how much are you concerned about softness that gets too soft? the idea that this patch of weakness -- it is hard to call this overly weak -- does not become something pernicious for risk assets? gina: i am not entirely concerned because all of these cyclical segments of the u.s. equity market are trading at multiple standard deviations below average. you have this interesting dichotomy happening in the u.s. equity market where tech stocks and the biggest communication stocks have driven all the return this year. they are the only stocks trading in premiums. but if you take the consumer discretionary space, where we

have had the most negative guidance and where most people think recession is likely to emerge, consumer discretionary stocks, excluding amazon and tesla, are trading two standard deviations below five-year averages. we are prepared for an environment of slow growth. what the equity market struggles with is not about growth. companies are well prepared for a slowdown in growth. they have talked about a slowdown in growth for a long time. where they struggle and continue to struggle is with inflation and inflation volatility. if we are moving into an environment where growth slows, they can contend with that. they have talked about it for a long time. what they are not prepared for and what they struggle with is an environment where growth does not slow and inflation remains high and sticky. that is the difficult point for equities. we had that throughout much of 2022. we contended with fears of that

environment reemerging over the last three months. anything that confirms that environment is going away is going to be perceived positively by stocks. tom: thank you so much. i am still not brave enough to buy my first share. gina martin adams holding my hand. futures up 21. she drives the equities at bloomberg intelligence. it is a sea change from the bank index with a nice bounce yesterday just to get to the top of a two standard deviation range. up 16%. that would be the pop in the bank index. lisa: which is interesting given the fact it used to be higher rates would help the banking sector, and all of a sudden, lower rates helps. there is a feeling on the street that suddenly, stable rate for the idea the fed is done will bring more dealmakers, etc., back to the market after being on the sidelines. tom: just now getting a glimmer

of a pause in the various surges in movement. i will focus on equities up 20. the two-year yield is where you are focused. 4.88% but you wonder when people who have bet away -- not short -- but bet away or are on the sidelines. how do they interpret the week that you and i have lived? lisa: when i think about michael hartman who has been bearish. he says the treatment we have seen the last couple sessions gives us a sense we see a year-end rally -- a santa claus rally as they call it. a lot of pent-up energy the hind this. tom: the 10 year yield coming down more now. not applause 2.81% from the

2.5%. that is a sizable move and be inflation is there. thank you verbal team for a spectacular week. raphael bostic this afternoon on bloomberg. ♪ jonathan: the bond market bulls will get their way this week. live from new york city. we have a countdown to the open starting now. >> everything you need to get set for the start of u.s. trading, at this is bloomberg the open with jonathan ferro. ♪ jonathan: live from new york coming up the payrolls data favoring