>> the time has come for policy to adjust. >> we are more vulnerable. >> no question it is strong. >> people it moved violently in terms of the narrative of their economy and with the fed should do. >> i need to get a move on. i wish they started it earlier. >> this is "bloomberg surveillance." jonathan:: chairman powell on friday. the time has come. my from new york city this morning, good morning. for our audience worldwide, "bloomberg surveillance." . stocks just short of all-time highs on the s&p 500. your scores look like this. future slightly positive. russell, small-cap.

jackson hole and wyoming, reads as follows, we don't see -- lisa, that was the big one. lisa: he added the slowdown in the labor market was "unmistakable." this is the reason why to me the key data point economically this week will be the jobless claims on thursday. what we're looking at is a moment where maybe they tape a point of penance is not really happening. any kind of shift, in a perception of the labor market will quickly move the markets to believe the 50 point basis cut is in the offing. jonathan: sitting on the table anticipating that speech, looking back to 2022 come the speech about the central bank focused on getting inflation down. not paying much attention to the labor market because it was strong. i think without two years later we would come back with a focus

on inflation and the labor market. on friday, nailed it, fed seen as a single mandate central bank but with a crucial qualification that it is now focused on avoiding car on a planet rather than lowering inflation. -- employment rather than lowering inflation. lisa: you felt that in the terms of the words jay powell use. he was talking about inflation, inflation and this time labor market, labor force, etc. there is a feeling here, research presented, this is the federal reserve that needs to get ahead of material weakening. they did not talk about is a must is important as what they did talk about. they did not talk about sacrificing 2% target for some sort of labor market security. i think that was the take away for a lot of people who see any downside surprise in the labor market is going to cause real turbocharging of the rate cuts. jonathan: jobless claims.

you hear a lot about september 6 payrolls report for the month of august. the estimate so far with five estimates in our survey at the moment, that is going to build but 160 is the number at the moment. if you're just joining us, welcome. let's start with equities, futures on the s&p 500. a little bit firmer. bond market, 3.78. weak data out of germany we can talk about in a moment. lisa: we get some inflation data out of europe. i am curious to see whether the ecb tries to match some of the expectations we have seen. more later. the key won't be the initial jobless claims on thursday. the other key data point is going to be wednesday, nvidia reporting earnings. the company has not missed estimates in the past seven

quarters. we are primary daly today -- we hear from mary daly today. on friday, we get those pce data points which will be important. a lot of people already expect what it is. spending for consumers. the take away is going to be how much do we end up with this idea, frankly, former vice chair put well. the fed likes to say it is data and not data point dependent, september 6 likely significance and the 25 versus 50 discussion at the next meeting. jonathan: sales are massar. we will get a few answers to questions. coming up -- stocks looking to build after to exhibit gains as

traders assess the size of a separate cuts following jay powell's dovish pivot and jackson hole. since my preferred path was 25 or even 50 in july with a deposit september, i should probably lean toward 50 but i cannot. peach come how big is the september 6 payroll report -- pete, how big is the september payroll report? >> i think adp will take on a bit more of a meeting -- meeting for markets. adp was probably more than anything on an fp. i'm wondering, what would have happened or where would we be now on rates, markets had we had accurate job numbers instead of having to revise them down by 800 15,000? but we are where we are in we have to live with it. i think we will watch adp. i think people are trying to figure out what is the state of

labor. i think it will take a little more weakness or -- they have been slow to move. yes, he pivoted but i think 25 is what we get unless we get almost negative payrolls. jonathan: i love your thoughts on how we would respond based on what you just said. are we more inclined to put weight on weak data and ignore strength? >> i think we are. if we get strong payroll data, we're definitely not going to zero in terms of rate cuts. 25 is locked in. if we get a strong payroll, it will get revised. i think we more susceptible to a weak print. people are trying to they're going to look at adp. even jobless claims, people are going -- we can't trust the establishment headline the day it comes out anymore. lisa: i love you go to adp

because a lot of people say, how do we read this. typically when the fed started cutting rates, it was pretty negative for risk assets. that is been the consistent theme. do think this market is underpricing the risk that it might not be as positive as the fed is hoping? >> we have become too conditioned to lower rates automatically good for stocks. to me the big case is going to be -- we wrote about the fed plodding along. the fed is going to be slow to respond to market conditions. i think that happened in july. we are now pricing in eight cuts in the next eight meetings. that seems too optimistic from the fed unless the data is so awful. i think rick -- risk assets -- they're going to be determined one by nvidia, a huge earnings report and if you look last week, we had all of this back and forth. have percent, 1%, up, down, all

around. we are at the mercy of -- more more people are talking about the rebalancing of these leveraged etf's and more single names. the market is sloppy to trade right now because of that. lisa: before we go to nvidia and the earnings on wednesday, there is this question of what the consequence of some of this choppiness, lack of liquidity really is. is there any bigger systemic type of consequence to the chop we are saying that is expected to continue? >> i think what we saw in the early part of august is what we will start seeing more and more of. these gradual and better than gradual, fairly rapid moves higher but really rapid moves lower. i think you will have to play around that if you're trying to position your portfolio. you're in an era take some profits, as we went from bearish

to bullish, but because these downside moves i think will be sharp, dramatic, accentuated by the leveraged etf balancing, complete lack of liquidity. that is my gameplaying. relatively small position size, take chips off the table, set up for these rapid downsized moves. jonathan: let's talk about where leadership has been over the last weeks. small caps, regional banks up by more than 5%. when you say take chips off the table come are you talking about those parts of the market? >> you want to take the chips off the table in the nasdaq 100. i like the banking sector. i think you're starting to see the russell 2000 you well. i can see commercial real estate doing well. companies left behind. this has been for at least a year or longer, momentum has been the one factor that has worked well. i think we might have the case

to see momentum start building and the russell 2000 type stocks. if the momentum develops -- something a little more sustained, start driving and given the nature, i think you can see a nice run into small caps and the banks. lisa: wednesday we get nvidia earnings. the expectation based and option something like a 9% move. we have had seven straight quarters where they outperformed come upgraded forecast. how vulnerable is the market given how big it is? >> i think it is more susceptible to the downside move than upside. it is great. stocks can go higher. but i feel like selling pressure -- people selling rallies right now. if you get a downside move, it could be pretty aggressive. it will impact the indices. we are having to try to adjust how we think about -- when 50%

of these indices are five to 15 names, that is too much. they don't behave as passive. because of one stock, has a rapid ripple effect. russell 2000 would not be as impact about that ripple effect. jonathan: one final question, can we ignore dollar-yen now? >> i think that was overstated. i think you want to keep an eye on it. maybe if it breaks through below 140 it becomes an issue. i felt like at the time, like the bogeyman, everyone was talking about it. i don't think it was as prevalent as it was. this is more about the ai story and the economy and how bad or good jobs are and how quickly the fed can respond. i'm not paying that much attention to the yen. jonathan: dollar-yen down 1.3% of friday's session. lisa: we saw a massive selloff in the dollar.

it cause george at deutsche bank considering his strong dollar call. it has not been disruptive to the risk trade and that signals maybe we have shifted out of this yen carry trade unwind, although some are talking about the five hole in their pockets. the bogeyman can come back. jonathan: we will see. equity still doing ok. let's take the opportunity to get stories from elsewhere with your bloomberg brief. >> china and the philippines are trading blame after a chinese costar shipped collided with the philippine vessel in a disputed area. manila claims its aggressive and dangerous maneuvers from chinese ship sank it fired water cannons. -- saying it fired water cannons. it is fueled tensions between the regions. bitcoin touching six to $5,000 for the first time in about three weeks earlier today.

the rally triggered by growing demand for bitcoin etf's is the federal reserve signals it is ready to loose monetary policy. the cryptocurrency advance more than 7% last week, the sharpest increase in a week since may july. boeing facing questions over the future of its starliner program after nasa train to spacex to return two astronauts stuck on the international space station. nasa announced the decision after weeks of testing and debate over boeings faulty spacecraft. the astronauts will stay at the iss for about six more months before flying home in february i spacex. the test flight was originally intended to last about nine days. jonathan: thank you. we will catch up with guy johnson out of london and the next hour. i can't believe the story is bigger. two astronauts stuck in space meant to be there for nine days and will be there for months?

lisa: can you imagine? they thought they were coming home next month and it's like, just kidding. just stay up until february. jonathan: when my flight is delayed two hours. six months. lisa: there is more to that story. it is interesting. jonathan: -- vice pres. harris: he intends to enact what in effect is a national sales tax, call it a trump tax. >> this whole thing kamala harris dead where she made a bunch of claims about what would have -- did where she made a bunch of claims about what would happen and not what has happened. jonathan: coming up, good morning. ♪

♪♪

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equities up this morning. yields lower a single basis point. finding taglines that stick. vice pres. harris: all the while he intends to enact and affect is a national sales tax, call it a trump tax. >> there's this whole thing harris did where she made a bunch of claims about what would happen and not enough actually reflection on what already happened. donald trump was already president. he used harris to bring manufacturing jobs back to our country and i think you'll do it again. jonathan: republicans shift to the first presidential debate september 10. "the debate and the run up to it very likely defines the race. trump's is obvious. it is his turn to play spaghetti politics and find a taglines that night and now him to gain some momentum."

september 10. there is a bit of tension between the trump campaign and abc news and the question mark as to whether that is going to happen at all. what is your reaction to that? >> i think it probably still does. you get a situation at bottom where trump withdraws from the debate based on some real or imagined slight by the news network. he looks like he is pulling out and won't want to face harris. i don't think that is the case at all. jonathan: it is a big event for both of them to define each other or attempt to. talk about the best case, how things have changed for you in the last couple of weeks? >> harris i think is about 60% likely to become president. i think the momentum, the aspirational nest of the thing and, frankly, the appeal of the new as opposed to the dreary, last decade that we have had -- i think that is how voters are

increasingly looking at it. i think that kind of carries her. and you see trump on the defensive not really able to land a lot of punches. vance makes my point, he talks about the mechanism of how you should see this race rather than making a case on policy specifics. if you have to argue the chairs on the titanic deck, or losing. lisa: if they're trying to make an argument on policy specifics, they're having trouble because we haven't really gotten policy specifics. that is been one of the criticisms that this is a vibe-driven type of campaign and it really isn't heavy on details of policy. is that landing with undecided voters? >> i don't think that matters to undecided voters. undecided voters by a large care about what the candidate says that he or she is going to do. they are not really interested in the policy superstructure

underneath or the specifics of any of that. they care about priorities, results. if they think the candidate can deliver those, that is good for the candidate. lisa: what is striking to me, i was wondering over the weekend and listening to both sides, trying to frame the arguments and thinking about whether this could be a vibe-driven election cycle, you point out it is likely one half or more of the potus balance get casted early. 60% cast their ballot not traditionally by mail and/or before election day. how many people do think will cast the ballot before anything materially changes, potential before the september 10 debate? >> there will be of aggression to do that. both parties, particularly democrats, have structures in place to try to encourage that. you are right, the statistics i cited were from the census bureau and even if you knock off a little for the fact 2020 was the big covid year, let's say

roughly half of those votes get casted early and nontraditional, meaning by mail, sense. what you've got is a situation where the vibe can turn into vote early and that is exactly what the democrats want to do. jonathan: what you will see is a head-to-head number and then you will see a number that includes the party candidate. rfk stepped down. what is your sense of how that will influence the numbers in the polling in the weeks to come ? >> i said right out-of-the-box i thought kennedy leaving the race wasn't going to make each of a difference. his numbers went way through the floor over the past couple of months. that is something i anticipated. my assumption is, i will be interested to see the polling, one of those went home to harris. secondly, anybody that ends up going to trump doesn't give trump a particular bump, it is

writing the ship a bit to compensate the people that already went home to harris. secondly, i think kennedy is in a situation where even in the swing states, he doesn't bring a lot. other pollsters who have been looking at this -- nate silver, for example -- show there is something like 0.3% that go to trump. not a big number. thirdly, parenthetically about the polls, we have not had a pole that registered public opinion since the 21st, a week ago. we are waiting for the harris bump polls, number one. number two, we are waiting for likely voter rather than registered voter polls which will give us a more distilled idea of where the electorate actually is. jonathan: still waiting for a sit-down interview. do you are never the vice president that she would get something scheduled before the end of the month? what has happened with that? >> i think they will dodge that

as long as they can. they will do the things they need to do that check the box have a live interview and are as controllable as possible. so that probably means a friendlier network than say bloomberg, for example. you're in a situation where -- she is not going to want to be asked a lot of hard questions. she doesn't have to answer a lot of hard questions. she won't want to and won't have to. he much the end of it. lisa: we were talking about the spacex question over the weekend. nasa astronauts will be taken back by a spacex spacecraft rather than a boeing one. it comes at a time when camel harris is in charge of the space program. how do you view some of the policy decisions like dodging any potential accident through

an election lens at a time where any misstep, any sort of exhaustion is type of development could derail some of the vibes they seem to be trying to ride. >> i don't think that is out of left field at all. the confidence of the federal government ought to be a much bigger issue than it is, no matter who is in charge of it at a particular time. that is a double-edged sword. you can go back to covid and say anything you want about covid or dr. fauci or anything else and trump was the president at the time. this could be prosecuted both ways. the confidence of the federal government is -- competence of the federal government is a significant problem. harris share some culpability for that as you point out. but i think she will dodge it by a large because people other than her, bureaucrats, are going to be seen as the decision-makers. jonathan: are we not friendly? >> when i said that i thought --

lisa: you don't like us? we are not nice? >> you all will prosecute that fairly and without fear or favor. jonathan: we ask questions, which is probably why that interview wont happen. terry, thank you. i have a policy suggestion for everyone. legislation just come into effect in australia. shirley and's can legally ignore reasonable after our work calls and emails under this new legislation under the laws employers face fines of $263,000 for getting in touch with an employee -- up to six to $3000 for getting in touch with an employee. are you for it? lisa: what is essential and nonessential? jonathan: i'm waiting for the courts to work through this. it will happen pretty quickly. get that first email and, nope

was not call your lawyer. lisa: i would like to see how this gets carried out. i would like to see due process of reasonable versus unreasonable. jonathan: coming up, tensions mounting in the middle east as israel takes out thousands of misle -- missile launchers and lebanon. the latest reaction from norman roule. ♪

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♪ >> the right to disconnect. the australian prime minister, these words are very popular. many australians argan frustrated that they are expected to be on all of that for 24 hours a day and as a mental health issue, frankly. lisa: i think a lot of people will. there is a balance between efficiency and quality of life, and getting that balance correct is the right way to go and question is how do you achieve that balance? jonathan: how does this work on wall street? lisa: what business want to run somewhere where they have to pay $63,000 if they say one about that deal? i think it is coming up for expiration today. jonathan: just doesn't work in practice. lisa: it's efficiency, it is a lot of things. jonathan: politically pandering to the electorate. lisa: i'm not going to be so

skeptical. two tents on the s&p 500, futures with a list. the nasdaq up by two tents of 1%. the nasdaq 100, a third week again last week. it's been a while. the front end of the curve were all the action is, a double-digit percentage basis -- basepoint move in last week's sessions. we are down by about two basis points on a 10 year, down by half a basis point today. the whole curve, just dropping following the words from chairman powell. lisa: fed chair jay powell was notably dovish even against expectations. he didn't seem to talk about measured pace of rate cuts. he seemed to open the door to bigger rate cuts. and frankly, one conversation i thought was particularly telling was the former cleveland fed

president who said they may not start with a 25 basis point rate cut that doesn't mean they won't go to one at the next meeting they don't want to start babe. that doesn't mean they're not going to go big. that is of the market is starting to price in. jonathan: they said they are not data point dependent but ultimately this whole conversation is data point dependent. september 6 payrolls. most people agree with that. lisa: the bar is pretty high. this is something we heard also from the philadelphia fed were the same 25 is probably it's because they don't want to move the markets even more. but again, that goes to this question of are they going to signal 50 basis point avenue one? are they basically going to do it anyway? to this degree, palm mustache jonathan: what are we talking about? lisa: tom was very dismissive. he says people talk about 25 or 50, who cared on one hand, you're right. but if you go 50, the market is

going to pricing 200. and then i think is what they want to get to. jonathan: who was speaking on friday? with that the federal reserve chairman or was he referring to the consensus on the committee? lisa: that's a great question, and we do have betsy do coming up and she said interestingly, the rest of the commons reflected the fomc actions and judgments. jonathan: that's the equity market, the bond market. crude and the last 30 minutes or so. lisa, $80.75. lisa: there is this headline that caught my attention, that olivia easton government says it will stop all oil production and exports. this is the reason you saw oil pop. this is a debate over frankly, government rule. this is the central bank governor being threatened to be pushed out of office in the

region and in response to shutting down crude. to me it just highlights that we are also focused on what happened with lebanon, with iran, with israel, but it is not like the rest of the world is quiescent. not like the rest of the world's into the quiet. if there are some real struggles, you are seeing up early this morning. jonathan: one to watch, keep on the radar throughout the session. they change a pounds dovish pivot to jackson hole assessing the size and pace of potential rate cuts. we will hear from raphael bostic later this week as well as the san francisco fed president airee daily sitting down with michael mckee at 2:00 p.m. eastern time. see how much distance they like there is between chairman powell and the rest of the later on. nasa announcing it won't send astronauts home from the international space station on bowen starliner, instead tapping spacex to handle the mission.

the recovery is slated to launch in late september which would have the astronauts back on u.s. soil in february, months later than initially planned. what an embarrassing moment for boeing. lisa: and it comes after billions of dollars of losses tied to all sorts of snafus and hiccups in their space program. it real question now, soul-searching for the new ceo who coming into a whole host of problems. does he jettison the space program? and how much does the was government want to foster some sort of competitive process to ensure that there aren't the same kind of glitches and issues that keep astronauts in space for six months longer? jonathan: what a win for musk. lisa: and coming from in administration with some tense relations with him and i wonder how much he will view this as an all of which to him. i don't know if i'm reading too much into this. this is the reading through this and that was my first thought. i will say it highlights how they are going to safety above any type of allegiance or desired outcome because what

they want to avoid is some sort of loss of accrual which would be stash a crew which would be catastrophic for them and that is what they are really putting first. jonathan: more on felony little bit later this morning. let's turn to tensions mounting in the middle east. israel taking thousands of has full of missile launches and what it is calling you preemptive strike, saying hezbollah was about to fire thousands of missiles of northern israel out of the region, let's get to the story. what is the latest in what was your reaction to the news of the weekend? >> the way i've been describing this is a ds with tory escalation. we knew for a couple of weeks that has a latin planning retaliation for the killing of its senior commander. they had mentioned many times in the course of the last couple weeks that they retaliation, a revenge strike was forthcoming in the question was what shape or format that was going to take.

i the coco bonds and other iranian proxies, we got the answer this weekend. what we saw was in fact quite a limited and calculated response. in the end, has bulletin act alone. israel managed to intercept many of the rockets that potentially could have got fired israel same be intercepted thousands of rockets that were going to be directed toward central israel, but hezbollah themselves so they managed to successfully launch more than 340 rockets. but in the end it didn't sustained a lot of damage. there was one life lost on the back of it and they did not target any civilians. it was limited in terms of objective in nature, but from their perspective they are presenting it as a victory of some sort. later in the afternoon yesterday we get comments from the saying that phase one of the retaliation was over, they are and wait-and-see mode to assess whether they need to do more, but his message to the lebanese

people is you can relax now, which is very strange wording given everything that has gone on in the border in the last couple months. and i should say from israel's perspective, they did declare a 48-hour state of emergency but by the end of the day, the tel aviv stock market was actually up on the day. it does tell you that there is a sense of relief that this wasn't first or that was a broader engagement from the region. lisa: this is the reason why i was surprised with some of the headlines were threatened escalation rocketed with this escalation or de-escalation? >> that's why i've been calling a ds killer tour he escalation. the other the question that people still have is what does ron do from here? let's not forget that the same evening that he has a look commander was killed, you also have the assassination taking place in tehran. it was a very embarrassing event for iranian security and they

have since found to retaliate in some shape or format as well. interesting to hear from the iranian foreign minister this morning that he was saying if they do respond, it will be definite and calculated but they are not seeking to increase tensions and i think this is the operative word here. it does not seem like you're gonna want to get dragged into a bigger war, and that is one of the reasons the region at least right now seems to have calmed down just a couple notches from that heightened sense of alert has been on the last couple weeks. jonathan: somewhat counterintuitive, out of the region in by this morning. cross over to norman rule. at the police asked the right question and we got the framing to answer. with this in escalation or de-escalation? >> good morning. it was certainly escalation. anytime you have 100 israeli aircraft flying over lebanon and 300 rockets fired into israel, and normal time that would be an

extraordinary event. it has been de-escalated because each party does not see a conventional war. even the nature of the strikes which were limited to military sites in israel according to hezbollah and southern lebanon shows that each side is not trying to turn this into a conventional conflict. and even that is consistent with how this entire conflict has been maintained since october. no one is looking for a war. lisa: another way of asking this because this increase or decrease the chains of a cease fire? >> it has no impact on the cease-fire. the cease-fire is going to be an issue between someone with very little reason to release hostages since it impacts the and benjamin netanyahu, who has been repeatedly criticized by his own security establishment for not making the hostages as great a priority as the destruction of hamas.

there is no public evidence that the cease-fire talks will succeed, although diplomacy works best and they could be reason for optimism that are not yet made public. lisa: there also is this bigger question about the significance of whether the u.s. has influence over israel anymore. the degree to which it does have influence over israel. there was some suggestion that the u.s. was not aware of what was about to take place, was not a participant and had to respond by sending military craft to the region. what do you make of that in terms of the u.s. influence in israel? >> when you say not aware, do you mean the killing for the lebanon event? >> it's more a question of whether they understood what happened with lebanon over the weekend. >> there is no question the united states would have been completely aware of lebanese hezbollah activities, the nature

of u.s. and israeli intelligence relationship is extremely tight. and also, we have a vast array of military personnel in the region capable of monitoring hezbollah operations as well. a slightly that a geospatial and other intelligence collection methods were used to monitor lebanese hezbollah and we probably were aware of what was happening. jonathan: look at the tension in where we are at. tension continues between israel and lebanon the war continues. on the backdrop he referred from several of to have given us the impression that we are pretty close to striking some kind deal what evidence is there that we are getting closer? >> nothing public. then maybe something in private again but i think you're going to see that as israel closes down its operations in gaza or remove them to a lower level, the weight is going toward

lebanon, both to deter lebanese hezbollah and also to create security conditions that enable 60,000 israelis to return to their homes. >> norm, thank you, appreciate it. tension continues. tragic loss of life continues. we've been told repeatedly you're getting closer, that this was the moment to make something happen, to strike a deal around cease-fire talks you never know what is happening behind closed doors. you never know how close we actually are. but in public, we look as far away as we always have been. >> you could tell that iran and lebanon do not want a wider altercation ended the same time there is a real pressure the longer the altercation goes on gaza with domestic pressure. people who are seeing the news and getting very angry about. it is a very tense situation and hard to get a real hand on what is actually going on. jonathan: just to touch base

right now, equity features on the s&p posited by more than 1/10 of 1%. with your bloomberg green, here is yara. yahaira: germany's business outlook held at its lowest level since february. the iof out institute and expectations gauge dictating 6.8 in august from a revised 87 the previous month with expectations worsening in both manufacturing and services. optimism that germany would rebound in 2024 from two years of almost zero growth as stated as an anticipated jump in consumer spending failed to materialize in the country's industrial sector continues to struggle the firm behind the messaging app telegram has questioned the grounds for france's detention of its ceo is taken into custody in a paris airport over the weekend. the russian billionaire was the taint on suspicion of failing to take steps to prevent criminal use of the act. and dutch authorities fined

uber for transferring personal data of european taxi drivers to the u.s. and the largest penalty ever issued by its watchdog group against any company. the data protection authority set uber was collecting information such as tantalizing systemic location data and criminal and medical data and then retaining them in servers in the u.s.. uber indicated plans to object. that is your bloomberg green. jonathan: up next, the time has come. >> the time has come for a policy to adjust. the direction of travel is clear and the timing and pace of rate cuts will depend on incoming data in the balance of risks. jonathan: that conversation up next. you are watching bloomberg tv. ♪

♪ jonathan: live from new york city, looking for to long two weeks of gains on the 500, equity features positive by 0.15%. bond market yields lower by one basis point. under surveillance this morning, the time has come. >> the time has come for policy to adjust. the direction of travel is clear, timing and pace of rate cuts will depend on incoming data, evolving outlook and the balance of risks. it seems unlikely that a labor market will be a source of elevated inflationary pressures anytime soon. we do not seek or welcome further cooling and labor market conditions. jonathan: the fed preparing to cut interest rates with chair powell now firmly focused on the labor market. writing the following, the august jobs report derailed the first rate hike in 2015, and we appear to have the possibility

that he could push the fed to a half-point cut in 2024. you've left the markets to be continually hypersensitive to upcoming economic polices. conrad, get into that. i the same since number six is to be the difference between 25 or 50. >> morning. it is going to be that the decider, the size of the rate cut. my baseline is that the fed cuts by 25 basis points but the reason i brought up that prior incident was we had all the discussion heading into the september 2015 meeting when the fed was looking to hike rates for the first time about how they shouldn't be overly sensitive to a particular data release, then we got a disappointing august jobs report in september 2015 in the fed kicked the first rate hike to december of that year. and we are setting up for a similar situation this time. if we were to get a very disappointing jobs report for august on september 6 in the market were to move to

significantly price in a 50 basis point rate cut, i don't think that the data justifies that kind of a move. i think we need a strong signal that the economy is in recession or severe stress in the financial system where i don't believe this evidence of either. but the markets could move toward a 50 basis point rate cut on that september 6 jobs report and then that for the very difficult efficient. do they want to disappoint markets? probably not. lisa: and if they cut by 50 basis points, how much morgan markets price in with more than 200 basis point of rate cut waste and by the end a question i have is just how much is inflation actually off the table? is inflation even in the picture anymore for the fed? >> that's a very good point b is a court this week the important data release is in vision data release and can that on friday. the broad consensus is that we get a 2/10 core pce reading which i think would be welcomed by the fed. as a kind of game that the fed is looking for.

but look at a slight pickup in the inflation rate to 2.7% from 2.6%. powell at the july 31 press conference has reemphasized the year-over-year rates rather than the short-term rates. it would be consistent if you look at three-month inflation rate with inflation close to two, but 2.6 and 2.7 is not the direction that fed is looking for. can they really say inflation -- they are not telling us they are not looking inflation, just that they are looking at inflation and employment on more than even setting, that both of those mandates are important to them. but clearly on the inflation data, and i think that the message, we can't completely ignore the inflation data yet and we are not get at target. the fed still has work to do. lisa: there's a question about how much they are beginning a destination in terms of what the neutral rate eventually will be.

how important is that, given the fact that they are talking about don't focus on the pace, focus on the destination? >> if we look at what the fed is telling us that the fund rate, that is supposed to be the signal the market of where the destination is. i'm not convinced that the fed believes that as strongly as they may have been terms of where the long run rate on the s&p was the pandemic. the markets are taking that, though. if we look at where rates are headed, by the end of next year, the fed funding rate that is priced close to 3%. but it is not really neutral in this courage and violent and i don't think that that is the case. i think the neutral interest rate was probably never as low as the fed was estimating pre-pandemic and now they are not as convinced that they can say that rate with a high degree of confidence. so that is where i think the disconnect is. if we have a recession i would not be surprised if we see the fed funds rate as low as 3%.

if we don't have a recession, i think that is the signal the fed is giving us. they don't believe there is a recession and they think they're just needs to be some adjustment to the fed funds rate that does need to be as restrictive with inflation now close to the target, but not get air. we need restrictive policy, it just doesn't need to be as restrictive. 3% fed funds rate i think is accommodative anything that most officials would say the same thing. even though that is in conflict with what the s&p is telling us, which is very problematic. jonathan: if we take a little step back again and reflect on what is get together meant to be about, it was meant to be about the transmission, the efficacy of policy. he alluded to something pretty important. he basically suggested that high rates weren't a big factor in reducing nation. at the story in the labor market was a supply-side one which i think begs the question just how restrictive the chairman things we actually are.

>> depending on what we are looking at, we come to different answers. i think the fed needs to take a bit more credit to the disinflation we had. the inflation we had was a consequence and best consequence of dismissive is of the inflation dynamics. now, the fed responded starting in 2022 to the rise in elation, and i think that is the reason why we practice disinflation. the fed should take credit for that. outside of some signals, and i don't want to be completely dismissive of the disconcerting signals from the unemployment rate, but at the same time we have jobless claims that are very low. why aren't those people filing unemployment front employment benefits? we have things like a very important indicator to us that there are profits. that is another important release we get this week. we have profit margins that are still very healthy and as a

result of it, you see a response in the equity market. so all of those things don't suggest that policies overly restrictive, and therefore needs to be adjusted very aggressively. but i do think you can make the case that some modest rate cuts, that would be reasonable path for the fed to give -- beyond given the disinflation that we've had an think that of the path take. what happened on friday with the speech, and i don't think it was a bad speech, but powell probably could have done a little bit more to drive home that when the fed is thinking now is more in terms of modest adjustments. maybe take in the bit of the emphasis off the september meeting. sorry, the september 6 employment report. jonathan: thank you, sir. he did the word search on the speech. no mention of bradshaw at all. gradual reductions. looking ahead to thursday,

jobless claims. the previous week hundred 32. lisa: if you ask this question, it was a really good one earlier. how much are people biased to a downside surprise? if you've got fewer jobless claims file than expected, will that measure with people just say wait a while russian mark jonathan: based on the buzz on wall street, they seem to be more willing to embrace the weaker data and ignore the strength, we will see. this is an ongoing conversation. in the next hour, guy johnson on the latest with spacex and former fed governor betsy duke. from new york, the second hour of bloomberg surveillance up next.

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>> we've got this momentum driven market. >> the market is rightfully focused on the importance of growth holding up. >> the tradition is known to we are in a slowing growth environments we have to decide whether it heartland or soft lands. >> very possible we grant higher from these levels rather than going low. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of "bloomberg surveillance" begins right now as chairman, supports new leadership in this equity market. check out that leadership. lastly, the small caps up by

1.35%. the regional banks up by more than five. the small caps up by 0.9%. the s&p up by 0.1%. your week ahead is absolutely stacked. it is always stacked but this time it is absolutely stacked. one is wednesday and the other is thursday. new video earnings on wednesday. the for you is jobless claims on thursday. lisa: nvidia will be important. jobless claims goes to how data-dependent this market is given the fact that jay powell opened the door to a potential 50 basis point rate cut as long as he did not see a downward surprise. the key question we have been analyzing all morning and will continue to do so, how big of a downside surprise does he need to see? how big is that mood? -- how big is that move? so exciting. jonathan: we will find out.

100. 114 last time around. 87 precisely. lisa: 87,000. jonathan: the fact that we are joking about this, because of that speech on friday whether this was the intention or not, it is the outcome, markets are now hypersensitive to one data point. lisa: what you pointed out was really important. he did not talk about gradual or in some sort of methodological way in terms of rate cuts. how much of this is a jay powell question and how much is this a committee question. in general, people are wondering how quickly they will go and how much the market moves on that to one direction in time where in the past rate cuts heralded some type of weakness. at what point are we looking for weakness basically taking the soft landing as given? jonathan: based on some of the conversations we had going into that speech from other fed

officials, this was almost mario draghi-esque. the former ecb president had a habit of basically taking the whole governing council with him whether they like it or not and basically said this is my view and it is yours also. and then complained about it to various news outlets, but ultimately he would end up getting what he wanted. chairman powell traditionally is a consensus builder affecting the consensus of the committee. that's our elected chairman was speaking for himself. that is not my opinion but the judgment based on what we heard from other fed officials. there was a clear difference objectively from what we heard from other fed officials friday versus what we heard from the fed chair. lisa: to build on that, we start to see dissent? is this a time he is starting to forgo consensus for getting his view in the forefront or trying to wrangle some consensus? we have seen consensus going back for years. the question is how much he

wants that versus an outcome he truly believes in his court he could potentially get ahead of a real deterioration in the labor market. i don't know the answer but i know that right now it seems like there is a bit of a division in terms of the pace but not the direction. everyone was talking about the potential for rate cuts. the question now is how quickly and whether the data will disrupt. i don't know and terms of his personal opinion but he is more dovish than other members. jonathan: something contrarian, a little contrarian. we think the data over the next few much will make pricing look too conservative. we think the data over the next you want to make market pricing look too conservative. we expect 125 basis points this year with a further 150 next year. lisa: too conservative in which direction? if you end up with data that encourages the fed to go that deeply, is that a positive for risk assets? in the past, fed rate cuts usually were before the troughs in markets.

recognize the weakness after the federal reserve started to cut rates, so if you start to get that data, are we talking about too conservative in terms of how far the fed will cut rates but too conservative in terms of the weakness in the risk assets on the back of that? jonathan: equity futures up by 0.2% on the s&p. in the bond market, the yields lower, particularly the front end. a bulk of that, the bulk of that coming friday after the speech from chairman powell. the 10-year down. 37933. in the fx market, the euro 1.117 1. i am not overdoing it. not a great read from the index at all. lisa: yeah, it went to the lowest level since february, holding at that level at a time when people are wondering they are coming out of what has essentially been a recession in the biggest economy. the question is, how does the european region face off with these dual risks that are very different? inflation measured higher than

the u.s. by some metrics and growth is weaker, and you felt that tussle between those two. european officials were at jackson hole addressing the weakness, which means it will be a race to the bottom. jonathan: i imagine they did not use this language. the german economy is falling into crisis. pretty punchy language. lisa: it was stuck in stagnation and is getting worse. what is the response to that from germany? it is not rate cuts. is it fiscal spending? how does that deal with the fact that they don't typically like to widen the deficit, especially when borrowing costs are free? jonathan: broken. 1.1171 on the euro-dollar. coming up this hour, linda duessel, henrietta treyz, and betsy duke. we begin with our top story. fed chair jay powell's speech

sending stocks to all-time highs. the market is pleased to hear that parable is keeping a close eye on the labor market and will perhaps continue to cut in order to stave off a recession. it is a soft landing if we have succeeded enough in reducing inflation while not harming the labor force. that is bullish. linda joins us now for more. i want to understand if the leadership is bullish. you have identified the same thing and it is important to spend a little time of this. i think the bulls would identify the rally in small caps and say this looks good, improving breadth. against was on the show last weekend to look at utilities, staples, and health care. a defensive character to all of this. how are you framing things for your clients? linda: good morning. thank you so much for having me back. it is basically a broadening of the market. it is funny, you would not normally think small caps and financials, which are an early cycle play would be running at

the same time defensive's are running, but here we are in and around the highs we were at in july before the pullback, but the 10 year bond yield is 30 basis points lower than it was then, and the reeds, the utilities, which are very much interest-rate sensitive and also defensive are really starting to catch a bid. what do these stocks all have in common that are catching a bid? they have been ignored for a very long time, and if we believe, which we do, that we are not going into a recession but a slowing down of growth, then you can go out there and by those stocks because they are inexpensive and priced to where the downside probably is not much. jonathan: we get a lot a guest coming on hearsay and good news is good news and bad news. can you help us understand what is bad news? everyone comes out here and

talks about the august jobs report. what is a bad number? what would be a back number two the stock market? linda: that is funny. i were hoping you would not ask me that question. that number is that it keeps on going. would not want to surprise, but it is the trend that is most important because as we all know , these job numbers get revised and the difference between the national payroll number and the household number, they are different. you had this problem with all of the immigration, the people that came into swell the labor force. i would say what is positive as the labor force goes is the job participation rate in the prime age group, that would be the 35 to six is going up -- 60 year old group is going up. that is positive. that was a super tight job market, and you are coming back to normal. we believe there is a balance going on and that is a good thing, so we just don't want to

see those weekly jobs numbers continue to move up. they are kind of stagnant in a range that is good. that takes us back to, all right, it is a slowing market, slowing economy, but we are not going into a recession, and that is bullish. lisa: so basically you are not going to address the idea weakness because you are not seeing it? is that what you are saying it? linda: we are seeing weakness. we are seeing weakening of an extremely strong bull market. we have seen a boom market that came from massive stimulus, more stimulus than we have ever seen in the history of our country, and that is coming up, and that is natural and normal. we are seeing inflation that was really, really high come down a pace not to percent but 2.5%. that is good. a pace is good. slowing, no recession, that is what we want to see. lisa: let's talk about the other data point this week that could be somewhat market moving, and

that is nvidia earnings. you talk about how there is a re-dissipation in leadership and the push to small caps and the equal weight, which is at a record high. how much could you get a decisive earnings report from nvidia that could check that balance or have you change back to an overweight in some of the big tech cap numbers, or do you look at just the broadening out as holding regardless? linda: so the broadening up is a good thing. nvidia is a market moving event when they tell us what the earnings number is. the top 10 names have never been such a large percentage of the entire market cap of this s&p, nor have they been so large a percentage of the earnings of this s&p. i would say that if indeed they were to miss whisper numbers, for example, the stock could go down. that could potentially be a buying opportunity and i am not an analyst for that stock, but it is a very strong space, this entire ai space.

it is not going to stop or slow down anytime soon, and these stocks if they are rather expensive are nowhere near as expensive as the stocks were at the time the bubble burst back in 2000. so again, you should see some disappointment there and it will pull down the s&p, it would be because of the largest names and this would not negate a slowing but still growing economy and a broadening of the stocks. jonathan: is that the best way of valuing some of these stocks, the benchmarks to one of the most extreme periods of valuation in this market? linda: well, i am just using that example to compare because it is such an important name. it is unusual that one name or 10 names or seven names or whatever are such a big the market, but these companies are large-cap growth companies, technology companies. that is an exciting time, whether it is a vast movement in tech of a revolution in tech if

you will, and they all gravitate to the names and the promise of those names. the trouble we always get to in these situations is we extrapolate extremely high growth rates for too long. you can only grow so high, so long, and then you slow down your growth rate, and then you slow down your multiple. slowing down is ok. if i remember, i am not comparing exactly to that time but just saying i was alive back then and was in the market back then. the market crashed for names in that tech space, not because of anything they were doing wrong or even their valuation. it was a slowing of an economy that was probably heading to a recession. jonathan: we appreciate your experience as well and your take today. thank you. on nvidia just at the end. we will speak to an analyst and about one hour from now. let's give you an update on stories elsewhere this morning. yahaira: hi. tensions escalating in the

middle east as israel and hezbollah exchanged fire over the weekend. more than 100 israeli warplanes hit missile launchers in southern lebanon sunday morning. hezbollah responded with a rocket and drone attack that killed one israeli soldier with fallen debris. israeli officials claimed the strike prevented a massive assault planned by the iran backed militant group, and israel has declared a 48 hour state of emergency. meanwhile, italian authorities say the victims aboard mike lynch's yacht were either asleep or tried to escape as it sunk off the coast of sicily last week prosecutors are beginning a probe for charges of manslaughter and negligent shipwreck. the chief sicilian prosecutor saying there are currently no suspects. the probe is being conducted against "persons unknown." survivors of the wreck were not immediately tested for drugs or alcohol is authorities focused on first aid. apple is planning to unveil its latest product line on september 10, including new iphones,

watches, and airpods. apple is only making preparations for that day with company plans still under wraps. it is a critical launch for apple which has seen sluggish iphone and wearable sales in recent quarters and the pressure to keep up with ai advancements is only increasing. if the launch happens september 10, the latest phones will go on sale september 20. that is your bloomberg brief. jonathan: thank you.up next on the program, the sprint to november. >> harris is about 60% likely to become president. i think the momentum, the aspirationalness of the thing, that kind of carries her. jonathan: the conversation is up next. live from new york city this morning, good morning. ♪

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jonathan: stocks are positive waking up this monday morning. the morning to you all. up by 0.2%. the bond market yields just about unchanged. under surveillance this morning, the sprint to november. >> harris i think is about 60% likely to become president i think the momentum, the aspirationalness of the thing, and frankly the appeal of the new as opposed to the kind of dreary last decade we have had, i think that is how voters are increasingly looking at it. i think that really kind of carries her, and you see trump on the defensive, not really able to land a lot of punches. jonathan: here is the latest. vice president kamala harris back on the campaign trail this week as my campaign raised half $1 billion posted dnc. donald trump remaining in swing

states. she could be in the lead nationally and in critical swing states by enough of a margin to emerge as the favorite in the election. harris has ushered in dramatic shifts in the electoral landscape but is not yet favored to win the election in our opinion. henrietta, thank you for being with us. harris campaign and affiliates have raised $540 billion u.s. since biden quit. how does that stack up against campaign trump, and how are they spending it? henrietta: well, it does not compared to the trump campaign at all. the trump campaign's down into the range of $63 million for the entire month of july versus over $240 million for the harris campaign. the two are not equal. if you are looking at the fundraising numbers, the dnc versus the rnc, voted galvan's asian, the number of volunteers they have gotten in swing states

, it is almost double the size if not more in the harris camp, and i think that is something the trump campaign is actively worried about right now you saw it from their internal polling memos this weekend. they are anticipating not just has she risen six points since she started the race but she will increase another two to three points in the next couple weeks, the next couple days after the dnc. that is a natural bounce but one that would supersede trump. when you think about what trump is doing on the trail, he will not campaign until thursday, and friday he will be in pennsylvania. every single day is critical, particularly when you are behind like the trump campaign is now. jonathan: digging into the $540 million, one third contributed in convention first-time donors. two thirds were women. is the -- it is the gender split that is interesting. how firmly entrenched do you think that is, the split between

women and men in this morning and who they are supporting? henrietta: it is extremely firm. it is in every single swing state as well. often by 10, 11, 12 points. particularly noticeable are young -- among young male voters at every fema -- female demographic. there is this extreme gender divide that is expanding, becoming more obvious as the race wears on. what the harris campaign is going to do to dig into those numbers a little further with their super pacs as they will spend $370 million on ad campaigns between now and november 5, so get ready to hear a lot about kamala harris and her campaign. lisa: how much does the gender divide hinge to the issue of abortion? how much can trump really counter that by coming out with things like he did over the weekend talking about how he believes states should decide for themselves, that there

should not be a federal abortion law but each state can make their own decisions? henrietta: you know, i think the state decision piece is really problematic because you have the state decisions being made at the ballot in november. in florida, for example, where i think two thirds of abortions in the south are conducted. there is a ban now at six weeks and they need to vote on that to maintain it. whether it is louisiana, arizona, nevada, these issues are on everything about it so the last thing you want is a repeat of 2022, which was a real problem for the republican party at the senate and in the house, and that is what they are headed towards in 2024, and the messaging from the trunk campaign with jd vance and donald trump trying to come out as pro ivf but saying some fundamentally problematic things about family planning to put it nicely something that is alienating a lot of owners. that's a lot of voters and it is

-- a lot of voters, and it is not just women. abortion is the number three issue voters care about after immigration and inflation. immigration and abortion are net in -- neck and neck. lisa: we have heard of the price gouging type of discussion from kamala harris, all that we have seen some of her people walk it back and talk about how she will actually get it passed and it is an effort to take money away from grocery stores and things of that nature. how much are you getting a sense that the criticism of kamala harris, that she is not coming out with real policy, how much is that landing? henrietta: i think it is landing among the media groups, but amongst the general electorate, you don't see any of that translating to her polls, her fundraising. they made 86 million dollars last week alone, so the issue is not that she is not getting out in front of journalists and the press. that is an issue for the trunk

campaign, but the american voter that is now newly galvanized. democrats are 83% enthusiastic about this election versus 71% of republicans. it is not resonating with the average voter, and i think the problem for trump as she does not need to get specific on policy. we don't really need to have a robust discussion about where you think cap would interest tax rates or capital gains tax rates should be and what you're trying to do to offset the cost of the child tax credit. we don't need any of that. we just need this frontward campaign versus, do you want to go back to the trump administration of the four years he was in office? that is what the campaign was about and i don't see that changing over the next 71 days? jonathan: can we talk about policy? we want to talk about policy so hopefully we can do that. this news came out from canada. canada will impose new tariffs on chinese made electric vehicles, aluminum, steel, behind what we heard from the u.s. previously. a 100% levy on electric

vehicles, 25% on steel and aluminum. canada agrees with the united states. it seems to be where the world is when it comes to tariffs and china. how much daylight is there between trump and harris on this key issue for a lot of voters? henrietta: let's be my for the biden administration just a couple months ago put in the 1% electric vehicles tariff. the three times higher steel and aluminum tariffs or the steel tariffs. there is no question the trump administration started with tariffs, and that tariffs under biden are higher and more exhaustive now than they were under donald trump. the ustr the department, of congress, the restrictions are only growing. i don't see any scenario where any of these tariffs come off once they get put on. think about what you would have to see in order to take the tariffs off. you would have to see china capitulate, china proved and sustained they made changes on human rights and other things

and none of that is occurring. jonathan: thank you. squeezing in policy at the end. the harris campaign calling tariffs trump tax. but you heard henrietta say the taxes have gone up under this administration in many places. lisa: we will not get a discussion discussing bad tariffs from good tariffs but it is one we could be having because it is valid, especially because it is what is happening. jonathan: another setback for boeing in space. ♪ ai across any environment. above the clouds and on lots of clouds. with your secured data on prem, in real time on center court and assisting bank tellers on the edge. watsonx helps you deploy ai wherever you need it. so you can take your business wherever it needs to go. ibm. let's create.

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♪ jonathan: stocks on the s&p, coming off the back of two weeks of gains. adding a little bit of weight to the recent rally, up a 10th of 1%. we saw this on friday. a really strong day of gains. up more than 3.5%. it continues this monday morning. the rustle up by 0.8. lisa: we saw a new record high for the s&p 500, even though the market cap waited s&p is away from its all-time high. how much of this is sustainable? this is something linda didn't go to. we are seeing a reading from a strong pace but we are not seeing any indication of that which is why people are willing to embrace a soft landing. jonathan: after what the fed chair said on friday, is bad

news still bad news? depending on how sensitive it is to it? lisa: a lot of people think that's not the case. you have to wonder if there is a lag affect, how the rate cuts could affect the overall economy. essentially based on history, bad news will still be bad news at some point. jonathan: think how they responded to august 2. that's after the speech we heard on friday. with guests talking about emergency rate cuts and the potential of going 50 and not 25. could that change even more if we get a week print on september 6? you know how markets work, they are always pushing for the next chapter. it's the next page of that story? lisa: you go back to zero. it's a legitimate question. this goes back to having eradicated inflation is one of the potential risks out there. if that's the case, the floor is the limit and you can keep

cutting. if we have some inflationary pressure, that calculus comes more complicated. jonathan: even after friday, i think because of friday, there is a view that this chairman is highly data point dependent. you have to remember when we go 50-75 in the rate hiking cycle, it was off the back of consumer sentiment and the inflation expectations embodied which led to a much larger-we anticipated. lisa: if we take a step back, they are looking for an excuse to cut rates significantly. is there a data point that gives them a reason, an excuse to cut more significantly? i go back to what patrick parker had to say, that they expect a 25 basis point rate cut followed by a 50 or even more of a rate cut later on. they pointed to the initial rate hike and said it was initially smaller. and then came the 50 and the 75 and the bigger ones. they don't want the market

getting ahead of itself but that's not to say they are not onboard board with some significant rate cuts. jonathan: i'm just stirring the pot and seeing how things are going the next few weeks. not necessarily my view. that's for sure. it's good to be bond market, two-year, 39125. a movement of more than 10 basis points. the bulk of that in friday's session. we are down to 380 on the 10 year. 30 year, up a single basis point at 4.1%. lisa, you mention it again this morning, not walking away with a decent impression of the destination. we are obsessed over the speed of the journey and the journey of the risk that could begin on september 18. lisa: they are supposed -- this was the time where they were supposed to give you a sense of the destination and they avoided it. to me, i'm seeing a 3% or 2.5% destination. they don't agree on any particular point. this raises the question, are

they ok with a higher inflation rate? are they looking at a more inflationary economy? that's the reason why people are getting enthusiastic without necessarily understanding some of these bigger questions that plagued the market for quite a while. jonathan: the closest the fed chair has come to saying michigan accomplished without saying mission accomplished, did it feel like that friday? you were there. lisa: a bit. it was a grandiose speech in that way. i will say that we do have $69 billion of 2-year note's being optioned tomorrow and $44 billion of seven your notes being optioned on thursday. i'm curious to see if you have pressure over the long end, what does this mean for long-term inflation rates? that will come to the fore with the political schedule. jonathan: welcome back. i want to talk about foreign exchange. two currency pairs, two stories. euro-dollar, 1.1164. that euro, weaker by a

quarter of 1%. the economy is increasingly falling into crisis. 1.1164. i would say a structural crisis. that's the issue, here. lisa: a bloomberg terminal user messaged us and i think it is fantastic framing. the german economy simplistically is a car company. they are in a bad place with the electrical vehicle evolution. how much is there economy completely leveraged to the auto sector that is facing the headwinds of both the electric vehicle transition and the comp occasions there as well as pressure with china? the introduction of a lot of ev vehicles at a time where there is increasing fissure between the west and the east? jonathan: we can have that conversation another time with some real depth. the euro, just purely an observation here. a good use for many of you. donnie has been moving like this for a period -- the dollar has

been moving like this for a period of time. the correlation between yen strength and a risk appetite is totally broken down. people who don't want to spend their mornings and nights waking up and checking the currency, this is probably welcome news. lisa: let's see, let's see if things get disruptive in a more significant way. but yes, maybe we overstated how disruptive that was at a time when people were looking for excuses to trade and exchanging funds that were having hiccups. jonathan: under surveillance, let's check out crude oil rising as middle east tensions wrap up. israel taking on thousands of hezbollah yesterday in what it called a primitive strike. israel responded by firing more than 200 projectiles that caused women to damage. the tension is only one part of the story. brent crude is up 2.8%. lisa: bolivia preventing exports

as well as production in the eastern region as they face some sort of takeover attempt of the central bank governor, the central bank governor exerting this halt on exports. it highlights how much uncertainty there is. i will note one other story that came out overnight that colored the pricing of oil. that is that russia attacked ukraine's energy supplies in a significant way. when we start looking at the response in the oil markets and contributing it to the middle east, a word of caution, there are things that are trading pressures there. jonathan: up by almost 3%. i want to turn to the latest on the politics. we mention some numbers around the harris campaign and the fundraising, more than half $1 billion, massive numbers. the total call reaching $540 million since president biden announced he would step aside with $82 million -- 82 billion dollars rolling in during the d nc last week.

one third of those contributions were first-time donors and two thirds were women. the donations we are seeing is largely a reflection of where the support is and where it's coming from in this country. jonathan: -- lisa: when you listen to her speech, she was not talking about breaking the glass ceiling and talking about how she would be the first female president. it's an interesting dynamic of what's behind that? is it the abortion policy or something else? you have seen this divide between men and women growing in the united states in a dramatic way and we have seen studies on that. out wonder -- i wonder how long we can have a vibe campaign rather than policy. jonathan: do you think he needs to put some pressure on and get some sit-down interviews? lisa: it's a problem for the media but not for the voters. people don't seem to care. this is something republicans are leaning into. they are trying to accuse kamala harris's campaign of not coming out with specifics.

whether it lands remains to be seen. i don't know if we have specifics from anyone that can be passed. how much of a black box is anyone who comes into office if we don't take seriously any of the proposals they put out there? beme an issue. jonathan: we are classy here. there was a magazine that came out recently with a massive cover story. a favorable cover story. should she be running going forward with that kind of story? in a favorable story about the vice president without a sit down conversation? i don't think so. lisa: we can discuss some of the coverage, etc. at this point, we are getting very close to voting. that is what terry haynes can say. next week, we start to get early voting in this country. at a certain point, this is what you are getting. what you see is what you get in terms of the campaign that is already set to go into actual votes. jonathan: that's the latest on the politics or let's turn to boeing.

boeing facing a new setback to its space ambitions. nasa announcing it will not use boeings faulty starliner crafter to send home astronauts stuck at the international space station. the agency deciding it's safer to use elon musk's spacex. guy johnson joins us for more out of london. how much of setback is this? how embarrassing is this for boeing? guy: it's usually embarrassing. they sent two astronauts up and they were meant to be up there for a week. they been up there a couple of months and will be up there until the beginning of next year. you have to reconfigure cap seals on the spacex side and the boeing side. they will bring the capsule that went up back on crude because they can't run the risk of bringing the two astronauts back in. it's got thruster issues and they are concerned about what reentry would look like. this is a program job that is billions over budget and its behind schedule. it's been like this for quite some time. going is saying that it is

committed to the program. but remember, you have a new ceo coming in. he's got a blank piece of paper and he's looking at everything right now. yeah, it's hugely embarrassing. it's also potentially financially very consequential. there is a lot already invested in this program. what happens to it next will matter to boeing shareholders. jonathan: how blank is that piece of paper? does the incumbent ceo have the option of stepping away from that business? guy: i think everything is on the table. i think you have to figure out how you are going to write the ship. let's say it's a priority, how high is it in terms of the list of things that need to get done? how big of a priority is that? does he need to make sure the civil side of the business is fixed first? is there enough bandwidth to solve all of the problem simultaneously? there are lots of things going on at boeing at the moment. the civil business needs to be put back on an even keel. the max program, what happens

with a max replacement is the next big challenge. what's happening with the 87? what's happening with the 777x? there are lots of challenges that need to be resolved for this company. you come back to the space program, sure, it's going to be an issue and it's going to be something this company has to resolve what windows does that have to happen? and do you have the luxury of time when spacex is doing what it's doing right now? remember it has another launch going up. it has another launch going up. it will be sending astronauts up. they will spend time in one of the highest -- that we have ever seen. the problem is you have a competitor doing it better and faster. do you stick with the program and continue to make losses? it's a really big challenge. boeing has limited resources. it has to figure out where it wants to spend down. -- spend them. lisa: why should they continue with a program that has left with losses where they are falling behind? guy: because of so much that has

been invested already. it's going to be an area of growth going forward. can boeing afford not to be in space is a key question this company needs to answer. i think that will be the challenge. it's really difficult to answer it at the moment. at some point, this business will be profitable. how much you need to put into it, how many resources, human resources or financial resources need to go into it to get to that point remains a difficult question. this is unbelievably, like stuff that we are dealing with. we know that. it's a resource issue. can we afford not to be in this ultimately, further down the road, if this turns out to be a hugely profitable part of your business? it's a really difficult question and there are so many unknowns. there are some difficult challenges and questions he has to answer. we don't know. at the moment he says he's committed but this company is falling behind spacex in a big way at the moment. jonathan: huge win for elon musk. guy johnson with the latest.

with an update on stories elsewhere with your bloomberg brief. >> volodymyr zelenskyy says kyiv's incursion into russia is part of an effort to make moscow's fair piece. ukrainian forces our claim and they control over 1200 square kilometers of territory inside russia for the first time since world war ii. russia's defense ministry says it's troops continue to rappel kyiv's efforts in several regions. canada is imposing new tariffs on china, targeting electric vehicles, aluminum and steel. that's according to people familiar with the matter. canada will impose a 25% tariff on steel and aluminum. justin trudeau is expected to unveil the policy in nova scotia where he has gathered with his cabinet for a series of meetings about the economy and foreign

relations. lando noris won the dutch grand prix, closing the gill app -- gap on maximus tappan. noris has closed the gap in recent days and told reporters that mclaren has the best car in the sport. the next race is this weekend. that's your bloomberg brief. jonathan: the best we can. up next, -- we can. up next, powell. >> heavily signaling they will make this move in september. that's already been priced in the markets. jonathan: that's up next. this is bloomberg. ♪♪ ♪♪

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jonathan: the important stuff,

this close to oasis getting back together. settling their differences and touring next summer. lisa: you're going aren't you? jonathan: it's the one thing i would go to. i'd go to one event next summer if it happens. lisa: a lot of people thought that they were kind of lost in their time. jonathan: that sounds like an american perspective on the band. lisa: music theorists believe they were highly sophisticated and broke ground in ways they were not appreciated for. jonathan: mid 1990's. ian gallagher is teasing people on twitter, saying that twice seven of august, there will be an announcement at 8:00 a.m. we will see, if they have settled their differences now in are best friends again. we will see how long it lasts. looking at futures, s&p, posited

by 0.03%. -- positive by 0.03%. under surveillance this morning, powell's dovish pivot. >> with this meeting and the july meeting as well, heavily signaling they will make this move in september and subsequent moves. that has already been priced into the markets. >> they probably don't need to go 50 basis points. i think that would trigger expectations about a really rapid pace of rate decline. jonathan: traders are awaiting the first round of data since jay powell confirmed rate cuts are coming with jobless claims on thursday and pca on friday. the debate turning to the size of the first rate cut. the former fed governor bessie duke writing it would take something extraordinary to derail the 25 basis points cut in september. betsy joins us.

wonderful to see you once again pray let's start with friday and the speech on friday. lisa and i have a some of the question. was the chairman speaking for the committee or speaking for himself? betsy: for the entire speech, he was speaking for the committee except for the one line where he said my confidence has grown that inflation is on a sustainable path. there, he said my and that's unusual for this chairman. and i think what he was doing there was he was expressing his own opinion but giving the committee room in september to the sep to put out their own estimates of where the various indicators are going to be and their confidence. jonathan: how big do you think the rains will be in the summer of economic projections come september 18? how wide will that range be? betsy: the range for the projections themselves or the confidence?

the range for the projections themselves will not be a more unusual wide range. i'm watching for the confidence in the inflation forecast. in the june projections, there were just one or two participants who had normal confidence in their projections. all the rest of them said more uncertainty than usual. that's the confidence based on what i'm looking for. lisa: do you think it's appropriate for the federal reserve be so disproportionate to cutting rates at a time where we are not seeing true weakness in the labor market? betsy: cutting rates is only reducing the amount of tightness. it's not in any way becoming stimulative. i think it's appropriate to begin that. but i think they will go fairly slowly and feel their way along. the one piece that i don't think there is consensus on is what is the level of neutral, what's the neutral level of interest rates,

those that are neither stimulative nor restrictive. i think they will be feeling their way along to that point. lisa: they didn't resolve the theme of the conference which is how much is monetary policy responsible for bringing down inflation and how much could be responsible for bringing downsides to the labor market in general? did we get any answers to the bigger questions other than the fed chair said we will cut rates and start the process and we could potentially cut a lot? betsy: i think he did address that question. the pc talked about is the importance of inflection expectations. what i heard him say was yes, we were wrong on transitory. once we realized, we acted. so what i heard from that is the fed might get the individual settings wrong from time to time but it's commitment to its mandate and willingness to act in furtherance of that mandate is most important for the

confidence and anchoring inflation expectations. and that piece, i think he declared victory on. not necessarily inflation but inflation expectations remaining anchored through this cycle of inflation. jonathan: can we deal with inflation, the contribution of bringing inflation down from eight to three? i think we walked away with this idea that the federal reserve chair was acknowledging that an all of the work -- a lot of the work came from elsewhere. betsy: this was a supply-side driven inflation anyway. all of the work was on the supply side which the fed can't affect. all the fed can do is call demand in check as best they could while supply caught up. that is strength of the labor market as well as the goods market. i think they did that. but, i heard in his speech he recognized the reduction inflation has come entirely from supply, including on the labor side. when you look at labor, i don't

think we have a weak labor market. it's coming into balance but it's coming into balance because of improvements in participation and increases in immigration. both of which have a limit to how much they can continue to contribute. jonathan: betsy duke, appreciate it. former fed governor betsy duke. further improvements on inflation from here, does it require the pain the federal chair was talking about and is he willing to allow the pain to emerge? lisa: he's not worried about labor markets. quite the opposite. he's worried about the deterioration that would not be welcome. what she said was fascinating. declaring victory with -- their role in bringing down inflation expectations created a price stability that they are heading out for. the six planes by the university of michigan survey takes on renewed reports.

they believe that inflation over the next 1, 3 and 10 years is actually going to be -- might be the most important kind of information for them to look at. jonathan: are you looking forward to leaving behind this period of mount airy policy? -- monetary policy? lisa: i'm looking forward to books being written about it so we can understand it. i would say the chapters not over. jonathan: the obsession over you miss. lisa: it highlights how little we understand. we don't have agreement on what the new neutral rate is. we don't understand what the excess is that we built up over the zero rate policies or that they have to be unwound in any kind of disorderly fashion. there are some any questions left over from the zero interest rate period of time. there are a lot of things that are going to be interesting that will be written. jonathan: if you want to liven things up and stir the pot, read adams post. he things the fed should prepare

the market and this economy from the pivot to the piver. and point out the mast majority of tariffs are paid for by u.s. purchases and therefore will stoke inflation, rather than simply hoping the fact is -- the fed needs to start laying the groundwork for a pipit now. adam poser -- pivot right now. adam poser believes if trump wins the election, the fed will be hiking next year. lisa: today is today, yesterday is yesterday and tomorrow is tomorrow. jonathan: i'm rooting for you. fantastic. third hour of bloomberg surveillance is up next. >> at the democratic national

♪ >> the time has come for policy to adjust. >> we are more vulnerable to another negative data point in the labor market. >> there's no question. >> people have moved violently in terms of the narrative of the economy and what the fed should do. >> they need to get a move on. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: big shakeup in the stock market, the rally continues this monday morning. good morning to you all. the third hour of "bloomberg surveillance" starts right now. the russell ripping by another 8/10 of 1%. we have picked out these two key events. two dates. wednesday and thursday. nvidia earnings wednesday afternoon, thursday morning at eight: 30 eastern time, jobless claims. lisa: at what point is bad news good news? i hate to bring this back but there is the issue of good news is good news because the fed will cut rates but bad news is bad news because the fed will cut rates more aggressively. that's the dynamic that fed chair powell put out there on friday when he said the time has come. basically that was the all clear to markets saying the fed has your back. jonathan: a win-win for

everyone, now. lisa: at least for now. we will keep asking people and people will try to dodge it about what the number is where bad news becomes bad news. in the meantime, they can explain that there will be some sort of fed or otherwise, there is not any negativity baked into the data they have seen as of yet. jonathan: cpi is on september 11. that used to be the data point for this market. the estimates will keep coming in and this estimate will move around. i think this market could take 160 and run with it. lisa: one thing we haven't explored is it seems like the fed is seeing signs of weakening. austin will be talking about that in a more dramatic way. people come on this show and say they don't see it. we are not hearing that from the commentary and companies saying they are seeing ongoing retail spending and they are keeping people employed. which is it? what is it that the fed is seeing that other people in the

market are not? that to me i think is something that we have to explore. that is what's been supporting equity rallies at a time when the fed is talking about weakness they need to get ahead of. jonathan: when you say the fed, are you talking about chairman powell or other memories of the committee? when the chairman spoke on friday, was he speaking to himself -- for himself or the committee? betsy was on the program months ago and she said almost for the entirety of the speech, he was speaking for the committee until he talked about confidence levels around inflation and he talked about my comfort around inflation. how much space will there be for debate? jonathan: -- lisa: it seems like they have dodged the discussion of how much inflation is going to come down. -- that matches the longest streak of consensus types of reads going back to the period between 2003 and 2005. do we see fissures in that given the fact that we have to say at

one point -- at what point -- you can bring down interest rates just based on how much inflation has come down. jonathan: some healthy dissent. you'd welcome that, wouldn't you? i'd welcome that. lisa: we are hearing that around the margins. what's the point of getting consensus if there is a difference of opinion? healthy debate is healthy. jonathan: we will take some healthy dissent. a little bit of a lift here. 380 -- 3.8084. crude is up by 2.8%. the bti, 76.95. brent crude up almost 3% as well. lisa: there is a rival government in bolivia trying to kick out the central bank governor and the central bank governor in the eastern governments said it will shut down all oil production exports. this was what led to the trigger that we saw where oil prices were higher coming into the recession but even higher still.

it highlights how it's not just about what's going on with israel and lebanon and iran but also in the broader region. i will add to this, you could question whether that lifting oil prices to start the session had to do more with what was going on in israel and lebanon and hezbollah or whether it had more to do with the fact that russia bombed ukraine's energy sources. there's a lot going on under the hood that is making things complicated not just for oil traders but central bankers to the oil world, saudi arabia. jonathan: wti 76. coming up, we will speak to liz ann sonders. pierre and matt. we begin with the big issue. stocks rallying as fed chair jay powell gibbs his clearest idea that september is -- gives his clearest idea that september is on the table.

markets rallied on cementing a start to be rate cutting cycle. the labor market is more clearly in focus for the fed with the view expressed at jackson hole that the fed does not see the need for any further labor market weakening. lisa and joins us for more -- lisa ann joins us for more. the overwhelming majority of people don't have much concern. >> i don't have much concern. i would say, i know you have been talking about it through the course of the morning. be careful what you wish for if you are hoping for an aggressive cutting cycle. there is a long history in terms of years but there is only 14 full fed cycles. over history. that is a small sample size. you have a really wide range of performance in terms of what the market has done in the aftermath of the initial cut. but where things are clearer is if you contrast fast cutting cycles with slow cutting cycles. and the maximum drawdown is

twice as large within a year, following the initial cut in fast cutting cycles versus slow cutting cycles. so, you actually want a fed that is eyeing the escalator down, not the elevator down. i think that gets lost in some of this debate. jonathan: we've heard people say, i'm sure you have as well, that the fed is put back and everything will be ok no matter how bad the data might be. how the market would respond to bad data, we have been turned good news is good news and bad news is bad news. do you think that bad news really still is bad news? >> particularly if it's really bad news. if we were to see a significant weakening from what we have seen in the labor market, you would get that reaction on the part of the fed. but i'm not sure risk assets would have a sustainable rally associated with that. so, i think that is the calculus at this point. the level of weaker than

expected data and what it generates in terms of expectations for the fed. lisa: everyone will hate this question and i'm sure you will but i will ask it anyway. what is that trigger for a jobs market that means this is truly bad news? >> that's a good question. i don't know if it's one data point. although i think if you get the next labor report next week and across the metrics that we are all focused on, not just the headlines and payrolls but what the household survey says, what the revisions are to the prior two months, if you see it in terms of hours worked, long-term unemployment, the differential between temporary and permanent, i think it would have to be something where the weakness was pretty robust within the data versus just a headline being weaker. and i wanted to go back to the first part of john's question earlier. i hope this wraps a bow around this in terms of is the fed put still alive?

i think it is still alive as it relates to economic data. there was a time where the fed put was applicable to really week equity markets. i think powell has been pretty clear that their mandate, part of their dual mandate is not keeping volatility suppressed in the equity markets. so, i think that fed put is dead. i think it is very much alive but we need to have it in the context of economic data, not market volatility. lisa: the distinction between the two is getting more calm look at it. especially as they talk about how any downside risk to the labor market could be negative at a time where people look at financial conditions as a key input. at what point are we looking at a fed reserve that is not going to tolerate some sort of significant selloff because it could weaken that outlook for the labor market? >> here's a scenario where i think the ad put would not apply to markets. if we were to actually get robust data, both on the

inflation side of things and not a weakening in the labor market and it changed the calculus to the fed maybe having to be even considered not moving in september, that could cause some turmoil in the equity market. that would not be a trigger for the fed to step in and say ignore the better economic data, ignore the uptick in inflation, we will tackle weakness in the equity market by continuing to loosen policy. lisa, your point is good about financial conditions. it was very brief but we saw a pretty big tightening in financial conditions when we had that early august turmoil. that turned on a dime and that is another reason why our view is the fed is going to start with 25 and advises us to stick with that and only with more significant weakness in the economy would they consider bumping that up to 50? lisa: what do you think will be more important? jobless claims or nvidia?

>> tell me what nvidia's report is. i think nvidia is in line. it may not be a big needle mover. but i think you could see a needle mover for the market that particular day. both with an outside surprise on the upside or the downside. claims is important but i think the next monthly jobs report may be exceeds the importance of claims unless we see a big outlier number within claims. then you have core pce too. that does not tend to surprise around expectations. once you have cpi and ppi in the books, you map it to what pci is -- pc is going to be. -- pce is going to be. jonathan: a series of all-time highs and equal weight on the s&p 500. what's your take on the leadership at the moment and what i you telling clients? -- are you telling clients? >> you've seen equal weight but you want to fade anything low-quality with small caps and

lean into higher quality. a huge difference in terms of performance within an index like the russell 2000 between non-zombie companies and zombie companies. a 17 point percentage difference with the non-zombies outperforming. you look at profitability as a factor, that's been a dominant factor within large-cap indexes but also within small-cap indexes. i think you want to -- if you are looking for opportunities, don't sacrifice the fundamentals. especially around things like profitability and avoiding those zombie companies. jonathan: appreciate it as always. small caps up by 0.5%. the s&p up by .1. >> kamala harris campaign raised 80 $2 million there and the democratic convention. that pushes the campaign's hall to 540 million dollars since joe biden announced he was stepping

aside. a third of those who contribute it were first-time donors and two thirds were women. the top 10 super pacs supporting trump have raised approximately $305 million since the beginning of the year. dual hurricanes are threatening hawaii. it's a rare combination that could bring heavy rain and wind to the islands twice within one week. a hurricane passed south of the big island with sustained winds near 80 miles per hour. another name storm could impact the islands in the coming days -- named storm could impact the islands in the coming days. kelly or berg faces questions over the future of the starliner program after nasa turned to space x to return astronauts stuck on the international space station. nasa announced the decision after weeks of testing and debate over boeing's faulty spacecraft. it's the latest blow in a year that included a kevin blau,

federal investigations and an executive shakeup. -- a cabin blowout, federal investigations and an executive shakeup. jonathan: we will get morning calls and catch up with pierre. from new york, this is bloomberg. ♪

jonathan: the opening bell, one hour and 14 minutes away. equity futures up by 0.15%. the 10 year near 380.65 -- three .8065. -- 3.8065. a weaker second half expected due to increased competition, and lisa has given up shopping

at lululemon. the stock is up by .5%. lisa: there are competitors. jonathan: i'm an unofficial brand ambassador. lisa: it's fantastic. this is going to turn bad so let's move on. [laughter] jonathan: the stock is up by 1.5%. we are moving on. baird raising its price. the retailer reports on wednesday. we are seeing several potential headwinds. the stock is up 2.5%. -- keeping a hold rating. nike's back athletic footwear survey suggests competitive pressures in the u.s. market. lisa: they missed out. i'm sorry. this has been the issue for nike and adidas, where they are talking about how do they compete with the ocs of the world.

they have lost some of the cloud in the running world, the athletic world. they are trying to renew their cool at a time where they have all of these upstart companies targeting air jordan's that were popular five years ago. jonathan: have we talk about it before? i think it's the first time. lisa: it's really high quality. i like the style. jonathan: when this wraps up, we will continue this. good stuff. turning to tech, all eyes on nvidia. earnings on wednesday, the last of the magnificent 72 report shares of more than 10%. -- seven to report shares of more than 10%. that stock is up about a half of 1% this morning after a decent rally on friday. pierre joins us for more. no through expectations for you and the team coming on wednesday. >> on wednesday, you know investors should -- all this

noise about the belak whale -- black whale. that created some nervousness around the stock. to us, nvidia is in the same situation. the supply chain is in capacity steadily. -- we think the members are going to do fine. the second thing is all investors are going to ask on the conference call about the blackwell delays. what does that mean? all you hear is counterintuitive. when you launch like blackwell, it's consuming more of your supply capacity.

you need more. it's easing up capacity constraints. what we think is going to be explained on wednesday that why blackwell might be delayed by six to eight, it's going to serve very well. many people, many teams want to have as many ppus asap. they will keep buying a lot, as much as they can of the next generation. jonathan: i want to ask you a few questions that a don't think will be answered on the call wednesday. it's what's happening further downstream. i have this conversation last week with bloomberg's mandeep singh, i would love your thoughts too. when you hear from their biggest customers, they are still bold up on investing in this cycle

without a doubt. you get the sense that investors around the edges might be losing patience with the story. do they want to see the investment turn into bottom-line profit growth? pr, do you identify any kinds of restlessness further downstream? -- pierre, do you identify any kinds of restlessness downstream? >> i think you are on point. we are doing our best, tracking down who is doing what with ai. so far, we think the signals are positive. you look at what facebook can produce in terms of efficiency gains. the migration and recommendation engines. when you hear companies like walmart talking about how much efficiency gains they got from ai, i think we are seeing a

phase where people are getting excited about it. we are almost like in a contradictory situation where today, if you don't invest in ai, whether you are walmart or google, you are taking big risks. ai is very powerful and evolving very fast. i think we are fairly safe in terms -- there is another reality, which is that we are getting into 2025, into a world that is going to spend 150 billion dollars on ai chips. and the key question is going to be again, what's next? can nvidia's business grow significantly from there? but we will not have any visibility on that for the next 6-9 months. lisa: do we have any visibility into what the policy backdrop is going to be and how that might affect nvidia? i say that as there is a front-page story in the wall

street journal talking about how chinese ai developers are working with internet brokers to access nvidia chips oversees that they can work on them without violating some of the bands on importing's nvidia chips into mainland china. how much do you look at this and see this as something that could potentially be a liability for the company they talk about going forward? >> the government can do whatever they want. the invisible hand is pushing to watch china. -- gpu to watch china. the government has to work on a thin line. it's very challenging. they want to keep the leadership and ai in the u.s. they don't want to weaken nvidia. they want to make sure they don't let china catch up in

terms of ai capabilities. i think this balancing act is going to continue. we have seen over the last 2-3 years. you might have a tightening of regulation around nvidia. but at the end of the day, it is a smaller moving part. member, we are still in a world in which people want way more gpu's than what is being used. if you have a limiting access to china, china will instantly by previous generation gpu's, less powerful gpu's. they are going to go to clients -- western clients. it might create a lot of headlines but i don't think it's enough to disrupt the project as long as we are supply constrained. jonathan: thank you for your clarity as always.

looking ahead to numbers from nvidia wednesday afternoon. the most important quote ahead of these results came from alphabet, who said the biggest risk here is under investing. that's one of their biggest customers, saying they want to overinvest and not underinvest because the biggest risk is under investing. when investors lose patient with that, -- lose patience with that, that's one reason for the story to change. i don't see that just yet. lisa: that's the reason there is so much optimism. you aren't hearing back from companies. they are saying you can be skeptical about expenditures but we will keep doing it. this is a company that has not missed estimates in the past seven quarters. i would argue they have blown away expectations. that's what a lot of people are expecting this week as well. options are seeing a 9.4% move post earnings. we are talking about a company

that has a massive valuation. we are talking about huge swings in market capitalization value. jonathan: slightly higher in the premarket this morning. equity futures up by 1/10 of 1%. up next, matt of deutsche bank and then we will speak to michael collins. [introspective music]

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jonathan: stocks on the s&p, 60 minutes out from the opening bell. we've noted the performance of small caps. it continues, up 8/10 of 1% on the russell. following remarks from fed chair jay powell, the yields aggressively lower. down, 3.9 one. not too bad. lisa: very little drama. these are minor moves. i think it is interesting that the slight pop in oil prices is coming with longer-term yields popping a touch on the margins. again, this sort of what are we not watching out there? is there a risk to longer-term yields and longer-term inflation

expectations the more biased the fed is to cutting rates in response to any potential economic weakness? jonathan: is this a demand side story or supply-side story? lisa: completely stopping the production of exports and crew. this is in response to a domestic squabble, kicking out the central bank governor in the eastern government region. it highlights how vulnerable this whole sector is to a whole host of potentially volatile areas. it's not just that. it's russia attacking ukraine's energy supplies. there is a lot going on that goes beyond what's going on with israel and hezbollah and iran. jonathan: crude oil is up by 2.7 1 percent. apple is planning to unveil its latest iphones on september 10

and watches. it looks to stay competitive on ai. that's the big day, september 10. lisa: that's also going to be the debate, supposedly on abc, between the two residential candidates. possibly, depending on -- presidential candidates. possibly, depending on whether that gets done. if there is introduction of artificial intelligence in a concrete way, the true measure i have been told is the jonathan ferro index on whether jonathan ferro will go to the apple store and turn his in because he sees the other one is preferable. jonathan: i turned some old ones in. they are incredibly helpful. lisa: thank you for being nice to him. jonathan: very easy to take stuff back. super easy. it goes just like that. just like that. lisa: does it make you want to get a new phone?

jonathan: i'm considering. we will see what the new one looks like. we will see what the new one looks like. will the ai stuff change my life and help me multitask in a more efficient way? can i spend less time on the phone? does that make sense? lisa: do you think you are not going to be suspicious of what mechanically is going on? jonathan: i'm going to be super suspicious. lisa: you're still ok with it? jonathan: i've never used siri. lisa: you have to use ai because you have -- because you have to use it or you will be left behind. jonathan: i feel like i'm being left behind by technology everyday and i resent it. i do resent it. lisa: we can talk about that later. jonathan: jake sullivan is heading to china tuesday through thursday as the ministration push to keep dialogue going in china.

china has another problem. who is the next president of the united states? what does november bring? lisa: does it matter? we've been talking about u.s. tariffs. we have reporting this morning. justin trudeau's expect it to give a press conference later to talk about canada planning to match what the u.s. is doing, hitting china with tariffs of electric vehicles and steel. this is a global type effort. how much does this gain steam in a way? jonathan: how much leverage is there between the two candidates? the rest of the world needs to worry when it comes to tariffs. it feels like a bargaining chip for donald trump. lisa: how much of what he's putting out there simply a bargaining chip versus being something he plans to implement? that's another debate. how much is it basically just dog whistles to try to get people a sense of what they may

or may not do to use as a bargaining chip later on? jonathan: it's a bit of everything right now. going back to what lisa was alluding to, september 10 is meant to be the date also for the debate. but now there is a question about whether that debate will take place on abc and whether donald trump will turn up or not. lisa: he raised question saying the reporters involved were biased. jonathan: you should watch that exchange and judge for yourself. the powell pivot and focus. matt saying this. the white house or powell's speech emphasized greater confidence on inflation. he wanted deterioration in the labor market. upcoming labor market and growth data will more likely determine the initial size and pace of policies. good morning to you. >> the morning. jonathan: september 6, this question was always going to come your way. forgive us for asking directly. how bad does the number need to be to make this 50? what are we talking?

100, 125? >> it didn't need to be all that bad for the fed to go 50 basis points. best case, they go 25 basis points because we expect payrolls will bounce back. the expectation was you needed to see a rebound in the data in order for the fed to go 25 basis points not 50. friday confirms that idea that powell, the two lines would look at is him not wanting anymore further weakening in the power -- data market and being willing to step in at this point in time. if you were to put numbers on it, if payrolls are below 100,000, similarly. jonathan: were surprised -- were you surprised by the extent of the pivot? the bank focused on inflation. two years later, we've been looking for balance. i happened to agree with him, it feels like a bank account that

focused on a different side of the mandate. is that fair? >> i don't know that they are completely on the labor markets. if you look at the past year or two years, it's been focused on the inflation side. importantly, they were seeking slower growth in a weaker labor market to help them get inflation down. it's clear that that is no longer the case. inflation and data do matter. but i think in terms of the size of the moves and the timing of those moves -- lisa: what did you think of the fact that jay powell did not use the word gradual, methodical, any of the other tea leaves that other fed officials have used to indicate they will not move quickly. >> this is one where context is important. we didn't expect them to use language around gradual or methodical or patient. we expected them to keep open the optionality which is exactly what he did. we got the context over the previous days where we had parker and collins using language.

context matters a lot. what he did was allow the market to price some premium of basis points. they increased their optionality. they did not want to be locked into a set 25 point basis move. lisa: this is what is doing beliefs that this is a single mandate fed. he's basically saying the floor is the limit. we can cut as aggressively as we need to. even though we are not necessarily seeing weakness. we might see weakening but not weakness. do you think that there is a point in which adams point could come back into the fore where we are looking at eight three inflationary environment? -- a re-inflationary environment? >> there was an uptick in shelter inflation p they have confidence that is coming down. you are right. we are not seeing any outright weakness in the labor market data. but when you look at the broad

swath of data, the higher rate is incredibly low. the vacancy rate relative to the unemployment rate is back to where it was in 2019. the unemployment rate has risen 9/10 of a percent. we have not seen layoffs pickup. the question for the fed's they are sitting at 5.3%, well above what any neutral might be. doesn't make sense to start the process of cutting rates and take out some insurance against the downside risk? it makes sense in this context. jonathan: the economic projections come out september 18 as well. the former -- i spoke to be former fed governor early on. we have unemployment year end. they have it at 4% year end 24. 4.2 for 2025 p four point one for 2026. one of those numbers -- 2025. four .1 for 2026. one of those numbers going to look like? >> that will motivate what will likely be three rate cuts for

this year. i think of the fed is debating between 20 five and 50 and they side toward 25 because the data is resilient, one area where they can give a dovish single to the market is further out. 2025, 2026. what they built was this very gradual process. this notion is probably behind us. we are now of the view, i think the market is of the view and the fed's of the view that they are going 25 basis points each meeting and it's a debate between 25 and 50 until they get closer to neutral. jonathan: this is great. we get dissent? >> on 25 basis points, no. if they were to move by larger, there is potential for dissent. jonathan: if you asked chairman powell between 25 and 50, is he leaning toward 50? >> i don't think so. i think there was an important message from the committee last week which is they would like to and prefer to be able to go at this more meticulous pace.

they will be responding to the data. for the market, it's created this difficulty because it has given the sense that they are data point defendant -- dependent. jonathan: are they not? >> the sense is certainly there and the last data point is before the blackout period. it creates the potential for the market to move in a direction they might not want heading into the blackout period. jonathan: it hasn't stopped them before. to continue the conversation, michael collins joins us for more. did the fed reserve chair just claim victory over inflation? >> yes. i think it's the right thing to do. you are seeing the actual data really punch lower, jonathan. cpi, both headline and core, our printing below 2% now year-over-year. we all know housing has been a problem in the data. housing is a lagging indicator. home price is now more and --

now, in more and more metropolitan areas, falling. home prices are down 25% from a crazy peak. you are definitely seeing the housing part come down. that's going to keep inflation closer to 2%. the fed is, i have not seen them have it. a lot of people criticized the fed of being too stalwart and sticking to their guns and being too slow to pivot. they have pivoted a lot this cycle. from zero to five point five when inflation was high. they did a major pivot from vocus and on inflation to rightly focusing on weakness in the labor market. jonathan: it was a phrase we used to hear a lot of. they talked about extending the cycle, attempting to extend the cycle. i hear the same thing all over again. as a market participant, you operate with the assumption they can achieve that. they can extend the cycle. >> they have the ammunition to do it. the question is do they have the guts to do it. what they should do is cut rates, start now and they get

that finally. powell is on board to that. if they could snap their fingers and not worry, they would put the funds at 3.5 today. i think that's probably the right level today, given the growth and inflation outlook. but you know that's not how they operate. they are going to really slowly, methodically. discounting the probability of 50 basis point cuts at this point. i think they will move 25's until the markets force them or the data forces them to move more aggressively. the funds rate is arguably 200 basis points too high right now. they will be really slow and there is a chance they have to plate -- to play catch-up at some point. they have the room to engineer this soft landing. i think there is a good chance they pull it off. the economy, the private sector is not over their skeez like

they have been. it's been a short post-covid expansion. companies and consumers and the financial sector and the housing sector are not leveraged. that is the most important point when we look at the economy from the bottom up. there is a real good possibility that we don't have a hard landing here. lisa: it seems like a consensus. are we overpricing the chance of a soft landing? even if it's the most likely scenario, how much is that already a point that the market is leveraged given the fact that high yield spreads are some of the lowest we have seen during the cycle and that frankly all in jump on yields are the lowest they have been in two years. >> it's funny. the rates markets feel like they are pricing in too high of a probability of a recession. right now, in two years from today, the markets are pricing at almost exactly a 3% funds rate. that's a lot. that's a lot of cuts. i think what the markets are

pricing in their is not that they get the three but that there is a good chance they get to 3.5 or four. there's this increase in probability they have to cut into the twos. i think the probability distribution is priced in. the credit markets to your point and arguably the equity markets are kind of whistling past the graveyard here and really assuming that either you have a soft landing or if you do have a recession, at least that it is a mild one and it's not an existential credit crisis where default rates spiked or you have a huge increase in bankruptcies. frankly, that's our view that this could be one of those cycles, similar to maybe 2000 where financial assets reprice but the actual economy does not take a big hit. you had a lot of defaults. a lot of that was fraud related and other things. i could see a very benign default cycle over the next few years, even as the economy slows. lisa: to put this through to understand what you're doing and where you are leaning in, what

do you think is underpriced and what do you think is overpriced that on the margins you are training? -- trending? >> it's straightforward. there are too many cuts priced in in the near term, given the high probability of the soft issue landing, benign economic scenario. we are fading the rally in rates, marginally. under the five-year part of the curve, trying to bet the fed will not cut as aggressively as what's priced in right now. that's one way to do it. and then on the credit side, you play defense. you hunker, wait for opportunities. like you saw two or three weeks ago where fall spike, spreads blew out aggressively. the high yield spread wide and almost 100 basis points. those are big moves quickly. it's difficult to execute on but you want to be able to capitalize on those bouts of volatility and on credit problems, even if they are

idiosyncratic problems. be defensive in credit but be aggressive and willing to add risks when you have those opportunities. you have this fed backstop that is potentially gigantic. lisa: were you disappointed that there was not a clear statement on a neutral right or clear discussion among the fed officials? >> know, they are as confused as we are on the neutral rate. it's a moving target. it is really hard. where is the funds rate supposed to be in a perfect world? they have two or three quarters as their long-term dodd. that is probably going to continue inching upward toward three. the markets priced them at 32 years from now. the funds rate, inflation is at 2.5, should the funds rate be 1.5 and the puts the nominal rate at three or 3.5? that's reasonable to me. i don't think it's supposed to

be two, which is where we are right now. we are closer to three. somewhere between zero and one would be my guess. hi twos, low threes is reasonable. jonathan: what happened to the maturity of credit? you use to hear things like survive until 2025. i saw this quote coming from 24 asset management. it's less of a war, it might be a fence. >> i was a high-yield strategist 30 years ago. we always worried about the maturity wall. we never hit the wall. companies, they change their behavior when conditions change and people forget that. it's kind of -- it's not a static environment. as rates have gone up, companies have actively been very aggressive in managing balance sheets, paying down debt as it comes due, turning out their debt. and now with these rate structures lower, spreads really tight as lisa mentioned, now suddenly companies are mentioning all in yields, one hundred, maybe 200 basis points

lower than they were at their peak are year or so ago. that's not terrible in a world where my revenues are growing at an mid-even high single digit. my margins are hanging in there. let's refinance our debt for investment grade and seven handle coupons for high yield. it's not terrible. they manage the wall and you never actually hit it. what causes the wall is people not being able to make a payment, and interest payment, as much as a principal payment. i think the maturity wall is overstated. jonathan: thank you. appreciate the update. we have taken a lot of breaks at the wall over the last few months. lisa: the jump on maturity wall records a historic collapse -- junk-bond maturity wall records a historic collapse. it highlights how much people are trying to turn this out. it always is this way. people worry about the maturity wall. i remember in 2013, people said

this is it, it's over. jonathan: this has happened without a federal reserve cut in interest rates, isn't that a surprise? lisa: it goes to the point of how markets work for the federal reserve. this is the reason they have the ability to go slowly, the markets have gotten out front. jonathan: let's get you an update on stories elsewhere. here is your bloomberg brief. >> tensions escalating in the middle east as israel and hezbollah exchanged fire over the weekend. over 100 is really warplanes hit missile launchers in southern lebanon on sunday. has villa responded with a rocket and drone attack that killed and --has villa responded with -- hesbollah has responded with a drone attack that killed an israeli soldier. canada is -- new tariffs

on china. canada will impose a 100% levy on evs and h when he 5% on steel and aluminum. --a 25% on steel and aluminum. the first ever rolex rainbow daytona watch is getting ready to go up for auction in geneva. it will be auctioned on november 8. it is expected to sell for at least $3.5 million. the watch is believed to be the first ever to feature the now famous rainbow jim set pattern produced by the swiss watchmaker according to phillips. the watch has been in a private collection for almost two decades. that's your bloomberg brief. jonathan: thank you. it does absolutely nothing for me. nothing at all. lisa: rolex? jonathan: that flashy stuff. just nothing. lisa: where'd you go with this? jonathan: you see what's happening now?

lisa: but who are you trying to impress? i'm preaching to the choir here. jonathan: yeah, on the same page. up next, we will get you some earnings. some data and the calendar just around the corner.

jonathan: 36 minutes away, equities up by .1%. yields up a single basis point. the latest in libya as well. the week ahead, the calendar looks like this. mary daly speaking to miley

keefe. wednesday, nvidia reports after the closing bell. thursday, u.s. gdp and another round of jobless claims. lisa: what's one to be the most important thing for this week and week where a lot of people are going to be on vacation. he was talking about how there is outsized volatility. going back to when the people are away, they will play. will we see some big moves? jonathan: if you tell me what the moves are, i will tell you what is the most important data point. lisa: if nvidia moves by more than 9%, akin to what the market is currently expecting, that's almost 300 dollars of market capital that will be added or subtracted in one day. that's not significant. jonathan: the record is 329

billion. that was the end of july. lisa: i was looking at a period, it's a four week period that expands july -- that spans july and august. nvidia lost a quarter of its value. it has gained all of it back read these are massive swings in a short period of time. jonathan: welcome back. lisa: thank you. good to see you. jonathan: good to see you too. has she taken a week off? good for her, come back after labor day weekend. coming up, christopher, sebastian page, matt stucky and phil. this is bloomberg. ♪

>> futures edging higher on this monday morning after a big finish on friday. 30 minutes to go until the start of trading. katie: counting down to a fed cut. investors are debating the size of the first reduction and future easing. investors also anticipating nvidia's earnings, which may tell whether artificial intelligence exuberance is warranted. plus more retail results roll in. nordstrom, gap, and others report as inflation-wary consumers continue to seek bargains and value. let's look at where markets are trading 30