>> i review is that the fed probably is done. >> for the fed, yes, the bar is high for another hike. >> we will get a period of slower growth but that is not surprising. >> there is disinflation in the u.s. economy. >> the question is how long does it take to get back to that 2% inflation threshold? >> this is "bloomberg surveillance." jonathan: what a 24 hours.

for our audience worldwide, this is bloomberg surveillance alongside tom came in lisa abramowicz. tk yesterday, that was the sound of a declaration of the victory over inflation and financial markets. tom: it was not transitory, it happened right away. i can honestly say as lisa and i tackle that, you are off on your break with your interns but lisa and i, it just kept coming on. here is the statement. tom: i was logged onto the bloomberg for the close. small caps up more than 5%. best today this year. s&p 500 real estate, best day this year. nvidia after 10 consecutive sessions. the moves we saw yesterday off the back of the smallest of downside surprises lisa: on inflation. lisa:that is an important clarification. 0.1 percentage point difference

in the inflationary people were expecting versus the one they got. you can make all sorts of other excuses like the whisper number was higher. we have actually won against the fight of inflation on the heels of a downside surprise like that tells you what people want and how much the narrative is shifting jonathan: regardless of whether it sticks. jonathan:i don't think the site is going to jump on board just yet. it is too premature for this federal reserve. tom: a major shia jason furman teaching all of us. he did a great analysis along with others. three month annualized, some really complex formulas. instead of saying mission accomplished and i tease people have that knowing it is not, the question is the vector is in place. this really accentuates the disinflationary trends. jonathan: so much happy talk it is overwhelming. inflation data, soft landing

nirvana for equity markets. lisa: it was nirvana if you take a look at all of the internals because not only did you get serious disinflation even in things like airplane tickets, but you also had real wages increasing. basically, the consumer picture was actually doing better at a time you did see disinflation continuing to accelerate. tom: was nirvana a band? jonathan: it was a band. early mid 1990's. tom: we got more than out on here. then labeler out with a note saying guess what? 1/5 of returns historically. 1/5 of returns come in december. jonathan: 4700 year-end year. not far away from where we are right now. here is the line i think matters. the current starting point will limit the potential appreciation for the benchmark u.s. equity benchmark -- index in 2024.

this view is already reflected in equity prices. take all the happy talk of the last three minutes. have we already discounted it in markets? lisa: in other words, you could get a tepid year of gains. increasingly, our conversations are a lot more nuanced about where the gains are going to come from. this small-cap move was the biggest game in a year and really comes on the heels of everyone saying we like it but cannot really bank on it because we have been burned again and again sought one point does this actually lead to normalization in terms of correlations in a way that belies the gains that implies. jonathan: this move yesterday was the definition of an everything rally. the s&p up. equity futures pushing higher. bond markets yesterday, double digit moves on yields lower across the whole curve. this morning, up a couple of basis points. the yield this morning, 447.

lisa: talking yesterday about the lack of liquidity and violent moves. do we get a sense of stability or is this just a rally with a narrative shift that is going to portend another narrative shift down the line? u.s. retail sales and ppi data comes out. will ppi confirm what we saw yesterday? retail sales really important. we kept hearing that from guest after guest yesterday. do we see a deceleration after last month's surprise game month over month year-over-year? we have sort of normalized even with inflation baked in. tom: what is good for the market today in retail sales? is good retail sales good or as bad retail sales? jonathan: are you the one asking is good news is good news this morning? i think based on current disinflationary trends, any signs of decent output is good news because a lot of people out the moment seemed to be shaking

out the threat of that transpired turning in the higher inflation. lisa: i'm just thinking about store kaiser screaming on his television saying good news is good news and this is what we want. today, we also get the color commentary from some of the big retailers. target comes out with earnings. t.j. maxx. what i'm curious about is how much do we see target reaping the benefits of some of their cost-cutting echo t.j. maxx will be interesting, our discounters getting attention as consumers pushback around the region. today, the apec summit is taking place. you can expect photos and handshakes and press conferences. this might be more interesting. at 10:30 eastern, xi jinping is going to headline this dinner with the ceos. he has consistently looking for business diplomacy. how much can he really offer some of these executives? tom: is in an out catering?

could you see all of those executives with their little bag? jonathan: cheeseburger with onions and fries and a diet coke. i'm so judging of diet coke drinkers. i don't know why. lisa: so now you have a totally different view? jonathan: just diet soda. lisa: most people thought it was a pretty baller move of her to do that. going to in n out on the way to the airport to pick up xi jinping. just very college student. tom: could you imagine the minutia of that? jonathan: should buy this place, fantastic burgers there. we are going to talk about markets, don't worry. soft landing of anna for the equity market.

is this soft landing nirvana for the equity market? >> it is certainly goldilocks or whatever fairytale spin you want to put on it. the combination of forces are quite right with thing equity markets and sentiments of fading inflationary pressure, rate hikes in the rearview mirror after troubling post-summer periods. i think markets can give a little bit back after such euphoric gains. there is nothing irrational i don't think about how the market is performing away. tom: you have been a real student of these markets. to me, it screams second leg of a bull market. boom, second leg of a bull market. does this feel second leg off the october lows 13 months ago? ben: perhaps i am evoking too

much enthusiasm here. i certainly think there are gains to go for at this stage. that resilience growth story can run. i don't think a recessionary threat is immediate as we look to the first half of next year. as i said, with rate hikes seemingly behind us, that could support momentum along with the reason we are in cash on the sidelines looking for a home but i would not want to lose sight of the severity and pace of interest rate hikes we have seen. i think recessionary risks are material second half of next year. want to enjoy the spoils of market momentum but you have to be thoughtful about when to pivot to get a little bit more defensive. cannot quite get on board the idea this is the start of a sort of second bull market as you put it. tom: i look at the second bull market in the sectors and just observing it.

do you see breadth in this move? the shock move off one inflation report. is there going to be a new breadth out of this globally echo ben: i would suggest probably more breadth outside of u.s. large caps though we do believe they should continue to enjoy positive momentum. just as we saw in u.s. small caps and slightly better at data internationally some european survey data about where growth is going. it would not be quite such concentrated area of gains. international exposure, slightly more value, slightly more small-cap exposure. looks like a reasonable trade into year-end but you have to be numb bolted take those. in our sort of portfolios, we are not quite so tactical and we do harbor or do find some comfort in u.s. large caps to be able to enjoy gains at this

moment but also be there to cushion some of the blow from lots that might materialize in the face of a recession next year. lisa: i'm still struck on the poetry you owed -- uttered. it sounds wonderful like going to a party and eating until it is done. how do you know when it is done and what does it mean to remain them both and enjoy spoils of something you know is soon to end? ben: i must be giddy in my communication. i think because of market momentum and because growth is looking resilience and maybe there is something of a manufacturing recovery, the d stocking cycle we have seen, that looks like it might have run its course.

and with rate hikes in the rearview mirror, there's a lot of reasons to be positive. with cash on the sidelines, i think breadth is a natural outcome of increased optimism. i think this can run into the end of the year. as i sort of said, if you can make trades with months or two months at a time, worth going for it but if you are slightly more cautious in your execution and are alert to the risks of recession as they build through next year, maybe more resilient assets might you might be sort of better off sitting there and enjoying perhaps less relative games in the short-term but less volatility as well. jonathan: thank you. what do we all think of lyrics in southside research? follow taylor swift's advice,

all you had to do was stay invested. tom: [laughter] jonathan: does that work for you? lisa: [laughter] tom: the forecast is brilliant. jonathan: i feel like that was almost a bet he had to get it in their because they are not looking for that much upside anyway. does it work? lisa: we are talking about it. jonathan: well said. i am talking about the note. there's a whole bunch of reasons why they think there is limited upside and it is worth going through them. the above consensus gdp growth story they are looking for cost and says is already reflected in equity prices. margins have stabilized. he thinks we are fairly valued at the moment even if the fed has finished its hiking cycle. they will remain on hold until q4 2024. that is the goldman view. tom: what are we going to see

over the weekend? i would like to see a lot of people, including me, humility is in order and dennis gartman, for 30 years, has led the way with candor when he is wrong. i talked to him the other day and dennis gartman just said, tom, i flat out got this wrong. we need a lot more. jonathan: lots of people got this year wrong. wonder how they are thinking about next year and with the biggest risk is. tom: and what if this is the job market? jonathan: equity futures right now still positive on the s&p 500 after a monster day of gains. good morning.

>> when it comes to government

funding as i have long said, it has to be bipartisan. right now, that is the path we seem to be on. >> we are not going to have a massive spending bill before christmas. that is a gift to the american people because that is no way to legislate. we have gotten together to break it up. jonathan: hours before a bipartisan vote in the house that would avoid a potential government shutdown. that bill now moves to the senate. we might deal with this this week. they're going to deal with it a few times going into the new year. tom: whatever. mid-march, january. jonathan: the story is not going away tom: and what gets me going. i'm somewhat of a student of this as you look at some of the charts on twitter. again, i can say we have never seen these charts like the amount of interest we are paying. jonathan: we don't have to deal with it going into christmas and

maybe we can open the door into a bigger rally. equity markets flying over the last 24 hours. yields aggressively lower across the curve yesterday. yields higher. by couple basis points. it does not matter what i say right now, you are just going to talk over me. can i just finished? is that ok? jonathan: [laughter] tom: will 4726 on tom: tom: the 10-year. go. jonathan: market drawdown. jonathan:nothing to do with bonds. i knew it. tom: look how the nasdaq is made up. look how it has caught up so quickly in the last month. spx, negative six. i was stunned. i thought it would be like -11. that is how fast we have come back. jonathan: that is amazing. [laughter] tom: no jonathan: idea,

continue. jonathan:i am done. i am so done. tom: we are never done with the president of the committee responsible for the federal budget. this importantly, my was in a stand or ninth done in judo and she can self defend herself in our fractious washington. in all your years in washington, have you ever seen it >> >> so violently polarized? absolutely not. what is going on right now, i think about this because this is a moment where we areare basicay missing the big picture of what is going on externally. there are external threats from around the world that should be unifying us in helping us function and my fear it leaves us in an immensely vulnerable place. we have these huge vulnerable best parallel risks. our fiscal situation and political situation leaves us vulnerable. it is now within the parties,

not just between the parties. tom: explain to all of our listeners and viewers the one item that is front and center which is our rising interest expense. translate how we should interpret a $1 trillion government interest expense. >> it is a bright flashing warning sign that the u.s. fiscal situation is unsustainable. a trillion dollars in interest is sort of shocking but absently protectable because we are borrowing so much every year and it is getting worse even when the economy is so strong interest is the fasting growing part of the federal budget eclipse and health care that was for quite some time. we spend more on interest payments down we do on all spending for children under 18 at the federal level and within a few years, we are going to be spending more on interest and we are on national defense. clearly, squeezing out all of these important priorities. there is not going to be as much

money because interest comes first. let's keep in mind that would interest rates were low, there were all sorts of people saying borrow more. it is almost like it is free. it is not. it was not and this is the moment where it shows you that if and when interest rates go up and almost always do, the huge debt limit you have as a result of people encouraging to borrow more leaves you immensely vulnerable and squeezes out other priorities both investments, national security and anything else we might want to be spending or preparing for. lisa: yesterday, monday got a little more free. how much of a bond rally are we away from being sustainable on a fiscal picture? >> it is coming from changes to the structural budget situation. when interest payments were not growing and were not the fastest area in the budget, that was a big relief. it took some pressure off but you still have huge growth in spending from the aging of the population and ongoing health care costs.

social security and medicare are going to continue to grow much faster than the overall economy. revenues are not going to keep up with it unless our policymakers do something and they know that feels kind of difficult to imagine right now but unless they do something hard which is look at the real budget, the entitlements and tax side and make some changes, this unsustainable separation between the two and growing deficit and debt is going to continue. lisa: you talk about based on how things are going, it does not seem like they are going to do any. we are more interested on elbow gate with kevin mccarthy in the house that we are on tangible gains with respect to reducing the deficit. do you feel like you are banging your head against the wall when you talk to the different congress members and try to get them to hook into more sustainable solutions? >> i don't right now because there has been a very encouraging sign both in the house and senate in a bipartisan effort which is to put together a fiscal commission and what they would do is look at all of these parts of the budget over

the next year. no guarantee it works but it is still really hard choices and congress does not like to do anything difficult right now. what they like to do is cut taxes and grow spending and giveaway things. the benefit of a commission is it gives members a chance to build a working relationship where does not come to blows and understand issue better and give some political cover if they come up with recommendations to be adopted. one great thing would be if they could come up with a social security fix given that program is heading toward up solvency in a decade. tom: how close are we to another simpson bowles effort? >> it is bipartisan, there's already lots of opposition for reason but political. i don't know how you can look at a program headed toward of solvency and say stop, don't try to fix it but that is what a lot of people are saying. you are hearing from the white house, criticisms over the notion of a fiscal commission. also, people want to politicize these issues.

overall, i think there is broad-based support and it is growing and what i see is at the end of the year, we are going to have a lot of borrowing for emergencies and legitimate emergencies. per taps also tax cuts that should be offset. they are talking about a deal where you would extend some business tax cuts. that is a borrowing deal. if they do end up borrowing more, i think this clamor for doing something in the fiscal commission is the best mechanism to do it is only going to grow. i could see that being part of a deal at some point. the warnings from rating agencies and congressional budget office are just going to keep coming. tom: big time. jonathan: there is a big battle over spending the horizon. maya mentioned the credit agencies. federal interest payments relative to revenue. this is what they expect in

2033. that is going to climb to 26%, from 9.7% in 2022. that is a huge huge number. tom: and that is why it is so important to listen to people like maya. it is not that there is bad information or false information, there is just a jumble of stuff that is a letter to us. the cleared are like what you just said lisa:, clears the mind. lisa:the details on how to fix social security don't gather the headlines and it is difficult to purse through all of that in a granular way on morning television. people gravitate to these other posturing stories in a much more significant way and that is what politicians follow to generate support. how much can we really get something done? something that can actually be divorced from the partisan politics has to be the way to go. jonathan: do you think that is possible? lisa: i hope so because at a

certain point, it does become unsustainable. tom: what does the 120 five sterling do to people in the united kingdom? tom: that is a change in course. everything is a jumble off of yesterday including 109 euro and a 125 sterling. that is almost a shock number. jonathan: i love the shock in the u.k. today. tom: mission accomplished. jonathan: rishi sunak trying to take some credit for that which i thought was slightly humorous. chris is going to weigh in on some of this mess. equity futures right now. what a move in the last 24 hours. equities up .3%. fight club in d.c. up next. rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989!

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♪ jonathan: although took was a small downside surprise on inflation and boom, this equity markets fighting higher and rally aggressively into the close. the nasdaq up by half of 1%. yesterday the best day of gains from the s&p since april. small caps up another 1.5% this morning. up more than 5% yesterday for the best day of 2023. lisa: markets were in search of a narrative to give them more optimism. you saw them lean into it, and rally that i felt not even

necessarily looking back to see whether it was true or not, it didn't matter. you can enjoy the spoils for now. jonathan: every single sector on the s&p 500 as we said a few times already this morning, the very definition of and everythink rally and and the bond market as well. double-digit moves run across the curve. this morning a little bit higher on a 10 year by a couple of basis points but we are sub-450. tom: bond shift is just fine, i'm waiting for the 10 year yield. we will see how that goes. anything under 2% is confirming at a shock but to me, december into q1 next year is the breadth of the market. there is a bet by some that breath will come in and join the magnificent seven. others just refused to participate. jonathan: it is a multipart actor this week, let's be clear on that.

we've had cpi. we will hear from the retailers as well. yesterday we heard from home depot. third-quarter adjusted eps, 210. lisa: comparative sales coming in less bad than expected. interesting that they cleared about 14% lower level of inventory, so they are clearly working down some of those problems, target shares up almost 7% but this is off of a really rough year, down more than 20% safari far year to date. jonathan: consumer discretionary had a good day yesterday. reduce rates, take some weight off consumers. if that the story? lisa: it seems like people are being more discretionary which is a reason why some of the commentary from the retailers and retail sales in two hours time might portray a somewhat more nuanced picture than the runaway excitement that we saw yesterday.

jonathan: tomorrow i believe we hear from walmart, macy's, and the gap. looking forward to coverage of that. china's xi jinping arriving in san francisco for a high-stakes meeting with joe biden and his first trip to the u.s. in six years. the leaders expected to meet at 11:00 a.m. local time to discuss key issues including economic competition and military communication along with artificial intelligence, the status of taiwan and conflicts involving ukraine and israel. sources also telling bloomberg that chinese officials are likely to seek a rollback on export controls, tariffs and restrictions on investment in the united states. tom: we are going to ask for one thing and give up another. a couple interesting sentences of speculation about what america would do with human rights. but to your point on tariffs, ab that is the surprise here in that the tariffs begin to be discussed, or dare i say, even

dropped. jonathan: i think this is about the thermostat. not a bad policy shift. for this market, they had this to say. be prepared for the meeting this week to come across as highly conciliatory, prompting an effort to year end. we don't even need to see concrete actions taken if the messaging is strong. that messaging should be enough to get the job done. that is kind of what people expect. lisa: pick your reason, the rally will continue. that seems to be the theme from wall street in terms of the conciliatory tone. xi jinping was talking about taiwan and having more of a closer business relationship with that region, which again is a softening in tone. it all goes to that mood music director about. jonathan: house lawmakers voting to vote -- pass a temporary stopgap funding bill greatly lowering the risk of a shutdown.

democrats barely got mike johnson to pass legislation with 209 democrats joining 127 republicans in support of the measure. legislation now goes to the senate even though it doesn't include aid for ukraine or israel. sounds like happy families down in washington, d.c. it was anything but elsewhere on capitol hill. congressional hearing on labor coming close to a full-blown fistfight. tensions boiling over between senators and a witness. oklahoma senator markwayne mullin a former mma fighter losing patience as he read aloud a hostile twitter interaction between himself and the witness. it took 82-year-old senator bernie sanders to come between them. >> this is a time, this is a place. you can run your mouth, we can finish here. >> perfect. stan your butt up then.

>> stand your butt up. >> you are united states senator, you are an embarrassment. an embarrassment to the state of oklahoma. the searing is about the condition of the working class in america. you are the biggest dog here. jonathan: absolutely lost for words. the first time i saw the video yesterday i thought it was a spoof. i had to watch it twice, three times, four times. absolutely ridiculous what is taking place in washington. lisa: my favorite is bernie sanders with the gamble. could you guys credit? just stop it. jonathan: what is funny about the whole thing is no one really knows what the hearing is about. all we've walked away from his those images. lisa: not to be serious but there is this feeling that that is what is going to catch attention, that from that house resolution that passed we are going to be talking about kevin mccarthy possibly elbowing another republican congress member. we are not talking about the

substance and how much is that what he is fighting against? this is made-for-tv. tom:tom: i do take your point, lisa, that this is playing for the local constituencies, whoever is involved. think of the movie lincoln with daniel day-lewis. sally field. the most famous event in congress was the caning. like you walk around with the cane, years ago. there is a history of this in washington. jonathan: the senator that we are talking about who was included referenced what you are talking about. tom: o really? jonathan: later on in the conversation. tom: it is really sad. i was on the phone yesterday with someone in washington and they were almost crestfallen about it. we are not supposed to do this. do they do this in london? every time i've been to house of

commons it is like -- jonathan: i'm not sure anyone wants to unpack, either. tom: we don't cane economists, either. these extraordinary times, a chief economist on global economic research and jp morgan. it is a time to reset for 2024. a lot of us would suggest we got it wrong and to me it centers around productivity. it is a mystery that is out there. are all these good feelings happening? right now we have a new level of productivity in america. >> i think it's a little early to say but the news has been good, we've been running a little over 2% on productivity gains. that's almost 1% above what we averaged last cycle. some of that comes because of strong growth but there has been pretty solid investment for some time.

the supply-side performance of the u.s. has also been helped by strong labor force growth, running much faster on immigration flows then we can getting in the labor force participation rate. some of the optimism i think on the u.s. comes from the fact that while we've had strong demand in the last year, we've also had very impressive supply both on productivity and labor force. tom: how do you and your team responds to people who say the three stimulus is drift away, we will have the end of the biden stimulus, if you will, and then we will slow down again to lethargy? how do you respond to that insight? >> i think we are going to slow down. we grew almost 3% over the last four quarters. it's right to say fiscal policy supports we are helpful in that and that is not going to be there for the next few quarters. i also don't think the fed is about to ease, so that's not going to help us.

but what has been missed here most in 2023 is the fact that while the fed has been tightening a lot, the underlying health of the private sector, both households and businesses remain quite strong. i think you will slow but i don't think this is an economy in any imminent threat of anything really bad happening. jonathan: pretty incredible to see unemployment south of 4%, and to get in nation converging toward 3%. what are we converging toward? are we consolidating around 3% inflation or going back toward 2%? >> that is the view, that we've gotten a lot of the damage done out of the pricing that there still is a stickiness here. labor markets are tight, we've also shifted psychology somewhat and you can see that in some of the inflation expectation measures. yesterday's report was clearly a positive and i would note it was also a positive for both. keep in mind what is happening in the energy space, a flat headline reading. core numbers are still running

on the last three months around 3.5%. i don't think that's going to change. the fed is going to be patient but i don't think this is a victory and i don't think we are going to be giving the fed room to ease off the inflation numbers anytime soon. lisa: that probably will be right, maybe. we don't know. doesn't even matter? no data that is going to come out is going to really alter this sort of goldilocks amazing nerve on a view that seems to be imbuing markets with glow. is there anything they could possibly shake that just in terms of year-over-year comps over the next two month heading to year-end? >> on the economy side from corporate we had a very strong third quarter and gdp, piercing that in profits. what we are going to see today is still underlying gains in retail spending. don't think the economy is going to weaken that much. the supply-side is ok. the profit picture looks good. economy is slowing but not

looking bad. i think there is an equivalence between an economy that can get inflation all the way down and one in which the fed is going to have to stay high for long is going to gradually erode through restrictive policy stance. but it is going to be a gradual story and it is going to be taking some time before we can distinguish that from the more optimistic one where we get all the way back and have a sustainable economic expansion where the fed can take its feet off the brakes. lisa: see you are pushing back against the market expectations for 50 basis points of rate cuts by next july? >> for sure. if we had a much worse economic environment, something that scared the fed on growth, you can get some fed easing but i don't think the inflation news is enough here in terms of what we are seeing to get the fed about taking anything back. at least not in the next few months. in the middle of next year if we got surprised by supply-side inflation there is an opportunity to move that is not the baseline view. jonathan: thank you.

bruce of jp morgan on the latest. look at the market, the market is declaring victory in the fight against nation. you ask people what they think the fed is going to do, they are not going to declare victory anytime soon. you heard that from bruce for a whole bunch of reasons. target is positive. the stock is flying, up by more than 11% right now, up by 11.7%. third quarter sales better than expected. earnings look way better. big upside surprise. 210 against the estimate of 147. lisa: this stems from targets issue trying to work down a bunch of inventory especially relative to walmart. they seem to have been working it through down 14% even though at least food sales among others were actually down year-over-year because of leisure was coming down, prices were coming down. it leads to this push and pull of specific store management rather than a larger kind of call. tom: we go back to 2019, let's

do that on target. i think we forget the pandemic impact here. it wishes absolutely jay norma's. it is a nice, typical trend. in the autumn of 2019, boom, and all we have done is go round trip off of where we are today. jonathan: i ran the numbers yesterday, we are talking about target, $51 billion by the way. nvidia, 10 days of gains, up more than 20%. $200 billion plus of market cap. that's ridiculous. lisa: target is a rounding error for the gains. jonathan: that is where i'm putting it. from new york city this morning, good morning.

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>> they are doing the right thing to turn out. they can raise rates a lot.

they need to wait to see the effect on the economy in the u.s. particularly as the fiscal spending, the excess fiscal spending is winding down and quantitative tightening is kicking in. but i still think you should prepare to do a little bit more. people should be prepared for that just as the risk management tool. i'm afraid inflation may not go away that quickly. jonathan: that was jamie dimon speaking in an exclusive interview with our affiliate over in mexico, doing some great work. i think, risk management. this is a business leader who runs a bank who has to think about the risks that may be rates are here for a longer time than people anticipate because inflation is a lot stickier than something think. tom: these guys are working overtime playing macro economics because they don't want to admit but are doing. they are the second bank of the united states. take the combined profits of the four larger banks and it is not much different than what andrew jackson was worried about. they don't want to talk about that. lisa: it is instructive here

where they see the balance of risks not as a federal reserve, but as the biggest bank in the united states. if the balance of risks shifting out to people getting overly complacent that the fed is done? that raises this question, where is the pain point? you were asking that earlier. is it better than expected next year or worse than expected? jonathan: we've touched on something we got to really work on over the next couple of weeks. what is the bet now? that inflation is no longer a threat, that the fed is done? does it go beyond that? is the bet now that rates are going back to where they were before? maybe even 1%, what is the bet right now? lisa: the bet as i can see it is for rate funds to accelerate buffer rates to stay higher, 4%, 3.5%, not necessarily going back to pre-pandemic levels and that the economy can withstand it.

that to me is the key question. that i think is actually a big question mark in terms of what the real neutral rate is. that is sort of the nuanced way that the market is calibrating. tom: you want to go with me on this? it is a total baloney, a parlor game of fed futures. what matters is the job economy and what we are going to see is bruce cashman just talked about productivity. we have missed guest -- mis-guest in this decide on the unemployment rate, factors more important than gaming out. jonathan: i love it when you are both on the same page without even realizing it. lisa: it is total baloney. it is about the nuances in terms of where rates end up. tom: jennifer is the marriage counselor who joins us with bloomberg intelligence. thank you so much for joining.

i want you to explain what falls to the bottom line. home depot has a net income margin of nine cents, $.10. target, i was shocked, is for cents on the dollar. is anybody making money in this business? >> good morning. it's a good question, and it's definitely one of the challenges that we always see in this retail sector i have to say targets results today were very encouraging. it does give a little bit of optimism for the fourth quarter. revenues, same-store sales, it is a great increase in margin because some of the productivity initiatives that they put in place are starting to really help take cost at of the business. jonathan: walmart is filed -- up by more than 1.2%. what is the read across from the company to the other? >> target having better-than-expected results, it

really only means good things for walmart. one might does tend to outperform in environments where people are pulling back and being careful with their spending. i think that a better-than-expected result today may lead to a very good outlook for tomorrow as well. lisa: but how do you parse through the management side of things vs. the macro call? on the management side target seemed to work down 14% of some of the excess inventory leading to some of this used. does that really crossover to some sort of readthrough in the broader consumer? >> i think what we've seen as across a lot of retailers they had your out there inventory in this post-pandemic world. we went through a phase where everybody was stockpiling inventory so that they had stuff available. then they had too much, they had to clear it out. then they had to find the right equilibrium and they were still concerns about the plight

constraints, and we are seeing across multiple retailers. what is important is that inventory is down that much but they are already stocks for holiday so to us that also means that they should be able to sell through a good portion of the inventory over the holiday season and not end up in the same position they were in where they had to have a lot of markdowns. lisa: yesterday we were talking about drugstores in certain cities putting pictures of toilet paper behind shells and having people request for it to be delivered to them from the back of the store. target did talk about fact as they call it, saying it is still weighing on the margins in the material way. what do you make of this, how long are we going to hear about this in earnings and is this simply an excuse for margin pressure or is this something that is going to become increasingly concerning for both investors as well as the executive? >> what we usually see in the longer-term cycles is that theft escalates whenever the consumer is under pressure. and as inflation is coming down,

that actually should be a little bit of a release on that pressure with regards to theft and the losses retailers are having. people generally want to do the right thing, and target in particular has been very vocal about theft levels. it was just not profitable to -- but as inflation comes down that you get a little bit easier going forward. tom: i want you to know a 4% dividend, 11% dividend growth. i've got a multiple of 15 which is one third of the high flyers, 1/5 of nvidia. can brian cornell and his team say we are back on plan, the pandemic is beyond us and we will have the glide pass of the target we knew years ago? >> i think we might be at a turning point. it may be a little early to say we are already there but today's results definitely indicate that a lot of the strategies that they are retrenching, that they

are putting back into place to put target back on the right trajectory. jonathan: let's catch up again tomorrow when we get numbers from walmart. target in the free market absolutely flying. offset margin improvement in particular areas of the business, i'd love some more clarity. margins are better-than-expected. lisa: i'd love to see details numbers. it would be interesting to see if they could give some sense of how much more they receive margin compression theft and what they are doing about we talked about store closures in september. a lot of pushback saying they didn't have the same kind of foot traffic. how much is this being angled in the media that we all feel we walk into a store and it is affecting our consumer experience whenever thing is locked behind. jonathan: that's why the foot

traffic is down, clearly. tom: how do you compete with amazon or any other online shopping site if you have to go income to press a button, wait for someone? tom: you've mentioned the dreaded where they don't want to talk about witches is amazon and amazon is going to both their mouth on this. i'm so biased by what i observed here in new york city. i can't imagine what i observed as across the nation as well and on that conference call with target today that is really the key question here. that is the question. jonathan: the statement from target, there were nine stores across four states. one in a manhattan location, two in seattle, three important, oregon. this is the statement from target. we cannot continue operating is theft and organized retail crime or threatening the safety of our team and contributed to unsustainable business performance. what would be upsetting for the likes of target, cvs?

to see how quickly you can address some of these issues in places like san francisco when someone important comes to town. can they maintain that? tom: yes. but my question is why can't we just fix this now? in the old days it was simple. i was in the timeout chair for six months, seven months. lisa: i have to be completely honest, i observed it myself, somebody clearing shelves. i said there is somebody in there literally clearing the shelves are you going to go arrest them? they said no, we are going to get them released in 24 hours and essentially this is going to waste eight hours of our day that we could be doing other angst. these are some of the challenges just to give you a picture of the view. jonathan: you speak to the police officers, the morale is just rock-bottom on this issue. tom: i call it a solvable

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♪ >> our view is that the fed probably is done. >> for the fed, the boris high for another hike. we will get a grid of slower growth that is not surprising. >> there is disinflation in the u.s. economy and we are heading back to 2%. how long does it take to get back to that 2% inflation threshold? >> this is "bloomberg surveillance" with tom, jonathan

ferro and lisa abramowicz. jonathan: unicorn in rainbows, it is the everything rally in this equity market and in this bond market. live from new york city this morning, good morning. this is bloomberg surveillance on tv and radio alongside tom keene lee that abramowitz. your equity market positive again this morning and the s&p up by 0.4%. after a monster day of gains in yesterday's session. tom: it will be interesting to see how that adjusts, but what is important is the markets lifted in the last hour. there is a continue debated to this market exactly like there was yesterday. i waited for some sense of pullback yesterday, it just never came. jonathan: police we went are some of the numbers earlier this morning. the small caps up by more than 5%, yesterday this year. real estate get some relief off an aggressive move in the bond market, yields down.

>> the sound of victory being cheered across wall street, maybe, maybe not. but does it matter? that is ultimately the question and be kind of her that tone when he was saying enjoy the spoils of market momentum. how many people are feeling the same? ride this to the end of the year because it doesn't seem to be showing any signs of abating. tom: their seasonality, a lot of good research on that. but as we were going to air here, mr. jon ferro mentioned this people who have enthusiasm that they are not fully invested. what do you do this morning? jonathan: if you missed yesterday, this morning is hard to get into. you look at moves like that and you weren't involved. you hear from smart people over at goldman sachs talking about limited upside on the s&p 500. even with a constructive view on the economy for the next 12 months. people are talking about this big move out of cash.

it is difficult when you miss these moves. tom: our team continues showing great equity coverage. truly the legend with us here in a moment. to give us perspective on what you do when you see this kind of bid? was it a short cover, was a fake, or is this the real deal? i'm going to go back to 1977 when he believed we would get to 1982. jonathan: it was a sprinkle of absolutely everything from all corners. need to talk about target just briefly, that stock higher by almost 15%. we are going to hear from walmart tomorrow, macy's as well, from the gap as well. it is good news so far for target come up time. tom: lisa: up big time as they work than some of the inventory. the key question is does this indicate people trading down or shifting back to basic necessities, or does this really

indicate an all-out buying spree if it indicates that strength that people are talking about even with this inflation? we just don't know. jonathan: we don't know, but it is better news. tom: it is better news. lisa: i'm happy bramo. tom: do such a thing exists? jonathan: lisa keeps telling us she is spending money on a refrigerator. buying an automobile as well? when lisa starts spending down the savings come is that an indicator? lisa: everything jonathan: else is broken. jonathan:if lisa is capitulating and starts to spend. what does that mean for the economy next year? lisa: if freezers break, other people will be buying refrigerators. u.s. retail sales will offer a different view than simply a refrigerator as well as ppi data. but do we see the same kind of

enthusiasm in retail sales as we saw last month? to me, this is really key. it's a good news to see a huge bump up in retail sales especially with disinflation that will dampen the overall nominal levels? we have results from target at 7:30, about 25 minutes. we do get t.j. maxx. i think t.j. maxx is going to be really interesting because usually it does better when people are looking for discounts. do you look at strength in this name as a positive or as something of a cautionary signal for the economy? tom: what is luxury here? you've been on top of this. what does louis vuitton do and all of that into the holiday season? jonathan: a lot of those places have worked up stock prices. lisa: and a lot of it has to do with china which brings us to the next thing we are watching. headlined by china's xi jinping and joe biden, they are going to meet later this afternoon in new

york time, 11:00 a.m. i believe. you can expect all of the photography. jonathan: more handshakes like this one? lisa: exactly, you can expect that. jonathan: i hate those soft ones. tom: the fist bump. lisa: but what if people have a problem with their hands? jonathan: you know what i see him do that i hate? ck does the left-hand thing that sticks out sort of like a wet left-hand. tom: that's because i'm over here and i'm shaking. wait until the first arthritis clicks in. and i have to apologize, i don't see where we are going. i'm so sorry about it. lisa: 10:30 is the meeting over this. jonathan: we lost that, didn't we? i'm sorry.

important question, i'm asking for a friend sitting next to me. what is your advice this morning to people who missed out on that rally just yesterday? >> welcome advice or more like commentary is my favorite financial philosopher charlie brown once said i have a feeling that when my ship comes in i will be at the airport. so really just don't try to be at the airport for the shipping lines when you should be at the airport. 9.3% compound annual total return over the last 35 years becomes 6.6% if you missed out on the 10 best days. also, the fourth quarter pre-election year for first-term administrations has been positive 100% of the time with the total return of 6%. we've already exceeded that, so essentially there is still likely some upside potential in the second half of this fourth quarter.

tom: sam, the night after the crash of '87 the friday on wall street week, robert kirby came from cap a guardian trust in american funds in let new york to speak with john templeton, peter lynch and others about the end of the world as we know it. the investment company of america has delivered 11.84% per year since 1934. tell our listeners how they can buy and hold constructively. >> first off, just understanding stockmarket history can serve as virtual valium. it can calm your nerves because you realize that while having declines is a very normal aspect of wall street activity, that the pullback, 5%-10% decline has recovered everything they've lost in an average of only a month and a half. corrections declines of 10% to 20% have taken only four months

on average to get back to breakeven. so you are really better off buying menu are inhaling -- then you are bailing and also remember what luke -- luke geiser said. your dog still loves you, your family still loves you, the market will do what it does. lisa: i can't take this seriously, it is fantastic. virtual valium, better off buying them bailing. a lot of these beliefs grew up at a time of incredible bond rally driven by this idea of their low interest, very low inflation, and that really underpinned a lot of the equity returns. i understand over a long-term stocks have performed well. if rates don't go down that much further how much does that affect the benchmark expectations for returns and stocks? >> you're absolutely correct any sense. we've gone through two secular changes since world war ii where we've had a rise in interest

rates from post-world war ii to the middle of 1981, and then we had a secular downtrend in long bond yields. yeah, you probably do have to split them up, and the double-digit gains that we saw in the secular downward in interest rates are not likely to be repeated because they were significantly smaller when interest rates were rising. we are pretty close to what the long-term average rate is. the average since april of 1953 is 5.25%. that is pretty close to where we peaked out in earlier october. i would tend to say it is really more a question of corporate profit growth, valuations, etc.. jonathan: can we talk about biggest risks? do you think the biggest risk right now is that we get a material flow down in the economy or this kind of strength we've seen so far persists into

2024? which one is it? > the biggest concern right now is probably the strength because we've been calling for a recession for the last two years. does the boy who cried wolf still get credit for the wolf finally arriving? the real question is we can look for retail sales today, but the street is expecting a 2% decline. or a 0.2% decline. we think we could see a rise, so the consumer is still remaining fairly resilient, but if they continue to spend and add to their debt levels, that could slow things down. right now i think the worry is that the fed will not be raising or cutting rates by may of next year, but rather probably by the third quarter or maybe even later. jonathan: just quickly, tk wants to know, is good news good news today or is good news bad news? >> for the next week good news may be bad news because the market typically declined in the

seven days after a small camp rise of 5% or more. however, we do tend to write ourselves 30 and 60 days to laugh -- after. jonathan: what a game. thank you, sir. retail sales about 80 minutes away. we will see if good news is good news for for that matter if it is bad news, and a bit. lisa: the key question, what if it is not that great? we retail sales but they are fine, they are eh. that is the best news we could possibly get. mediocre news is the good news. jonathan: that would cheer you up. lisa: that would cheer a lot of people up because it wouldn't necessarily be inflationary but he wouldn't be the retailers falling off a cliff. tom: if you buy a christmas tree are you going for the ok christmas tree or do you really want to support whole paycheck and get the three digit one? lisa: i want the sad tree that

no one else will get so i can make it beautiful. jonathan: you are that person who chooses the runt of the litter, are you? tom: there is no runt of the litter with fake trees. they are all perfect. jonathan: pick winners, bramo. it is what we do. if you are just joining us, welcome to the program. equity futures on the s&p positive by 0.5%. 4.4628. tom: even with the bond market with yields of two basis points after the festivities yesterday, i got a flat dollar. i have the bid on equities, really important for people waking up your radio and television. what are we going to see at 8:00 a.m. in retail sales? i'm sorry, some of it is target. lisa: there wasn't necessarily anything negative to cast any paul on what has acted as

virtual valium as people look out into the gains. what sam said about the balance of risks, to answer your question, is really interesting. the balance of risk is still strength. the more people who worry about recession, the more it prolongs it. it is the moment people start saying recession is off the table and lean into risk, do we start to see that shift? jonathan: he said the boy who cried wolf and all year we've said the economist to cried recession. equities higher by half of 1%. tk mentioned target, that stock is up by 15.3% in the premarket. we are joined in d.c. up next. it is fight club mark washington. this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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we seem to be on. >> we are not going to have a massive omnibus spending bill right before christmas. that is a gift to the american people because that is no way to legislate. we've gotten together to break it up. jonathan: some news and washington, d.c. with chuck schumer, mike johnson speaking just hours before a bipartisan vote in the house passing a stopgap funding bill that would avoid a potential government shutdown. that now moves to the senate and we can move on in relief for about a month. tom: but it is a month into january. we are doing this again the first of the year. jonathan: it's gonna be fun. tom: i don't know, i don't think it's good. i'm going to go to robert with his great book on you've got to have a sound fiscal house to prosecute domestic and foreign policy. i would suggest right now in particular the violence we saw yesterday, the threat of violence. jonathan: the threat of violence a more accurate way of putting

it. tom: it's maybe too much. the telegraph a number of years ago, the seven secrets of the houses of parliament which you won't learn on its new virtual tour. we are thrilled. this is important here. this is a tweet. thank you so much for effort in this bit of ferro history to us. it is real simple. violence in the united kingdom parliament. there are lines in front of each branch, still, mp's must stay behind them, to the line and stay at least a stored length away from the opposite mp's, and they are serious. jonathan: i didn't know that. i didn't fact check that but i did a little research myself and told the sergeant of arms is the only one allowed a sword. tom: it is like a game of thrones. jonathan: just like that, very accurate. tom: it is a sad state.

for those of you on radio, the video is more shocking than the language. to me, it is a new threat, a new violence. jonathan: is that what you think, that we are going to see more of this kind of thing? tom: there's always stupid stuff going on in washington. lisa: this reminds me of high school tiktok video that people send around to try to look cool. tom: but it's congress. lisa: exactly. tom: the expert on this, and she is good with a sword, henrietta joins us now. with all your years of experience in washington, how polarized is the polarity right now? >> they are just at each other's throats, almost literally. certainly the stories out of d.c. yesterday were just shocking. frankly, they have to go on recess. i'm so thankful that they have agreed to this picnic can approach. as mentioned before i think we're just going to be doing this again and i'm not

optimistic it's going to stop and january or brewery when the two current deadlines exist. we are going to be doing this every couple of months the rest of 2024 so we should get used to this kind of acrimony government shutdown risk. those headlines should be permanently emblazoned every couple of months in the newsreel. jonathan: we've got those headlines ready to go. can you frame how big despite overspending might be just next year? >> is just loud. it is not a big fight, it is just a loud fight. they are not getting any reductions in federal spending. a minimum of about $100 billion in additional aid that goes out across the mystic and international priorities. we are not fighting about spending cuts, we are fighting about the process. the freedom caucus came up with the idea of doing this letter to approach. it was rejected, resuscitated, and finally included in part in this deal but it contains no spending, and there is no scenario where the second tranche which includes defense

and foreign operations spending is going to expire after they reach a deal on the first couple of appropriations bills. this is a lot of sound, a lot of bark, a very little bite. >> given the fact that there is not israel or ukraine funding, how likely do you think that will get done by january, by february? does it even matter? >> that is a really important question and i think a lot of this is tied up with minority leader mcconnell and how much clout he continues to have with the party. we can't underestimate the impact of the loss of kentucky for the governors race that materially impacted his standing with his own conference. i think that is a big problem for ukraine aid. i was surprised in my last round of meetings in d.c. how little support there is for ukraine versus weather has been from the united states for the last year and eight months. it is really an iffy question on whether ukraine 80 gets provided at all. i do think that you think israel

ate off of the cr that they are passing now create at least a pathway but when you tie ukraine to the border and realized we haven't had border security legislation passed in a decade or more you really have a problem. it is good news that we don't have a bill yet, a cute hope alive, i would dim my expectations or robust aid to ukraine with israel obviously got another problem that is splitting the democratic party in half. just ripping it apart. those packages are going to be really hard to come by and i wouldn't be surprised if they didn't get it until january. lisa: it is getting harder and harder to parse through the signal through the noise. we are focusing on scuffles, both in the senate that bernie sanders had and with the wooden gamble, and than this, the accusation that kevin mccarthy elbowed fellow republican congress member tim burchett during some of the contentious negotiations. are any of these important to you on a policy or just

functional level? >> there is no policy. tom, you just make a statement about how if you don't have your fiscal house in order, you can't have policy. that is exactly what is happening. there is no policy so we are only talking about fiscal austerity. there is no discussion about passing a year-end tax bill with any kind of merit. they are running around punching each other in the back because they have gripes in qualls with who is a liar, who has trustworthiness. there is no policy, no uniting policy that drive the house republicans congress and that means that the senate can't get their act together or get their work done. it has really been a leadership exacerbated by mitch mcconnell being on the way out and a speaker that is untested with no real leadership mandate to work with on the republican side. i think there is no policy. they cannot move forward on

impeachment, they can't move forward on impeaching even the homeland security secretary. they don't have a plan for the border that is comprehensive look at path republican conference. when you have these type of majorities and a lack of leadership, this is where you land. thankfully we don't have to deal with the debt ceiling next year. jonathan: doesn't that make it all the more amazing that we managed to find an agreement in the house yesterday? >> yes, and i don't want to be contrarian, but the scenario where we shut down is even worse because there is no path to reopen. if you shutdown the government, we will be shut down for quite some time. people talk about we can possibly go past two weeks because we would miss a pay cycle. last time we did this for no good reason with no end in sight, we shut down for 35 days right over the christmas holiday. the one thing keeping my optimism alive with 20% or less of that we would shut down all year is basically that the

alternative is worse. shutting down means we stay shut down for quite some time. everybody looks incompetent and you can have the spite that fiscal austerity and spending if you are shut down. it starts to have a material negative impact. they are both bad options, but shutting down is the worst one. jonathan: hard to look incompetent when it is open. henrietta, thank you. i hear they are bringing the dual back to settle disputes in 2024. this has been nuts. tom: the national museum over in central park west, new york historical museum has sculptures of burr and hamilton, life-sized. the pistols are huge. it is frightening. i was scared stiff when i saw it, it made me jump. lisa: they are running around punching each other in the back but at a certain point how do you move forward if this masks the fact they've got no policy.

it creates a real issue. tom: with china coming to san franciscotom:, there is a change overnight. erica in tokyo, a brilliant story on the collapse of the japanese economic experiment. now funnel gdp on the japan malaise. under 1%, shocked inflation reports, shocked real gdp. 10% of japan is over 80 years old. jonathan: that is quite a stat. lisa: that is stunning. jonathan: coming up next, that conversation just around the corner. from new york city, this is bloomberg.

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jonathan: here is the shape of things right now. a monster way in the last few hours. yesterday, up by five point 4%. best day of gains on a russell. the s&p 500, every sector, check it out.

10 year right now. the yields are higher but aggressively lower in yesterday's session. the yield dropping by double digits. lisa: we need to look at how much they are actually going to draw rate. we had going back to low rates versus yeah going to stay here and see what happens. tom: it is not about getting to a certain point. it is a real tangible probability. vector confidence went through the moon today. jonathan: what is the bet right now. is it one or two? are they going to aggressively start cutting interest rates?

tom: we need more data. in an shock over the markets yesterday. retail sales was important yesterday but even more so after what we saw. jonathan: we saw a sneak peek at some of the numbers this morning. we just heard from tjx. $1.03. looking at some of the numbers elsewhere. lisa: that is versus the expectation. it is just coming off a touch but me, it really highlights how companies are seeing in-line operations after all the optimism baked in. the commentary might be more

interesting based on what they are seeing going forward and what consumers are coming to them. tom: home depot, nine cents maybe. a target early. tjx is very home depot like. jonathan: the numbers look really decent. more little bit later. israeli troops entering the chief hospital compound. it is part of a precise and targeted operation against thomas. israel adding that they are bringing supplies into the facility. u.s. intelligence confirming israel's view that hamas uses the hospital to conceal and

support its operations. this is a big focus in the last day or so. lisa: it is absolutely offensive to everybody. you can play the blame game all around the table. there is a key question of how much time does the israeli army have? you hear president biden getting louder about civilian deaths. it feels like into to be of three weeks, they will be some kind of conclusion in some sort of capacity. tom: i do not get it. i get the diplomacy and i get the goodwill of it, but this is absolutely original. the immediacy of this hospital with tangible images. jonathan: i have no doubt it will be part of the conversation

a little bit later, also the one in ukraine. elsewhere, the tentative agreement at risk of failure as they voted the deal. just 52% of them moving. a close margin, setting up key ballots. the voting deadline for :00 p.m. and they have shown more support so far. lisa: much more intractable conflict in terms of getting to an agreement. not really in the headlines. to me, it is interesting. they are trying to cut costs. what this highlights is, how much of a last gasp is this?

jonathan: the shift to ev is going to be so difficult. final story for you. ken griffin saying he will decide soon about financially backing nikki haley. >> i.e. supporting her financially yet? >> that is a decision that we are actively contemplating. the real issue is donald trump, for all his bluster, willing to get on stage with nikki haley or not. jonathan: quiet day for nikki haley. privately talking to haley about the economy, suggested to be impressed and then you have can griffin with a lot to distribute, going into that campaign. tom: the former president is

associated with his tower and he is supposed to be a new york city guy, but the reality is, his fortress is in florida, and that is where his foundation is. they are looking for someone to represent business interest. jonathan: have you seen some of the numbers? a lot of people thought the financial backing would go to the governor of florida, ron desantis. there is a change in momentum. tom: it heats up in february, which is almost on top of us.

maybe he will by the new york yankees. joining us, a readjustment is in order. what did you adjust yesterday? how do you adapt and adjust to what we observed? >> this is kind of what we were expecting is a gradual moderation in inflation. we gradually decline. this is playing into our narrative. we thought it might have been last month but it turned out to be this month. the trajectory is that inflation should start to gradually decline over the coming months.

lisa: a lot of people are pricing insignificant rate cut. >> maybe around three point five percent by the end of this year. the trajectory is for a gradual decline but that should be sufficient for the fed to adjust policy. they have raised rates some aggressively. if they even cut rates a little bit, that is what the market needs. lisa: violent reactions that we have seen is an interesting divergence. what do you make of the fact that the outlook has not changed that dramatically from one to the other. what does that tell you?

>> it tells you that the market is paying attention. it is sounding a little bit dovish but we saw this really been in treasuries. it supported modestly higher yields. you're are also talking about an environment where it is extraordinarily choppy. add to that the risk associated with cyberattacks. but i think we have to take the signal from the noise, and the signal is that the fed is going to keep policy on hold. tom: what will the inflation-adjusted yield do? it was 2.16 in the enthusiasm

and it is coming down. >> the yield has declined dramatically as well. we attributed that to premium and supply. you know what? that scenario has not really changed significantly. i think it is more the market trying to assess where yields should be from a fundamental basis. given the trajectory growth, you should be moving lower. jonathan: can we just sit on qt? what is your outlook at the

federal reserve, pulling back on that balance sheet? >> i think that the fed definitely wants to continue qt for as long as they possibly can. the debate is, will they continue when they are ready to cut rates? they are waiting for the fed to cut rates as early as may. the question is beyond that. i think our feeling is that they will continue in the background for as long as they can, which could be as late as the third quarter of next year. they could think about tapering or slowing down the balance sheet runoff. cutting mates and doing qt are opposite. we will have to see how this

plays out. our call is that they will go into next year. jonathan: i do not know why they do not entertain a currently. a few you are just joining the program, welcome. it is just about positive here. yields are climbing a little bit higher. just a monster turnaround in the last 24 hours with yields lower. the euro this morning, we are pulling back some euro weakness. yesterday was the worst day for the dollar for the whole of 2023. the last 12 months.

tom: it was interesting to see the euro move. i look at the euro-yen but what -- what was interesting, i mentioned it earlier. the yen did not move that much. japan cannot emphasize enough, the shock. jonathan: coming up a little bit later this morning, 8:30 eastern time. the next big data print of the week so far. this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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it creates a little bit of anxiety over, will this be a soft landing, this stagnation is a source of concern. it will help bring inflation down, that is for sure. jonathan: speaking with tom mackenzie a little earlier. the highest since late august. putting it back by zero .2%. >> retail sales are coming up. we have taken our radar off. a few people are qualified.

but john, he has lived the challenges of italy. i am absolutely taken by the stridency of the regard for the ecb to get back to the comfort of an ecb statistic. what is the probability of doing that anytime in the near future? >> according to our estimates, we will be very near this target and 2025. the pace of decline, of inflation, which was very sharp october 22 and 23, it will be a little bit slower in the next

year, year and a half. we expect this declined to go towards percent by the end of 2025. >> successfully getting the vector moving in the right direction. jon ferro mentioned disinflationary statistics. can you say that you will see the same headlines in europe soon? >> if we look at the last figures that we had for inflation, they wear for october and the inflation rate was 2.9%. if you look at october 2022,

from 10.6 to two .9, it is a sharp decline. we know that this was mostly determined by energy prices. it was determined by the hikes energy prices. this means that the path that we have ahead of us -- i think we are on track for this production, provided we do not have surprises on energy prices connected to geopolitical evolution. jonathan: can we talk about italy, specifically? it is different to the government. the government has a projection and can we start with what that underpins?

>> we have different calculations. for example, we estimate in our forecast, expenditure to reduce the labor tax burden. it has taken in this year and last year. they announced that they will keep this measure until we have this factored in our forecast. the difference --there is a tax labor reduction and they are not yet conducting then.

jonathan: what happens if it comes into line with your expectations? >> we have rules and we are discussing how to update and and take them more efficient, but something that will not change in the coming fiscal rules is the fact that we have a threshold for deficit budget of 3%. we call on them to reduce their deficit. we know they are coming from the double shock. course, the pandemic and then second, this was different. the energy shock that we experienced last year.

we know where it is coming from, but we want to bring them down. on average, we are bringing them down. the dead at european level in relation to 22 was substantial. commissioner, would you be accommodating of bigger deficits? >> i think it is serious to have a reasonable threshold. 3%. by the way, and my own country, i had the opportunity to participate and lead one of them and we were always in the last 15 to 20 years, apart from the covid crisis with a primary

advance. below the 3% threshold. i think it is reasonable. we need to go back to this threshold. we take into account the extraordinary situation of the last few weeks. >> i am wondering how wide the range of options are for your forecast, if there is another cold winter, if there is some sort of energy shock or if you see oil prices where they are. >> i think we are better prepared than the previous autumn. we were starting in uncharted world. we had to cut the mash and and

we were uncertain on supply of energy. someone was predicting a recession and we had a level of storage and i think we reduced energy consumption. we are better prepared than last year. it is much lower than last year but they are still high in relation to the war in ukraine. we had to address a different situation, but it is not so difficult as it was one year ago. jonathan: thank you for the update. thinking back 12 months. there was this real fear that they were going to a dark place

given the energy situation. lisa: now it is not even in the outlook that much, have we really supplied --have we really solved the supply chain? these are some of the questions. tom: i'm going to say that it links into retail sales. lisa: prices are going down. tom: i'm sorry. you have the same as this massive migrant debate. i use my air miles to move children around.

jonathan: living it up, lisa. she is really spending. a refrigerator? lisa: i do not pay for it. ♪

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>> i think that is enough for equities.

quest if we lose the labor market, we lose consumers. >> we do not think we are in for a boom time, but we think that the resilience we have seen can hang on. tom: good morning, everyone. we are on radio, on television. retail sales in 30 minutes. will it be the same festivities that we saw yesterday? preview tell sales come up point 7% on the nasdaq 100. jonathan: best day of gains. you saw again after gain. up more than 5%. best day of the year. the reading does not change our

view. in fact, it goes on to say that it rises with financial conditions. this is why i think a lot of people say that it matters because they do. tom: they suggest a leveling instead of the nirvana. lisa: it is how it happens. is it just staying around 4% for a full year? whether the fed actually has to surprised with additional is off the table. would probably cause a shock in data pricing.

tom: sam stovall is outstanding. everyone this weekend. it is wednesday, but we are writing for the weekend. strategists are at the weekend. they are ripping up their allocations to get to next week. jonathan: next year, we might get there net --this year. lisa: we are reaping gains. the strength that we will see not only in the economy, but markets. tom: i'm taking some of the details from the 18 to 19 months

ago, negative five, but the nasdaq has double digit drawdown. jonathan: a big move yesterday. the future is shifting higher. just a little bit higher, but still 450. a loss of dollar weakness out there. that currency pair near the highest of late august for the u.s. dollar. tom: this is a tough business. if we test up a video of anastasia on the market, a number of months ago, she said,

lisa, it is going to be ok. is this the second bull market off of october lows? are we clicking in with a new bull market lift? >> it is amazing how quickly things shift. we went from bad technicals to a great set up. the chase is on and it will involve a lot of stakeholders with systematic traders. i think we drifted higher but i do think we will finish higher. quest is that what you think works for year-end? >> i think it will.

it also rallied pretty massively yesterday as well. the reason i hesitate, i love the target beat this morning, but it feels like a one-off. if we are looking at consumer spending, they are likely to be slower and more discerning. they will look for promotions. maybe it takes it higher with that come about from a quality perspective on margins, growth and secular opportunity, it is still there. quest valuations are pretty high. quest everything is working in the right direction, but when it comes to big tech, yields help

but what i like about big tech is that earnings growth is there. the next year or two, the average growth is about 60%. valuations, i know they say that big ec is expensive, but when you adjust, it is not that expensive. maybe that seems expensive, but when you expand the chart, it is not actually off the chart. everything is relative. lisa: is it a better than economic picture or is it some kind of recession that feeds into profit recession? >> i think the reason has been that this is a soft landing year.

i think something harder might need to happen and here is the big question. how quickly does the fed cut? if they cut, i think we are off to the races. this is the risk moment. if they stay persistent, i think some of the boules -- bulls will be disappointed. tom: we saw the target today. what is it up right now? 42%? the answer is, i think it is underestimated in fed centric new york city. every corporation out there is going to adapt and adjust.

>> those inventories were held back. there is a refinancing bill of some of that work. that. it goes across the spectrum. is the commercial real estate operators and then corporate. the reason i think we have not seen an impact, the floating rate has been low and they have not had a lot of maturities. if the fed does not cut, i think it will become harder for corporate. if margins get squeezed, i think cost-cutting is the next measure. the market that i worry about our leverage loans and if you

look at the ratios, for a lot of those issuers, maybe 1.3. how does that change next year, if you have some slowdown? high yield, i am a little less worried. you have better fundamentals and there is a small portion that needs to be rolled over but from a broader economic perspective, if you start to have more delinquencies, some default -- venture capital bankruptcies have been on the rise, so all of that starts to impact a sector of the economy. jonathan: for good reason early in the spring. what is your view of them? >> a mixed view of them.

earlier in the show, i said i was warming up to the bank sector because we were expecting it and i'm not sure that it does in 2024, so if you have lackluster activity, we have those higher delinquencies, defaults and charge-offs that come back to the banking sector. i appreciate the rally that they are participating in. lisa: you sound less optimistic than you did. can you talk about how many gains have been mixed in? >> the reason for that is a lot of investors come into the year expecting this to be a recessionary year with lackluster economic growth. so, a lot of people are now in the soft landing camp and are

not even talking about recession, but if you think about this, the longer rates stay at the same level, the relationship that we talked about previously, we will get into restrictive territory. that is what caused a recession. i do worry about that. i do not think it is in the people's numbers right now. it is going to be a long year, so we cannot just prepare for the whole thing. the joy is here. i think that the fed for now seems to be behind us. some of the worst options.

jonathan: if you are just catching up with us, markets are still positive. we are about 18 minutes away from u.s. retail sales. following cpi yesterday. really downside surprise. equities rallying. that was yesterday. yields are up. lisa: the why behind this, it was not a big miss. it is --it was a good news moment. it was a market looking for narrative, and it found one. it could coalesce around this

soft landing kind of feel. that is what generated this. quest the bottom line is that they were cutting expenses. the real nuts and bolts were executed. jonathan: that move was phenomenal yesterday. tom: i am waiting for walmart. ♪

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president biden: we are not trying to decouple. we are trying to change the

relationship for the better. if the chinese people are in trouble, if the average homeowner or citizen in china is able to have a decent paying job , it benefits all of us. jonathan: he is said to meet with xi jinping at the apec summit. later today on the west coast, we will catch up with anne-marie. a little less than the and we will get retail sales in america. we are positive on s&p after a stellar day of gains. higher by 1.3%. up by 1.9.

tom: we are at a nominal number. if there is price decline. lisa: you are going to let him do this. seriously? is this a new thing? jonathan: i am becoming more mainstream. tom: mike mckee helped out this morning. she is in san francisco and domestic politics. she is outside the center for the summit. she joins us for the diplomacy and pageantry. what is the schedule today? what are we observing for, and at what time of day should be tuned in?

quest people want to tune in on the east coast time. i am in central san francisco, where you see the heads of states descending on these meetings and also the broader apec summit, but more importantly, it is gorgeous. it is south of san francisco. onlookers are not going to be able to get a sense because they are moving out of the city. but also, to evoke that vibe, also on the west coast, it was supposed to be more relaxed environment so they could get to work and have a serious dialogue and serious conversation.

tom: he and a select few lived the permutations of this relationship. how does the white house perceive him versus the history of china? >> this white house wants to get this relationship back on track. they are walking into this meeting after a year of true acrimony between these individuals. at this moment, one of the highest priorities is to get military to military communications back to a normal cadence. he talked about the fact that he once to get back to this relationship. they want to set ground rules. the president gave a little bit of a poke. the fact of the matter is that

in china, the economy is struggling. an economy that is struggling but they are moving into and becoming more of a hawk when it comes to the military side. lisa: do we know who will be attending the dinner with xi jinping? >> we do know who will be share at the summit. these individuals will be sitting down with xi jinping and it seems like there are almost two dinners going on. there will be a smaller one with frank conversations. and really, china wants to make it clear.

china is investable. i go back to the comments that the secretary made in august. businesses continue to tell her that they are nervous to invest in china. per xi jinping, that is worrisome. that is why these meetings are so important. lisa: on the way for the airport to meet xi jinping, what is her role in this, given that she met with top level officials in china and laid the groundwork for what we are going to hear, possibly later today. quest to be able to understand what delegates are eating before meeting world leaders? that was totally impromptu. she was on the way, hungry, and

she said, i want a burger. if you are on the east coast, that is one of the first things you do. it is likely why the biden administration sent janet yellen there. she obviously went to beijing and had that first meeting with her counterpart. she has been setting the groundwork. jonathan: i have been to that one. it is a good one. it is putting much the same. what are you talking about? tom: i could see it.

jonathan: thank you. tremendous reporting. on the groundwork. to be clear, i think the challenge is incredibly difficult. i think it is a difficult needle to thread for the following reasons. he can only control what he can control. certainly, he has disrupted that the last 24 months. they have made it much more volatile and unpredictable, but at the same time, he also needs the u.s. to play along. i'm not sure the direction of travel changes. i think it is about dialing the temperature down. i think a lot of corporate america has looked elsewhere. i do not really care what you

use, but it has been the direction of travel for the last few years. lisa: there has been no sense of how the relationship will evolve. given that, what can they say in one make nice meeting? the businesses that were really dependent on china before, looking increasingly long-term to diversify. >> i think the great unspoken are the executives saying, what did you do to my hong kong? every corporation has some sort of entrenched relationship in hong kong that has been blown up. what we are talking about, they cannot talk about.

but they have been blown up. jonathan: without a doubt. the data point stands out for all of us in the last few weeks. turning that around is going to take more. tom: i'm looking at some form of tariffs. jonathan: marilyn watson on blackrock and the rally from the 20 four hours. good morning. ♪ ♪

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tom: we have been looking at the abramowitz spending pulse into retail sales. lisa: the key question is how the market is going to respond to some upside or downside surprise given what we saw yesterday. tom: and follow onto michelle meyer with her expertise at mastercard will be something. right now, out of control with the control group. michael mckee on america's consumer and retail sales.

mike: sales are better than anticipated. the headline comes in down 1/10. tom: markets up. mike: last month revised up to 0.9%. i got to tell you something about that. the forecast was for a drop of 0.3%. take out autos and gas and you are up 1/10. retail sales control. gdp is up 0.2%. ppi is out and it is deflationary. headline falls half a percent after being up half a percent in september. the core rate, which i put the trade number into as well, is at 0.1% after 0.3% the prior month. we are seeing significant revisions to the ppi numbers. year-over-year basis headline 1.3% and core 2.4%.

the empire manufacturing index goes up to 9.1% from -4.6%. a lot to digest. the one thing i wanted to measure -- mention -- because they are so heavily revised and they come halfway through the month, they get more information. generally, and i would assume the distinguished gentlelady across from me will be able to expand on this, you look at more than one month in a row to average out where we are. 0.9% up and 1/10 the lower and still a good couple of months of spending. all of this impacted by gasoline prices. it is all price-based. tom: the markets look up more than before but now they are pretty much level. down 35,000. the vix 14.19.

it is not the 19 basis point yield from yesterday. lisa: not to be speculative but when the first numbers came out and it was retail sales coming in pretty much in line, ppi, deflation, bond rally. then you look at the revisions. it was revised upward one after another in the prior months. people are still spending and that is really the key question behind the disinflationary narrative. tom: is it too early to parse 15 pages of data and say what amazon did? mike: online retailers were up 7.6% on a year-over-year basis. people still spending money. obviously, one of the bigger losers was gasoline, down 0.3%,

which is less than anticipated given that gasoline prices fell about 10% during the month of october. clothing and accessory stores flat. maybe that is not a surprise after everybody goes back to school shopping in september. sporting goods, hobby, musical instruments, bookstores the big loser along with furniture and home furniture stores. motor vehicles, new unit sales dropped and you get a drop of 1%. food stores up 0.6%. grocery stores of 0.7%. tom: this is important to bracket these reports. roughly 5.04% to a year, massive lower yield, and we have come back four basis points to 4.88%. after these reports it is still

a huge yield shift. lisa: does this confirm that goldilocks nirvana? we are seeing retail sales continue and disinflation or deflation in goods continue? mike: obviously, disinflation plays a role. this is all price-based. the fact that we have seen a decline in overall prices is going to subtract something from retail sales growth. the report gives something for both sides. if you want to say the economy is slowing, 0.2% is slower than 0.7% for the control group. if you want to say the economy is growing, it is much better than anticipated and we are still seeing strength in different categories. we do have to be careful. we analyze this because lisa only bought her refrigerator this month. it does not show up in the appliance store sales. lisa: my god.

the most talked about refrigerator. [laughter] nobody needs to hear more about this refrigerator. tom: the dolce & gabbana refrigerator. [laughter] this is a joy. what happens with young economists as you read the research and go, oh, they are quite competent. not long ago and far away but a few years ago that was michelle meyer absolutely owning the consumer. she is no chief economist for mastercard. you own the analysis of the american consumer. michelle: we have not stopped spending. think about the data this morning. it was an incredible combination of continued strength in retail spend, rebound in manufacturing which shows a need for goods

production because consumers are still spending, and you are getting some relief on the pricing side. it is a really nice combination. tom: i hate asking this question and i am stunned. first time i have asked. on november 15, what does the holiday season look like? what does black friday look like like an black monday? what does this retail madness look like? michelle: it is a longer holiday season. we have learned that the last few years. it is heavily promotional based. part of that is because of the fact there is so much a demand to buy online. think about the numbers we saw this morning. just over 8% year-over-year growth in e-commerce sales. you are seeing a consumer that is exploring many channels and that creates more opportunity to get new products, and it creates more need for retailers to

compete with these big moments in time. that is what is going to be indicative. we will learn a lot from black friday and it is approaching quickly. lisa: how sustainable is this combination of robust retail sales and disinflation or outright deflation? michelle: i think you have to consider the different categories. when you looked at cpi yesterday, you saw some categories like these durable goods, like your refrigerator -- [laughter] -- we are seeing price declines but for many services you are still seeing price increases. part of the drop in prices for some of these goods reflects the fact prices increased too much coming out of the pandemic because of supply chain issues, because of higher costs. now it is reverting to something more normal. that means, in real terms, you will see support in these items

moving through. in nominal terms, you could see moves down in overall spend. it really depends on why inflation is moving and that is a function of the type of product and how things evolve coming out of the pandemic. lisa: when you put it together does this seem like a recipe for this goldilocks soft landing? or does this paint the picture of a fed that needs to do more and an economy that has way too much momentum to achieve the disinflation a lot of people are baking into market evaluations? michelle: i think the data is shaping up in a way that is favorable. you continue to have economic growth. look at the third quarter gdp numbers. but was fairly broad based economic activity, not just consumers, but inventories getting manageable and in stock. things have been evolving remarkably well in terms of the real economy taking out some of the excess.

the labor market coasting into a slower trajectory but still expansionary. how much of that is because of monetary policy? how much of that is because of the nature of the shock we had initially? we will see. probably both but it is evolving quite nicely, and obviously, exceeding expectations. tom: we talked about the debt and the deficit earlier. let's talk about the average charge card is 25%, 26% interest. migrating up now to 28%, 29%. i find 30% to be almost criminal, but you look at this daily. do we spend less? michelle: what we are looking at overall is how monetary policy is transmitting into the economy broadly. when you think about who is borrowing there are companies borrowing in terms of expansionary needs, consumers borrowing on whether they want to buy a home or big-ticket

item. higher interest rates are certainly transmitting into the economy. you can see it today with the retail sales number that mike referenced around housing related items, furniture, bigger ticket items that require debt. you are seeing some hits to that type of spending. i think the high level of interest rates goes back to lisa's point around how the fed is trying to calibrate this economy with some easing of real growth, but still allowing inflation to come down. tom: you are out of the game that i will ask you the game question. what is your 12 months forward real gdp? you are talking to fancy people at mastercard and they don't want charge cards. they want to know what michelle meyer thinks. what is your real gdp call? michelle: i am still in the game in -- tom: you are still doing this daily? michelle: absolutely. that is who i am. when i look ahead this year we had an economy that ran above

its underlying trend. we are trending for real growth between 2.4% in 2023. as we look ahead we are going to see some moderation closer to the underlying trend growth rate. tom: sub 2%? she did not answer me. michelle: i am still in the game. [laughter] tom: i got the michelle meyer not answer. go away. michelle: thank you. tom: brilliant work. it is linked into the charge cards but also about the greater economy. i want fireworks. lisa: the s&p up 0.3%. still solid on the day. i want to bring this to you just crossing the terminal. spacex is discussing an initial public offering for its

startling satellite business. it has been in the news about providing reception satellite operations for a host of different countries. it could come as soon 2024. they are laying the groundwork for it in terms of isolating some of the resources into a separate unit. a lot of questions about how this will potentially percolate out. tom: it is a ton of satellites in the air. it is taking the internet in orbit. it is that simple. lisa: he dominates it. he has been in the focus of who he provides access to. it has been controversial and highlighting how strong his presence is in terms of global interconnectivity. we will continue looking through as we get more details. we just wanted to bring that to you. it just permeates this feeling that we are heading toward a really good set up heading into next year with people kind of pushing out that recession

forecast. tom: big time pushing out. no question. we did not talk to michelle meyer about this but the basic idea of wind does that labor economy break? that is a recalibration we have to make in the first week of december. lisa: companies are still investing. people are still buying. what is going to be the trigger? they are not seeing it in earnings. margins are better than expected. tom: we will have to see. michael mckee is with us and he will dive into this for bloomberg radio and television. futures up 11. stay with us, "bloomberg surveillance." ♪

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with the right hikes behind us it could support momentum along with cash on the sidelines looking for a home. lisa: maybe they are finding it in risk assets. investment director at invesco earlier this morning talking before we got that retail sales report tied with the ppi data. continuing on this feeling of goldilocks that has permeated throughout markets. we still are seeing a lift to stocks. bonds a little softer. yields up six basis points. tom: we are going to do this in 45 minutes. high-frequency economics on retail sales, they are really good and there is this one phrase which goes back to the debate of monday of a still strong labor market. again, all of this fed analysis

is centered around not rates but what does the american job economy do? it is a strong labor market. lisa: the economy is still holding. want to look at names highlighting that point. we got earnings from target as well as t.j. maxx. tomorrow we get walmart results. when i find interesting is where we were set going into this. target outperforming. better-than-expected third-quarter earnings. showing in-line expectations for earnings, but also, inventory coming down 14%. really highlighted how much they have turned that story around. tom: i did not know this. target pe 15%. target pe 31% -- walmart pe 31%. wow. lisa: massive. t.j. maxx softer after giving guidance that was underwhelming, talking about not necessarily

upgrading how much they see sales to increase. tom: what is great about this is we do not talk to david sowerby until the russell goes up 5%. lisa: let's get there right now. portfolio manager and managing director at ancora. you seeing goldilocks and rainbows and lots of things that give you confidence? david: lollipops and puppies too. it is not just that small caps can rally but large caps can too. tom and i had a conversation about 10 trading days ago on the radio and i made the reference then -- if jay powell is the head lifeguard, the head lifeguard blew the whistle to get back in the pool. you have less fed tightening. sentiment unusually bearish.

and out of third-quarter earnings and cash flow, that has been good margins. 11%, above average. companies are growing their dividends better than 10%. you are never going to get all the stars aligned. nevertheless, blow the whistle, back in the pool. tom: the fact is when they move, they move. in 2003, 20 years ago, the russell 2000 in the range of 40%, 45%. do you suggest we could see that given this titanic shift in rate and inflation belief? david: i think the relative performance of small caps to large caps sets the table that small caps cannot perform. you have valuations at roughly the same levels on saw in early 2000.

may be alternatives like private equity instead, yet small caps delivered for an extended period of five years or longer. the setting is very good and the key was interest rates peaking and starting to decline. that has been the catalyst. tom: is there a magnificent seven in mid-caps? forget about the small caps but in the caught in the middle almost large caps. are there tech-type companies? david: less so. you do not have out of the -- more than 30% do not make money, but you still have a robust fishing hole to be buying stocks. today's retail day. let's talk about two small retail stocks that look appealing. one is vera bradley who makes home accessories, luggage.

generating good cash flow. only two analysts follow this company. you have a better opportunity to find value when you have fewer analysts. that is one example. if you move to the fast casual dining space, potbelly is growing their cash handsomely. good balance sheet. quick service sandwiches. they are growing their stores more than 10%, good unit growth. those are two good small-cap names to keep your eye on knowing there is no magnificent seven among small-cap stocks. lisa: let's talk about those small-cap businesses and how rates higher for longer will affect them next year. if the strength we are seeing in the retail sales, yes, we are seeing disinflation, but if we see rates staying around here, do these companies get squeezed by the fact any downturn in sales -- they cannot borrow to

offset that without paying a punitive rate. they cannot hire cheap employees because the salaries have gone up. how squeezed are they in the face of any unexpected weakness? david: i think whether it is small-cap or large-cap the higher interest rates posed an element of squeezing. when you have so many opportunities to buy in the small-cap space, much like their large-cap siblings, they were able to extend their debt to move to fixed rate debt -- good move -- and you have seen that prevail not just in the large-cap but small-cap space. so often we pay attention to the income statement, earnings-per-share, really focus on the cash flow and the often forgotten in the trinity, the balance sheet. if you put those together, you can find good opportunities in this small-cap space where you have the opportunity for double-digit return. tom: what is the efficacy of active versus passive index in

mid-cap? is it worth stockpicking or do you buy the mid-cap etf? david: you will never hear me say the overused phrase it is a stock pickers market. however, my parents raised me don't play for a tie. be an active stock picker. whether it is large-cap o k small-cap you can be well diversified. not the whole 2000 given so many companies are not profitable. it is a better backdrop to be an active investor and that favors the active investor versus the passive, without talking my book. tom: you are talking your book. thank you so much. senior executive says we have to talk about apple too much.

such a pleasant relief from our total fixation on 15 stocks, 20 stocks. lisa: those stocks have given everything. people are saying they probably will continue to into your end. there was a shift today, a slight shift, around the margins. not like yesterday which was much more dramatic and less nuanced. there seems to be doubt creeping into bond markets. tom: back five basis points. lisa: a little doubt about whether the fed has won this. about whether inflation is really gone. no rate cuts being priced into the meeting for the remainder of this year. and now rate cuts are slowly being priced out along the curve. tom: i agree, there is a subtle dynamic office report. we are still up 17 on futures, but we are up 25 earlier. dow futures over 100 points. there is a lot of soul-searching going on.

we make jokes to keep the coffee going but this is really serious stuff. there is a lot of global wall street people whose jobs are in jeopardy because they were some relative of caution or even gloomy. what happened yesterday is a serious thing to people's livelihoods. lisa: we are seeing the goldilocks transpire the people said was pretty much impossible to achieve. the data is suggesting that is what is happening. whether it is a moment in time or whether it is something that is sustainable is the unknown. can we get strong sales and disinflation for the foreseeable future? tom: data check into the close. up 16. dow futures up 82. yields higher off the stunning moves yesterday, 4.49% on the 10-year. cannot say enough about the coverage the last couple of days. mohamed el-erian is scheduled

for friday. good morning. ♪

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jon: what a monster move in the last 24 hours. that move continues. down 0.3% -- up 0.3% on the s&p. the countdown to the open starts now. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg: the open," with jonathan ferro. jon: live from new york, coming up, markets declaring victory in the fight against inflation. the house beating the ris