>> the truth is the economy has been doing great here. >> what we need to do -- to see is a continuation in terms of inflation easing. >> inflation is on a downward trend. >> you don't want the fed to cut rates too quickly. >> the fed is in an ok place right now. announcer: this is "bloomberg surveillance." lisa: welcome back. this is "bloomberg surveillance." today is the most important day of the week. annemarie, danny, and myself got here early. jon did not, as he is -- is on a cruise around the world. the focus squarely on the

consumer and how long they can keep spending. we have jobless claims. we will get walmart. which of these three events do you think is most important? dani: i have to go for jobless claims. there is this push and pull between 25 and 50 basis points. the cpi doesn't give us any clarity. in order to get permission to go 50 you need the deterioration of the labor market. you only see that with continuing numbers from jobless claims and the payrolls trend. annmarie: i'm looking for to the walmart aren't -- earnings, because i want to know the resilience of not the low end consumer, and how much are the upper end consumer trading down into walmart. especially as the harris campaign is leaning into this idea of price gouging. it was the biden-harris administration that welcome the fact that walmart, walgreens, target were cutting prices. lisa: we get into the price gouging at some of the economic policies. we may hear more about it on

friday from the harris campaign. i'm curious about whether walmart is a true reflection of the consumer. this is something you are hitting on, especially with the downshifting of wealthier individuals to shop at walmart is a good deal is a good deal. annmarie: that is why walmart is so interesting now. the last quarter they said they are seeing the higher end consumer chart -- starting to trade in. how much more are we seeing those that have the money to spend potentially ongoing to a more up-marketplace actually looking for deals as well? and also, did the price cutting work? lisa: and his walmart even a consumer company anymore? is it a media company or advertising company? meanwhile, the response from federal reserve officials has been interesting. austan goolsbee has been on message, but that message has been getting louder. he had an interview overnight where he said, "it feels like, on the margin, i'm getting more concerned about the employment side of the mandate."

how much are we seeing that momentum increasing with fed officials calling and preparing for september rate cuts? dani: the tone has shifted over the past 24 hours. from officials saying the risk is cutting too soon, and now they are saying the risk is not cutting soon enough. i think we have to talk about caustic, because he sounded different than he did just -- bostic, because he sounded different than he did just 24 hours ago. he sounded different yesterday. lisa: two days ago in the wall street journal he said he wanted to see more data to be sure inflation is coming down. it would be really bad if we started cutting rates and we had to turn around and raise them again. i'm willing to wait, but it is coming. two days later, he is open to an interest rate cut. the central bank cannot afford to be late. annmarie, now that inflation is coming into range, we have to

look at the other side of the mandate. there we have seen the unemployment rate rise. is this the same person? annmarie: basically, how data-dependent is the fed? that one cpi print basically has bostic saying, i'm not going to be ready until the end of the year. one print and he says, i'm open to it. lisa: in the market you are looking at a real august week. this is not like last week. this is real august, where things are some knowledge. you are seeing these easy little bit of higher on the s&p 500. climbing ever so slightly back toward those record highs. the euro still squarely above 1.10 versus the dollar, but not a lot of movement today. the 10-year yields south of 4%, having fallen dramatically last week. meanwhile, coming up this hour, dominic konstam of mizuho. bobby ghosh as cease fire talks

resume. and chin's on inflation. -- chen zhao on inflation. dominic konstam writing this. the debate was never about the inflation print. if inflation is going to be on target and employment is fine, the fed is doing 25. matters now is if employment continues to weaken. you are reflecting what we heard almost every single note overnight, which is inflation doesn't matter anymore. it is about employment. much are today's jobless claims the key event for you? dominic: if claims bump significantly higher that is going to be a very important event. if they don't i think the issue is still a question of waiting for them to bump higher. the issue you have is going from lower inflation into employment

and lower employment. because inflation does reflect a part of profitability in the corporate sector. as you squeeze profits the question is, to what extent does that force corporate's to cut back on the cost side, and obviously the risk that unemployment goes up a lot more than people are expecting? lisa: there is a question about -- around what the economy is doing, but then there is a question of how markets are positioned. it seems that giving -- given the rally we are headed back to that goldilocks expectation of a soft landing. how overweight it is this market to that outcome? dominic: i think the equity market is in a comfortable position in terms of the way that it is looking at the outcome of a sort of soft landing. to some extent that is reflected in the bond market because we are pricing for a low point in the funds rate, or around 3%. it's like if it has to unwind

its restriction. it doesn't necessarily have to get accommodative. doesn't have to go the other side of neutral, which would involve taking rates down to 2% or below. in a way both markets are sort of in the same sort of soft-ish landing place. that is reflected in a lot of the positioning. i think a lot of the real money side may have missed a lot of this rally, at least in bonds. the key issue, if you look at the pace of fed easing, is it is fairly orderly. the market is not quite convinced they have to go 50 basis point clips every meeting. it is sort of these 25's rolling out. if you look at some of the labor market models that even the fed has put out in the past, i think one of the big issues for us is we are almost at this kink in the labor market whereby as vacancies slow unemployment could accelerate higher.

it is not happening yet, but if that happens over the next three to six months the fed will have to be much more aggressive in bringing rates down. neither the bond market nor the equity market are positioned for that very well at all. that is the key issue, i think. dani: i'm interested in the cause of that. we have not exactly seen that. you have seen some really solid results from companies this corporate earnings season, excluding mac seven. 9% growth, and overall it is 11% growth. that is pretty healthy. where does the softness in profits first arrive? dominic: i'm glad you asked that question. we looked at 11 sectors in the s&p and we look at free cash flow. we look at interest expense and the ratio of the two. basically the two sectors that are doing incredibly well, technology and communications. and there are a few companies on the consumer side doing well is

where -- as well. once you strip out those in look at freak -- free cash flow, it is not good at all. you were going down to the worst ratios since the first financial crisis. the equity market is very bifurcated in terms of earnings, and in aggregate, yes, aggregate profits look right. but it is really a couple of sectors driving in. the question is whether those sectors can continue to drive it overall or whether the week is as it continues to run through all of those other sectors finally sort of unravels the good news from the two leaders. you know, to some extent i think that is a real risk. it is a real bifurcation in the corporate sector. aggregates look rate, but you cannot just rely on aggregates. you have to look underneath the covers and a little bit more in detail. there are think you expose weaknesses in this economy.

dani: how much do you pay attention to walmart earnings? how much will you be coming to this statement we get to get some sort of signal for the macro picture for the united states? dominic: to some extent. ahmed is always interesting. we have been through lots of cycles where walmart does initially quite well going into some sort of downturns, precisely for the reasons you highlight. you do see consumers going into cheaper product areas. then, of course, they sort of react later when there is a more broad-based weakness in the economy. but, yes, absolutely. it is all good information, and i agree the consumer is very interesting. particularly the lower end has been suffering from high interest rates. but, really, the main point for the consumer right now is they have not lost their job yet. shortly, you know, if we do go

through those job losses, that is an acceleration higher in unemployment. then you are really going to see the consumer hit the wall. balance sheets are not bad in aggregate. they are not in aggregate a problem, but that is only because they have not lost their jobs. the good news is that there is a lot of stimulus that can be put back into this economy in the event they do lose their jobs. you have interest rates that are extremely restrictive and have come down 300 basis points, if not more. that will help interest rates. it will unleash some sort of housing demand. it will help cars, etc. this is just a cycle. we are going to go through a cycle. rates need to come down, see what damage has been done. it will not be lasting and this is not a disaster by any means, as opposed to some previous cycles we have been through. annmarie: when you talk about adding economic stimulus, you say a reduced trump victory

bodes well for monetary policy to take the lead over fiscal policy. why do you think that? dominic: one of the things we have learned not just in the u.s., but elsewhere, is politicians have to be careful about using fiscal policy irresponsibly. particularly when you have large deficits. if you are not going to bring your deficits under control when the economy is doing well you don't want to keep widening them out when the economy is doing badly. right now it would not be appropriate to have a loose fiscal policy to try and stimulate the economy if we are slowing down, given our deficits are so wide. and you do have these things called bond market vigilantes who run around and will drive up longer-term interest rates even when you want lower interest rates across the board to stimulate the economy. the right kind of policy makes is to have monetary policy doing the heavy lifting in terms of adding stimulus to the economy. not fiscal policy. in a way which should have happened after covid was,

instead of having a very tight monetary policy raising interest rates to slow the economy down, they should have tightened fiscal policy. but no politician likes to do that. they figure they will not get elected on that basis, so of course you get the wrong kind of mix of policy. going into any slowdown let's hope we get the right kind of makes. lots of stimulus in terms of monetary policy and hopefully not much on the fiscal side. that will bring down interest rates to stay down, and that is the logic of that statement. lisa: dominic konstam of mizuho, thank you for kicking off this day. that is the most important day of the week. this one really is. he was your bloomberg brief with yahaira jacquez. >> minutia peak has resigned. she is the third ivy league leader to step down in the fallout of protests on campus. she wrote, it has been up period of turmoil.

over the summer i have been able to reflect and have decided that my moving on at this point would be best enabling columbia to traverse the challenges ahead. 26 financial firms agreed to pay nearly 400 million dollars in fines after the u.s. securities and the firms failed to keep their employees it -- employee'' electronic communications. financial firms are required to monitor and save communications involving their business to head off potential misconduct. and for some employees remote work is ok. newly-appointed starbucks ceo brian nickel will not be required to move to seattle next month. the coffee chain is setting up a remote office 1000 miles away in newport each, california, where his former employer, chipotle, is based. he will receive a $10 million cash-signing bonus and an annual

salary of $1.6 million. he will be eligible for annual equity awards up to $23 million. that is your bloomberg brief. lisa: if you are concerned about if he did want to move to the headquarters, they did say they will compensate for potentially moving fees, should he decide that the remote work sends a bad message to employees, who are being told they need to get back to the office. yahaira: i wonder how many employees -- dani: i wonder how many employees will get that offer? lisa: all i can say is, his entire pay package is worth $113 million, including all sorts of equity enticements, as well as payouts from what we -- from what he would have gotten at aaa. of next, it is not about that. it is about the economy. >> we are talking about a thing called the economy. they say it is the most important subject. i'm not sure. inflation is the most important. lisa: that is coming up next. this is bloomberg. ♪

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lisa: it has been a typical august, and yet it has been creeping higher. it is the kind of calm that people who are bulled up like to say. the s&p 500, climbing back toward that 5500. up about .1%. one of the key stories over the past few weeks has been dollar weakness. the euro squarely above that 1.10 mark. you think, how any people are thinking, they have the european vacations in just-in-time? 10-year yields inching a little bit higher, based -- but basically flat. crewed up about .6%. we entering around, trying to understand how to rationalize and price in some of the geopolitical risks.

under surveillance this morning, it is all about the economy. >> now this is a little bit different day because this is talking about a thing called the economy. they wanted to do a speech on the economy. they say it is the most important subject. i'm not sure it is. inflation is the most important, but that is part of economy. lisa: donald trump downplaying the economy at a campaign speech in north carolina, despite a recent new york times poll showing voters in swing states favor him over kamala harris on the issue. harris, set to unveil her economic plans tomorrow. with bloomberg reporting the vice president will call for a federal ban on food and grocery price gouging. joining us now is hadriana lowenkron. i want to start with, what have we heard specifically from the harris camp on price gouging? hadriana: this is an opportunity for the harris campaign to really seize on the fact that we

were prepared for an economic speech from trump and we got some mixed messages as to how exactly important he feels the economy is, despite polls saying the economy is important among voters. on the harris side, but expecting a federal ban on food and grocery price gouging. this is something that has been done at the state level before. with harris formally being the attorney general in california, she has some experience there. and again, her campaign so far has been about attacking corporate greed. and, again, showing that there is contrast there can -- compared to the trump campaign. his idea of cutting taxes and the billionaire class, etc. annmarie: when it comes to some of this divergence, how does kamala harris make the point that she is also different than ident? is he talked about price gouging a lot over the course of his administration? hadriana: this is a difficult

question in this is something they're going to have to figure out. biden and harris are going to be on the campaign stump together today for the first time since harris has become at the top of the ticket. experts, people and talking to, are getting a sense of, how can she decide where to cling to the biden administration and where to differentiate herself? they're going to be some instances where she's going to revert back to her policy standpoints ahead of -- prior to the vice president. which will be a bit more progressive and he appealed to those voters, such as the young voters of color. those of the people moving away from biden that she is now able to bring back into the democratic fold and put more states on the map and play. annmarie: president trump describes harris and biden as a way to attack biden's policies and linking harris to them. we are also going to hear from

trump today. why is he doing a press conference so soon after the one in mar-a-lago? hadriana: this is more last-minute than we had expected. but this, in addition to the press conference last week, he has had some various media appearances. unconventional type of videogame or -- elon musk on monday. these are opportunities for him to regain a campaign that has been overshadowed as of late by the harris campaign, who has seen a surge in both polling, as well as fundraising due to the growing momentum in the democratic party. he is able to take the opportunity, regain center stage. last week he dangled some debates in front of harris. he has made the fact that she has not yet had a press conference herself a central part of his campaign, hoping to draw some sort of contrast. he also made some comments about the fed, saying he potentially could have more experience and

potentially do a better job. so, anything could really happen at today's event. again, he is hoping to regain some of that media attention he has in the past been good at grabbing. yahaira: when it comes as dani: when it comes to political advertisements, the harris campaign has spent 10 times as much as the trump campaign since she became the candidate on digital advertising. the republicans have been using the money to stay with traditional advertising. what does that tell you about the direction these two campaigns are going in trying to court voters? hadriana: absolutely. part of the thing with digital advertising is, who are we hoping to attract? a lot of the differences in between target voters comes from generational differences. we know harris has younger voters that are more eager and excited for her potentially to take back the white house.

we also have reporting showing that there are different states that are, kind of, the homebase for a lot of these advertisements. we know that in north carolina there has been a lot of money on both sides put into the race. they are trying to make their mark. they are trying to figure out which demographics they can target and which states they should really be focusing on as we are seeing the polls completely switch up from just a couple of weeks ago when we knew that trump was at an all-time high across most of the states there. this switch up, again, shows that nothing can be taken for granted. the campaigns realized that, so we are going to see a lot more moving around in terms of the different types of advertising and the different places we are seeing them. lisa: hadriana lowenkron of bloomberg, thank you so much you so much for being with us. annmarie, i was struck about donald trump and a kind of confused message around whether he wants to use the fact that he is actually really got the upper hand when it comes to the

economy or not. annmarie: i find it so we are. they say the economy is the most important issue, but then he cleaned up his act by saying, inflation is part of the economy. this is the one message that he pulls really well on. -- polls very well on. it is the economy and immigration where trump's policies seem to do better with independence. it is weird that he would not just on that. lisa: it raises this question, how does the harris campaign take advantage of that, given that price gouging was something we heard from joe biden? it didn't really land. people were saying, what are you talking about? and the companies pushed back against it. is this somehow a more nuanced or different message than what we heard from president biden? yahaira: i guess it is nuanced in that the campaigns realized free markets are important, but they have a limited terms of

things like price gouging. i wonder if we are at this moment where companies are realizing that offering value is what consumers want right now and they have to do things like a mcdonald's five dollars menu. this is opportune timing that more companies do that. you could say this is exactly what our policies were aiming at. lisa: coming up cease fire talks set to resume as goebel allies try to raise to prevent some sort of water conflagration. this is bloomberg. -- wider conflagration. this is bloomberg. ♪ [whoosh] ♪ trains that sense what isn't on the schedule. ♪ trains that use the power of dell ai and intel. ♪ to see hundreds of miles of tracks. ♪ [vroom] [train horn] [buzz] clearing the way, [whoosh]

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lisa: heading into a sixth straight day of gains as the s&p 500 just quietly grinds out gains day after day. right now we see that once again with the s&p marginally higher, though paring back some of the earlier gains. the nasdaq outperforming once again. we have about 8.1% gain there. the russell 2000 underperforming. this is interesting on a day where we very much have the consumer in focus. but the russell 2000 down .4%. dani: which is so closely tied to the front end of the curve. you had to thread this perfect needle for the russell 2000 to outperform. that is, getting cuts to some size and having an upon me -- having an economy that doesn't

fall apart. lisa: and having cuts that are not necessarily going to be in response to a true deterioration. if you look at the bond market you are seeing 2-year yields lower. on that front you are seeing people take what raphael bostic changed his tune to this morning , and it seems like they are setting up for rate cut. the question is whether deterioration will cause bigger -- than expected. the 30 year marginally higher. the question, what does inflation look like and what does the fiscal picture look like, even that all of the different plans we are hearing, none of them are talking about that production. annmarie: you do not want to talk about debt reduction in an election year. nikki haley try to do that and she quickly had to reverse on a lot of that. no one is talking about some of the serious policies to take the fiscal path under control. what they are going to talk

about is things like, they are going to have to talk about tax cuts at some point. but mostly all of this, what you are hearing, is what pulls well right now. -- polls well right now. lisa: it has been weaker and continues to fluctuate. the euro-dollar, 1.1010. investors awaiting more insights into the u.s. economy. walmart earnings are due at 7:00 a.m., plus retail sales and another round of jobless claims at 8:30. in about a half hour we are going to get warmer. we'll talk about whether that is a reflection of the consumer or a specific company. when it comes to jobless claims, it takes on renewed importance at a time when every fed official is saying the labor market is going to hold the key to what we do next. dani: especially given last week was stronger than what we expected, but by 7000 people. we were off to the races.

this week takes on renewed importance because we say, is it going to be another strong print? does the trend continue or is it something that gives the fed permission to go 50 basis points? the market had a head fake with that. we were expecting 50 basis points. you get cpi that comes in line, that seems to suggest and nothing would allow you to do a jumbo rate. you need the labor data to show some deterioration. annmarie: austan goolsbee last night when asked about the dual mandate he says, it feels like on the margin i'm getting more concerned about the employment side of the mandate. which is why these numbers are going to be important. lisa: especially with the retail side of things. because americans do what they do best, which is expand. china's economic troubles continuing in the third quarter during renewed attention to the need for fiscal stimulus. china seeing a surprise and slowdown in fixed asset investment. retail sales beat expectations

largely due to seasonal factors but remain well below pre-pandemic growth. these are the two prongs we have been talking about extensively. you have the u.s. economy hanging in there and the chinese economy, if you look at iron ore, if you look at copper, you see that pain. dani: for if you look at company earnings. showing that chinese consumption is weak. it is this dichotomy of a chinese government that has been spending a lot on manufacturing that is leading to overcapacity and some distortions in the labor market. you get economists saying, you need to stop some of the stimulus. instead what you need is erect stimulus to the consumer. but of course, xi himself has called it european-style welfareism. annmarie: they think beijing is holding back, even though the beijing government put out this 20-point plan that potentially they would want to enact to boost that stimulus and boost the demand side. they said they are holding back

their firepower because they are not sure who is going to be president of the united states and they may need more ammunition if it is donald trump. lisa: which is fascinating, especially for international companies that are trying to come up with longer-term plans. in another region that is in focus, negotiations over a possible cease-fire between israel and hamas getting underway in delhi today on the broader region remains on alert for an escalation of tensions between iran and israel. with the hope of at least pausing the 10-month-long conflict. joining us now, bobby ghosh, who told us a couple of days ago that any hope for a cease-fire is somewhat misplaced. do you think this renewed effort changes that? bobby: i'm skeptical. the reports we are hearing out of washington and israel is that the israeli side does not seem ready for a cease-fire. benjamin netanyahu has been constantly adding to demands for the deal that item put forward a

couple of -- biden put forward in may. a stem with the man who masterminded the october 7 terrorist attack. if you read the obvious signs it doesn't allow for a lot of optimism. the mediators would love for some kind of deal. the region wants a deal. there is a little bit of a hail mary pass in this, but the biden administration has been suggesting that if there was progress on a deal that might be enough to hold back iran's retaliation for the attack within iran by israel. again, i have covered this region too long to hold onto optimism for any length of time. and especially, you noted in your lead in, who is missing from these talks? the leader of hamas is not there. and jim and i know who is not there. and, frankly, they have been

doing that constantly. when we say these talks are resuming today, the set piece may resume today, but these people have been in constant conversation. if there was any progress we would have heard it. lisa: this is a pretty pessimistic view. it is also realistic for people who have tracked events in the region. how does this and, considering the fact that it seems like it is grinding on, and yet reaching a boiling point? bobby: the great unknowns are what iran's retaliation is going to be a, when it will come. we have been waiting for a while. there has been a lot of interpretation about why iran has not responded yet. why hezbollah is not responded yet. if you are looking at teal leaves for too long you will see patterns that don't exist. it is complicated. the iranian leadership on this occasion has been very, very disciplined about not leaking out any information. it is clear that they have said

repeatedly there will be a response. having said it so often it is going to look awkward for them not to respond. but they have been tightlipped about what that response might look like. united states is anticipating a big attack. we have sent an aircraft carrier group, a nuclear submarine -- nuclear missile submarine group there. the trouble is that, while we wait for the attack there is the temptation to look around and see, what other explanations might be possible? i think we are in that phase. it is a little bit of a phony war where we are not sure what will happen next, but we want to figure things out. as i said, we are seeing patterns that don't really exist. annmarie: there is a tremendous amount of manpower being sent to the region, but the start of this administration they pulled a lot of manpower out of the region, or close to the region. if you consider afghanistan as part of asia. do you think that has any impact on the u.s.'s ability to set deterrence in the middle east? bobby: it has to.

you take out that much manpower and hardware out of the region from across the middle east, this is the third administration in a row that has talked about a pivot away from the middle east. the middle east has a way of reminding people every now and again, you do not pivot away from the middle east. and we are in another of those situations. we are sending carrier groups and simmering groups from elsewhere, which means we have less size on other problems in other parts of the world. -- less eyes on other problems in other parts of the world. the fact is, it is one of the most important regions in the world, most important trade routes in the world flow through there, through the red sea and persian gulf. most important oil and natural gas deposits in the world are there. and it is a part of the world where different countries are

historically at each other's throats. how can you turn away from that? annmarie: you had jake sullivan saying it is the calmest it has been in decades for days later, october 7 to happen. i want to ask you about the trump campaign. conflicting reports. whether or not the phone call happened, what would trump be pushing for right now? bobby: i think this might seem counterintuitive, that trump and biden would be of the same mind on this, but think about it from trump's point of view. trump's foreign policy is centered around the idea that he has taken the united states away, or is going to, from too much foreign involvement. homefront first, we don't want to be fighting other people's wars. trump would not want to inherit or in the middle east. if he is looking forward to a second term he would prefer that they are not be a big war in the middle east. so if that conversation

happened, or if it does happen, i would expect he would tell netanyahu, make a deal. dani: given we have already seen seismic collections around the world, is there a retaliation that escalates? what is the willingness of the u.s. and its allies to more actively participate? bobby: in the american case the united states has painted itself into a corner with israel. the has, despite -- the biden administration, despite its rhetoric about cease fire, has been loading up israelis with whatever weapons they have asked for. as i have said, we have sent more and more military, our own military assets into the region. there is an old saying in the theater about the checkoff play. if there is a gun on the mantelpiece in the first scene, by the third scene someone has to fire that gun. that is sending military hardware around the world. you send firepower into a

region, the tendency will be for someone to use it. lisa: bobby ghosh, we always appreciate your insights, know-how -- no matter how negative it might be with this region. that's get you an date on stories elsewhere this morning. yahaira: democratic presidential nominee kamala harris is leading republican nominee donald trump in pennsylvania. that is according to a new quinnipiac poll. it shows harris has a 40% to 45% advantage in the swing state and a hypothetical two-way race harris is also up 50% to 47%. market expectations for september fed rate cut were bolstered yesterday following comments from atlanta fed president raphael bostic. the financial times reporting that raphael bostic said he is open to aquatic next month's meeting, saying the central bank cannot afford to be wait -- to be late to ease policy. those comments came after cpi data showed unemployment falling below 3% for the first time

since 2021, approaching the fed's target. shares of cisco are surging in the premarket, up 6%. the biggest maker of computer networking equipment gave a bullish revenue forecast for the current period thanks to a rebound in orders. the company also announced it plans to cut thousands of jobs. cisco's cfo said the cuts are not about trying to boost profits, but about the company needing to shift further into cybersecurity, cloud systems, and ai-related products. that is your bloomberg reef. lisa: up next housing driving inflation. >> when you look at the moving parts, core inflation, 16.5 basis points, 23 of that was housing. core goods went further into deflation. lisa: it is the key mystery, given the uncertainty around what will happen with prices if rates go down. that is coming up next. this is bloomberg. ♪

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lisa: welcome back to "bloomberg surveillance." what we are seeing right now in the s&p 500 is mild gains. it is amazing to look that so far in august we have seen massive roller coasters, we have seen transitions of leadership, we have had questions to the tech authority. the s&p 500 is up .05%. dani: it speaks to, that money needs somewhere to go. and you can keep buying in the midst of summer, even when there is not a lot of liquidity. you can have japan following the most since night -- since 1987 and come back around. the data seems to be divided. you can get a weak payrolls number and the next week get strong jobless claims. everything keeps bouncing around, but the one trend remains.

money want somewhere to go. lisa: and it is looking for some direction from the federal reserve. there has been a great deal more volatility in the bond market. if you take a look at what is going on with 2-year yields, they have plummeted. it is not as if this has been a stagnant market. i'm looking at markets pricing in 210 basis points of rate cuts by the end of 2025. just to give you a sense of how -- not just when the fed will start cutting rates, but how deep they can cut them. i'm so old i can remember when they were talking about this being the neutral rate. dani: at the start of the year what was the market pricing in? six rate cuts by the end of this year? we are in august and we have yet to have one. maybe one is coming sooner, because mr. hawk himself, who said he needed more data, now telling ft that inflation is coming into range.

we have to look at the other side of the mandate. he is open now to a cut before the fourth quarter, a.k.a. september. lisa: neil., raphael bostic's shift shows they wanted to see more data for the sake of seeing more data. the lower inflation print demonstrates has been obvious for months. annmarie: this goes to what kaiser said to us yesterday. it is not the fact that the fed wants to see good data, they just want more data so they can say, we are starting to see a trend. how much of that is because they felt like they were behind the curve? lisa: the housing market. under surveillance this morning, housing right now still driving inflation. >> when you look at the moving parts, core inflation, 16 point five basis points, 23 of that was housing, right? goods went further into deflation. if you go back to the history of

disinflation cycle globally, it really is largely a story of the pandemic. so what is really driving inflation is housing. lisa: u.s. cpi coming in broadly in line with estimates. bloomberg economics seeing slow housing disinflation as one of the key reasons they expect core cpe to remain above the fed's target into next year. joining us now is chen zhou of redfin. is this true housing inflation or is this just a quirk in the way it is calculated by the government? chen: good morning. thanks so much for having me. you are right. it is happening with shelter inflation and cpi and in pce is reflecting idiosyncrasies of how that data is calculated. for both metrics it is the case that shelter inflation is the largest component. however, there are a couple of

problems with shelter inflation. the first is that there is this owners equivalent rent component to it. that is something that reflects a lot of assumptions about how housing payments for people who already own homes increases, when it is the fact that for existing homeowners there housing payments are almost always constant, because they have asked mortgage rates. the second issue is that rent data used in these metrics is very lagged. they do not reflect current inflationary pressure. if you look at market rate data from redfin what you will see is that market rents have been flat for the last two years. they may even be down a little bit. but in cpi rent data is lagged because most people are not signing new leases and moving. they are doing is, they are renewing their leases. there is this catch-up effect that has to play out over 1, 2

years, or maybe longer. what that really means is, if you are using cpi and pce to measure inflation you are looking at something that overstates current underlying inflationary pressure, and if you take out shelter where you will see is that inflation has been a target for a while now. lisa: what are you seeing in the real world of rents and housing prices in terms of how much inflationary pressure is there? do you believe this argument that when prices, when rates go down prices will fall because supply will come into the market? chen: sure, yeah. i will take the first part of the question first. but we are seeing in terms of rent is that rents have been flat. they have been flat for a couple of years now, and that is true in almost all parts of the country. it is especially true in the sunbelt, for example, where there was a lot of multifamily

construction. in terms of weather, home prices will increase when mortgage rates go down. mortgage rates are down already one whole percentage point in the last four months. if they keep falling, if the fed is able to meet markets' expectations about how quickly the fed is going to cut rates, the question is, do home prices increase? i think it really depends on whether you unlock or supply or more demand. when rates started to increase in 2022 what we saw was that demand fell. but supply actually fell more. so, there is some possibility that as rates come down you actually unlock more supply than demand. but the problem with that argument, really, is that even as rates come down they are not going to go down that much. they are not going to go down so low, you know, that people who have three or -- a 3% or 4% mortgage rate are going to see the same mortgage rate prevailing in the market again.

it is really a question of, how low do mortgage rates have to go before current owners feel unlocked? dani: you did see a spark of that yesterday with mortgage applications coming in 17% increase. the week prior had just been 7% with that decrease in mortgages. those came from refinancing. to 40% pickup with refinancing. does that not tell us there is this locked up supply and demand ready to go off like a spark? chen: there is definitely a lot of pent-up demand, for sure. that the mortgage purchase index also increased a little bit, and that is something that has been really low for a long period of time this year. on the supply side, i do think there is a good deal of supply that is ready to be unlocked. it is really a question of, how low do mortgage rates go? if you have a 3.5% mortgage rate and mortgage rate goes to

5.5%, is that enough for you to want to sell your home? and if you have a lot of home equity may be the answer is actually yes, because you can use a lot of that home-equity to offset the sting of trading up for a much higher mortgage rate. annmarie: we are going to hear a lot about the housing market from both political camps. notably kamala harris says she wants to boost construction of new homes. do think the united states is suffering from just not enough supply, period, across the continent? chen: yes. that has been the root cause of this affordability crisis that has been, you know, in the housing market for a very long time. it has intensified the last couple of years, but we have had an affordability crisis for some time. there simply is a supply shortage. estimates for how large the supply shortage is range from

1.5 million units to 5.5 million units or so. but no matter how you really crunch the numbers, point at the end of the day is that we simply don't have enough homes and we need to build a lot more. that is how we address the affordability issue. lisa: chins now, we really appreciate it. -- chen zhao, we really appreciate it. what will rate cuts actually do to that price, considering the fact that you could get that much more supply unleashed into the market? dani: the issue is you will have all this demand because rates come down. people still in the 3% and 4% mortgage, they might be delayed. even for some non-on that housing ladder they might say, you get down to 5%, that is attractive to me. people who are below that might not unleashed the supply. how willing are homebuilders going to be to build when, if they bring supply costs and

housing prices will come down, that might not be an attractive environment to build in. annmarie: will people, a.k.a. lisa, decide that now is the time to get out of my 3% fixed mortgage, because maybe i was looking for more space? or are you going to say, they are not coming down too much, i'm not ready to go out to the market. lisa: i'm very happy. there is no urgency, i have to say. we just put too much premium on space? what is space really for? we don't need to talk about that. that is a very new york city-centric view. coming up, lisa shalett, tom steyer, gregory melich, and harry sommer, the chief executive officer of norwegian cruises to tell us all about what jon is doing right now. you are watching bloomberg. ♪

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>> you could argue thursday is more important than wednesday this week. >> always look at the consumer. >> there is a bifurcation across consumers. >> the tailwind is just not there. >> these are evolutionary, not revolutionary shifts in consumer behavior. >> this is "bloomberg surveillance." lisa: moments away from getting the first of the trifecta of data. walmart earnings at any moment. really a key focus on the

consumer as the federal reserve looks to the employment mandate and how much consumers can continue to keep spending. good morning. this is "bloomberg surveillance ." i'm lisa abramowicz. jon is off this week. he will be returning next week. we are setting up for a sixth straight day of gains on the s&p. quiet given the fact it's been slight types of issues. dani: maybe we are waiting for the right kind of data. you could argue it's walmart or retail sales or anything that shows the strength of this underlying economy. jobless claims has to be one that we look forward to. lisa: we are getting walmart earnings. it's actually boosting full-year adjusted earnings-per-share to $2.35. sounds good. it is below the estimate which is $2.45.

third quarter earnings per share versus the estimate of $.55, shares lower by about 1%. i'm curious to dig in the numbers. it seems like they beat on the margin of the second quarter put the full-year forecast is coming in light. annmarie: it is the full-year forecast that getting the markets concerned. what does walmart think will be the resilience of the u.s. consumer? is it the advertising place? the entertainment place? they did the outlook lifted but it was not enough for the market . lisa: how much of walmart -- is walmart part of the full consumer story? we talk about a trifecta. we will be getting jobless claims as well as retail sales. interesting to see how much this coheres with the broader retail

story versus its own walmart plus enterprise and advertising and capturing the higher income brackets. dani: what we heard from corporations is a mixed consumer. for every mcdonald's there is a chipotle. for every pepsi saying weakness in the consumer you have procter & gamble saying we are not seeing it. when it comes to walmart, the cfo says they are seeing consumers be concerned, choice for, about -- choiceful, value seeking. a consumer who is discriminating but not a consumer that is sliding into recession. lisa: this is interesting, the nuance. the idea of incremental fraying doesn't really speak to armageddon. you wonder how much this is representative of the broader consumer base. how high expectations are. they did lift their forecast,

just not as much priced in. annmarie: they did lift the forecast. when it comes to this idea of the discerning consumer, walmart says over the quarter they added more discounts, trying to get more consumers in which rose 35% in food. groceries. this is a hot topic when it comes to the political campaigns. groceries make about 60% of sales. the retailer is gaining traffic and shoppers across income cohorts. the upper end and lower end both looking for deals and are going to walmart who was cutting prices. lisa: it speaks to the summer in america. this was one of the standouts in terms of their purchases this year. lawn, garden, products like pool noodles were standouts. combining all pool noodles that walmart sold would stretch out a 30,000 football fields. practice ca -- back-to-school

season is off to a good start. dani: a pool noodle recession indicator. how long the stretches how much there is a recession. people are buying home related stuff but not going to home depot to buy home related stuff. they are -- you get a split consumer. walmart does trade at 28 times earnings. amazon just 21 times earnings. walmart is more expensive than these growth tech stocks. is a good enough and you have a forecast that did not meet expectations? lisa: it seems like it is good enough because the shares are up almost 5%. this is not the entire day, not the focus. it is markets in response to waning inflation and what we expect to see with retail sales and jobless claims.

markets basically range bound. slightly up. 5480 on the s&p. 110 on euro-dollar. crude marginally higher. lisa shalett from morgan stanley. tom steyer as kamala harris reveals her economic plan. and greg melich for details on walmart in the pool noodles that stretch out across the world. questions run the health of the consumer. mixed signals ranging from home depot to mcdonald's. now this from walmart. how much this discerning fraying around the edges speaks to something pernicious or something that's a healthy welcome cooling? joining us to discuss is lisa shalett, morgan stanley. is what we are seeing something supportive of the soft landing

case or something that should change raphael bostic's view and cause them to cut rates by 50 points next month? lisa s.: absolutely not. we don't have a lot of experience with soft landings. soft landings are just that. they are landings and they are lumpy and incoherent. there is not clear signals. we will have to get used to this over the next 12 months. so long as we have signs that economic growth stays above zero we are in that soft landing zip code. my read of the current data is that there's enough good going on to offset whatever the weakness is. dani: is it good for big tech or everyone else? who is a good for considering it's not basically a cyclical booming recovery? we have seen dominance of the big tech behemoths.

lisa s.: we have to differentiate between what is good for company earnings and what is good for the stocks and priced exactly to your point with regards to walmart. our view is that a soft landing backdrop is good for a broad swath of companies. it tends to be very good for some of your cyclicals. some of the financials, some of the energy companies, some industrials, some materials companies . at the same time more defensive oriented sectors. when you ask about linking the economy to the stock market, what is priced in? while many tech companies will "be fine," because we are not in a recession. they will be able to continue to see the capital spending plans play out.

the reality is they are priced for perfection. many of the other sectors are not. as i know you guys know, we at morgan stanley have been favoring an equal weighted approach to owning the s&p 500. we are saying it's about owning the ends of the barbell as opposed to the leadership for the last 15 18 months. dani: how far can you stretch that out? does ago was -- doesn't ago was far to say owning small-cap stocks in this environment? lisa s.: fantastic question. not in our opinion. we are of the opinion that the small caps are potentially entering a really interesting evolution in their role as an asset class. we are concerned about what we have identified as adverse selection.

we have gone through a cycle where the small-cap universe, the total market cap today of about $3 trillion, which is about the entire market capitalization of one of the mag 7, these companies have really seen a deterioration in their aggregate and average profitability. historically, the russell 2000 universe has seen maybe 20 to 25 -- 20% to 25% of the universe unprofitable. now we are hovering around 45% to 48%. that's against the backdrop where u.s. gdp growth has been a store nearly robust, especially on a nominal basis. i understand these are companies that were hit hardest by floating-rate debt and the hikes the fed has made. look, the reality is that in a world where private equity is so

active in picking up the best small and midsized companies i would not chase small-cap. we think they face too many headwinds. annmarie: that point is so interesting. the idea that the russell 2000 universe is shrinking and the good companies are shrinking because of private equity. what does it mean if we stretch this to the logical conclusion? private equity not only doesn't ipo as often but keeps buying of good companies in the russell 2000. what do you make of the health for public investors in the small-cap universe? lisa s.: i think it will be really tough. that is what we have been warning clients. what we call adverse selection. what is left if you demand daily liquidity in this asset class may not be among the best opportunities that are out there

in the professional investors, the private community has taken all the diamonds out. fishing for value in this small-cap universe is may be a fool the rent -- full they aren't -- fools errand. lisa a.: lisa shalett, thank you for being with us. a lot of interesting and informative data, including walmart earnings which came out. some of the details in this really presented a conflicting image about the precipice of a downturn. walmart is gaining market share not just in some of the staples aspects but the general merchandise category which had been flat on its back. they saw a slight pickup in discretionary items which have been in decline for 11 quarters. line by line, the increased sales. the earnings forecast.

not that they see some sort of ability to float out of the water but lack of weakness. this does not speak to a consumer flat on its back. dani: that's the important part, it's not weakness. some consumers are looking for value. that has been the threat across earnings t -- thread across earnings. it's a stretched consumer but not a weak one. maybe we just look at this through the corporate lens. it is getting more competitive for consumer companies. there will be margin compression. that is not a recession. annmarie: we have seen that. it wasn't just walmart that comprises. target, aldi, walgreens followed suit. there will be more competition because consumers are demanding it. walmart maintains this is also

wealthier shoppers finding deals. lisa: i went to see how much pool noodles work for them to actually highlight it. $.98 on walmart's website. annmarie: it's like the lipstick affect. if you're feeling the pinch, you go for something small. dani: is a luxury item of pool noodle? lisa: you just need the pool to go with it, in minor issue. yahaira has been looking into walmart. what do you got? yahaira: shares are up in the premarket almost 6%. the company boosted sales guidance for the full year as the retailer looks to attract shoppers searching for deals. the cfo says they are seeing a consumer that continues to be choiceful and value seeking but they are not seeing anchor mental fraying and health. they expect net sales to rise for the year against previous guidance of 4%. he lifted his targets for

operating income and profits. republican vice presidential candidate jd vance is strongly suspecting he will participate in an october 1 debate with tim walz. in an interview with fox news, vance said his team was to look at the parameters of the debate invitation for cbs news first. walz has accepted the invitation to the match in new york city. bloomberg has learned apple is ramping up work on a home tabletop device as it seeks new sources of revenue. a team consisting of several hundred people is working on the product which uses a thin robotic arm to move around a large display screen. it is envisioned as a smart home command center, videoconferencing machine and home security tool. that is your bloomberg brief. lisa: this is why i need more space. to pack it full of pool noodles. when you live in the city it's

hard to have too many pool noodles. they are basically just space occupiers. it also no pool. up next, the harris economic vision. >> i will take on big corporations that engage in illegal price gouging. america has tried these failed policies before and we are not going back. lisa: that is coming up next. this is bloomberg. ♪ ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants?

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once you know the moves. with godaddy websites plus marketing, you can quickly create a website, and ai will customize it for you. get your business out there and get more customers in here. no sweat... for you anyway. create a beautiful website in minutes with godaddy. lisa: the market is responding -- at least walmart shares are responding to a consumer that is not fraying. he goes in the face of concerns about not necessarily recession but a deeper downturn than

people previously thought. futures higher by just about .1%. the euro unchanged versus the dollar at 110. 10-year yield marginally higher. we will get jobless claims and retail sales. how much does this get confirmed by the data? up next, the harris economic vision. >> when i'm president we will continue our fight for working families. when i am president, i will continue that work to bring down prices. i will take on big corporations that engage in illegal price gouging. america has tried these failed policies before and we are not going back. lisa: kamala harris and president biden are said to speak in maryland today, their first joint trip since biden dropped out of the race. this is coming ahead of harris's

rally in north carolina tomorrow or she will unveil details about her policy agenda. joining us is tom steyer, cofounder of galvanized climate solutions. what are you hoping to hear from harris's campaign given we have not heard so much in terms of how she differs from president biden? tom: what i'm expecting to hear and hoping to hear is that her agenda about the economy be about opportunity. she understands that america is the land of opportunity and is giving everyone the chance to do the most. that is what drives the economy, makes this capitalistic economy so strong. i expect her to continue most of the policies of the biden-harris administration. annmarie: she will continue on this electrifying the grid. what more do you expect if she were to win that they can add onto what biden did when it comes to the inflation reduction act? tom: you will be about

implementing the inflation reduction act, which is not just about the grid. it's about deploying the existing technologies, wind, solar, batteries, but also about innovating and creating the next generation of energy related companies and technologies. that second part is absolutely critical. we are seeing deployment happen spurred by the ira but very much driven by private money. what we need to see his new companies solving -- is new companies solving problems. annmarie: when it comes to competition, why not let the cheap chinese ev's into the u.s.? tom: hi -- here's my answer. i'm a huge believer in trade. i believe the benefits to american consumers are huge and important.

what is true is that the chinese economy is doing something strange. they are leading the manufacturing of almost every clean energy product. wind turbines, solar arrays, batteries, but they are the biggest polluter in terms of carbon emissions. they are using their carbon emissions to try to drive their economic program of leading this energy transition to pull their week economy out of the ditch. -- weak economy out of the ditch. the idea that they should be charged for their missions makes good sense to me. we are doing it in a not directly. it is with interns turns out to be pretty fair. annmarie: the other big political issue is who is going to win the union vote. how does kamala harris strike that tone? they want to see more ev's on the road but it unnerves a lot of rank-and-file of the labor

unions in places like michigan which is critical to democrats maintaining the white house. tom: let's take a step back. we have all listened to eli musk and donald trump talk about their attitude towards organized labor and labor unions. they have been sued over what they said on twitter. it is not a choice between kamala, a very strong union person and a blank person, it is someone who is antiunion and anti-working person. that has been a long history over decades of where mr. trump has gone and likely to go. yes, it is clear that michigan, the uaw has a huge sway in michigan. they are a really important part of the democratic coalition but the truth is a person who supports working people and supports organized labor is deftly kamala harris. to go any other way is to ignore the facts of this week, let

alone the last two decades. dani: you are painting a dichotomy between the candidates. in your conversations with investors and portfolio companies that want to do clean technology, if there is a sense they are holding back on investing because of uncertainty of the race and my continue to do so if it is a trump presidency? tom: when we talk about the possibility of a trump presidency, let's break it down. what will happen in the united states of america? when it comes to the deployment of the existing technologies they are just cheaper. if you look around the world last year, 2023, new electricity generation, 86% was renewable. they are not doing it to be nice. it is a cheaper, better deal and the lines have crossed and there is nothing mr. trump can do to change the economic forces. what is really important from the standpoint of addressing the climate crisis more broadly is

it's obviously a global issue. it requires global cooperation and american leadership. that is something a trump administration will never do. they famously withdrew from the paris accords. he's talking about getting out of nato, let alone cooperating with the u.n. efforts around climate. from the standpoint of the economy that is baked in the cake because it's a better deal. texas has tripled it solar since 2018. that is the state where they love to say how bad renewables are. they are a bigger wind and solar producer than california. lisa: do you think musk's friendship for trump will mean a from the environment for logic vehicles? tom: no. mr. trump doesn't have policies or friendships. that will change over time. they don't even have a platform. they literally don't have a platform because they don't have policies, just instinct, urgency and vengeance.

lisa: lisa shalett, we appreciate you coming in is always. for the record, he does not use pool noodles. coming up in a little bit, greg melich as walmart raises guidance. not a lot of weakness. you see the shares responding to that. how does that feed into an hour and five and it's time retail sales in the united states? does it confirm the lack of weakness we are seeing in walmart? this is bloomberg. ♪ oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them? that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it!

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lisa: walmart is not seeing the weakness. it is seeing gains in terms of market share when it comes to higher income shoppers. more on that in a minute. you are seeing the lift accelerate a touch on the margins. about .2% on s&p futures. nasdaq up almost .3%. russell 2000 trying to climb above zero. this is interesting. what stands out is that positive news or signs of resilience are now benefiting the nasdaq perhaps more than the russell 2000 at a time where the big are winning more. dani: cpi data last month basically the same as what we

got this month, we saw the exact opposite of that. large cap stocks did poorly in a rotation into the russell 2000. it is amazing how quickly the sentiment has turned. lisa shalett saying the companies in the russell are not good. these are companies worth owning. lisa: either way, the bond market does come down to the federal reserve. essentially, nothing ends the positivity making people think the fed reserve will rethink its rate cuts. that is a compelling thought as you pointed out some of the change tone among the hawkish members of the federal reserve. annmarie: raphael bostic changed his tune within 24 hours with the cpi print. he's now open to a before the fourth quarter. previously he said potentially open to a cut at the end of the year. office one data point there is

now for raphael bostic looking at may be more emphasis on labor, which you also heard from austin goolsby. lisa: we will get jobless claims in an hours time. completely flat after the euro strengthened to the strongest going back to january at 110. austin goolsby saying he's more concerned about the labor market, noting the on up limit rate could indicate we are not settling down at steady-state levels but moving into something worse. this came ahead of jobless claims and retail sales at 8:30 a.m. eastern. he's been consistent. very much across the board talking about downside risks to growth. he's not alone and that is the key. dani: more people are joining. the key differentiation is that cutting too late is the bigger risk. not cutting too soon and the re-acceleration of inflation,

which bostick said that on tuesday. on tuesday, he said we don't want to cut rates and have to turn around and raise them again. again, he is saying we cannot afford to be late. that is a huge shift in tone after the cpi print. it's what so many market participants are looking for. they did say the fed is behind the curve and they might be too late. annmarie: that got the attention of neil dutta. how much is it that the fed is concerned about making a mistake when it came to earlier when they had to hike rates and everyone said you were behind the curve? lisa: there's a lot of unclear signals. that is what lisa was talking about. people saying this mush might be a good thing. others say when you see on a playmate climb it tends to go exponentially. it doesn't creep up in the linear fashion. companies are continuing to innovate. apple pushing ahead with the

developed of a tabletop robot that would cost around $1000. the device combines an ipad-like display with a robotic limb offering a twist on home product like amazon's echo and meta's discontinued portal. if you are dribbling or something or making a mess, does that hand come out and wipe your mouth? dani: it meant that you could be on a conference call and walked to the other side of the room and say turned to look at me. the arm can move the screen to you. is that -- annmarie: it's robotic so it's basically a robotic ipad. it feel sick revamped version of an ipad. how many more tablets does the world really need? lisa: evidently quite a few. there's a question about how much innovation moves the needle. that is the ultimate question at a time when people are wondering if they are falling behind some of the ai push.

dani: apple comes out and unveils the vision pro and says this will change everything. everyone will buy it. they did not even mention it in the last earnings. not a word about the vision pro. will this fall in the same line where you spend money on this product and people don't buy it? lisa: it's fun to listen to what their product ideas are so keep on coming. walmart boosting its sales guidance for the full year as they look to attract shoppers searching for deals. the company expecting net sales to rise as much as 4.75% for the year against the previous guidance of 4%. greg melich joins us now. he has an outperform reading on a $74 price target on walmart. thank you for being with us. i want to start to your response of walmart's share gain among higher and consumers. greg: walmart has been gaining traffic on all consumers now for a good eight quarters. the broadening out of people

going to walmart just to save money on food but going to find where they need things, they can get some extra and great value versus what else is out in the market. i think the result on the second quarter above 4%, sam's above 5%, and the raising of the guidance is the suggestion that walmart has that momentum with new customers. lisa: how much do you give credence it's because they are offering deals and value and it has to lead to margin compression? if you have a big box store without decorations people think they are getting value and they have the money to spend anyway. greg: these results speak for themselves. they got some gross margin rate expansion. that was probably -- where is that coming from? a combination of great productivity. they have been investing a lot to get productive. it comes from the new

businesses, the advertising or e-commerce or marketplace that is helping drive the higher gross margin rate. it is driven by productivity and new businesses. it is not by taking out prices. dani: i'm interested in one aspect of the business he spent some time talking about. they rival amazon for becoming just recent centers. every local walmart can serve as that. how close are we to a world were not only can they play along the same lines as amazon but they overtake them? greg: overtake is a strong word. they can certainly compete effectively with amazon. that is what we have seen from walmart. not just this quarter but the last couple of years. using the 3500 plus supercenters around the country as effectively fulfillment centers where they can get 120,000 sku's to people's doors within an hour.

walmart is getting more delivery same day. but because walmart has over 100,000 sku's close so that many households they are leaning into that and consumers are welcoming it. dani: if we look at the overall picture, the idea that walmart has been spending a lot on this. a 10-year journey of investing. this is idiosyncratic, the result of walmart putting the money into attracting better market share and a notch for the help of the economy, for this is -- or this is just the consumer looking for value and that is why walmart is outperforming? greg: i am in the former camp. i understand people trying to find cracks in the consumers but you can see in the results they were winning share when people were flush with all the excess savings from all the checks we threw around a few years ago. now that the savings is gone they are still gaining traffic and gaining shares.

i would lean into the former part of your question. they have a company specific retail mental that is showing up. -- this is coming to fruition over a decade of investment. there u.s. margins dropped from close to 8% to as low as 4.9% a few years ago. they are only back to just over 5%. this is now starting to harvest the benefits of all the investment they were doing over the last decade. lisa: what do you make of the fact that we did see the market basically reverse? walmart boosted their full-year adjusted earnings-per-share view to arrange that missed what the estimate was. i think the market took that at first as a negative but realized there is a healthy consumer and walmart is doing pretty well. what is the threshold the market is willing to give for saying the future of this company? greg: the stock has done well

over 30% year-to-date. people's expectations were high. when that came out people were like it does not go all the way to the street's $244. when you go through the numbers you realize it can be a conservative estimate. the underlying fundamentals in terms of traffic and margin and profitability, and inventory is down 2% so that's nice and clean. all the fund metals -- fundamentals is why you saw that reaction. annmarie: the international sales also rose by walmart and in china. what do you make of the health of the u.s. consumer and the chinese consumer right now? greg: i will defer to see what they have to say about those details. i think what walmart brings to the table, and this is what we have seen with costco as well, the global consumer is focused on value.

after what has gone on the last three to five years. a global consumer looking for value. walmart, the proposition of great assortment and great price resonates not just with u.s. consumers but with mexican and chinese as well. lisa: i know you also cover home depot and autozone and a host of others, including lowe's and costco. is walmart unique among these companies at being able to consolidate share and execute in a way where they can be more efficient and more profitable with increased productivity, or is this the story and retailers more broadly? greg: great question. i will answer a little different. the broader retail winners are the ones that get it right. that understand you need assortment, convenience and value. at different times consumers will lean into different parts of that equation. what we are seeing, and is not

just new this month but the last i would say six quarters in the u.s. and year-to-date now between amazon, costco and walmart you have three retailers that are accounting for two thirds of retail dollar growth. others can do ok but they have to find a way to keep up with that. in the case of home depot, we like that one. they are the reason their comps continue to fall, the cyclical pressures and home improvement. they are also in a good position to gain share through productivity and value. lisa: i wonder what this means in the post-pandemic era where productivity is key. having auxiliary businesses to support profitability also is central to creating a value proposition. does this mean the big are going to get your and the others will fall out? greg: the world is set up for the big to get bigger. it is harder for midsize businesses. if you're stuck in the middle it's hard.

the investments walmart can make or home depot or amazon or costco in productivity, that's a big number. that's a big check to write. it can be harder for some of the mom-and-pop's. where walmart can help them is what their marketplace business. that can grow very well. that's a way for them to show value to smaller businesses that want to lean into walmart's e-commerce platform as opposed to pay amazon rates. lisa: greg melich, thank you so much. really interesting to get the insight. dani, to your point, how competitive they are getting with amazon and the offerings. dani: almost what i heard from greg as we are not giving enough credit to the executives for the kind of growth we are seeing. it is just the consumer trading to walmart. for amazon, that's a problem.

walmart is putting indicative investment trying to steal the market share. lisa: which is why starbucks would pay more than $100 million for an executive package to get chipotle's executive. you are seeing an actual record pace of ceos being fired or forced out at a time where people are looking for execution. let's get an update on stories elsewhere. here is yahaira. yahaira: ubs will liquidate a key real estate fund in the latest line of turmoil tied to the troubled commercial real estate market. the fund had 80% of its assets in office properties largely in the u.s. and germany. the decision means ubs will have to sell the most liquid assets below their long-term intrinsic values. the bank will take up to several years to recover the losses amid a sluggish pace in transactions. 26 financial firms are agreeing to pay nearly $400 million in total fines after the sec said

they failed to keep employees electronic communications. the regulators said they are committed to ensuring compliance in the whatsapp investigations. they add to the billions big banks have already agreed to pay the sec to settle similar investigations. financial firms are required to monitor and safety medications involving the business to head off potential misconduct. the world health organization declared an international health emergency wednesday over an escalating mpox outbreak in africa. a mutated strain has spread to at least six african countries, infecting some 15,000 people and killing over 500 this year. mpox is spread through contact with an infected person or animal. lisa: we will talk about some of the data compiled by e exchange.com. check it out.

divergence in the travel industry. >> we are settling into a more normalized demand environment. weakness in the consumer hits our business. there is certainly a bifurcation across consumers. lisa: that is coming up next. this is "bloomberg surveillance ." ♪ ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses

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lisa: the gains keep coming as people look at the consumer that is not yet falling out of bed. the latest read and about 45 minutes with retail sales and jobless claims. continuing to nudge higher a quarter of a percent. yields. under surveillance this morning, divergence in the travel industry. >> we are settling into a more

normalized demand of varmint. weakness in the consumer hits our business. we operate a cyclical industry. there is bifurcation across the consumers. we find the luxury, simmer wants to spend a higher and higher percentage of the travel wallet with brands they really trust. lisa: cruise lines bucking the trend in travel. signs of a consumer sled and continue to bound in certain corners. norwegian cruise line holdings and carnival and royal caribbean boosting their outlooks amid record-setting demand. harry sommer joins us now. thank you for being with us. i want to start with what you are seeing in terms of whether demand is plateauing, accelerating or falling off a touch on the margins. harry: good morning and thank you for having me on. demand increase is great. we are very happy with what we are seeing with the consumer. keeping in mind the demographic we are pursuing is mostly

upper-middle-class-upper-class demographic across our three brands. those consumers have money to spend and are continuing to spend it on vacations. lisa: i guess there is a question of how divorced the upper actual funds -- echelons are from the rest of the economy . do you find your business is insulated from a cycle where you have consumers that are not necessarily feeling the same pinch as elsewhere? harry: there's a number of criteria, things that really do help insulate us. number one, we are fishing in the upper demographic pool. we have a very long lead time for bookings. unlike hotel and air that are dependent on closer bookings, the average curve is six to eight months into the future. we have to minutes visibility into trends. if there's ever any weakness, we are not seeing any but every once in a while there are a few sailings that are doing less well. we can make adjustments six to eight months in advance that put

things back on track. it's a unique feature of the cruise industry that allows us to continue to have more stable and higher returns. fundamentally, cruises are a tremendous value. the average yield is anywhere from 30% to 40% below what they spend on a hotel. consumers, whether times are good but especially when less good certainly recognize the value. the last couple of quarters we have reported a percent and 6% year-over-year yield increases compared to last year where we are guiding to another 6% for q3. we see that as a strong consumer. dani: i wonder about prices. are you and a position where you might be able to raise prices given the level of demand? harry: great question. i think what we have shown in the last few quarters is pricing has been going up.

we are guiding for prices to go up. imagine with the long lead time i described q3 and q4 substantially sold out. we have great visibility and we stand behind the guidance we issued a few weeks ago in our quarterly earnings call. pricing will absolutely go up in both quarters. it looks that way for 2025 as well. dani: as a ceo of a major company lisa mentioned ceos being let go from companies at an unprecedented pace going back to 2017. i wonder how you think about this moment. you are the ceo of a company that is successful. when you look among your peers, not just the cruise industry but large companies, has something changed? there is more pressure and away there has not been before? harry: i'm guessing there has always been pressure in the ceo role. we are in a world of a rapidly evolving consumer. tastes change over time and consumers change over time.

we have to be constantly innovating in the future. right now we are planning for ship deliveries through 2036. we have to have a pretty good crystal ball and a pretty good feel for what the consumer is going to want for years, even a decade into the future. it's important to keep the future focus if were going to be successful. annmarie: we had the ceo of marriott on yesterday talking about marriott yachts. are you concerned on the higher end consumer the competition that is coming into the industry? harry: i have always said our competition is not other cruises. cruises make up about 2% to 3% of the overall vacation market. we are focused on what hotels do and cruising is a wonderful vacation. i mentioned the huge gap in value. we are priced 30% to 40% below hotels. hotels have the asset-like model as being competitive advantage

in the industry. it's also a competitive disadvantage because they lose control of the product. we own all 32 ships in the fleet, 100%. we have 13 warships on order. we can ensure we deliver an outstanding consistent product across the fleet. guests are beginning to realize that consistency is something you don't always get in the hotel space. annmarie: you get on board, all the extras you have to spend more on like excursions. are you seeing consumers start to ratchet back some of that spending? harry: not at all. onboard spend spent continues at record levels. we get weekly reports as the ships travel and are 60,000 guests we are carrying. on board spent shows no cracks. we are very happy. it's another advantage. i mentioned the long lead time consumers have making bookings. they are paying four to five months in advance. by the time they are on the cruise the money is spent,

already paid for author credit card. they come on the ship with a full wallet and ready to spend more. unlike hotels were people don't really stay at a hotel other than to sleep, people stay on the ship to do everything. shop, spa, casino. they arrange short tours for us. -- shore tours for us. lisa: for literally captured audience. harry sommer, norwegian cruise line holdings president and chief executive officer. i imagine people coming on with fatwallet. annmarie: they forgot how much they spent four months ago and then they come on, they just got paid and they are ready to go on that excursion. lisa: when you think about the different travel executives, they focus on the higher end. there is no weakness there whatsoever. on the lower end you are seeing weakness. what walmart earnings did was highlighted the overall -- the weakness is not accelerating and does not seem to be the preeminent attitude coloring the

earnings or frankly the ability for this economy to eke out continued growth. dani: i wonder if we need to look back at the earnings that talked about a we consumer -- weak consumer. is it almost an excuse? potentially it is just a strategy issue. they have not catered to a value seeking consumer. lisa: suddenly it matters how efficient you can be and the small execution misses to the bottom line. coming up, joyce chang, tom mackenzie, tom for sally -- percelli as we wait for the doubleheader of retail sales and jobless claims. good morning. ♪

>> the truth is the economy is doing great. >> what we need to see is continuation in terms of inflation easing. >> the fed and the market are comfortable that inflation is

down. >> we do not want the fed to be cutting rates too quickly. >> the fed is an ok place. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. annmarie: walmart-- lisa: walmart earnings and then more coming up. retail sales as well as jobless claims. welcome back to the third hour. annmarie, lisa, and dani. jon is off right now which is a good and beautiful thing and he will be back on monday. after getting walmart earnings that seem to defy some gloomier prognostications about the economy. dani: the ideas if walmart is doing well consumers are trading down but you are seeing a walmart that is investing a lot to complete -- to compete with amazon and offer value products. that suggests a walmart capturing consumers willing to spend.

they are just being more discriminating. lisa: this raises this question and something we have been talking about a lot, how long does a bifurcated consumer mask underlying weakness or is this a multi-cylinder economy that keeps pumping in different ways to keep it afloat and keeps the overall data points giving a muddied and unclear economic risk. annmarie: we need to listen to the fed meaning that we put more emphasis on what is going on in the labor market. we have seen a higher unemployment rate. goolsbee is leaning into that and we heard it from rafael bostic. lisa: from austan goolsbee overnight we heard in an interview with the bloomberg news team, "it feels like on the margin i am getting more concerned about the employment side of the mandate." he called current rates restrictive stance that is appropriate if the economy is overheating. from rafael bostic, saying that

he needed more data to be absolutely sure that inflation is coming down before cutting rates. today the financial times says he is open to a cut in september saying that the fed "cannot afford to be late." dani: the good part is that so many people will cheer this and so many people say that it is a risk of cutting too late and not cutting too soon. the other concern is the institutional one, that the framework does not make sense that you could have one cpi print allowing for the switch but maybe it is a market that lead them into this position which is pricing in so many cuts. for most people they will just take that the tone is changed. annmarie: it goes to the criticism of the fed is they just want more data it does not matter what it is. lisa: to confirm a viewpoint after they got burned with transitory and then it being a little bit too late on certain points. it is a valid point, at what

point do you have enough data. the market has enough data to go off of to climb back toward record highs. and to eke out gains to really mention that seems like distant memory for so many people. a .10%. the nasdaq leading the charge and we are not seeing that outperforming which is notable given the fact that we are seeing strength with expected rate cuts. the euro eking out flat and near the highest levels going back to january 1. the 10-year yields are higher but stable. this is coming with good news and assumed rate cut by the federal reserve. coming up joyce chang as the s&p 500 now just under a fifth day of games. why the labor market is decided -- is the deciding factor. and matthew miss ken on how great cuts could ramp-up more than expected in 2025. we begin with stocks higher as

inflation data boost cut bets. traders boosting in a 25 basis point cut. joyce chang seeing a more aggressive path writing "we expect the fed to speed up rate nord a lot -- normalization to speed up to 100 basis points. with frontloaded cuts of 50 basis points in september and another 50 in november." she joins us now. i could barely get my words out because that is a bold call especially at a time where it does not seem like the economy is falling off a cliff. does that make you rethink or are you doubling down? joyce: for the next six months the path is clear. it is a combination of inflation being lower and the supplies side effects taking hold in the u.s. but also the employment numbers. we are seeing a disconnect from the rest of the world. we are not seeing lower wage inflation as in the u.s..

i think that the fed feels there is more scope. so you could still have this reset in 2025, but the combination of the disinflation trend that we have been seeing along with the employment path means that they feel more comfortable doing something more aggressive and that is what the messaging will be going into jackson hole. lisa: i could just hear the former managing developer at barclays screaming at the screen, and what you -- what are you talking about, there are economic profits accelerating for the other 400-9300 -- 93 companies in the s&p 500. how can the fed justify cutting by that much at a time where they are not seeing that kind of weakness? joyce: not off a cliff but you will see a synchronized slowdown. we are going into a recession. the recession risk, 25 to 35% is

where we are at. we have growth slowing in the u.s.. the best of the u.s. growth story is i think behind us. it is not a recession. we do not have the conditions for a recession, do not see the credit market stress or the profit margin compression. we see no energy. we had the earthquake with the carry unwind and it is settling down. i do think that there is scope. we had been easing programmed in. but there is scope to go aggressively just seeing the combination on nation and also on the employment questions. dani: for people who do not expect aggressive cuts one of the refrains they will hear is that they will signal something they do not into. cutting 50 basis points signals that something is falling off a cliff. for messaging they will not want to do that.

what do you make of those arguments? joyce: there are a number of things to look at. the effects of easy financial conditions and the market conditions themselves and the economic data. what you are seeing is the question on the low volatility period over. you have people in this carry trade for two years. about 70% has been unwound. there is also a messaging on the easing financial condition playing along with the economic data. and the market still has actually settled quickly. i think that this is part of the questions that we are getting from a lot of the investors right now, how do we look at market positioning versus fundamental data. annmarie: when you feel -- when you see people like rafael bostic change tune within 24 hours does this say how data dependent the fed is? joyce: that is why you can see more of a reset, he saw a

recession risk at 45% is where we had it previously before. what you are seeing is the supplies side effects on inflation are taking hold in the u.s. in a way that is more profound. we are not seeing the same tick down where with wage inflation. i am pretty comfortable that you are going into a peaceful easing going into september. annmarie: the idea that this is lowball, that is very important for the dollar because we are saying the dollar has been weakening. but globally you are seeing relief when it comes to inflation. how do you see the interplay between the two of the ability of the u.s. to cut rapidly enough that real weakness comes into the dollar? joyce: i do not think you will see real weakness carried you have a synchronized slowdown in growth, i do not think that calls for dollar weakness.

but, the dollar appreciation trend might stop. i do think that you are having more of an impact on emerging markets. latin america could ease more aggressively than forecast. everybody is reversing the talk on brazil hiking rates. and then a lot of these bearish positions, there are a lot of questions on do we keep those positions on. i would not say dollar weakness but i look at the emerging markets currency is and it is the growth differential with europe and china. you are seeing the u.s. exceptionalism still there. annmarie: the former president is actually talking about wanting a weaker dollar if he gets elected. how are you thinking about politics. you say peaceful going into september. my world is nothing but that. joyce: 2025 holds a lot of risk. if you look at tariffs being the core policy that means more

dollar appreciation. when we have looked at the numbers look at if you are just looking at 60% tariff on china, is that another 1% higher on inflation, is it another 1.5 higher on inflation if you are looking at the 10% universal tariff and five to set -- five to 10% appreciation. there is a desire for a weaker dollar and a contradiction on what the tariffs would mean. annmarie: you have the call on the most likely outcome of a divided congress. is that the best case scenario? joyce: the financial markets will be more comfortable if it is a divided government. there has been more concern about how much could change under executive authority, a lot of the trade and immigration does not need to go through congress. i feel like particularly when you look at things like the outlook for the fiscal deficit, the divided congress is where the market feels like they will be more checks and balances.

lisa: i wonder how uneven this positioning has been. the earthquake that lasted all of one day in the markets last week and it highlighted the leverage in the system and we were talking to investors saying you cannot wipe that out at the end of the day and you cannot get rid of how lopsided the investments are and -- in certain tech companies are versus the rest of the market. how much needs to get unwound before you can get aggressively bullish? joyce: we said how much more need to see the markets getting back to a 2000 were -- 2015 or 2016 level. they set an 8% correction. we think a lot of this momentum has come off and this is more of an unwind and momentum flush. i think the low volatility period is behind us, even though we are getting higher and very low volume after having a big

selloff, i think it is behind us and that the impact of the easy financial conditions is something that the fed is spending more time monitoring, not just a dual mandate but how is the market looking at this. lisa: 18 minutes until jobless claims and retail sales and i want to circle back to the idea of how the fed justifies a 50 basis point rate cut next month. we are looking right now for jobless claims that are still kind of not particularly elevated. what would we have to see that they could hook onto justify 50 basis points without spooking markets that thanks that the economy is really ok? joyce: you can justify 50 basis points right now with the inflation numbers and unemployment numbers. i do not think you will see a pirate -- private payroll group go below 1%. i do not think you will see a massive tick up, but we have

seen a combination of her wage inflation coming down and the numbers see -- being weaker and expectations along with the expectations. i do not think you need more beyond that. just printing below 3% on the inflation number was something that people did not think what happened. lisa: wonderful to have you. it has been too long. we are expecting 235,000 initial jobless claims up from 233,000. we will get that read in 60 minutes. let us get you an update on stories elsewhere. this is your bloomberg brief. >> shares an old tub beauty are surging 11% after berkshire hathaway added a small stake in the chain during the second quarter. buffett also added to a stake in serious us -- sirius xm which is up nearly 7%.

bloomberg radio provides below -- programming to sirius xm. hurricane ernesto is making its way towards bermuda after leaving almost half of puerto rico without power. they say that ernesto could strike early saturday. this develops days after debbie finished its move along the u.s. east coast leaving at least eight people dead. ernesto is the fifth named storm of the hurricane season. they have predicted and above normal season with as many as 25 named storms and four to seven major hurricanes. aaron judge becoming the fastest layer ever to hit re-hundred career home runs eating the milestone and a 10-2 win over the white sox. he hit the mark in his 955th game, 100 games faster than the previous record holder. judge has hit 43 home runs this season alone and is the favorite to win a second and bp award.

lisa: up next the morning calls plus tom mackenzie as apple looks to add a new revenue stream with a new device. that is next. this is bloomberg. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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lisa: people are feeling good ahead of the data points. initial jobless claims and retail shells -- sales. you can see the game continuing to increase up a quarter of the percent on the s&p 500. in crude it is higher up more than 1%. a key question on if this is reflecting geopolitical risk or economic confidence. first up, wells fargo raising

the price target on kellanova saying that the acquisition of mars has it heading to the stars. deutsche bank upgrading robin hood to buy and raising its price target to $24. the analyst sites near and long-term upsides. jp morgan adding dell to the focus list and raising the target to $160 citing an attractive entry point after a recent pullback plus robust long-term upsides. apple is pushing ahead for plans for a tabletop device that combines and i to have display with a robotic limb as it searches for new sources of revenue. tom mackenzie joins us. how is an ipad with a robotic limb changing their scenario? tom: they are trading at 30 times forward earnings and they need another product after they scrapped the autonomous car project to drive those revenues and justify that valuation.

this is one area that they are focused on. we know through mark that this is a priority not just for team cook but for members of the executive team. robotics in this product but a wider lead into robotics and a combination of apple artificial intelligence coming through across the hardware devices. and the combination of that software and hardware. the robotic arm or lamb -- limb and the i plot -- ipad platform. videoconferencing through home security. it might be creepy to some. lisa: alexa and all of these other devices are fun for asking questions and seeing how far they can push their limits. with respect to a robotic arm and combining it with artificial intelligence there is a dream that it can clean up after you but there is a bigger question which is how much does this underscore many ways that apple

is looking to deploy artificial intelligence and how much does it show the limitations of the hopes and dreams of this new technology to increase product purchase? tom: when you speak to people who have a few around the position of ai those say they have this touch point across tens and hundreds of millions of customers around the world in terms of their iphones that drive 46%, not to mention the ipads and the robotic arms that sit in your home. they have the hardware and devices and they need to map artificial intelligence and combined the two in a seamless way that engages users. it remains a question mark. we will have some answers on the first of this comes to bear. but forward-looking they need additional hardware devices to drive the revenues that have been flat the upside we saw in terms of sales numbers during the pandemic. they need to find the additional

catalyst to pair with the ai program and systems that they have. dani: there is a graveyard of companies and i mean meta attempting this with the meta portal. do we know what the appetite will be for this now? tom: and if you look back at some of the previous devices, the homepod have not provided -- have not competed as well. they have had other devices that have underperformed. the set top box does not sell as well as roku and other competitors. it is a valid question as to whether they can design this with the usability. we know the marketing team had question marks around this and we were talking about the consumer in sentiment. the marketing team are pushing sub $1000. we will see how that evolves between now and 2026 and 2027 or it is expected to be available in stores.

it remains a question mark into whether the consumer will buy into a project in this. annmarie: i would ask about the consumer in china given the weakness we have seen apple have in china. spent a ton of time in beijing. what are you seeing in terms of china trying to put in possess on their own national players -- emphasis on their own national players. tom: apple continues to hammer on the question of data security. they will need to emphasize that if you have one of these devices. would suspect, whether that is in the u.s. and china. that ties you around concerns in china about data collection in u.s. companies. and then on the competitive side as you have nodded to tencent, baidu, alibaba and others, particularly baidu had these home devices that you could interact with using some form of

generative ai in those homes. they come in at a very low price point. hard to see how they can on price and breakthrough on a consumer in china that has already invested these products with chinese brand names and concerns about data security being pushed by the central government. lisa: what i would do to look at somebody's kitchen 10 years from now right now. thank you for being with us. we are just about six minutes away from jobless claims and retail sales and that is the focus at the time where companies are creating things like devices that you can put on your table that have an arm or some innovations that we will see more broadly. a real question about how

vulnerable this market is to an upside surprise in jobless claims or downsize and retail sales. dani: you have to look at jobless claims that is a more important thing. lisa: i have mohammed's voice in my head saying listen to what companies are saying. if you want to get a sense of the economy listen to what companies have said. companies ca consumer with wallets ready to go at the higher and median kind of echelon. you have to wonder where markets will focus our energies at the time where the winners are taking all and some of the weaker players are struggling. annmarie: today it has to be about the jobless claims. last thursday you had a report that trended badly. walmart is saying they are

seeing a healthy and robust consumer and they had the prices -- they had to cut prices to get there. home depot are seeing a consumer that if it is a lot of money you might defer and wait for the fed. lisa: we are expecting 230 5000 up from 233,000, basically flat. we will rake that up next as well as retail sales and the increase of 0.4% after it being flat in the prior month. tom purcell he and matthew miskin are here to react to get their insights. this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is.

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lisa: here it is, the moment a lot of people have been waiting for. this is bloomberg surveillance and here is how the stage is set up. can see the gains across the board with the nasdaq the charge in the bonds phase, quiet after that massive rally at the front end. 395 -- 3.9531. this bleeds in pretty much that -- flat and we are seeing the highest levels going back to january. michael mckee is in studio with the data. mike: we have a noah's arc of data. that we have to run through including retail sales stronger than anticipated on a headline number up 1%.

if you look at the control group of .3%. down from last month but significantly higher than the .1 anticipated by economists. initial jobless claims fall 227000 and continuing claims are below where they were, unrevised. we will see what the revision says. 1,000,806 and 4000. last week's headline chain -- claims. a decline in those and import prices up .10. petroleum up .2. by year-by-year basis, we are the same. import prices not adding to inflation. finally, two other numbers. the philadelphia fed nags -- comes in negative seven down from 13.9 and we will have to see the underlying numbers. empire manufacturing, -4.7,

better than -6.6. given those two regional indicators they offset each other in terms of impact and i do not know if it tells us anything about what we will get from isn once we get to the beginning of the month. lisa: keep looking for those numbers. i am seeing the reaction as interesting today's combination of data that on the margins challenges how much the fed can and will cut rates next month. the stock world is good news is good news, especially with the russell 2000. it highlights that strength versus the -- bolsters the smaller players even with the potential for a rate cut. s&p futures up .6%. the russell 2000 up 1.5% even though you are seeing yields continuing to climb. dani: i think this challenges

the idea that the consumer is slowing down and there is technical -- cyclical weakness. the fact that retail sales came in at 1%, i mentioned the wide range, the high end was point 1%. not a single survey sought retail sales as strong as they were. it is not like the world is changing and it is covid and everybody has a ton of money but it is a different tone from what we expected a month ago with companies talking about a weaker consumer. lisa: through the front end of the yield curve you could see that that feeds into the currencies here as a reversal of what we have seen recently in terms of dollar weakening -- weakness which reverses sharply with dollar euro falling just a touch on the margins. you have been looking through the information, mike. what do you see? mike: if you miss it they did not get the whole strength of the auto sales business.

in june we had a hack of the auto sales data system and a lot of people could not process sales. sales were up point -- up 4% in july compared with june. that adds a lot to the overall number. the interesting thing is that just about every other category is up. see .5% gain in furniture. 1.6% gain in electronics is in appliances. building materials up .9% interesting with the results of home depot. food and beverage up and grocery stores up 1%. you see a little bit of this and the walmart numbers that people were switching out of what they are buying a little bit less and we do see that because you see a rise in grocery stores and decline in department stores. miscellaneous -- miscellaneous store retailers which include

the internet folks down .2% and then non-store retailers which is much more directly the internet folks, .2%. very small. food services and drinking places up .3%. if you want to look for a softening of the economy it is in the discretionary side. overall people are still spending. one other data point that i want to point out from the empire number, which does not get a lot of publicity. one thing that we saw that kept that negative is a big decline in hours worked. that is what you would look for if you were thinking the economy was slowing down. i do not see that necessarily and other indexes. lisa: stay close, he would love to hear your thoughts as you part -- parse through the data. bond markets are selling off and you are seeing good news is good news. joining us is tom porcelli, always wonderful to see you and

thank you for being here. what is your initial take. this would not suggest that the fed is behind the curve and they need to cut aggressively. tom p.: it depends on how you define behind the curve. i do not know if you are looking for notable consumer weakness today. but let us just you the fed -- use the fed's own forecast against them. what they are forecasting for the -- unemployment rate next year and what they are forecasting for the fed fund rate next year. the unemployment rate and inflation rate are -- you have that right now and they have 100 basis points of cuts. i would argue that you pull forward the slowing in labor and slowing in the unemployment rate. i think there is justification for pulling forward this 100 basis points of -- worth of cuts for next year. to me that is the right calculus of a. i would also argue that when you think about cuts, and again it

is not a part of the forecast. i have a lot of sympathy for the idea which is what the market is pricing in. i think what we have to keep in mind is that even at 100 basis points if you cut 100 basis points the fed is restrictive. that is the interesting thing. policy is calibrated for a meaningfully higher inflation rate and for a meaningfully lower unemployment rate those have moved. annmarie: that said -- lisa: that said if this is restrictive why are you seeing an acceleration of retail sales? matthew: what i -- tom p.: what i would say is that there are so many buffers in place. when you think back to how that started, all of the fiscal stimulus and excess saving, the idea that there was a wealth effect because home prices were rising a lot, this made people exist in this feel-good environment. and i think that really propelled consumption in so many

ways. i would argue that the hikes that we saw, the aggressive tightening cycle did not have a chance to clampdown because of the extra factors in play. but i would highlight that you are starting to see delinquency rates on the rise, modestly but on the rise and you are seeing the unemployment rate rising. it is relatively low but up .5%. you are starting to see the tight policy show through. dani: it is the idea that you are not cutting to react but to get us in the right place. when you think about rate cuts what is that line? with projections 100 make sense but is that looking like a recession? where is the cutoff? tom p.: it is an important idea and i think that when the fed starts cutting, classically it is like it is over, the recession is here. i do not think that that is what it is. the narrative should be we are

looking to extend the cycle and expansion. the fed has an opportunity to shift the narrative and i would argue that they are starting the process now. when powell focused to labor over inflation, that is step one in the next step is that we do not think that things are slowing in a notable way but we recognize that the policy is calibrated for a different regime than right now so we can take that. dani: raphael bostic is starting to recalibrate. if that is a case and they will message that this is not deterioration but landing the plane. how do they do that before the u.s. election? tom p.: i love this question and we have done this analysis as many others have. we just went back to 1984 to get a nice round number. we looked at every single election from 1984 through today and see is that history that

modest history is littered with examples of the fet adjusting policy during election years. not just during election years, but in and around the election month. all they needed was the justification from a data perspective. and i would argue the end employment rate being up as much as it is an inflation being down is your justification. lisa: how do we know that it is not headed in the other direction and that we already saw the slowdown because jobless claims are going down. you see walmart increasing its expectation and company is doing better out of the 493 halvor -- other than the magnificent seven and accelerating earnings. how do we know that we will not be turbocharged by rate cuts? tom p.: super important question. walmart is maybe the exception to what is going on broadly. we know from other retailers that they are starting to feel the pressure of the consumer

that is really looking for value. and if walmart is the value player than it makes sense that they performed well. i did not look at the numbers directly but they did pretty well. that is important. but i think that this is my point. i think let this continue to rollout. let the economy continue to expand by removing the aggressive tightening. i do not know that unless you think that inflation will re-accelerate the four handles which is what this policy is calibrated for, the fed can feel comfortable that all you are doing is taking back the aggressive things you do not need anymore because inflation has slowed. i will make this point, when you think about inflation just think about labor. the unemployment rate is up but in combination with that the hours are down and mike mentioned that earlier. broadly speaking hours are down and wages are down. quit rates are down. the consumer is not feeling that worried about labor.

if you think about the thing driving from a consumption perspective it is the unemployment rate. it rises and consumption tends to slow. lisa: what would you have to see in september to change your view? tom p.: you need a dud. i do not know how you quantify that. i acknowledge that. you need a number that has been worst condors than the one that we saw last and last report. you get that that is the justification for going 50. lisa: always wonderful to see you and thank you for being here. if you are just joining us jobless claims came in below expectations. people were looking at some sort of increase. 227,000 versus 233,000 the prior week and we are seeing retail sales divide -- the file expectations versus 0.4%. markets are seeing good news in equity markets and bad news in

bonds as people retrace expectations. joining us now is matt. what is your take away from these reports? matthew: we will get another opportunity to embrace bonds as a backup. and frankly we think the dollar seems to benefit the rebound after a lot of weakness. over the course of the last week we have seen eurozone do worse but the euro has been crushing it. the dollar cannot seem to buy right now. lo and behold we have strong retail sales and initial jobless claims down 227,000. the music is playing and high-yield spreads will contract and for now good news is good news. lisa: can i ask, do you think we would've seen this reaction up 11 basis points in the strength we were talking about and the small caps up 2%. do you think it would have been different if it was not august in the middle of the summer and we were back at the trading

desks? matt: i think it would be. we are back to good news is good news in our view and moving out of the really conundrum type market responses where it would be like this is bad news all of a sudden rates are lower helping small caps. good news is good news for growth. it has been really messy from a macro standpoint because you get this long treasury rally and small-cap financial is doing well. that is a weird mix. but now we are seeing that longer data yields are coming down and it is not necessarily good for growth and defensive equity. if you look at the guts of the defense session of the market it is defensive equity is. it is good from our perspective and that it makes sense, it is logical and for investors that is a good thing for their portfolios because that makes a lot of sense. dani: one of those things that

people have cheered is that bonds can act as a hedge in the correlation is broken. you see stocks up and bond prices down. if we are not in a recession or worried about growth is that interplay a hold? matt: we think it does and frankly you have hot -- you have had a lot of guests on and we are hearing all of this cut talk and for us it is overly optimistic looking at 50 basis points per meeting through the end of the year and 100 basis points. we would look for more cuts into 2025. we are not trying to get cute. the bond market will see volatility and we would in brace intermediate or higher-quality bonds where we think we will get more returns. for now just get the income, you will get 2.5 in income.

just be happy with that. and then more returns. in the meantime we think the dollar gets a nice balance and you think that get some of the rotation out of the dollar overdone and that is what we look at tactically. annmarie: at the moment the market is not trying to be too cute with the fed pricing in less than 100 basis points 2024. what are you expecting in the totality of cuts for this year? matt: three, or a quarter per meeting or maybe a quarter basis point -- a quarter of a percent, .25 and and maybe another one. we skip november and go to december. it is the beginning of the cycle. either way they want to put it will be bullish over time. we do not think that right now the economy is screaming for the rate cuts. we have had people come on asking for a 75 basis cut on the back of not even a 10%

correction. we think that is overblown. just be patient. let -- we do not want the politics getting in the noise. you get an opportunity to brace bonds we would take it. we want that right now for investors as we set up a 2025. lisa: i feel like you are having this conversation a lot with clients. they say is the fed coming into rescue us? matt: yes. we talked to clients and investors all over the country and most are bearish, the recession is right around the corner and there are $6 trillion in money market. last year the most popular investment was cash. this year it is bonds. investors are conservative and what we are trying to do is if you like the yields in cash of 5.5%, let's lock that in for five years in relatively high quality bonds and a modest credit bias, mostly investment

grade paper and let us get you that for the next five years and then we can talk about equities and look for opportunities let us make the decision first. annmarie: if you want them not to be bearish is to show them the data today and the market reaction. we have been talking so much about positioning. after the past two weeks of the fears of what the leverage was in the system and how it gets washed out. here we are not talking about it at all or the fundamentals. do i in your clients to be worried about positioning and potential leverage within the system? matt: we think you do. risk management is always important and relevant. right now we are seeing a relatively conservative position with a lot of cash on the sidelines. we are just trying to make thoughtful risk management decisions where we are saying in a portfolio can we make sure we

get attractive income four years from now and can we make sure that equities are higher-quality, have access to great client sheets and high equity growth. if we could stick to the quality parts of the market we think that it will reduce the volatility and reduce downside risk. lisa: thank you so much, as always for your thoughts. michael mckee has been looking through all of the data points. what stands out as you parse through? mike: with retail cheryl's -- sales it is the shrift -- safed into discretionary to staple spending if you expect the economy to be slowing down and it is distorted somewhat by auto sales because of the shutdown of the internet in june. the other things that stand out are that when you look at the jobless claims numbers the biggest declines over the past week were in texas and michigan. it shows that it was these know factors.

the hurricane and the plant shutdowns. so we were back to where we were before july. and the last thing i would point out is that in the philly fed number like the empire number, hours worked went down. you are looking at weaker manufacturing and companies cutting back on hours and not people which reflects a slowing economy. lisa: thank you so much but let us get you an update on stories elsewhere. >> let us recap all of the data starting with u.s. retail sales advancing by more than forecast in july waking to a brazilian consumer even in the face of high prices and borrowing costs. sales advanced among -- above the median estimate. initial jobs claims fell for a second straight week at 227,000 despite a recent pullback in hiring. shares of walmart are up in the premarket up 8%. the company boosted its sales

guidance as the retailer looks to attract shoppers searching for deals. the cfo says aca consumer that continues to be value seeking but they are not seeing any improvement -- incremental praying. they expect net sales to rise as far as .4 after previous guidance. they also lifted the target or operating income and profit. for some employees remote work is ok. the newly appointed starbucks ceo will not be required to move to seattle he joins the company. the coffee chain is setting up a remote office 1000 miles away in california where his former employer is based. he will receive a $10 million bonus for joining the company and an annual salary of $1.6 plus eligible for annually equitable -- annual equity awards up to $23 million. lisa: great work as always.

up next setting up for the andy of the week in the week ahead. this is bloomberg surveillance. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

lisa: good news is good news for equities after a retail print that came in above expectations and a jobless print below expectations which turbocharge the s&p. there are also gains to the two year yield up 14 basis points. counting you down to the opening bell. here is the trading diary. tomorrow housing starts and building permits at 8:30 p.m.. university of michigan sentiment plus morse -- more fed speak. next wednesday we will get fed minutes at 2:00 p.m. thursday another round of jobless claims was tested -- s&p u.s. pmi tomorrow.

noel dixon of state street and katerina of morgan -- of morgan stanley. i got to say today was interesting. and i am wondering what your main takeaways were because for me it is that the retailer and consumer is still able to spend the economy is falling off a cliff. dani: i think we under appreciate the strength sense the retail number just beat expectations. it is that walmart has a good strategy. and then the pockets of weakness, a little bit of confusion where mike mckee talks about people spending on staples and discretionary. it is all good but every tiny the look is something not great. annmarie: it is noisy but it does feel like a normalizing feeling as people are going for more staples and not discretionary. walmart cut prices and they are still seeing people coming into the stores. i have to say that the harris campaign is trying to sell price gouging and this will not work. lisa: it depends on who the

target is. what the details of that is. when you take a step back what i find notable is that i see people saying the fed will be justified by cutting rates 100 basis points even with a jobs figure coming in with health and retail sales expanding. we are there from joyce chang of jp morgan. the key question, how do they message that. we will be talking about that tomorrow.

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matt: futures really hard. katie: bloomberg open interest starts right now. matt: stocks soar, eels jump across the board after higher than expected retail sales .28 resilient consumer. on the earnings front, walmart raises sales guidance as it expects to draw shoppers hunting for bargains and following the big money, top investors

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