>> you can forgive a lot of things if growth is remaining resilient. >> expectations of higher growth are now built into markets. >> i really think the focus for the second half will be on the slow down in growth. >> that is a perfect scenario. deceleration in wage growth and the fed has a clear runway to do what it wants. >> as long as the economy is expanding we are finding opportunities. do not overthink it. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york

city this morning, good morning. this is "bloomberg surveillance." your equity market on the s&p 500 negative .6%. kicking up june with the day of gains but only just. we need to talk about the calendar again following the weaker than expected manufacturing ism in yesterday's session. we begin tuesday looking for this. the services ism taking on so much more importance. we have been whipsawed by economic data. but lisa: the disappointments have been coming in consistently. it gives rise to people who believe this economy is decelerating at a faster clip. you get enough of these prints, especially the services ism, and suddenly you have a trend.

jonathan: a phrase you will hear a lot is bad news, bad news. we need to define what bad news is before we talk about whether bad news is bad news. payrolls a little bit lower to about 185. bank of america below 125. bad news could become bad news. stuart kaiser says headline payrolls below 150,000 would be worrisome. how worrisome would that be this friday? lisa: bank of america says goldilocks range is between 125,000 and 175,000. stuart kaiser says under 250,000 is negative. andrew hollenhorst talking about a rapidly weakening economy. we do not know how to interpret the data we are looking at because we do not understand the dynamics behind them which is the reason the ranges we are seeing are growing which is the reason why bank of america came out this morning and said fragility and stocks is near a

30 year high. people are trying to understand what their paradigm is as stocks whipsaw on a single name basis. jonathan: only two weeks ago we had the breakout in the pmi the economy was too hot and we are having a downside surprised. neil dutta saying an accident could be brewing. lisa: he is saying that right now the economy is probably weakening more than the fed will recognize. inflation is not coming down as quickly in the headline data as it will later on. he thinks the fed will only cut once or not at all which would be an accident. he thinks the fed should cut more. this is the debate right now. we do not understand where the range of risks are. is the fed at greater risk of allowing inflation to run too hot into next year? or deflating and taking an economy that is losing steam

rapidly? we do not understand. if we listen to the executives and ceos it is not clear they understand, either. they say high income consumers are doing just fine. everyone else is a crapshoot. jonathan: the story could change day today and it could change later when we get more economic data with jolt. crude is lower will check out the scores across the board. brent crude, a break of $80 in yesterday's session for the first time since february. lowe's we've not seen since january on wti, down another 2%. looking at crude and looking at the bond market, yields have been lower. 4.3084. equity futures lower .55%. coming up this hour we will catch up with julian emanuel of evercore. former fed economist claudia sahm on line inflation feels bad and bloomberg's will kennedy. we begin with our top story,

weaker than expected manufacturing data leaving the door open to rate cuts. julian emanuel writing "volatility will rise from these depressed levels given the catalyst of cpi and the fed and the extraordinary machinations of u.s. politics." julian is around the table with us. how much weight you put on that data? julian: we have to recognize the last couple of weeks have been extraordinary. a week and a half ago the bloomberg financial conditions index printed the loosest it has printed since 1994. then you had the third weight in the s&p 500. yields down 20 basis points. you would've told me the s&p 500 would've been up two or three or

4%. we are down and that points to the fact that the market is looking at the data differently in a market where we have inflation uncomfortably sticky. jonathan: i have a friend called marco jp morgan who said "a number of macro signals are pointing to economic slow down or a recession. market risk sentiment remains positive. stop markets are closed all-time highs. " it implies something has to give. we do not -- julian: we think so. you go back to this idea that in the average year the peak to trough drawdown -- based on the events we have witnessed in the last week alone both geopolitically and economically or otherwise, one can argue this

is at least an average year. lisa: which raises the question of what is a drawdown look like? the ism data came out and it was bad news is bad news. stocks sold off in tandem with bonds getting a bid and people were thinking maybe this is a dip and we will buy it. what is to say that will materially change? julian: the speculative juices over the last several weeks are there. no question about that. the tendency tends to be those types of episodes ebb when the p &l starts deteriorating. if everyone's favorite meme stock starts heading back towards $20 or lower in everyone's favorite stock that is about to split on june 10 starts to trade sideways or lower. this idea of stock split's being outright bullish for a stock is

very specious and to us it has echoes of something that happened in late 2020 when you had two of the other magnificent seven stocks split on the same day and that was an interim top and the nasdaq. lisa: you're talking about gamestop and nvidia. gamestop, the meme stock that cannot quit. then you have this question of nvidia and the stock split and how beneficial that would be. let's start with gamestop. is there any message for the broader market in the rally we have seen? or is this just an idiosyncratic story that has gotten legs because people find it appealing? julian: the message is the fed needs to think long and hard about cutting rates when you have this degree of speculation still in the markets buoyed by the liquidity that as we saw a week and a half ago had gotten to all-time lose going back to 1994. there needs to be a recognition

that the dynamic is perhaps a little bit more finely balanced than this rally would otherwise indicate. lisa: do you see a parallel between gamestop and some of the speculative activity at nvidia and elevated -- it is going anywhere, it could become a $20 trillion stock in two years. people's expectations are going to the moon. is that because of where rates are? is that expectations of a fed rate cut or just a paradigm shift? julian: you have to differentiate. you know we've been on this program a lot. we are early to the ai revolution. we are firm believers in the ai revolution. if you think about the internet in the late 90's and the early to thousands, you had a paradigm where those types of developments and the good

feeling around those share price games extended the economic cycle, but did not eliminate the economic cycle. jonathan: where you think we are? mid 1990's? late 1990's? lisa: i would say -- julian: i would say you are in the late 1990's. there is a desire to say this is 1995. this is the dawn of the entirety of it. jonathan: why are they wrong? julian: first i would say why they are right. they are right because you are in the early innings of ai adoption. it will be a game changer and productivity enhancer. will it be to the degree the internet was? that remains an open book. you heard chair powell who that idea in the short term. in 1995 the only time the fed cut rates because it could is

because the economy was strong like it is now, but core pce was already a 2.1%. we have a different paradigm and multiples were 14 times versus 21.5 for 22 times. jonathan: it is the late 90's. is the juice worth the squeeze or is it time to step away? julian: as an active manager you need to be invested on the one hand. the fact is the market dynamics and the market structure actually afford the ability to hedge like never before because 5.25 interest rates work because cash is attractive and selling call options against buying cheap what options is as attractive as it gets. lisa: are you saying as an equity strategist you like bonds and cash? julian: bonds -- you have to

differentiate between bonds and cash. part of the error of the last year urso was the expectation -- the last year or so was the expectation cash would be worth less. because inflation has remained stickier cash has retained its value. bonds are going to be what will work if there is a downturn. that is part of the message of these last couple of weeks is that there may not be a downturn but there could be a growth scare dynamic. lisa: you're saying initially cash look good but you're moving out the curve because you see deceleration? julian: very gently. our view at evercore isi's we do expect a slow down at the end of this year into early next and that will be bond bullish. it will certainly be part of the

dynamic that causes the fed to cut rates. you have only started to see these beginning signs of a slow down and what you're going to need to see is inflation to fall in tandem with accelerating slow down if that is the case. jonathan: i feel like we have bullied you into sounding more bearish than you actually are. [laughter] julian: to be clear, we have felt uncomfortable with valuations where they are. when you look at the long history of returns, the average return at this valuation on a year is zero. you also had times like late 20 and into 2021, and obviously since you asked the question 1999 and into 2000 where that has been wrong. those peaks were 28 times earnings. that is 6300 on the s&p 500.

what we are saying is it is time to catch our breath given all of the uncertainty of these dynamics, particularly given the fact the price of uncertainty is so incredibly cheap right now. jonathan: it is good to see you. julian emanuel of evercore. equity futures negative .6%. here is your bloomberg brief. yahaira: the ruby fell in indian stocks dropped the most in four years as early election results indicate the race there is much closer than any of the exit polls estimated. narenda modi and his party are seeking a third term in power but initial tallies show the party is struggling to win a majority of seats in national elections. airbus may be closing in on a deal with china. bloomberg news has learned the plane maker is negotiating a major sale of more than 100 aircraft to china.

talks have gained momentum since president xi jinping visited his french counterpart last month. and a glitch in a software update is being blamed for trading halts at the new york stock exchange yesterday. the glitch also read the nyse to incorrectly display 99% drops in companies including berkshire hathaway. the disruption was resolved after 45 minutes when the exchange reverted to running a different software. the nyse will cancel the bad trades at berkshire hathaway and is reviewing other erroneous halt. jonathan: what a mess. more and about 30 minutes times. equities lower. a massive week of data. coming up next, the weight of inflation. >> we have more work to do on the price side. prices are still too high and we have a cost-cutting agenda we will push. jonathan: that conversation is just around the corner.

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jonathan: welcome to the program. equity futures near session lows. yields pulling back. 4.3767. much more on crude. five-day losing streak. wti $72.56, down 2.2%.

under surveillance, the weight of inflation. >> we have a lot more work to do on the price side. prices are still too high and we have aggressive cost-cutting agenda we will push. inflation down 60% off its peak and that translates into real earnings and feeds back into consumer spending. let's take a close shape with occam's razor and call that a healthy perpetual motion economy that has been reliably delivering for working households for a while. jonathan: despite cooling inflation data, rising prices are making americans critical of the economy. 41% of americans name inflation or the high cost of living as their top issue. the cost of owning or renting a home rank second at 14%. claudia sahm writes people who experience the u.s. economy continue to disagree with the people who measure it and the most likely reason is inflation.

most americans still see it as a major problem while most economists do not. claudia joins us for more. help us understand. are we measuring it wrong or is it just a difference of perspective? claudia: it is about the perspective. inflation is a change in prices. it is legitimate for most americans to compare back to 2021 before prices took off and it is legitimate for economists to look at the last 12 months. it is all the same thing and we are using a different perspective and we end up talking past each other and this is not about semantics. there is a real disconnect. jonathan: which perspective do you think is more important to policymakers? claudia: policymakers serve the american people so to look on all fronts. it absolutely makes sense why people use the overall increase in prices as the reference point and it is important we

understand the prices are not increasing at the same pace. policymakers serve the people, they do not serve economists. they need to focus on that. there is not tension between the definitions. lisa: what is the policy shift that comes from the recognition that people's feelings are not wrong and the way they're looking at it is not wrong in a policymakers serve the people how should that shift what policies they follow? claudia: policymakers need to move past the idea that this is about economics. there are perceptions that are very important. part of the peace is you have a big disconnect between how people view their own finances -- there was a recent survey that said 70% of people view their own finances as at least good, comfortable. when you ask them about the national economy the same people, about 25% say the economy is good.

this does not make sense. it does not make sense in tying it back to economic conditions. those people, they ought to us about the national economy. it is a real puzzle. this is what policymakers, particular yet the white house, need to understand, they have to stop talking to economists about this. this is out of our lane. lisa: is this a messaging exercise? it is not totally rhetorical. is this a matter of saying to people inflation is still a real problem which is why we are holding rates where they are, or isn't different? -- or is it different? is it saying we can cut rates on the margins and take a look at where inflation is in a year and how does this change from a messaging standpoint if not from a policy standpoint? claudia: i don't think it is messaging. there is something going on that

made people pretty ok with their finances. their finances depend on interest rates, have they bought a home, can they buy their groceries come if you ask them they say they are doing ok. these are the things economists or the federal reserve want to get up in the economy. slow inflation down. how does that affect people. if you ask how that is affecting them come it is ok, we are doing it. if you ask them how things are going big picture, the economy is bad. there is a disconnect. they need to figure out what is going on. it is not entirely -- it is part of white people are a little downbeat has to do with inflation. there is something more. i don't think the fed needs to worry about the messaging. they will do what they do. there are a lot of other policymakers out in front of people and they cannot act like

cutting prices are getting interest rates down will fix that. it may help some people but it will not fix disconnect. jonathan: we love your view on fed policy. lisa mentioned neil dutta. this is what he has to say. he says there is a potential accident brewing. he has conviction core inflation is slowing. do you think there is a bit of an accident brewing at the federal reserve? claudia: i am extremely frustrated that when the fed talks about the risk to the economy they are hyper focused on inflation could take off. we might have to hike. i agree with neil in the sense we should be talking about the other risk. employment could weaken and we are having a fed that is not cutting 25 in a meeting, they are cutting 75. we are not talking about that risk. it is not my baseline. i think we ought to put all the possibilities on the table and prepare markets and people that there might be something else in the cards other than hiking.

it is just not in the conversation which is mind blowing. lisa: one of the reasons why is it has been so difficult to get the economy to understand the trajectory we are looking at. to give us a sense of where you think policy has had any affect, do you think higher rates have kept home prices high by reducing the volume of sales? claudia: the federal reserve through the unconventional monetary policies, buying of mortgage backed securities, they have completely -- what is the right word -- they have affected the housing markets in a way that has been unusual and frankly detrimental. rates move so fast. i think it is hard to look at the housing markets and give a diagnosis of what the fed did they because you have to put the whole picture together when they

are pushing down house prices and out they are going up. -- pushing down house prices and now they are going up. they have a mess they are trying to unwind and that is one of the interest rate sectors and one could argue this unusual set up is why the transmission have not quite pulled into the rest of the economy. jonathan: interesting. claudia, well handled as always. good to hear from you. equities down .5%. crude five-day losing streak. brent crude breaking below $80. we'll catch up with bloomberg's will kennedy on the others. this is bloomberg. ♪

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a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

jonathan: it was quite the reversal in yesterday's session. we were down on the ism. this morning we are down again .5% on the s&p. on the nasdaq we are off .5%. this time the russell was up more than 1% and now is down 1%. we are all over the place. which of the board and get to the bond market. two year, 4.7995. only a few weeks ago when we had a stronger-than-expected pmi and we're all talking about the economy running too hot. that morning the two-year opened

up at 4.87. we are down to 4.7995. data point to data point. we have both read the same note. kit jukes of socgen saying it takes one -- it only takes two swallowers to signal the arrival of summer than ism services data are important. we talked about tuesday into wednesday. that data point has taken on a lot more weight. lisa: we are looking for narratives, want to hook into in terms of a trajectory going forward for the economy. if the ism print we saw yesterday was a read through, then all of a sudden people will talk about a more rapidly deteriorating u.s. economy, slowing to slow. not necessarily slowing. jonathan: lets which of the board and get to crude. five-day losing streak on wti. brent crude $76.87, wti down to

$72.57. a big supply-side story yesterday. once you get a data point like we got, people start to talk about the demand side of the equation. are we talking about supply or demand? lisa: we never know. on the one hand you have the supply story with opec-plus agreeing to bring online a certain barrels later in the year. that was a potentially dovish signal to the oil market. there have been people talking about peak gasoline prices, the fact that even with some of the incredible increase in driving season the demand for oil and gas is not there. our to gauge what this is. nonetheless -- hard to gauge what this is. nonetheless people are talking about more negative price pressure at the margins until the next narrative. jonathan: lowest level since january. under surveillance, weaker than expected factory data sparking a rally in treasuries. ism the lowest level in three

months. we will get factory orders, durable goods, and jolts job openings at 10:00 eastern time. it was the data that got this market started. ism was the weakest in three months. new orders, biggest drop since june 2022. will that be confirmed by services? lisa: michael darda quantified it in terms of what the readthrough is to the s&p 500. he says levels are consistent with declines in the s&p 500 earnings estimates and capital spending growth. putting out the price to perfection is accurate way to characterize where the market is based on what i is a manufacturing numbers are telling you. is this a quirk in the data? the s&p global manufacturing data comes to mind in particular. jonathan: here's another economic data point. president biden crackdown immigration. bloomberg reported he will sign

an executive order looking to prevent new asylum claims by migrants crossing the border. crossings it 2500 a day. we will catch up with steve englander of standard chartered who will point to this issue as a big issue in the labor market. will this be a big data point going into payrolls not this friday but a few months from now, maybe a year from now? lisa: marriott yesterday saying immigration is important for them to get enough people to staff their properties. he was talking about how he is looking to bring more people in. we have asked people repeatedly. to some degree it feels like it is colored by a certain politicization that has had people disagree on basic fundamental economics. you've had a number of wall street houses say the immigration we have seen has kept down wages and has increased growth dramatically. unclear how quickly that could reverse and how much we have got

a boost from that. jonathan: numbers on that later this morning. elsewhere in the commodity market, crude prices falling below $80 a barrel, the lowest level in four months. in opec-plus decision to bring more oil to market is raising supply concerns. we can catch up with will kennedy in london. let's go straight to it. is this a supply-side story or are we starting to worry about demand? will: as always i will be boring and say it is both. what traders are confronted with now is a situation where they are starting to see the prospect of those opec cuts which have underpinned the market in recent months against a period where the demand outlook may be getting more uncertain. it is worth pointing out that thus far since the end of the pandemic demand has been strong and attended by historical standards to be strong, adding 2

million barrels a day last year which is very helpful and by historical standards strong again this year, ahead of expectations. that may continue. i think the decision opec made in the weekend makes the market more vulnerable to any wobbly demand. annmarie: a bit of could -- jonathan: a bit of confusion around the decision over the weekend. they were extending but they could boost supply later this year. where should the emphasis be? will: the emphasis should be on the fact it was a deal that enabled opec to continue to present a united front until the end of next year and deal with tricky issues. the most important issue they managed to deal with was the production level for the uae. the uae has always felt it was having to do more heavy lifting within the current quota set up and had been campaigning for a higher quota. part of the agreement deliver that.

make sure that was not taken too badly by the market. they promised to restrain the broader production target until 2025. it is a mixed picture and take some understanding. i think it was a deal that enabled them to deal with tricky issues and preserve the unity of the group into next year. the bullish argument is we have a much clearer idea about what policy will be until the very end of 2025. lisa: we have any sense? travel season is alive and well. a lot of people are on the roads. there is this feeling that it is not that people are driving less , it is not the people are flying less, it is that they are using less fuel and that is the reason demand is not as great. is it because of some sort of economic downturn or because of greater efficiency or is it because of u.s. production

offsetting any incremental gains in demand? will: i think the broader picture is despite some signals around the edges that things may be getting softer, underlying demand remain stronger. someone pointed out a chart from the oil trader that said jet fuel demand around the world is truly above pre-pandemic levels. we still think people are driving a lot. gasoline demand look strong. there is weakness in diesel demand which is more leveraged to industrial parts of the economy. do not think there is a compelling reason to say demand is weak. if people are getting concerned about a slowdown in some parts of the economy it might not be as strong as previously thought but i do not think it would be fair to present a demand weakness narrative just yet. lisa: given there's not necessarily weakness materializing and given on the supply-side things can change quickly, how do hundreds -- how

do you understand the story from maersk, the shipping company increasing its profit forecast for the second time in barely a month as they look at disruptions they are saying and the fact they will continue charging a significantly higher rate to ship goods. does that disruption give people pause? are people still talking about the potential for this to percolate into the oil sector? or have people basically become numb to some of the possibilities that have not come to pass? will: i would make two points. the world economy has adjusted. shipping oil around the world has adjusted to the problems in the suez canal and oil is getting to where it needs to go. it has had a material impact on the oil market because of ships having to sail these routes which has been good for profits and oil demand and has added several hundred thousand barrels a day of extra global oil demand because the ships are having to go that much further around africa to get from asia to europe.

it is another reason why the demand picture is still pretty healthy. lisa: let's finish -- jonathan: let's finish on the demand picture more broadly. using concern beyond crude and places like copper and iron ore? will: copper has been a bullish story over the recent months. there is a debate about how much of that is based on fundamentals in the here and now which do not look superstrong compared with the flow of investor money coming to copper because the narrative has been to a left about the medium-term outlook around electrification, around batteries, around electric vehicles and the lack of supply. there may be a short-term mismatch there but i do not think we are at a stage where people are looking round the commodity complex thick and global economy will get a chill. that is not what we are seeing right now. jonathan: will kennedy from bloomberg out of london both in crude and in copper.

copper a break of 10,000, we are down 1.5% in london trading. let's get an update on stories elsewhere. here is your bloomberg rate. yahaira: brexit architect nigel faraj is running in the u.k. general election. he has announced it comes less than two weeks after he said he would not run because his time would be better spent helping donald trump get back into the white house. farage stood to be an mp unsuccessfully seven times but is currently more of a household name than some conservative ministers. maersk said world supply lines are more impacted than first expected from ongoing disruptions in the red sea. the global shipping company raised its profit outlook as disruptions remove capacity from the global fleet and provide a boost to freight rates. it is the second time in about a month maersk has boosted its outlook with the stock rising 22% in the month of may. e*trade is considering banning

meme stock leader keith gill from its platform. the wall street journal reported e*trade and parent company morgan stanley are concerned about potential stock manipulation around his recent purchases of gamestop options. gill bought a large volume of the video game retailers options through e*trade, reigniting a meme stock frenzy. this past weekend he did it again, posting a screenshot of what appeared to be a $160 million position in gamestop, sending the stocks up 31% yesterday. that is your bloomberg brief. jonathan: let's save the conspiracy theories for a moment and go to that wall street journal piece. according to people familiar with their internal discussions, we talked about one concern e*trade has. there are two. the debate includes whether his actions amounted to manipulation and whether or not the firm is

willing to risk drawing the attention of his meme army by removing him. the second point is far more interesting. lisa: especially given what happened to robinhood when they tried to take them off their site. there is a president and if they have that army withdraw from e*trade, how big is that army? clearly he has quite the following. jonathan: never mind the legal concerns, just the concerns they come after the platform. coming up, the case for a july cut. >> we will see softer inflation and soft erected be labor markets. that will be a powerful sign for the fed it is time to start cutting rates. a fascinating front -- jonathan: a fascinating conversation with steven englander of standard chartered coming up. ♪ ...to living legends. —you got this. —thank you. vanguard's retirement solutions can help all your employees

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program. equity futures -.5% on the s&p. rally in the bond market yesterday. yields lower. down almost one basis point on the 10 year. under surveillance, the case for a july cut. >> it comes down to the data. we can spend all of our time listening to fed speak and that gives guidance about where they want to go. where they will go will depend on the data. what we think we will see a softer inflation and soccer activity and labor markets. if you put those together -- softer inflation and softer activity in labor markets. jonathan: investors looking ahead to a busy slate of jobs data with jolts at 10:00 head of the payrolls print on friday. steve englander of standard chartered writing "a july cut is our baseline. there are two more meetings

before july so there considerable room for pce to slow." i saw in my inbox yesterday before the ism data came out and not afterwards. you do not think this market was pricing a big enough probability on the prospect of a july rate cut. talk us through the call. steve: market probability is 10 or 15%. almost the minimus in terms of rate cut probabilities. we have seen some deceleration in the numbers in terms of pce inflation. one of the things we have looked at is if you look at the february 2024, march 2024, april 2024, they are all below the corresponding months in 2023. at the beginning of the year there was a seasonality argument that prices are bunched at the beginning of the year.

that possibility still rises. the other part that is there -- that is something into was alluding to. you take a look at gdp now. three weeks ago it was over 4%. 10 days ago it was 3.5%, now it is 1.8%. the numbers have shown a trend towards softening. the fed has been mixed in terms of saying what constitution -- in terms of saying what constitutes a real slow down that would get everybody on board for a cot, but they've been unanimous in terms of saying if we begin to see the economy slowing down but that is enough. they really believe in the phillips curve and they would think that is the phillips curve manifesting itself. jonathan: you pointed to two inflation reports between now and july unreason the door was still open for a cat. you did not talk about payrolls.

you mentioned andrew hollenhorst. his call on friday is 140. he says once you get prints like that that starts open the door. what is your number for friday? steve: we are at 195 but keep in mind we see a lot of immigration in this number. we reported that based on data we have along employment authorizations that are being handed out that over last six months 110,000 per month of nfp are people who cross the border, called undocumented, applying for asylum after a time. they get work permits in they can work for bloomberg and standard chartered or they can get countered in nfd just like everyone else. lisa: can you give us a sense of why this is making it difficult

for the fed understand the real economy? what kind of distortion does this create for people trying to understand the direction of the economic data points? steve: if you listen through a week's worth of bloomberg surveillance, 90% of the conversation will be on demand in terms of macro impact. in terms of being able to understand supply shocks, the magnitude, the impact, the market and the fed have a lot of trouble because typically those are unusual. it is not the same as saying last year we had 1% fiscal thrust, this year we are having half a percent, figure out the impact. it is very hard to assess what the impact is. as we discovered until we were able to get the data on authorizations, it is hard to get any numbers on the magnitude of the supply shock. lisa: are you basically saying

the immigration supply shock, which has created these robust labor market numbers, has masked an underlying weakness you think the fed needs to address as soon as next month and they may have to address it repeatedly this year with further rate cuts at a time when the data may look good but will quickly deteriorate, especially if immigration stalls? is that the scenario you are laying out? steve: roughly. we think the economy are slowing down and we think the data are suggesting that. you look at the data on consumer finances, you look at where most of the survey are on employment, they are downbeat. especially the surveys that would capture traditional workers, not new immigrants. we do see the downward slope and downward progress in inflation. it does leave room to cut. july, if we think they are doing

25 in the market thinks they are doing three, there is a big difference. the case for july -- the july scenario is a solid one, much more solid than the pricing would suggest. jonathan: let's run with your scenario and push it through the fx market. what does it change? steve: steve: i think the dollar strength we have seen has been driven by the worry that maybe the fed will not cut, that the limit, some people speculating maybe the next move is a hike, we do not think so, we think they will cut twice this year. i think if we began to see the fed cutting and the beginning of a rate cutting cycle, because it is not going to be one and done. a lot of the dollar strength we have seen could be eroded. we could see carry trade's become more fashionable. things like the yen, which were

getting bid up because the market could not resist 350 or 400 basis point spreads, all of a sudden if those spread start compressing, the sell yen story becomes a lot less attractive, especially if the boj begins its hiking cycle. i think it is qualitative as well as quantitative in the sense that there is a big fear in the market that the fed will not move and that every central bank that cuts is doing it at its own risk. if the fed sends a signal it is going to move, i think that gets relieved and the willingness to sell dollars is increased. jonathan: can we throw in some politics? the importance of voting. in mexico, big win, in south africa and india tighter than expected elections. outside the g10 remit you have

but can you walk us through the politics and tell us how important those elections are? steve: i can barely deal with politics in manhattan, let alone what is happening elsewhere. we have written that the big win in mexico raises the possibility they can make more dramatic moves and we have shifted our positive view on mexico a little bit. let me leave it there. jonathan: steve englander of standard chartered. it is good to catch up. steve mentioned japan. a bit of yen strength on the screen. a report coming from bloomberg. they are reducing bond buys as early as june. doj reducing bond buying as early as june. lisa: to me this is one of the covert stories that might become front focused later this year. torsten slok at apollo has pointed out that if you get yen strength in tandem with potential rate cuts -- rate

hikes at a time where people are looking at the highest yields long-term on japanese jgb's going back to 2012, that could take a lot of the demand for treasuries away. that could lead to higher treasury yields considering how big of a buyer base the japanese had been for u.s. government debt. jonathan: which explains why every single bond investor has been going to tokyo, notches because dollar-yen has been close to 160, they need to understand what is happening in bond market. lisa: you need to understand what demand is. one of the offspring is going to japan on a class trip. we got a lecture from them about behavior and the expectation. jonathan: the kids lectured you about behavior? the school lectured them? lisa: you should not answer your phones on the subway. it is not like the new york city subway. do not scream across the subway.

jonathan: are they animals or children? lisa: you've not going to the subway. what is the difference? [laughter] jonathan: 154.92. a very respectful culture. coming up, wei li of blackrock. jacob win growth. dave calhoun sitting down with guy johnson. he did not want to miss that conversation. and will have the latest from krishna memani. the calendar this week is absolutely stacked after the weaker than expected ism. the focus will be on the services ism tomorrow and jolts data and later an appetizer for all of the job stated he will get through the week including jobless claims on thursday and payrolls on friday. the second hour of surveillance is up next. ♪

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her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

>> is a bit discouraging we have not seen a broadening out of the equity rally. >> you have a steadily narrowing market. >> i am concerned there is very little direct participation in the market. >> we know higher rates are weighing on the small caps but appreciate small caps or try to get a rental of -- at a low versus the market. >> diversification is the opportunity investors have a flatter market.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour bloomberg surveillance begins now. good morning, good morning. one of our favorite quotes from a good friend of this program over the last couple of years. "narrative table tennis." ping-pong back-and-forth. this weeks ago we are pmi and we were talking about a hot economy. now we have a soft ism and we are talking medical economy and we are putting more weight on commentary like this from andrew hollenhorst. he says "jobs for april should show declining openings and quit rates at multi-year lows. we expect payrolls below consensus of 140 and a 4% unemployed rate on friday," which means he is looking for rate cuts in july. joining steve englander of standard chartered. lisa: steve englander pointed to

data that is skewed by supply shocks on either side and how we are underestimating the data with immigration in the labor market. neil dutta messaged me and said you will be proud, i have gone negative. he is never negative. he is recommending bonds, seeing a potential fed mistake if they do not cut rates because of the weakness and the degree of weakness there is in the market. the only reason i would say it is gaining steam is because the bloomberg u.s. economic surprise index has turned about the most negative going back to 2019. this is a lot of people's attention. jonathan: does everyone on team marco? a jp morgan he said that a number of macro signals are party to an economic slowdown or recession. market sentiment remains positive with markets near all-time highs. does something have to give? does something have to give? wei: the question -- lisa: the question is what. people are saying you see

weakness which is the reason small caps are in a bad position. if there are fed rate cuts for the reason of weakness than you see sell off. yesterday they were down even as the nasdaq is up. if you see rates staying high they are punished because they are more interest rate sensitive. there are pockets of the economy that have to give further, even if some of the big secular themes like artificial intelligence keep going. jonathan: wti down for a fifth consecutive session. yesterday a break of 80 for the first time in february. this morning, $72.87 and down 1.87%. in equities we are down half of 1% on the s&p. on the russell to small caps, up 1%. this morning down 1%. we are -.9%. coming up we will catch up with wei li of blackrock about inflationary pressures. boeing ceo dave calhoun sitting

down with guy johnson, and krishna memani on why bond investors cannot catch a break. the latest economic data boosting the case for fed rate cuts. wei li of blackrock writing "even with anticipated rate cuts we see policy rates in the u.s. and europe sitting in a far higher level than pre-pandemic and we expect ongoing inflationary pressures and structurally lower growth than in the past across major economies." wei li is with us in new york. how much weight would you put on that number? wei: it is not just the ism manufacturing. if you look at the date on friday, it was weak. the gdp revision last week was negative. if you look at the u.s. economic surprise indicator, it has taken a turn for a softer direction. i would think it is not entirely surprising that growth is cooling off elevated levels we have seen.

we always thought the fed wants to cut and maybe this makes the case starting the rate cuts this year. jonathan: some people might make the argument weaker data, lower rates, let's by bonds. is this the momentum by bonds? wei: we like equities better than bonds because earnings are strong, u.s. equities have delivered the strongest growth in two years and margins are expanding in seven out of the 11 sectors we look at. we are seeing a bit -- i'm not calling it a big disconnect but companies are able to continue to grow in the context of metaphors as well as ai benefiting the property cycle. as a result of back equities are still well-positioned in the context of rate cuts. yesterday we saw a bad news somewhat good for risk sentiment. lisa: let's dig into this idea of how far the ai theme can go

at a time when evaluations are already high. how much further delay have to go outside of nvidia which has been the big gator with everything else not monetizing it to the same degree it as quickly as people previously thought? wei: for some of the notable names manifesting from the ai theme earnings have been coming through stronger than price appreciation. it is a surprise to know that nvidia is cheaper compared to last year. if you look at some of the multiples, especially considering how quickly earnings have been guided higher. i would say there's more room for the ai theme to play out but we are not just looking at the obvious beneficiaries. the magnificent seven has become the magnificent five. but also thinking about what other sectors and companies can benefit from the incredible infrastructure spend that needs to happen to support the ai force we are talking about.

data center, energy consumption. sectors like energy may benefit from this. lisa: how selective do you have to be to avoid some of the pitfalls for what might be continued into weaker data we are seeing. i was looking at michael darda's research and he was trying to project out what this ism manufacturing report would mean, particularly the new orders for forward earnings and he said it would indicate a much lower forward earnings than currently being priced in. do you agree? is that something you can avoid by avoiding certain companies? wei: the new component from yesterday's ism manufacturing was worrisome because he was particularly disappointed. there is a leading quality to that in the typical cycle but we are not in a typical cycle. we are in a cycle that has been boosted by forces we have not seen before in terms of the magnitude and the state of

transition. be selective in terms of the beneficiaries of these forces is how we will navigate the market environment rather than across the board. lisa: is a confusing moment on a lot of levels. one thing people have been pointing to is it is time to start being enthusiastic about europe because you have stronger-than-expected economic data, the opposite trend that we got in the united states, and we have the potential for rate cuts, they will cut thursday, except for one person who does not believe so. there is a question on why you should not aggressively going to europe which is getting the tailwinds of better-than-expected economic data and rate cuts. wei: this thursday is an interesting moment because the ecb has never cut when growth is improving, when inflation is above target, and went the unemployment rate is at a record low and they will cut this thursday. they pre-much committed to that. they are also coming before the

fed and before clarity around what the fed will do next. this is a highly atypical. here we are. if you look at flows, there has been a lot of interest in to european equities for this very reason, not only for home investors based in europe, but also for u.s. investors as well if you look at u.s. etf flows. there is an appetite for your -- there is an appetite for european exposures we like that through an active lens. industrials and energy, and this is how we want to play europe. jonathan: many officials on the governing council would argue they are independent on the federal reserve. how dependent are they on what happens? wei: if you had asked me at the beginning of the year do you think the ecb would go before the fed i would have said no. i would have said no.

the fact they are going this thursday is remarkable. they will start first but we do not think they will go far if the fed does not follow. there is a narrative of divergence as a result of the ecb going now and who knows when the fed will go. ultimately they are related through the currency effect. jonathan: you think that narrative is overstated? wei: for the very near term maybe there is some credit to that. over the long-term both central banks face higher for longer structural challenges that push inflation higher and we do not think the ecb can go very far. jonathan: a big argument for you and the team. this is probably where we should finish. you think rates are not going back to where they were pre-pandemic, they will settle higher and inflation will be stickier. how is this regime different? what is different about this moment compared to several years back? wei: the structural forces are

shaping the macro environment in a way we did not have five or 10 years ago. we are talking about the aging population, we are talking about low carbon transition, we are talking about geopolitical fragmentation. all of that points to inflation pressures to address and lean against. all of this against the backdrop of high indented levels, fiscal expansionary policy. regardless of who gets into the white house. this is a difficult environment and portfolios are sometimes guessing we could get back to the good period but we need to position higher for longer. jonathan: whaley --wei li of blackrock with some thoughts on the regime we are in currently. with updates on stories elsewhere, here is your bloomberg brief. yahaira: the date has been set for donald trump's appeal to

remove fani willis from the georgia electie case. oral arguments are set for october 4, making a trial before the u.s. presidential election on november 5 virtually impossible. trump and 14 co-defendants are accused of trying to overturn his georgia loss to joe biden in the 2020 election. the former president and others had pushed for fani willis to be removed because of romantic relationship she had with the special prosecutor. intel's pat gelsinger is firing back at nvidia's jensen wong who claimed that traditional processors like intel are running out of steam. gelsinger saying moore's law is alive and well and this is the fuel driving the semiconductor industry to reach $1 trillion by the end of the decade. intel has fallen behind rivals with revenue slipping over the last two years. gelsinger was brought back to the company three years ago to

help turn things around. footballs west -- footballs worst kept secret is out. mbappe is joining realogy in meaning europe's top club just got a lot stronger with the addition of one of europe's top players. madrid has been chasing mbappe for years. jonathan: for football fans if you're sick of real hundred dominance you will be sicker. he is 25. this will go on for years. of next, president biden's border crackdown. >> the reality is people do claim asylum when in fact they are fleeing poverty, generalized violence, and that is not an asylum case make. jonathan: the conversation is

coming up next. live from new york city, good morning. ♪ (♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪

we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

jonathan: the countdown to payrolls continues. friday, 8:30. looking at a number of about 185,000. the median estimate 185. previous number 175.

every futures pulling back after weaker than expected data. yields down little bit of this morning. your 10 year 4.38. in the commodity market, five days of losses. wti down. 72 on crude. under surveillance, president biden's border crackdown. >> the number of encounters at the southern border is very high. the fact of the matter is we have an extraordinary number of people claiming asylum and a greatly reduced number of people qualifying for it. the reality is people do claim asylum when they are fleeing poverty, generalized violence, that is not an asylum case make. jonathan: president biden is set

aside an executive order effectively preventing new claims by migrants crossing the border -- new asylum claims by migrants crossing the border. josh wingrove joins us with more. walk us through what you and the team are hearing. josh: this number is a stricter number than had been kicked around and biden is erring on the crackdown side of things. we are talking about 4300 a day according to april data of people crossing between ports of entry. biden is accusing people of having to go out -- good to stop want has been people watching across open stretches of the border. this would try to close the border, 2500 crossings a day, below where we are now, not reopen it until we fall under 1500 days, a third of where we

are now. we are tried to drop quite a bit. there tried to put a billboard up to say use the app and use the popular system. this will likely be a candidate to be modified if not struck down. biden himself has said they need a bill in congress to make permanent changes. this might end up being more of a messaging exercise. jonathan: can you walk us through that. how much executive power he has over this issue? wei: it -- josh: it is a bit up in the air. this is essentially a loophole is trying to drive a mack truck through. the courts will look at it and they will be challenged by immigration rights advocate who say people have a right to claim asylum. you heard the secretary say they are claiming with false grounds or insufficient grounds and the

delays are years. we are talking seven years. if you make a claim and you wait seven years to get it adjudicated. biden is having a big event at the white house. progressives are mad and criticizing this as too onerous. moderates do not like it. a lot of swing state senators in the states biden himself needs to win will not be there in right now he is trying to thread the needle but it looks like he is getting the cold shoulder from the left and center flank. lisa: i wanted to ask about the timing of why he is spreading the needle now opposed to three months ago when this first came to light in terms of the hot button political issue. why did he come through this at this point rather than waiting until now if you had that executive power all along? josh: they have been studying it

, figuring out whether they can roll the dice and get something done on this. they were try to see if the bill would pass. the senate has a bipartisan border bill that died in the house under donald trump who said flatly he does not want to give biden a win on the issue. republicans do not want to do anything. anyone you talk to says a bill would make more difference than executive action. they were try to get that bill revived. that was a messaging exercise. that bill is still dead. biden's question is can i do anything, try to do something? that is what he is doing with this. he said they were looking to see what they could try to do. the big swings is mine -- the big thing is money.

money to hire people, to hire judges, how can you allocate money with executive order with the flip of a pen? even if this survives legal challenges, it comes down to people power and boots on the ground and right now the u.s. does not have that. lisa: are you saying even if this is not necessarily overturned by a court of law it would not have any effect without congressional support financially? josh: it could have a short-term effect in removing people. it looks like these will be title eight removals so as not like title 42. right now if you're looking at this from a laborforce perspective, these claimants would not last for years, they would last a much shorter period of time and be removed.

huge highs in december. the mexican president has crackdown. to your question earlier about why biden was acting now. you have a mexican dynamic in the air and he is trying to get ahead of that to prevent a surge in the weeks and final few months before the election. he does not want to be heading into november with a border crisis which is what trump would be delighted to have happen. lisa: there is the political angle and how this plays out in november. there is also an economic outlook. steve englander was saying there is a reason the jobs numbers look as good as they do and math some of the weakness underneath. going into next year, if there is not a consensus or willingness in congress to pass

anything broad-based, what power would trump have if he were elected to affect major changes to the border front himself? josh: josh: trump would probably try to use the same power biden is trying to use and he will probably get caught up in the same legal mess it looks like biden will get caught in. he will also go farther. he is talking about mass deportations. it is not only a case of people not coming in but being removed entirely. it disease the head. i've been on the campaign trail and talked to republicans who say they're number one issues are the border being unsecure and they cannot find any labor for their economy. these are problems that could be a solution to one another but there is not an appetite right now in congress for a bipartisan grand immigration reform question, and that is hanging in the air. i should know that biden has been trying to expand legal

pathways within the tight authority the president has without congress acting. we do not expect big announcements on that today on new ways for people to legally enter the country. instead they are trying to shutter the irregular crossings, people walking across the border, and steer them to existing legal pathways, particularly the app where you can file asylum claims. jonathan: if you're dizzy now, wait five months. this from terry haines of pangaea. "biden has been teasing border security action on an issue that might determine the fate of his presidency. after all of that time the best his staff can come up with is a nothing burger that is not decisive or effective and does not make a positive difference for biden and satisfies no constituency accept status quo democratic progressives with whom the biden staff might carry

favor to increase their post white house prospects. come to think of it, that last one is probably the point." that from terry haines of pangaea. coming up, guy johnson sitting down with dave calhoun of billing. let's take you to berlin where we are speaking with the airbus ceo. >> do think the aircraft will look like what we are used to seeing? >> there'll will be differences in the wingspan, the size of the engine. the very futuristic blended wing design. ♪

jonathan: equities negative by 0.5 percent on the s&p 500, nasdaq lower by point 4%. an indication of how much this market has changed in 24 hours. yesterday we kicked off june higher. now we are down 1%. negative zero .9%. we are the economic data, sensitive to every data point. it doesn't take much for the narrative to whipsaw from one part of the story to the next very quickly. the bond market, two-year, 10 year, 30 year. we had a hot pmi and then threatening 5% again. then you have a cold manufacturing number and we get

dragged back down to 4.80 on the two-year. the 30-year, 4.535 six. the same thing happening over with job openings. tomorrow with ism services. when we get jobless claims on thursday and friday when we get payrolls. lisa: is in line still a beat? something you raised when we got in line data for the economy that people viewed as great, we are not seeing acceleration in inflation. do we get the opposite response if the bias is towards a faster than expected deceleration? you don't get the upside surprise? if you look at the potential for surprises, right now, people are looking for the confirmation a weakness and getting nervousness around what happens if you don't get some surprise to the upside given all of the negative surprises we've seen. jonathan: nervous in both directions. that is why this can change over again tomorrow.

in terms of a slowdown, the concerns around that, crude almost spoke to those biases. if you saw them yesterday reinforced by the data and again by this move in crude. five days of crude moving lower. wti in the low. brent crude south of 80 for the first time since february. 77.12. lisa: we have had trouble clarifying if it was supply or demand. it's not just me struggling to answer which is which. it's unclear one a a lot of people have uncertainty. matt horn bought came out with this base case, bear case, bull case. his bull case is the 10 year yield falling to 2.8% by mid year next year. the base case is 3.7 5%. the bear case is 5.2%. almost 2.5 percentage points

between the bear and the bull case which gives you a sense of how much truck you can drive between people's expectations. jonathan: super wide. key economic data is due out at 10:00 a.m. eastern. we get jobs, factory orders, durable goods, economists looking for jobs for a third straight month to drop. jobless claims, payrolls, we should have a decent picture of the jobs market later this week. lisa: they can dismiss some of the headlines, just so they can get the maximum number of potential applicants. the data doesn't lie. if workers feel confident enough to leave their job voluntarily, that is usually a robust labor market. if they stop doing that, which has been happening recently, that is a sign of nervousness people take more seriously. jonathan: ism, the weakest in three months, sub 50 in contraction. we have seen a lot of that in

manufacturing. that is not surprising. the biggest drop since june 22 is notable. the employment component in the ism manufacturing wasn't bad at all. it was ok. lisa: better than expected. it expanded versus the expectation for 45.5. how do you understand this? people don't understand it. this goes back to the point, is there some other factor that is skewing the data? immigration, simply a lack of workers left over from the pandemic, or is there strength that we are not measuring? it is a confusing statistic. jonathan: the federal reserve has to put forecasts together. i think they find their own structure, which they are responsible for, but within their own structure i feel bad for them. they have to put out a dot plot, do the? lisa: you feel bad for them because they have to come

together with projections at a time of great uncertainty which raises the question of, do they leave things the same? jonathan: speaking of feeling bad for people, do you feel bad for dave calhoun, the boeing ceo ? sitting down with guy johnson, conversation that you want to tune into. let's listen. >> a series of safety incidents that have put you back. that is reflected in the financials and you are on a journey to change the culture of the business and put financials on an even keel. we see this day in and day out. give me a sense of the timeline. how long is this process can take? -- process going to take? dave: the best answer is, it will take as long as it will take. one of the flaws than any of us can get into is to predict that moment. i can predict circumstances that will define those moments. everybody knows when this started. it was with a couple of horrific

accidents where lives were lost. the company at that moment in time had a very difficult experience. what i call the lack of transparency, unwillingness to take responsibility immediately. i have been candid about that. i believe transparency of all things and relative to all cultures is about the most powerful word i've seen. any company, especially large-scale companies, willing to be transparent about anything ? they will suffer less. the minute you start to hide something in a big company others notice and might hide. i am not suggesting that it was nefarious or anything of the sort, but transparency is like the most critical thing in the world. we started what i call the recovery moment, which was the beginning of 2020. we made wholesale changes to the leadership team, wholesale changes to the board.

we stopped production of the max 100%. we went a full year and a month without producing a single airplane. created a safety office based on lots of experiences the faa had working directly with airlines. ironically, they mandated a safety airline system for airlines but not the manufacturers in the industry. i thought that we would take that and learn everything we could and create a safety office. stay tuned to the fleet, know what it is doing all day every day, and be transparent about everything that you see and get good at that. so, take that forward. this is where i will start to approach the experience we had with alaska airlines. the depressurization event and

the door. we started production in the first month of 2021 from a rate of zero. in a workforce, well we had not laid it off, we moved it to a variety of places around our factories. then we had to move them back and re-mobilize all of that effort. at the same time, i haven't mentioned covid. that happened. so, demand for airplanes fell precipitously. it also shut down our two factories because the first case in the u.s. was between them, literally. we have a moment that is hard to describe. then we had to begin the mobilization. i would agree with everything he said about the supply chain and the ramifications of covid on the supply chain. the turnover of experienced people. the loss of really important skills.

the coming back in a much slower and sporadic pace than any of us hoped for. maybe we should have expected it, but at least we were hoping. 21, 22, 23 we were gradually bringing up the rates. the demand for airplanes came back faster than any of us imagined it would in a robust way. we were increasing our rates. a little bit of an issue began to arise. you may know when non-conformance gets to your factory and you have the capability to fix it, you do. you can do one of those, two of those, but when it starts to overwhelm the physicians in your factory -- the positions in your factory and you're doing more of that work, or simply trying to accommodate a part that didn't show up what it was supposed to.

in position 2, let's do it in position 4. this happens and migrates into the factory. while it was not the specific cause to alaska, in my view it was the systemic cause. it was the issue that created the opportunity. a little bad behavior without a doubt on the part of somebody, who we don't know yet, but it created an opportunity in the last position of a factory to allow for an escape. which we are not allowed to do and will never be allowed to do. that was a short story of a long set of issues. what you do when this sort of stuff happens? this is what i love about the industry, for what it's worth. 1989, a united airlines lost an aircraft in sioux city, iowa. there were many fatalities.

i was at ge. it was a total moment for ge on the subject of safety. a complete overhaul of the business, the company, its approach to engineering, the maturity of design practices, and in the allegiance to the skills that are required to perfect the mature design practice. it was an overhaul of the entire company. i also remember that when i came in as ceo at the end of the next decade in the 1990's it was like it happened yesterday. every employee remembered it, understood it, their commitment design practices started with a brief discussion on what happened in sioux city. that will be us. that will be us. i don't know when that moment is that we are starting to feel really stable. i think in the engineering world and commitment in the design

space, human factors, all of the things that led to the real tragedies, i believe those fixes are in place. we will keep maturing, maturing, maturing. i believe in this alaska moment and the escape that we got from our factory, i think that the comprehensiveness of our plan, our willingness to take responsibility in the first instance, sent a clear message to all of our company that transparency will be paramount in this process. we presented this comprehensive plan to our regulator. this is what i want to make sure everyone understands. this is our plan, not the regulators plan. our plan, not a regulators plan. they will provide oversight. they will regulate us. but it has to be us. we have to believe in it. we have to love it. we have to want to do it. we have to take the pain that comes with slowing down the factory. we've got to take the pain.

if we slow it down and we stick to the disciplines that will synchronize the supply chain with insatiable demand for airplanes and stay disciplined on that, we will put this all in the rearview mirror and be way better for. there will be a moment later in life when someone looks back and says this may have been the most important moment in boeing's life. guy: what advice do you give to your successor? what kind of person does that need to be? you laid down what needs to happen. what person will deliver that kind of plan? what would you like to see? what kind of person needs to be in your chair to do what you have just described? dave: again, i will start with the word transparency. guy: is it an external candidate ? internal candidate? dave: i am not going there. i will go anywhere you want, but we are not going there. it will be a deliberate process. it has been thought through.

i will be the most important player on the field. guy: it will be an ongoing journey? not something that will be completed easily or quickly. what you described happened over many years. how symmetrical -- dave: again, you are getting way too into this one. this process, the thought process around what it takes, who it is -- i'm 67 going on 68. this is not like we woke up and, let's go do it. it is methodical. it will be well done, well articulated, and timely. guy: and boeing will be a different company as a result of it? dave: it is a different company. if i didn't believe that i wouldn't go. everything we put into place, our commitment to transparency, the way we practiced it post-alaska, the extent that we practiced it post-alaska in full visibility to every interest surrounding us for the past five

years made a difference and will continue to make a difference. i believe anybody -- by the way, our board is educated on what it means. anybody who comes into this role has to start with that process, that notion. the rest of these initiatives and efforts in my view will be the momentum is there, it will continue, and if i always give someone a warning sign it is pace. the first question you asked me. when is it going to be done? it will be done when it will be done. be patient. keep the supply chain synchronized. guy: are there metrics that we should look out for? dave: we posted the metrics we are looking at. they are transparent for everybody. transparent for our regulator. yes. with those metrics are meant to represent in a factory is stability. guy: how important is boeing to america? dave: i believe it is the most

important company in the world and i'm not objective. here is the thing. here's the thing. our mission is to protect, connect, and explore the world. ink for a second about each of those and how important they are in the world, particularly now. i loved the answer to the question on do we need four or five more competitors? we need two great ones. guy: do we have two great ones? dave: of course we do. of course we do. of course we do. we take off and land every second of every day. every second of every day. we deliver safe airplanes. in my view there is no question about that. stop for a minute. there are two guys who do this, connect. the protect, which no one talks about in respect to boeing and

the work we do for our u.s. military and more importantly as we move forward the growing what we do for the allied forces around the world, we are all contending with new threats. that is -- not a whole new opportunity, but an opportunity that is getting all of the emphasis it could possibly be getting. as long as we continue to develop products relevant to those new threats, we will be in a great place. guy: in terms of -- let's circle back. is there an engine -- an engineering quality you need to run this country? do you need to get your hands dirty and understand what is happening on the shop floor? dave: if you directing that at me like every popular media -- guy: i'm not. i am asking you the successor question. is this an engineering problem? a talent problem?

dave: it is no one problem. the engineering talents in our company are enormous. i have been hanging around a lot of engineering companies and interests for a long time and i ever seen one with more breath and skill in my life. it has to be organized, it has to be applied in a disciplined way. with respect to a successor they won't engineer anything. if they engineer something, that is when we should run for the hills. they have to be keenly aware of where the engineering expertise lies and make sure that it is supported in every way that can be. that it gets the last vote on everything. the last vote on everything. the manufacturing processes, do i have to assemble airplanes? does my successor need to assemble airplanes? no. does it need to know the factories are stable, have the metrics that provide for that? does it have to have the resident skills and proficiencies in place to make sure that's the case?

the answer is yes. there is all of that. it has to be organized. we got a wake-up call to do it even better. that's what we do. we focus on and do it. guy: going back to the point about competition. this is a point of disruption in the industry. this is a point of disruption in the industry. if boeing is looking that way, will it be distracted from the disruption taking place in this industry potentially? by having to go through this process, leaving yourself open to the disruption that we have seen in the ev sector and what is happening in europe with the car industry, there are others interested in what you do and want to do it better. how do you make sure that doesn't happen? dave: what we did -- of the things that i'm very common in is what we did. we sustained all of the meter technology research and development programs related to

technologies that we think play on the next platform. all of these have to be developed, tested, matured, before you can design an airplane that incorporates it. that is a lesson that all of a sudden learn to have ever developed an airplane. make sure that you take the time to mature those things. i feel good about the portfolio of capabilities that we will bring to that airplane. very good about it. you take the time to make sure they are mature and ready. there will be significant changes as we go forward. yes, efficiency is the one we talk about, but autonomy is another one people should talk more about. it doesn't mean pilot-less, just autonomy capable. guy: let's think about that. we are struggling to certify derivatives of current aircraft. what do you think regulators will think about that? how much of a lag will there be between new airplanes coming to the market -- this is the question you won't answer. let's assume that -- that

it's in the next 10 years. 10 years from now, how long would it take to certify that airplane? how much of a slowdown in the process will that mean? dave: i can't predict that. we are an applicant for an autonomous civil vehicle with our small air taxi called whisk. we are an applicant. that means that the regulator accepted the application and are organizing themselves to certify autonomy and develop an approach. they can codify. it is one of the big reasons we are invested in whisk. one of the big reasons. i have a lot of confidence that airplane will not only hit the market, but will be deemed safe and demonstrate that. guy: you talked before about how important boeing is to america and the world.

let's ask you a question. we are going to have an election in november. what do you want to see from the next administration? what does boeing want to see from the next administration? dave: i think everybody knows we are a company that relies on trade. free-trade to us will be the first on the list of desires. i will be the first to acknowledge that that seems to be going in the wrong direction, and has been for quite some time. guy: are you worried? dave: yeah, i'm worried. i worry that the ramifications of isolation -- i don't want to overstate the word. they are going to bring down economies. they just are. they just are. i happen to be in an industry because choices are limited and because needs are great. it probably won't hit me first.

but i worry about isolation with respect to the economic ramifications for lots of countries and lots of people. isolation breeds disenchantment and disenchantment breeds political turnover. that is the world i worry about with respect isolation and i don't like any of the signs that i see. guy: how is that? how does that change the way you think about the way boeing will operate? dave: we will run hard, continue to build the world's best airplane, and we will compete. i will lobby every day all day for free-trade. guy: does it stop the sustainability story, cooperation? i have heard building bridges the number of times today. what you are describing is not building bridges, it is blowing them up. dave: it is what i'm observing and i expect you are too. we have to be honest about what we are observing and expressed concern about what may happen as a result. those in industry have a pretty

good picture on that. we have to lobby and convince the public and politicians that free-trade is in everyone's best interest. guy: are they a danger to the sustainability story -- we went through the launch aid saga. we remember that. is there a danger that we end up balk and isaac this process, the next generation of airplanes, that there is no cooperation? it becomes an effort that is driven by industrial policy with very domestic purposes at mind, in mind? dave: that is a description of an end game i have no interest in. i don't think it gets there. i really don't think it gets there. it is with respect to this industry that we have allied nations supporting both supply sides. in my view that will play will

ultimately. we know we will have a competitor from china. we have a keen awareness for all of that. we should not be afraid of it. we should continue to develop technologies. i agree with guillaume 's comments. compete with the best of the best. in my case, that is guillaume. he would probably say the same. we just keep trying to outdo each other and that is where we keep running.i think that a china competitor has a long way to go, measured in decades, not years. guy: how should government support boeing and airbus and government support the process of building the next generation of airplanes? how should government support the sustainability story that we are all hopefully on? the journey we are on? dave: i think they have to mandate sustainability. i think we are all committed to it.

i'm not suggesting we need a slap in the face, but there are certain things that will have to happen policy-wise that create the need and confidence we are down that path. that is all things sustainable fuel, sustainable aviation fuel. that is the answer that gets us even close to our objectives by 2050. i am in great favor of those kinds of policies. subject to the political sides understanding of the time frames needed to get there. i believe we have tools across our industry. we have one called cascade where you can do the math easily, in like an hour, to figure out what policy objective will do in the next 20 to 25 years. so, that is what we need to do. jonathan: guy johnson just about to wrap up that conversation with dave calhoun of boeing.

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>> you can forgive a lot of things if growth is remaining resilient. >> expectations of higher growth are so built into markets the

two-way risk on growth numbers are really significant. >> i really think the focus on the second half will be on growth. >>economy stays reasonably firm, and the fed has a clear runway to do what it wants. as long as the economy is expanding and we are finding opportunities, don't over think it. >> this is bloomberg surveillanceih ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. trying to build on some very small gains in yesterday's session after getting whipsawed by the economic data. plenty of opportunity to do that again over the next few days. later job openings. on friday, payrolls. a stacked 60 minutes for you. wells fargo on the call for a near-term slowdown. george ferguson, boeing grapples

with more delivery delays. a fantastic exchange with dave calhoun. guy johnson -- with dave johnson and guy -- with dave calhoun and guy johnson a moment ago. his bad news bad news? wells fargo saying that the economy is slowing gradually enough that economic surprises may trigger only consolidation, election and geopolitical disappointments could trigger larger pullbacks. we are joined by christian. it is great to catch up with you. is bad news just bad news? could you define this friday when we get payrolls what bad news looks like? >> jon, we have been cautious for some time driven by the fact the fed raised rates so precipitously. although the long, variable lags might be a little more long and variable this time, we have thought for some time the economy will slow.

the tricky part is there will be some hoping for rate cuts to come back to the forefront. those folks will want a worse number. the tricky part for us is that we are more fundamentally driven. if you get a worse number, at some point you have to deal with a slowdown. jonathan: 125 at bank of america is bad news apparently? stuart kaiser of citi will be catching up later this week. what is bad this friday? >> i don't thing 150 would be such a bad number. i think if you put 150 in conjunction with gdp now coming down to 1.8 you can make that case. i think in the sequence of things we've seen and of the variability in employment, i don't think 150 is a bad number. the point that i would make to counter what sameer was saying is that there will be a

slowdown, we have been hoping for a slow down nothing in the data indicates things are slowing down in a perceptible way. the fed would like to see that, but there's no evidence yet. lisa: a lot of people would disagree with you. partly because what you are seeing under the hood is ism manufacturing coming in lower than expected. the u.s. economic surprises index falling to the most negative going back to 2019. why isn't that enough to say tha things are slowing? >> things are slowing from a very rapid pace, but if you have your growth rate at 2% after 550 basis points of rate increases, i don't think that that would be considered a meaningful slowdown. that's the point i'm trying to make. if we stay at 2%, which is what neil says he dm to me at 2:00 a.m. last night to confirm that.

that is really not a slowdown at this point in the cycle. lisa: what would you say given that we've been grappling with this for months now? what is slowing but not slow? what is the normal cooling that is positive versus something that is nefarious? sameer: i know that i am not in this dm group at 2:00 a.m. at night. the tricky part is, lags have been longer and more variable. but every time someone refinances they pay a higher interest rate than last year, the last two years, the last three years. thatis creeping into the economy on the lower rungs. typically, it tends to go from the lower rungs to the upper rungs and you are seeing that. whether it is corporate and high-yield, it also creeps up. spreads are low but the amount that companies are paying has gone up. from that standpoint what we see is a saucer in terms of things come down and they settle into a new normal.

eventually you re-accelerate when savings have been rebuilt and people have worked off the excess. jonathan: you are looking for the recovery to a slowdown that krishna says hasn't happened yet. can you help us understand the next 12 months? sameer: for markets, the next few months will be choppy. i don't anticipate new highs in 2024 until maybe after the elections. i think that that is pending on when we get clarity around the elections which could possibly push into late 2024 early 2025. then markets can figure out which set of socks will do well in this administration, whoever that might be. then we make new highs in 2025 alongside the economic recovery. jonathan: do you share that view? krishna: the overall trend for asset prices is probably higher. i don't think that it happens in early 2025. a lot of the policies that will be implemented after the election i think there is a

driver on the upside that will be driven by that far more than the election results themselves because there will be some amount of uncertainty. from an economic perspective things are in a good place. how do you incorporate that ok economic news in the context of valuations and likelihood that inflation remains somewhat elevated relative to what the fed would like it to be? lisa: i love this. you have different economic outlooks, but you might have the same investment thesis. krishna: i think the summer is lost. the second quarter was lost. things started not slowing down in february. it became quite clear that we are going to be in this range bound market for some time. it doesn't mean that things cannot go up, just that we have to catch up to valuations, let

economic growth run, and see if inflation slows down. lisa: are you t-bills and chill as well? sameer: we approach the upper fours on the 10-year. i don't know if it takes six month or 12 months until the fed cuts. i think from a market standpoint and investment standpoint, the nice part for investors is that if you are in large caps you get better profitability, quality, and performance. that doesn't happen often. now you can fade e.m. and small caps and concentrate on the larger cap side and be ocasio k. that is the way to approach -- and be ok. that is the way to approach the next few months. krishna: if you look at the markets and you see which has a higher potential of running away from you, i don't think that that is equity markets. i don't think that that is bond markets on the negative side. if it is, it is bond markets on

the positive side. yields dropping, bonds doing much better. if you wanted to take a pond on the risky side, that is the pond i would take rather than the other one. jonathan: both candidates are troublesome for bonds. we will get more clarity on that as the year grows older. what would you say to that for someone looking for that recovery in 20 25? others are pointing to the bond market is troublesome. because of what may or may not come in november? sameer: with bonds you have to be disciplined because you have the fiscal profligacy in washington. if you push north of 475i think that there are some value in fixed incomes especially if there's disappointment on the economic side. you have to traverse this path of bad news to the fed cuts. i think it for 75 that probably makes sense. but then you fall back into the low four and high threes and possibly close out some of those

tactical loans for treasury on the longer end. i think you have to be very nimble but there will be opportunities. jonathan: it is early june. is it too early to talk about november? krishna: very much so. jonathan: when do you start to consider it? krishna: when the picture gets slightly clearer, which is never. the point is right now in terms of political developments it is still early and uncertain. i think that within a few months things will start to crystallize more as they gain traction. lisa: we have had guests say the fed cuts rates nine whoever wins in november will announce a big fiscal package including prolonged tax cuts and tariffs. that could send inflation hire and push yields higher. do you by that? krishna: that is certainly a risk. i don't think that the fed is cutting rates anytime soon. i think for the fed to cut rates anytime soon, especially ahead

of the election, things have to slow down in a more pronounced way than i have so far. lisa: this is an interesting debate that is percolating and i don't get a good sense of where the majority of people stand. what is the balance of risks now for the federal reserve? they are too tight or too loose ? we don't know. sameer: we have taken a step back and look for secular trends. things that will do regardless if the fed cuts or doesn't cut, regardless of who wins the white house. energies, industrials, materials. all are involved with ai and decarbonization in ansell are ways and health care. they traded regional valuations. you at least anticipate without having to lean into probably the most crowded trades.

lisa: what about the bond offset on the long end? sameer: if we get those markets come to us, i think that that's a great offset. you pierce some of the cyclical areas that are cheaper at the play well in an ok i, me with a head on the longer term fixed income side. if you see a rough patch, the short-term yields will melt very quickly. lisa: final word? krishna: the interesting thing about the bond market is that we can worry as much as we want, but the moment that you see a sign of a recession arrive, that's it. jonathan: what does that look like? some people think that we may have seen it already. krishna: it is not in the data. you might have seen it but it doesn't exist. jonathan: a group of economists looking back 12 months to say there it was? krishna: for that to happen, consumption has to slow down more and employment has to -- the growth has to taper off and people have to start losing

jobs. there is no sign of that yet. jonathan: thank you. equities down 0.4 percent on the s&p 500 with an update on stories elsewhere with your bloomberg brief. >> the indian ruby felt the most as they started following this weekend's election. the race is clover than -- closer than suppose indicated. modi is looking to extend his decade in power by five years, but initial tellings show that his ruling party is poised to lose its majority in parliament. donald trump's campaign says that it raised 34.8 million dollars in under 24 hours after his guilty verdict was announced. it is a signal of how the former president is using his legal troubles to rally support. nearly 30% of donors were first-time contributors according to his campaign.

novak djokovic came back to win an electric match in the fourth round of the french open. the tennis great fell behind two cents to one, but stormed back to take the match in five sets. the win gave him a 370th grand slam win passing roger federer for the most in tennis history. he pushed through a painful knee injury after slipping on the clay courts. he is not committed to continuing in the tournament. jonathan: i am convinced he is playing with us, but we will see. next on the program, some calls for you and george ferguson of bloomberg intelligence as boeing works to address supply chain issues. we will recap some of the conversation that guy johnson had with the boeing ceo.equity futures -0.4% and the opening bell is one hour 60 minutes away. -- one hour and 16 minutes away.

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jonathan: live from new york, welcome. good morning. equities negative by 0.4% off of session lows. yesterday was a wacky day. equities were ok and then were hammered by the ism manufacturing read. the close was a decent, positive to kick off june. down two basis points on the 10-year. crude is still selling off lower earlier but still down on the session. 72.97. morning calls. raising the price target on nvidia once more. a good friend of this program cited the chip giant's recent announcements including a super chip and the upcoming stock as an additional tailwind. the stock is a little lower down

.1% in the premarket. the second call from barclays remaining an underweight rating on paramount after the takeover from sky dance. the latest deal doesn't provide much upside to nonvoting shareholders and neither does it address key friction points. we are down by .3%. wells fargo raising the price target on american express predicting strong international growth in the next decade plus. consumer airlines continuing to grapple with demand. amid capacity pressures as summer travel picks up many carriers are impacted by boeing's delivery delays. the ceo dave calhoun sat down with guy johnson. >> any companies, large scale companies willing to be transparent about anything, they will suffer less. we presented this comprehensive plan to our regulator. i want to make sure everyone understands, this is our plan, not our regulator's plan.

if we stick to the disciplines that will synchronize this supply chain with the insatiable demand for airplanes, and stay disciplined on that, we will put this all in the rearview mirror. jonathan: george ferguson of bloomberg intelligence. i'm sure that you watched over a lot of that conversation. a great exchange. what stood out for you? george: i would guess that we continue to hear about the extreme demand for airplanes and boeing's desire to fill them. understandable.that is his job . we don't know that there is that big of a miss and the number of airplanes in the marketplace. we don't see the profitability. we see boeing's challenge of slipping market share. jonathan: the conversation in the beginning, the future of the conversation dave calhoun didn't want to indulge was succession planning. he referred to his age talking

about being in his late 60's which alluded to the point that they had been thinking about it. that makes me wonder if they have already been thinking about it, why is it taking so long? george: i really think that they had not been thinking about it until dave calhoun tenured his resignation. it seemed like the board was flat-footed. it is a hard position to fill. i said previously that you need of rockstar. someone who will be a good factory operator. has engineering talent as well as a mind for financial statements. i think it is really hard to fill, especially in america right now. we pushed a lot of manufacturing work overseas. i think it is a tall order and that is why this taking so long to figure out who it will be. lisa: is dave calhoun considered a rock star in the corporate world? george: i don't think so. i think dave calhoun has done a nice job filling a gap between a

ceo who didn't make it. i think he has tried to cobble things together, but i would not call him a rockstar. a rockstar is someone like larry out of ge who knows how to operate factories. lisa: there is an issue also with dave calhoun talking about how boeing is an entirely different company that it was before these events transpired. does it look like a totally different company? george: i think it looks like a totally different company than prior to the pandemic. i think that that is because they lost a lot of good talent during the pandemic. to me, it looks like a company that has endured a lot of turnover, that is in search of its next leaders. not only at the ceo level but on the factory floor level. i think that they have lost a bunch of talent there. they are about to go into union

negotiations for their most important union later this year. for pay packages and that workforce structure going into the back half of this decade. that will be super important. now, it doesn't look like a better company than it was pre-pandemic. it looks like a challenged company. different but challenged. jonathan: george, could you walk us through that? if they had structural issues it doesn't matter who's running the business, they would have to confront the same issues. or is it about execution? george: it is about execution, people, training. i think that boeing has lost its way probably since the 787 where they were trying to outsource as much as possible away from boeing factories. that is the story behind spirit as well. outsource away from the boeing factories. look for lower-cost labor, look

for the suppliers to ring some of the engineering so that they can be assembling airplanes and counting the cash. i think what they've learned is that you just can't do it. aerospace is to hard of a business. the tolerances are extremely tight. quality is super, super important. you have to build into your people, train them, build the right system so that when there are problems it is fed up to management. the reports out of management is a breakdown in someone's ability to manufacture products well. they have to go back to that core. lisa: dave calhoun dismissed the idea of competition, that anyone could get into challenge them. at the same time, on the margins, i wondered the significance of china ordering 100 airbus aircraft overnight. this is a departure from the past. the largest and first expenditure like this by china

in a while. it may come at the expense of some of their boeing purchases. george: i agree. there is no third party that can step in quickly to this industry even though the chinese are working right now. i don't see them having the ability to ramp up production and deliver a lot of airplanes. from that standpoint dave calhoun is telling you it is just two of us about the risk is that airbus will take more market share. i don't think you always play for market share, but to me one of the bigger problems is the more that you moved to higher rates, as airbus moves to higher rates, they are improving the flow through their factories and their supplier's factories, and that is improving the health of their suppliers, the skills of their suppliers. boeing runs the risk that if they are not ramping up production and doing it well, that they will leave their supplier base in a weaker position making it harder to get

the high levels of builds later in the cycle. i think that he needs to be concerned about market share because it feeds into the health of his supply chain, and that a supercritical right now. jonathan: for u.s. carriers, any evidence that airliners need those planes quickly and right now? george: some of them do need it, but the american results, the preannouncement of their revenue problems, to me it seems that the full-service carriers are doing pretty well. most of them. united and delta. american is pretty weak. it is the low cost, it is american putting a lot of capacity into the marketplace. i don't know if they need all these airplanes. jonathan: interesting. the airlines is quite a story over the past week. lisa: especially given the bifurcation that george was

alluding to in terms of the well-heeled consumer that is traveling to europe to take advantage of the foreign-exchange differential. jonathan: or tokyo. lisa: exactly. or the others. i will say that this poll just showed almost two thirds of americans considered middle-class a they are facing economic hardship and don't see their prospects getting materially better. jonathan: we will talk more about it in a moment. it is a big week ahead for economic data. we will break it down with j.p. morgan and bank of america. that conversation is just around the corner. this is bloomberg. ♪

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jonathan: 60 minutes away from the opening bell. equity futures down by one third of a percent. the rustle up by three quarters of 1%. bond market scores look like this, yields are lower once again. down two or three basis points. 478 .70. >> this idea that the fed had justification to cut as soon as next month is increasingly some of the belief we will have. there is another question, at

what point is that good news for the stock market, at what point is that bad news? the market had an ok kind of finish. the russell didn't. they seem to be in not a great place. jonathan: i love how people try to explain it yesterday. later in the day maybe the fed will cut rates, stocks are up. what a ridiculous 24 hours. >> it has been the way of the year. ping-pong, table tennis, maybe we have a change in narrative. maybe on the margins. people don't have a sense of a compass right now. jonathan: the person who has to write the market update five times per day, not once, four or five times, update, update. i feel sorry for them. lisa: if either you or i had to

do it, you could see the frustration. the frustration, we don't understand, you can't write that. jonathan: crude looks like this, brent, five-day losing streak. wti down to about 73. down 1.6%. brent crude, it is notable, 77.23. lisa: a lot of people pointed to the fact that opec plus might have been taken off-line for the next couple of months in october. i don't have a good handle on this. there is a supply aspect, demand aspect. airplane travel seems to be going gangbusters. opec-plus seems to be the narrative. jonathan: some top stories for you.

sources telling the wall street journal e*trade is considering the removal of the meme stock from its platform. gamestop shares moving showing his massive, i mean monster position. lisa: people saying if the gains stick he stands to gain something like $170 million. there is this question of what is manipulation. it is pretty blatant if you believe putting your beliefs out there could drive it to go buy something. it is not covert. he is not really hiding anything. it raises a lot of questions around the legal liability for these companies and as you pointed out, the business liability of going after someone who is so incredibly popular. jonathan: something they called in for internal discussions that

they are discussing at e*trade, i would love to be a fly on the wall. what are the big concerns if they remove him? lisa: the lawyer on one side, this could potentially be really bad. the ceo, this could be that in the other direction. either way, they seem to be in a tough spot. jonathan: looking forward to more reporting. president biden cracking down on immigration. an executive order looking to prevent new claims by migrants who walk across the u.s.-mexico border. if crossings hit 2500 today, we have been talking about this since february when this really started with the bipartisan effort on the table in congress. they are going to go forward with this. most people think it might be dead on arrival. lisa: basically on one level it might be overturned by the

court. there is in the staffing or finances to make this effective in any concrete way. a lot of people think that if trump gets elected, he could single-handedly do a lot of things on immigration. if the courts overturn this, how much does that curtail the ability of the next president to unilaterally move on the same issue. jonathan: they have big economic consequences. busy week of data underway. we expect a spark in treasuries yesterday. manufacturing falling to the lowest level in three months. 10:00 a.m. eastern time, jobs data, durable goods. joining us is j.p. morgan's cassie barrett. on that calendar, payroll is on friday, jobless claims on

thursday, take your pick on this calendar. what stands out for you? what is the big one? cassie: the hard labor market data is what is important to us. when we look at the fed action function it is becoming more asymmetric. the fed will be more sensitive to weaker economic data than they are to continued strength. that is what we all expect. when you talk about the manufacturing report that drove the rally in yields yesterday. jonathan: you say apparently. kelsey: manufacturing has been below 54 16 months in a row. it popped up above 50 in march and fell back below 50 for the last two months. the data has been telling us the economy stinks for quite a while. it is the hard data that is actually going to move the needle. you need to be looking at things like claims, jolts, job growth

on friday. that will change the mindset from inflation to the labor market. that is what we are watching. jonathan: do you think we are being misled by the survey data? >> we focus on the hard data. that is trend like, that keeps the fed firmly on hold. nothing changes until something changes. the data is not strong enough for the fed. we are very much sitting in that space comfortably right now as kelsey said, focused on the hard data, the jobs report, that is the star of the show. lisa: kelsey said the economy

stinks and has been for a while, do you agree? aditya: the soft data says it stinks. kelsey: thank you. [laughter] aditya: gdp growth was more than 3% last year. the manufacturing was under 50. varro narrowly -- very narrowly for a month, you take that with a grain of salt, u.s. is not a manufacturing economy. the consumer for now looks just fine. over memorial day for that week, we had more people flying than any week last year. we set a record above the summer peak, christmas peak. you will see even stronger summer travel this year. lisa: i know some people on the

set did actually travel memorial day weekend and had fine experiences. you do see enough weakness to validate fed rate cuts this year. what gives you the confidence in the soft data has been stinking for quite a while. this level of uncertainty when the fed is not too hot or too cold. kelsey: if i think about how we have been position so far this year, our game plan is to embrace the soft landing. there was a reason we still like duration. that is because of valuation. we think the bar to start hiking is very high.

the fed could respond if things start to weaken. there is a limit to the painless labor market rebalancing we have experienced. job openings have come down, the unemployment rate has gone up. that could persist for a period of time. i don't think it could persist forever. we are watching that labor market rebalancing. the next move the fed will make will protect the strength of the labor market, rather than fighting inflation. the majority of the inflation overshoot we think has lagged. it is related to housing and with cpi auto insurance. jonathan: is that policy protection preemptive? do they have to wait to actually see it? kelsey: when we look back at

history, pretty much every rate cut is initially considered preemptive until it is not. if you look at what the market price is when the fed is doing their first cut they underestimate the amount of cuts actually delivered. i think it probably will be viewed as preemptive initially and then we will have to see if it is enough. jonathan: do you agree? aditya: i'm telling the fed not so fast. you have to recognize they have been running at 4% annually. the april data is viewed as a big improvement. we annualize to more than 3% in april. some of it is housing. you just can't cherry pick in the situation the fed is in right now. lisa: we were talking earlier

about how it has been a supply shock in a way. the other is fiscal stimulus in general. still being a tailwind to economic growth. how do you factor that in to something that is the new normal or something that isn't going to run out? aditya: it looks like the fiscal impulse is fading. you have this very large surge in public investment that was related. the private side was related to the ira. it is still growing but much slower in the first quarter. it looks like the stimulus has the impulse to run its course. at a certain level of investment , it does not need to keep growing. that is where we are right now.

that means it is becoming less of a story and it is more of is demand going to accelerate? jonathan: what is that data telling you at the moment? aditya: spending is holding up pretty well. we still don't have a forecast with detailed sales. they may look pretty solid from what we have seen in the daily data. jonathan: tons of data. what do you see happening with the consumer? kelsey: we see the consumer continuing to spend. ultimately it is income growth. it all ties back to this labor market report. we do see from consumers that they are trading down. they are a little bit more conservative. there are cracks forming.

as long as you are employed you could continue to keep spending. lisa: how much do you see the supply shock from that level changing the numbers or making it look better than it is on the labor front? kelsey: that is part of the story. the fed has acknowledged it is part of the story. it is something we are going to have to continue to monitor. the surprise associated with immigration and the resiliency of the labor market, we now factor that in. i'm not sure exactly how much more we are going to get from that going forward, particularly when the whole regime could change. lisa: it raises the question of what is normal? also this idea of what are we

going back to? aditya: the challenge with doing that is any of these macro models with trend growth, they are backward looking. instead you have to look at what factors might have driven or made qualitative judgments or how long they could last. on the labor supply shock, we think that is probably not going to last. with immigration, even if you maintain current levels it is difficult to keep growing at these rates. it could last another six months as entrance take time to get jobs. on the investment side, the process has probably run its course. jonathan: setting the stage for

the federal reserve next wednesday. statement, forecast, news conference. how you and the team expect that to evolve in the next week or so. kelsey: the market moves ahead of the fed. we could all hypothesize what the neutral rate will be. what are the market saying? the rate is higher. the terminal rate right now is what the market is pricing. it might not be that high. that would imply a 2.5% real rate. the market is sending you a signal. we need to listen to that. when we think about the fed next week, the market has adjusted with less cuts.

my expectation would be instead of three cuts. we are on a journey to continue to move higher. we saw that first move and to be honest, it has been going on for a while now. those have been drifting for a year before the long term begins to move. we are in a transition here. that happens way after the market sniffs it out. jonathan: do you see the fed reserve coming down to your view of the world next wednesday? aditya: it will be a close call. the question is on one hand do you want to take that option out . on the other hand, you have to do it again. more importantly, there's going

to be a lot of focus. in they will not matter that much. the fed is so data-dependent. it is all about the data. it will cause some knee-jerk reaction in the markets. jonathan: from one data point to the next. you could tell us if that matters when we catch you next time. thank you. counting it down to the opening bell. let's get you an update on stories elsewhere with your bloomberg brief. yahaira: sky dance offers $23 per share as part of its plans to merge with paramount. the bid would be made to investors outside of the family that holds most of the voting stock. the chair is expected to speak later today at the annual meeting. pressure is building on mike

henry after its latest bid to acquire anglo american failed to materialize. bhp won't rush into another offer after arguing its restraints. the deal has major implications for the mining sector with investors wary of a copper brine -- buying spree. they want to focus on their own turnaround plan instead of taking the deal making the next few months critical. the intel ceo's firing back at jensen wong who claimed traditional processors are running out of steam. unlike what jensen would have you believe, it is alive and well. this is driving the semi conductor industry to reach $1 trillion by the end of the decade. intel has fallen behind rivals with revenue slipping in recent years. they were brought back to the company three years ago to help

turn things around. jonathan: thanks for this morning. wouldn't that change the story? lisa: if you are just saying we are coming for you, good luck with that. jonathan: we will set you up for the day ahead and look ahead to friday. the opening bell about 40 minutes away.

jonathan: welcome to the program . about 40 minutes away from the opening bell. it is the trading diary for this week. we will get jobs data plus factory orders. janet yellen testifying on

biden's budget proposal tomorrow. jobs data plus ecb rate decision, looking for that rate cut on thursday. finally it is the main event. we are hypersensitive to information in this bond market. >> the interesting thing is we could worry as much as we want. you see the sign of the arrived, that is it. it has to slowdown more and employment growth has to taper off. there is no sign of that just yet. jonathan: it didn't take much to spark a rally in this bond market. lisa: that is not data that you could really rely on in any capacity.

the jobs market will be that much more important. if you have that many fewer people, voluntarily exiting, does that give people an additional scared. valuations being what they are, it gets more sensitive to any incoming weakness. jonathan: that is the distinction kelsey was making 10 minutes ago. the best part of 18 months, that has been negative, hasn't been great. absolutely solid. the estimate for friday is 185, the people who think the fed will cut rates in july, they are looking for 140, is that bad? lisa: some people think it is goldilocks.

bank of america, 125-175 is goldilocks. it was accelerating up to services. that would generate the next wave of inflation in the economy. if that wasn't coming to pass, the diffusing of enthusiasm. jonathan: it was also a fear, let's go back two weeks. people were starting to worry about re-acceleration and they might be considering hiking interest rates. lisa: the market will also be incredibly data dependent. this raises the question about liquidity, why should anyone be having conviction? what kind of people are trading in this capacity? it feels rather soupy. jonathan: we talked about that repeatedly on this program. he will be with it on friday.

the federal reserve decision just around the corner. before we get to friday, much more to talk about. we will talk about -- catch up with the former barclays ceo, bob diamond. we will talk about the lack of strategy. we will speak to marilyn watson of black rock. thank you for choosing bloomberg tv, this was bloomberg surveillance. ♪ >> novak djokovic reminds the tennis world why he's the greatest of all time as he came through another five set thriller to reach the quarterfinals. the world number one had to overcome a knee injury to move on closing it out 6-3. after more than 4.5 hours on

court.

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matt: for our viewers worldwide khmer we are watching boeing versus airbus. the countdown to the open starts right now. ♪ matt: we begin with the big macro issue, signs of economic cooling. >> it's not entirely surprising that growth is cooling off from the levels we have seen. we've always thought the fed wants to cut and this makes the case for