♪ >> we are in a fairly sweet spot that has been placed decently into the market. >> this is an environment where you have to look at the fundamentals. >> investors should go into a more diversified approach. >> this market is driven by fundamentals. >> we are still having the mother of all debates. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: let's get your trading day started.

"bloomberg serveillance" starts right now. equity futures just turning positive in the last hour, up by one third of 1%. investors buying the overnight weakness. nvidia raising aftermarket losses at the best performing stock on the s&p 500 this year runs into a little bit of turbulence. down by 1.8% after failing to meet them very high expectations. their reaction on the edge of comical. joseph moore, expectations become more challenging at the superlative becomes mundane. matthew ramsey in what seems like an absurd statement in the context of the quarter in which nvidia printed data center growth of more than 150% year-over-year. the short-term noise is likely to continue. lisa: so i saw dan ives in a green room and he didn't have on a black suit that looked like yours that had a skinny time and he said he was a little worried that he might have to go out and

change his approach. but it was not to be, and he vows that at the end of the day-to-day it will be green because people will reassess the freak out and realize that perhaps they were just responding to outbursts. it is certainly heading in that direction. erasing this morning's losses as well. look what we get in terms of the numbers. for the third quarter, the company looking for $32.5 billion. analysts have predicted about $31.9 billion at the high-end of the range was 37.9. i guess the whisper, the people actually in the name, they were looking for a much bigger number. >> this was the lowest again in about six quarters. it shows a deceleration and there is this larger fear, has nvidia and the larger ai theme run out of room to be in moonshot? yes, you are pricing in growth but you can't price in the same trajectory you did a year ago.

how much are people looking at the blackwell delays, looking at gross margins that actually came in about 3% and saying hold on a second, they are losing pricing power, losing this astronomical rise and then you look at the numbers and it is a reality check because you start realizing they are they doing the well so we are basically just coming up with reasons to fade this story shortly. jonathan: the price action recovered from last night. if you are looking yesterday evening this is not what you expected. coming up a little bit later, the fate of today's market not just in the hands of how impressed you were not, jobless claims just around the choir. every single week we seem to be putting a little bit more weight on this high-frequency data around the labor market lisa: about as clear as mud because

you get contradictory signals on everything. on one hand you had seen jobless claims creep up just a bit. on the other, when you listen to the rhetoric on earnings calls, these are not companies that are about to do mass layoffs and they think that is really important. yes, you did half that 818,000 revision downward of last year's jobs. at the same time, that just brings us down to pre-pandemic norms. this is the reason why people aren't baking in some sort of hard landing that they are watching closely. jonathan: 232,000, make in-line. equities doing ok. doing ok just about positive. a lot of talk about what is happening with the inflation data particularly under germany. consider a rate cut not just in september but in the following meeting.

lisa: this is one of my biggest questions, is the weaker dollar story durable? , much is that losing preeminence as you see lower growth outlooks? this fully highlighted that. preliminary numbers showing why aren't they going to cut just as much as the fed, if not even more? jonathan: here's your line of this hour. we'll catch up with brian levitt of invesco one what nvidia earnings mean for big tech. why unemployment could hit 4.5% in next week's jobs report. we begin with our top story. nvidia shares inching lower after posting underwhelming forecast. brian letterwriting the market seems to be demonstrating some concerns about the margins and

the willingness of the large tech companies to continue to spend on chips into 2025 and 2026. good morning to you. you said before you are a foam of guy. are you still a foam a guy after those results? >> i think those are outstanding result and at some point we need to define what blowout means. i think what is critical is yes, nvidia is such a big percentage of the broad market, but investors are viewing this at the bellwether for all things right now. i even heard that there were earnings parties yesterday. i wasn't invited to any. it is a very focused part of the market. they have a hyperfocus client base, so investors are putting a lot into this because of the heavy concentration. in actuality the bigger story has been some of the broadening out we've seen in the market in

recent weeks that a lot of investors were hoping orson beginning of the year. jonathan: you brought up the customer base, what is happening further downstream away from nvidia. mehta, alphabet all increasing budgets recently. do you see any reason at all to be concerned about the prospect of maybe some of those companies pulling back on budget? >> if you listen to them right now, everybody trying to get ahead, nobody wanting to be left behind. my kids just came home from camp so we are looking for lice. when you're trying to pick a little bit, yeah, maybe you start to see some of these other businesses developing their own chips or maybe the overinvestment gets too far, but there was nothing in that report to suggest that this structural story is impaired. lisa: just shake their heads.

i did find this interesting. about 40% of nvidia return is coming from these four companies, and that really raises this issue of ok, can they broaden out? can they broaden out to a water slot? they talked about potential government spying chips? does that matter? you basically saying people just need to shave their heads and move on? >> over time they will broaden out that base. you will have significant overinvestment, but that creates some of their own conservation risk. it will need to broaden out, and likely will. so far we are talking about generative ai for the most art. >> you sent for the optimistic. you're taking a look at this insane realistically, nvidia still going to the low out name, and yet you say tactically you favor more defensive position,

even though you don't see any kind of hard landing, even though you don't see any kind of massive turmoil ahead of the election. why is it time to be defensive? >> fetishist tactical call. largely, what you are seeing is leading indicators for the u.s. economy slowing, or pointing towards him slowdown here, and you have pretty significant expectations for fed interest rate cuts. it almost feels a little bit like the november-december period of last year with the markets got very excited about a lot of rate cuts, the federal reserve is still somewhat cautious around how many cuts you are going to get. so the economy slows and that is still saying we are not necessarily going to cut six times in the next so many months. typically what you see is more of a quality environment. indicators are pointing to slow

down that the markets are less concerned about that and the markets are focusing on rate cuts and the fed has to deliver. jonathan: do you think there is a big difference between now and the start of the year pricing and a lot of cuts -- in a lot of cuts? >> you're seeing jobless rates move up, unemployment move up. the fed hasn't moved, so it is more likely that the fed carries through with some of it. we are going to ease in september and maybe a couple of times this year. the question is whether you normalize the yield curve in the timeframe of the market is currently expecting. when i say tactically defensive, we are looking at preferred indicators that suggest this is not usually an environment where quality outperforms. but, come back to the fomo comment, and the aftermath of peak inflation and peak tightening, the markets tend to do well over subsequent years.

defensive means more of a factor call or a view that rates were going to come down which has certainly happened. it doesn't mean that investors want to be out of stocks. equities tend to do well in the aftermath of tightening. lisa: there are a lot of people looking for signal and the response to nvidia earnings about market positioning, market sentiment, does this highlight how concerned people are that they are overly leveraged one specific name in one specific theme at a time where you can't be in moonshot forever? the willingness of people to ditch as quickly as they can even unknown news. is that telling you anything about positioning in the state of the market structurally? >> you have a little bit of a less healthy environment for markets. there is nothing in nvidia news to suggest that was incredible disruptive for nvidia.

what you would like to see over the next couple of years is this proverbial soft landing, the renormalization of the yield curve. if you get that in equal weight strategy or different flavors for the s&p 500 should take of participation. you go through these long periods where the market cap wins, and then you need some type of catalyst to change that. candidly, usually that is a recession and a recovery. what we are hoping for this time is a slowdown easing and a recovery. jonathan: that's what is weird about this. you want to play the recovery to the recession. which annmarie: is the reason we haven't gotten it and may not get it but i wonder how nervous people are. even if it happens, but maybe is overpriced.

jonathan: you need to go to this earnings parties. lisa: there was a lot of confusion and then they pressed sell and they took a drink. jonathan: i didn't know they were doing that now. lisa: i forgot what they were called, i have to remember what they are called. of course i was there doing crowd research but i have to do the research. there if this question of how quickly they've lost their fad-dom. it didn't really carry through. jonathan: i'll do a chair powell viewing party next fed decision. >> i'll join you. jonathan: you do the show. lisa: gee, thanks. we are going to do it remote. i think some people would like it more than others. jonathan: tk would love it. brian levitt of invesco. nvidia, we were trending as low as 118 earlier this morning now we are around 123 in the

premarket. lisa: which i guess isn't surprising when you take a look at the numbers, considering they did beat expectations pretty much across the board. it didn't meet the top expectations for the fact that people are looking at margins as a reason to lose hope, when you take a look at what the cfo actually said about margins coming in, this was a direct result of the blackwell disruptions in that it was going to shift back as soon as those were corrected. jonathan: he won't be saying the story is over. he is very bullish. let's get you in update on stories elsewhere this morning. here is your bloomberg brief. jake sullivan wrapping up a three-day trip to china with a meeting with president xi jinping. the first time sullivan has held one-on-one talks with the chinese leader, meeting coming hours after his first face-to-face with the top chinese army general the gunman

who attempted to assassinate donald trump searched online for both five and trump campaign events and look of explosives online over a span of five years. there have been nearly 1000 interviews but the suspects motive still unclear. finally, salesforce shares rising the premarket, the software giant feeding second-quarter expectations, relieving some investor concerns. salesforce also nothing the cfo will step down once her successor is chosen. that's the latest. up next, nvidia hitting some turbulence. >> the demand for black wealth far exceeds its supply. of course in the beginning, demand is so great that we are going to have lots and lots of supply. jonathan: let conversation this morning, good morning.

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♪ jonathan: dan ives just got back from a viewing party, hasn't slept, is going to join us in just a second. equity futures recovering up by a quarter of 1% on the s&p 500. nvidia doing a little bit better. under surveillance this morning, nvidia hitting some turbulence. >> the demand for blackwell far exceeds its supply, of course, in the beginning, because the demand is so great. we're going to have lots and lots of supply and we will be able to ramp starting in q4. we have billions of dollars in revenues and will rant from there into you won, q2 and through next year. we are going to have a great next year as well. jonathan: supplies will be plentiful even as nvidia's new

processor lineup is proving more challenging to manufacture. we believe nvidia shipped demand, blackwell concern delayed. robust outlook at a meteor enterprise pipeline into this revolution, just starting to kick off its next phase of growth then dropped by the studio for more. start with the production problems. what did he say that a your concerns? >> there were worries that these concerns were going to linger into year-end. you talk about billion from blackwell but ultimately we are talking about what could be tend so if any one thing was going to spoil this party, even though the initial reaction, bears came out of hibernation mode for a little bit, i believe this is a stock they should be green today and for broader tech, you heard everything you needed to. from a demand perspective, from

godfather of ai jensen. >> manufacturing the stuff is incredibly complex. with any real detail about manufacturing yield improving somewhat, did you get any detail about what was actually happening? >> if you look from a yield perspective, it could hurt the story was significant blackwell delays. and that is something that check the box. you look at the demand, on the margin of the execute this is going to be a $34 billion type of order so then you look at further in your life, you start to get these continued beats, you start to look at earnings power that significantly goes higher internet year and relative to capex and everything we are seeing tech, this was the most-watched earnings.

it is something where i think they came and delivered and i think this is going to put a few on that rally. lisa: it's fun, it is a cultural thing. you don't have to be here to root for a winning team. i'm very curious that the blackwell revenue that they are projecting out, they were very non-billions of dollars. people are looking at that insane if you really want to convince us that this delivery delight isn't going to be a serious problem, why not provide specifics especially at a time when markets are not able to diversify their buyer base? >> we think it is tended billions, not just lanes. jensen, a grand master poker player. if you look at nvidia here, this is lebron and heisel in terms of

where the story is ultimately going. the most important thing is the multiplier effect. it's not just about nvidia or microsoft. we believe it is a multiplier across tech and i think that us and that is most important for investors. lisa: it's fun to talk at the godfather and popcorn and all that. actually asia, talking to people who are the end the buyers of some of the ships in the users to understand exactly how much demand there is what has -- one seen with some questions about how long the magnificent three or four u.s. take tech companies can continue to support it? >> a trillion dollars is what we see from an ai perspective when there's three years. you go back six month ago, if you look at the underlined

demand, not just from hyper scalars, but eventually what is going to be other enterprises, edition starting all of our checks are showing demand actually continuing to accelerate. rome wasn't built in a day, neither was ai revolution. anyone think this is height, listening to conference calls, i don't know what watch party those bears are, they are not listening to the call that i am. jonathan: why couldn't we end up with the situation will be actually real competition? lisa:lisa: it is a great question. amd and obviously soon others

are going to benefit. the reason this is lebron in high school is because they are so ahead of any other competitor and right now they are the only game in town. the new gold, the new oil, amd chips. when you come away from that conference call last night, there's nothing that makes me think that we don't have a year from now or less, market caps. godfather of ai, nvidia. cupertino with the ai super cycle starting off on the iphone 16 and what is happening with redmond. lisa: in fairness to the bears, the bears weren't exactly coming out and saying the stock is going to tank. they are saying maybe just cash and a few chips. every question here of how big the addressable market is any question about whether they can essentially go into some of data centers that their buyer base the fund.

how much did they keep become competitors at a time where bigger and bigger companies are gaining the scrutiny of regulators? how much are you factoring that in as a ceiling for how far this godfather of ai can know? >> it is a little bit of a cohabitation that is happening here. regulatory is 40 miles per hour in the right lane, a minivan. the technology is 100 mile per hour the left lane, and i just think this will be self-regulation. openai and terms of what it looks like that next round of funding is. you will start to see those eventually. but this market in the first, second inning. that is our view in terms of

where we are from the ai revolution jonathan: formula one this weekend, for grace. lisa, down by 2.5% in the premarket. lisa: there's nothing wrong with minivans. what he's talking about is really important. essentially how much are we just seeing the beginning and maybe people have gotten to some -- used to the pace of adoption and the use cases. that's actually a very interesting distinction. >> coming up next on the program, kamala harris sitting down for her first campaign interview tonight. you're watching bloomberg surveillance. ♪ [suspenseful music] trains. [whoosh] ♪ trains that sense what isn't on the schedule. ♪

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jonathan: things are looking a little bit better, equity futures by .20% on the s&p. the s&p and nvidia makes up 6.6% of that index. around 8% of the nasdaq 100, and nvidia negative by 2.8%. we will come back to that in a moment. just the flavor of equities this morning, switching up the board against the equity market. jobless claims are up, the

estimate 232,000, and in this case, we take 232 and a rate cut in september. lisa: basically when people ratchet back their expectations for obese rate cut. if people basically move on, can you reconcile the degree of cuts we are expecting without weakness? how much of people moved on from that story of a hard landing and accepted a soft landing? that is one of the biggest clouds of the market, this is the base case. it is a soft landing near vona. how much have people not priced in the risk of recession even if it is not likely scenario? jonathan: and how much will this unlock real dollar weakness? especially through the fx market. i would like to talk about the other side of the trade. what about the ecb?

take a look at the chart, we get original breakdown of german cpi out of the headline read you got from the eurozone tomorrow, and we read down the breakdown of what we got from general, cpi was weaker than expected compared to a month ago, so you have the potential not just for a rate cut but the month after that and maybe onwards. lisa: and it is not just germany. the preliminary readout of spain shows the same downward surprise when it comes to inclusionary pressure. where's the concern that is going to outweigh the week as you see in a material way? we caught up with ecb officials last week, and they seemed like they were increasingly interested in cutting rates as much as the federal reserve. so the idea that the fed will cut the ecb at a time when they are seen weakness and disinflationary pressure, let's see. jonathan: 1.1093 on the euro. shares of nvidia lower in the

premarket. failing to live up to high expectations, delivering an underwhelming forecast and using production snaps. no real concern about supply issues. the fact that he spent the whole time speaking about that shows how bullish he is. lisa: these are some of the snags people are picking up on. 3% decline, the idea of how much that is coming from blackwell. the idea that 40% of nvidia has returned, so not diversified in terms of what they are doing and they just high valuations. to put this in perspective, their market valuation is more than $3 trillion and that means nvidia is worth roughly the same as the 10th largest chip companies combined, so that

gives you an idea of how far they have to follow which shows how far they have to far before talking about armageddon. jonathan: if there are supply issues and production signs, nobody has to fill in the gap anytime soon. lisa: we did not mention the $50 million ibex. the reason the bulls are not worried is that it is pretty astronomical. so at a certain point, how do you price, again, a moonshot and howdy determine when it becomes a growth story in the moonshot and what that means for expectations? jonathan: the patient's of investors and their customers, do they need to demonstrate a bigger return on investment under recent we are seeing quarter after quarter and do they need to show it quickly? we are starting to see small size of it. lisa: we need to understand what

ai does and to be able to use it and you will not. these are some of the questions that have led to people to have skepticism. other people say to wait, and when you hear someone the executives of these big tech companies, they believe very much in the story that they cannot invest enough. jonathan: nvidia down by 2.7%. the atlanta fed president raphael bostic looking for data to support cuts. he said, "i do not want us to be in a situation where we cannot and then have to raise rates again." he has said this a few times. i'm not saying he will not reduce interest rates the next month, but the fact of the matter is, we are having a different conversation at the federal reserve that we are with chairman powell himself. for other committee members, you go back to that speech on friday i do listen to comments like that, there is some daylight. lisa: it seems like he talks

about his confidence that inflation is coming down to the 2% target. that said, we spoke with him last week, this is someone who is prepared to cut rates by 25 basis points in september. how much do they push back against the pace and the scope of rate cuts more than the actual rate cutting cycle? they will cut rates but what is the destination, 200 basis points or more, before they cut by the end of next year? jonathan: you will have to see real weakness to get to 50. lisa: i think so. ok, disclaimer, personal opinion, i don't see how they could justify 50 basis points pushing the market completely offsides without there being a reason why they are concerned that would justify them recognizing that weakness. to me, i don't see the rush for that. jonathan: citi is looking for

125 and they say that is enough to go 150 in september. sub 100, 125 over citi? is that sufficient to engineer a rate cut of 50 basis points on september 18? lisa: that means they believe 50 is the base case in the bar is like to get there. they are not really together with other people on that. although, if you think about what chair powell has said, welcoming further cooling, this would be further:. jonathan: we will review more #estimates through the program. elsewhere, sitting down for their first interview, harris and tim walz. a narrow lead in nevada and arizona.

we will have a sit-down conversation later, what are the questions you have in mind that you would like answered later this evening? >> the questions will be answered at 1:45, when the harris campaign says the interview will be happening. i think this campaign would like to keep the cinderella moment going as long as possible. they will answer questions on fracking, on the border, but this format of the interview makes it hard to say exactly how well another network can press these questions. will she be addressing harris and tim walz at the same time? why is the first interview a double interview? is it going long sit-down? there is a lot we do not know. jonathan: on that matter, it is not really matter that much when

it comes to the format. the polls seem to be in their favor. james: the point in this interview is to do no harm, to demonstrate that, yes, we are willing to step out of the bubble and mix it up a little bit, but when you are ahead in the polls, that is when you need to play defense. harris is not ahead by very much. she does have a small, sustainable lead, 1% or 2%. she is probably on track to win unless trump can come back and make some of these other issues like the border, inflation, national security, energy. lisa: you said choosing tim walz for kamala harris may be the end

of her honeymoon, have you seen any signs that is the case? james: no, as i mentioned, they have a wonderful meeting going on here. they have voters or investors, the democratic base, they see a reliable candidate, and it is not a guarantee, but very strong positions so far. and the real question is whether or not we are seeing a recovery from a biden deficit or whether or not we are seeing an expansion and should we go beyond 51 or 52, and that she more than recovery the fallen away democratic voters, they african-americans, the hispanic voters? is she reaching out to the

midstream? that is really the test we need to see. lisa: when you look at the polls on the aggregators, they talk about harris having a small lead ahead of donald trump, and then when you talk to people focused on the market response to the election, they say that trump trade is still alive and people don't believe the polls. they believe there was a greater chance donald trump will eek it out do you agree with that assessment, the divide between polls and markets, and do you think it is dissident or one is right and what is wrong? james: no, i think donald trump is still very much in the game, but you have to give harris the edge for momentum. but she still does not have what she needs to win, donald trump has that coalition, and trump could win the race at 47%, or 48%, and in order to be assured of winning, harris probably needs about four points, so she

is not beating the spread yet. that's factor i. and we don't have other polls out about how people are seeing the main issues, the state of the country, those sort of polls take much longer to do, and before the harris nomination, before joe biden stepped down on july 21, you had issues showing that voters favor donald trump on many of the issues like immigration, inflation, national security crime, all of that was trump territory a month ago. is it still trump territory now? we don't know. coming in september, we probably will get more detail and more pulling on the state of the country, so i think that in about two or three weeks, a few

weeks after the first debate, we will have a better set of data because you can learn a lot from the polls. jonathan: the momentum has certainly shifted. james lucier, thank you. the first debate for them will be september 10. if you are just joining us, futures positive by .14%. lisa: to put into perspective at what point we were down, 2.8 percent, so, close the gap? dan ives is confident, otherwise he will go out and chase a is dressed. jonathan: he almost wore a blank suit this morning. lisa: do you believe that was the case? jonathan: absolutely not. not at all. let's get an update on stories elsewhere. here is your bloomberg brief.

huawei posting a six straight quarter of growth, gaining market share against one of its biggest competitors, apple. smartphone shipments jumping 50% in the june quarter, apple dropping to six place in the chinese market. massive. lisa: i thought this was one of the most interesting stories, highlighting how much the competition is pushing american companies out of china. how much of this is interest? jonathan: it has got to be. hp shares trading lower in the market. a profit outlook on a continued downturn, a disappointing forecast overshadowing the company's first revenue gain in two years. a long slump of demand for personal computers, and the final story, top hopes, coco gauff and djokovic easing into

the u.s. open. and ben shelton headed for a third rematch, chances of knocking down frances tiafoe in the quarterfinals. it was amazing last year. hoping for more of the same. lisa: are you going to go back? jonathan: no. too expensive. it is too much money. it does not work for us at all. and you have to go to bed like get 9:30. lisa: you could go to bed earlier. jonathan: it was 1:45 in the afternoon, and that is dinner for us. next, a big morning from raphael bostic. >> i do not want us to be in a situation where we cut and then we have to raise rates again. that would be very bad outlook. jonathan: that conversation around the corner. from new york, you are watching bloombergtv. ♪

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jonathan: equity futures on the s&p positive by .20%, yields unchanged. you are looking for a dramatic morning after yesterday news on nvidia. that is not what we have got. nvidia down by 2.5%. that was a whole lot worse. lisa: this goes back to what we talked about all week, it is the last week of august. some people say that because until october, but how many people were actually trading last night in terms of a lack of liquidity? i now people look at the earnings and they say, we really are going to freak out across the board at protections for ongoing growth? jonathan: by definition, it is almost the end of august. lisa: thank you. jonathan: raphael bostic's big morning -- warning.

>> there is still the jobs report that is going to come out next friday. these are going to be important months. just to make sure that it is still continuing trade i do not want us to be in a situation where we cut and then we have to raise rates again that would be a very bad outcome. and then we will be ready longer just to make sure we don't have that up-and-down. jonathan: looking ahead to jobless claims, and the august payrolls report, looking at a september rate cut, it stands to reason that when we see the august employment report on september 6, we are likely to see a higher unemployment rate, perhaps as high as 4.5%. thierry is with us this morning. 4.5%, what makes you think we are going in that direction? thierry: it seems to be evident

in the data that came out in the latter part of the second quarter, continuing into the third quarter. i would point significantly in that report to what is happening in regard to pulling in surveys and things like the conference board's assessment survey. it specifically showed that we are seeing that jobs are easy to get, and it turns out that that is not a bad indicator of the general health of the labor market. it seems to be historic over time, and that is a spread that is hard to get, and if you look at where it is now, it seems to be more consistent with the unemployment rate. but it certainly is pointing to a duration and direction. 5.5% is 4.2% above the print the

last month. it is not egregious or an aggressive move to expect. jonathan: if we get there, does that tea up 50 basis point september 18? thierry: i don't think so. i think now that we have seen fail bostick effectively saying after jay powell's dovish speech, i would expect some people are resisting 50 basis points, and to the fact that they would like to find consensus, they may go with 25 basis points, but that may include the prospect that in october we can get 50 basis points, and we are maturing of labor market and that will cause the fed text alert rate cuts -- accelerate rate cuts. lisa: if you have a fed that will cut a lot, that seems like the direction of travel, wait, then you look at europe and

other countries, and we had a toggle that is becoming increasingly tense, where do you fall on that? thierry: the dollar is weaker the last five weeks across the majors. with regard to sterling and the euro, there has been a duration of the value of the dollar. i think everything is in part, you cannot find one explanation that expense everything, but one of the reasons this has happened is because the fed has moved towards a much more dovish narrative the last few weeks, culminating with jay powell speech, their european central bank, and libya we have not. they are in the mode of suggesting that there outlook is bold cut and they are hoping not to cut sequentially. however, we are looking at a situation where the ecb can move to a sequential guidance with regard to the outlook for rate cuts in the sense that they

could do 25 basis points this year. the other thing that is happening, of course, is that we are seeing political problems in the u.k. now, and if you are asking me is the dollar going to continue to weaken? i would say no, despite the fact that we are seeing a lot of turmoil this month. lisa: do you expect the ecb to cut rates more significantly than the federal reserve for the totality of 2024? thierry: no. i think there's a good chance to do the same amount. if they only cut between now and the end of the year and the ecb does three, you will have a match effectively but that should not be the only determination. the currency is going to move with surprise in the central bank policy changes, not what is expected of what effectively happens, and if there is a surprise, you can lean towards a more dovish, especially since we

are coming off a time where they have been recently reluctant to signal aggressive rate cuts. jonathan: data emerging the last month or so, the investment universe and the opinion with a long dollar position the last few years, we have this very entrenched reach for dollar-denominated assets to pick up yield because you cannot get it in places like japan and china, and there is a preview that once you normalize interest rates, when growth differentials rebalance with lower rates and growth, ultimately, we unlock dollar weakness, get outflows out of those outsides. to the likes of stephen jen, who have come out and said that 10% you want strength in china, what is your view on the argument and how things stack up? thierry: my view is it is not about interest-rate growth only, it is about where rate change",

and bond yields are important, and returns on real assets is important, as well. as long as you see better growth overall in the u.s. relative to europe and japan, it will be a strong bid for the dollar. if i were to support the bearish dollar argument, i would have much more agreement with the prospect with geopolitical conditions and trends are no longer with to support the dollar. if we start to get reserve asset allocators away from the dollar for geopolitical reasons, then i would have to argue in favor of the dollar. but we are not seen that yet. some countries are moving away from the dollar, some are moving towards the dollar. right now, we are in a precarious balance between the two. jonathan: is it the trailer for the movie we are seeing the next two years? thierry: i think we very nejra

continue to see a rally in gold. low interest rates, we will be in support of that going forward, but also geopolitical concerns around the conflict support. lisa: i'm picturing being in a movie theater and all of a sudden, big, gold bullion coming out, just wait until the main picture,-- thierry: our. lisa: can you do that or more time. thierry: next summer. jonathan: coming up, that's not happening again. drew pettit, mandeep singh, from new york, you are watching bloombergtv. ♪

>> on economic fundamentals, the economy is seen supply that is by and large healthy. >> the combination of disinflation narrative and better-than-expected growth is helping markets continue to run. >> these cuts are going to grease the wheels for the soft landing. >> we do expect softness.

we don't think it is a recession. >> we are worried growth and slow but not that recession is on the horizon. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: two hours and 30 minutes away from the opening bell, equity futures doing ok. good morning, good morning. the second hour of "surveillance" starts now. equity futures on the s&p from her by .1%. we are up by 0.15% on the nasdaq, and nvidia down by 3.5% it was worse than this earlier in the session. dan ives said do not worry, if you have demand concerns, we don't see them yet and the numbers or the forecast, but what you are hearing from the south side is this company is still a step or two ahead of the competition. lisa: we've been a little too bullish. i will cast shade and explain why some are concerned.

maybe we have seen the end of shot growth and reach the point where there cannot continue to be rates at such degrees were people's hats are blown off. that is the time where nvidia has not shown the ability to move their bio base beyond the data center provider means, and that is an existential concern. are they going to show use cases or deliver these outsized expectations every single time? jonathan: these are valid concerns. the fact of the matter is, for the rest of the market, if you told me nvidia be down percent or 4%, i would say that based on the price action this morning, that is where we are. lisa: it seems people are looking at nvidia as their own story, of almost 160% so far this year, taking chips off the table, but there is this issue of it not representing broader weakness or the death of the story but simply questions

around how far valuations can get extended. one specific name that has lifted the market for the better part of two years. jonathan: a bit more with his coming into the stock by almost 4%. you are not welcome at the viewing parties. lisa: i know. i was reading the quotes from the beauty -- viewing parties, they were treated like sports events. jonathan: is this a new thing? lisa: i guess so, there was one bar in tribeca and there was a good story about it in the journal, one person said it is a little disappointing, she is a sports injury analyst. nvidia hit a homerun today but they have had so many the past quarters. that is what it is treated as, can he come out, and will he be mookie betts? that's the question, if they can only look like a regular company and not the rockstar in his leather jacket, suddenly people say maybe they should know the valuation. jonathan: stock is down by 4%,

and for the market, 90 minutes from now, jobless claims in america. this is the big data point. the appetizer going in to payrolls report september 6, head of september 18 on the federal reserve get together, how we could do payrolls need to be and how high does unemployment need to be to change the 25 basis point cut to 50? lisa: how much will receive of actual dissent on this fomc committee? which is even more viscerally discuss why they disagree with jay powell. we have talked about this, and i agree that this level of benchmark rates is structurally a lot higher to where inflation is at, and you could make an argument for why rates should be lower, but they have not led the market to believe a 50 basis point is the base case. they have the optionality if the market shows signs of deteriorating faster than expected. hard to see how they could see

that parmet, unless we see true weakness. jonathan: based on what we have heard from than the last week or so. outside of equities in the bond market, on the 10-year treasury, yield further down the curve, 382.90 2 -- 3.8292, 1.1097 on u.s. -- on euro-dollar. and further rate cuts down the road to the ecb, a weaker euro. cross asset, that's the story. coming up, drew pettit of citigroup as stocks fall following nvidia earnings, heidi crebo-rediker, and lydia boussour on her call for three fed cuts before the year end. after failing to live up to skyhigh expectations, drew writes the following, "i am quite growth expectations of the long run

estimates create a high bar for results, essentially you need to eat and raise that translates into out year street numbers moving higher as well as to justify current prices." through, do think the bar is too high for the nvidia's of this world? drew: i think it has been that way for the better part of the year. before we had our summer squall in the pullback we had, we talked about taking profits on the high flyers. the market reset expectations were set lower but then bounced right back, so we were basically back where we started heading into the nvidia report. you look at the results, yeah, you have had an ok beat, talking about current year expectations, but the bar is pretty high for the stock. a little bit of a pullback seems healthy right now. jonathan: we spoke to northwestern mutual earlier this week, making a point that many

people don't own nvidia. is this a name of stock you can afford not to own? drew: we don't think so. we moved tech away from overweight to market rate. we think you need exposure, but including our thematic focus is, we actually don't have nvidia, and those lists have kept pace. if you are not going to own nvidia, you need some derivative of it. we talk about this last time we saw it, there are a lot of careers if you don't own this stock. lisa: there's a difference between not owning it and selling a little bit to buy other things and there's an economic bet that there will be some sort of recovery that will make less loved names look more attractive. it's not just about nvidia. how much of the story is that you see economic growth, optics, because of rate cuts you expect

from the federal reserve that offsets the potential gains from the ai story that has been priced pretty closely in nvidia? drew: i don't know if it necessarily offsets it. it just helps broaden market returns. look, we are going to tie this back to fundamentals. we are actually starting to see more stocks in the s&p 500 with positive year over year earnings growth now. we are seeing stocks that are posting plus 20% earnings growth. before that, it was a mag seven story. on the flipside, and this helps the index out right here, you have fewer stocks posting year earnings declines, so to spin the answer a little bit different, i don't necessarily think it sucks the winds out of their sales but it helps us get stocks to contribute which helps hold the index at these higher

levels and at higher multiples. lisa: so you say will wait for what you say for big tech, where you put in your overweight's? drew: right now, we have lagged into cyclicals, which is interesting as we are trying to get ahead of fed rate cuts and a potential upturn in economic activity from lower rates, so you think you would like to write -- wait for the cut to make the positioning but the markets move ahead of that, so if you look at financials and consumer discretionary as an interesting set, industrials remove to market weight just because some of the evaluations got extended, and that is an area that we have been pretty long-term bullish on. jonathan: you have spent time on financials the last few days, can you explain to our audience that for financials to do well, we need a better picture for

growth, higher interest rates, as well, when most people the opposite and at the same time they think finance was will do well. what is different and why has this changed? drew: it is less about rates for large cap -- sorry, arch capital financials then mid to small financials. if you get rates down, that is going to accelerate economic activity and you are looking through a potential short and shallow economic downturn to the other side. and where financials are priced right now, they are priced for some slowing in economic activity, so you can buy head of that, market pricing is going to move ahead of economic reality happening, and that is the story right now. lisa: in terms of cyclicals, best buy coming out earnings, confirming her feelings of raising they share forecast, so if you look at consumer

cyclicals, you see ongoing strength in some of the reports we have seen. i'm wondering from an overall perspective, how hinged is your broadening out to the prospect of significant rate cuts by the federal reserve, given that some people call this into question given the strength we are seeing on the consumer? drew: not significantly actually. there is a difference between the main street consumer company and the wall street consumer company. let's call them themes with experiential commerce and someone where consumers are still spending money. yes, rates coming down helps the story, but i think the s&p 500 consumer names are less cyclical than your broader type of consumer company. i think people need to recognize that when they think about consumer stocks versus the economy.

the other piece, do we need the bed to cut a lot to support valuations? not really because we had the 10-year come down and reaching the two year come down, all supportive of higher multiples. jonathan: we have to leave it there, appreciate the update. drew pettit. the latest on their outlook. overweight financials, looking at cyclicals, looking at the recovery to a potential downturn in the not-too-distant future. lisa: but he said was interesting, the idea that they cyclical companies in the s&p 500 are less leveraged to the economic cycle than we realize, but he's not alone. so many people are talking about this and you put it perfectly, all these people are preparing for a recession that will never happen. jonathan: it is not about never. lisa: well that they are not expecting, so this is attention

that people have moved past and it is still very real. jonathan: tri-state neutral, nvidia down by 3.8%, doing ok so far. let's get you an update on stories elsewhere. here is your bloomberg brief. israeli forces carried out the largest operation in the west bank in years. palestinian health officials claimed 10 were killed and several injured. an israeli spokesperson claimed that there were weapons taken into the west bank, with this serving as a preemptive strike. kamala harris is on her second day of a three-day bus tour through georgia, heading towards rural areas, shoring up support. she's also getting ready for her first interview since taking an interview on cnn later tonight. competition underway in barcelona for the oldest sports trophy. italy, great britain, and france are competing to capture the cup , the first america's cup race

took place in 1851. i do not know that. i would be terrible at this. lisa: i listed that when i was in junior high school. jonathan: so you can sail? not motorboats. lisa: [laughter] i used to be able to. pulling the mainsail. [laughter] good to know. jonathan: next, nvidia's ai reality check. >> hyper scalers represent 45% of our data center business and we are relatively diversified today. jonathan: that conversation next. from new york city this morning, good morning. ♪

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jonathan: stocks positive 5.20% on the s&p, jobless claims and about one hour and 14 minutes away. the bond yields, showing 3.8330. under surveillance, and videos hyper check. >> hyper scalers represent 45% of our data center business and we are relatively diversified today with hyper scalers, internet service providers every have, enterprises so it is really diversified. jonathan: invidiously roaming forecast, tech stocks that need to cut the ai trade. and the chipmaker reskilling ai operations and exactly how much companies are dependent on

nvidia, and mandeep singh joins us for more. a concern about for a while, supply, and you don't just get to say supply will run through without explaining why you think it is going to improve -- supply will improve without explaining why you think it is going to improve. mandeep: they were able to wrap up their supply, and i think explaining supply will not just -- expanding supply will not just help nvidia, but others will try to make trips, whether on the trading side or other side. it supply is expanding, lead times are coming down and that is evident in the gross margin that they give, so q1, it was upper 70%, this quarter was like mid-70%, and going forward, the commentary was gross margins are probably going to stabilize, 20, 25, but clearly, the gross margin side.

jonathan: what exactly is the manufacturing yield? hello is it compared to where you expect it to be and how complex is something like this? mandeep: tsmc is the one manufacturing it and designing it, and what typically happens is with any new architecture, it is low at the picking because they are doing more in terms of the memory that it is using, and it is not surprising to hear that they are trying to solve the problems and they seem to be upbeat about q4's blackwell contribution. to me, the real standout was a gross margin commentary and the fact that they expect it to be the peak, and they expected to come down gradually. so, you know, hyper scalars,

commentary was good, they call it a low double-digit contributor. is it sustainable the same way as a hyper scaler? google continue to ramp up the for 2025. governments keep for spending like this, so i think when you look at the growth expectations, catalyst for further upside revisions are fewer than they were last quarter. that is fair. i think you see a negative reaction. there's no broad cliff anytime soon. this is about will keep surprising to the upside? the incremental datacenter revenue was 4 billion, so before boolean revenue, despite all the positive data points, from hyper scaler, and china business was up sequentially but the beat was not that big.

that is fair, i think the market is saying maybe there is some digestion in the second half. lisa: can you elaborate on the idea of margin speaking? is this running out of pricing power, or is this getting pushback, broadening demand? what is this? mandeep: anytime they launch a new architecture, it tends to get a higher price because the chip is more advanced, you can do more, and customers are willing to pay more if there is no competition. blackwell should command a higher price and that should add to the gross margin the same way from the previous architecture and the way it appeared. what sounded on the call was four q gross margins, and, clearly, they are spending more on the component side, and the memory that goes into chips, and they are spending more on the

boundary side, tsmc is raising their prices to nvidia. all the supply chain cost for nvidia are increasing, and that will impact the growth margins nvidia can demand. they make their own chips. lisa: this is fascinating. are you essentially saying that nvidia's suppliers are saying, hey, we are going to raise prices on you guys, and nvidia cannot turn around anymore and safe to the likes of microsoft or google, ok, you just have to pay us more? mandeep: i think so. this is happening gradually. it's not as if growth margins will compress 500 basis points in a quarter. that will happen at the end of a cycle. there's nothing in the demand commentary that suggests we are closer to the clip, but companies are profitable during the price cycle, and as the cycle and, the gross margin shrinks. in this case, because nvidia

makes their own chips, they can supply -- they cannot control how the supply chain raises prices. lisa: all of this, and they still have great results. and you say you loved the interview he did with bloomberg. you could feel his frustration, but do you think the market response is appropriate? mandeep: market is driven by whether we will see more positive to the eps, is the 2025 eps number low? if not, the stock will go down because the stock is driven by are they growing into their valuation? topline commentary was great but because of the margins, the eps revisions will not be of the same magnitude. that is where investors will take pause and say, ok, do we have visibility to 2026 and beyond? that is what will drive the

stock from here on. jonathan: apple, september 9, but you expect for them to unveil? mandeep: apple is the one hyper scaler. i put them there because of their size. that has not wrapped up. every other company is spending more on nvidia, wrapping up, and apple has not because they have the distribution and that is what it will focus on, how can they use the smartphone, the distribution may have to deploy these large models is still participate in this genai move? not having a model is still something that is extreme when it comes to the competition. jonathan: what can they announce to get an upgrade? mandeep: apple designs their own chips, and they can do it for large, angry models, and that is what apple intelligence, the platform they announced, is all about.

even though they don't have their own model, you can use openai and other large models on their phone, and it can offer you the functionality that everybody is raving about when it comes to generating ai, other chatbots or some sort of assistance, so you will still be able to use it, it is just not a model that you are using. jonathan: let's see what we get. breaking down the story on nvidia, looking ahead to that big unveiling of the iphone. lisa: what could make us upgrade? there is a lot of heavy lifting there. jonathan: it is not just about me. lisa: is it though? kidding. do you want to upgrade? jonathan: i would be close to upgrading. it's been a few years. lisa: what functionality would you be interested in? jonathan: the battery, baseline. lisa: it's not about something that will wake you up and be like, hello, jonathan. jonathan: no, that would freak

me out. i think the future is scary. lisa: that is not surprise me. i'm optimistic. jonathan: you are optimistic about nothing. lisa: the one thing that scares me is if ai can process information and extrapolate answers faster than humans can, and at what point does that become the ability to affect change? jonathan: in a good way? lisa: in a way that is out of control. what is to say that we are better decision-makers than ai? we are not. jonathan: ok, you go first. futures right now, up .10% for nasdaq. coming up, heidi crebo-rediker. a preview, up next. ♪

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jonathan: just a flavor of the scores, equity futures up like 2.2%. doing ok, two hours after the opening bell, when our way from jobless claims in america. we are down about 4% on nvidia in premarket trading. two year, 10-year, 30-year, front end of the curve, 3.8588 and we work very further out along the yield curve, from

two's device, is it sevens today? lisa: yes, yesterday's five-year year option was interesting because it was pretty strong in terms of the dynamics and that entails, which meant yields came in higher than where they were when it was first initially priced. this is interesting because it goes to the dynamic we were talking about. very clear demand that the federal reserve will cut rates. more uncertainty when it comes to fiscal trajectory, will affect the buyer-based. jonathan: the test gets harder and the bar gets higher as you work your way out along the curve. we have gone from twos to fives to sevens, and yesterday, should -- charles schwartz coming out and saying that the treasury yield plunge makes the extended ratio less attractive for them and then we heard from blackrock and we had a conversation about the fiscal deficit. we do not want to extend duration too much, so to your

point, your view at the front end of the curve, very different. lisa: just to the point, and the deficit, something people avoid their whole lives, it is not people saying that yields are going to blow out skyhigh because of the deficit, it is people saying on the margins, we don't understand what the risk premium should will be as a result of the fiscal deficit and the fiscal height, so my go that far out on the curve? it is a different argument saying that the sky is falling. these are not chicken little's. these are people saying we will get a bang for our buck. jonathan: 75 extra basis points as opposed to the debt crisis. two different conversations. let's take you to the fx market, looking at foreign-exchange. some of the data out of the euro zone, just a weaker euro, and

i've talked about this a few times already, the breakdown of eurozone cpi, we have the german breakdown, regional stuff, coming out with individual reads on inflation, lower than where we were in the previous month, indicating we could get it cuts from the ecb, but the conversation we had earlier with terry wiseman -- thierry wizman, if we can narrow rate differentials, is that sufficient to unlock real dollar weakness? additional point and the missing ingredient he says is you need to rebalance growth differentials, as well. from his perspective, he made the argument that the story in china was not great, we saw some downright around gdp targets, and germany has difficulties, and now there is a tough budget coming up later this year, which would put additional pressure on the bank of england, which is hard to make the argument that

we will get that bout of dollar weakness, at least from his perspective. lisa: there's also the question about where does the next central bank surprise come from? what is priced in now is a fed poised to move three times in the ecb, we are not sure. because of growth differentials, he sees a greater likelihood that the ecb could match what the fed is doing. he does not seek a massive surprise. if anything, or euro weakness. jonathan: we have notably massive long dollar position from investors outside of america, reaching for yields, and that is deeply entrenched. the yield available the last few years totally unavailable to what you can get elsewhere. lisa: i'm watching gold, that is the preview to a movie relevant. jonathan: i dollar-yen, the earthquake, i think so, as well. lisa: but who doesn't see that happening now, he's bullish on gold and watching this to

understand the flows. it hasn't happened yet. that does mean -- that does not mean it will not happen yet. stay tuned. jonathan: we need to come back and rebalance this out. 1.4460. under surveillance, a revenue beat, is it enough for nvidia? the chipmaker fighting to live up to investor's high hopes, reporting productions thanks. the stock is down by 4%. mandeep singh with this moments ago highlighting margins as the key issue going forward. lisa: that was fascinating, the idea that the tsmc's of the world are saying, nvidia, why don't you spend more cash on what we are providing to you? at the same time, it is getting pushback consumers in terms of how much they're willing to spend and face-off with price increases. that margin compression starts to eat away at their incredible moat of competitive edge and

their ability to keep rising prices and margins. jonathan: so expecting the stock to be positive by the end of the session? lisa: he could be right because how many people are saying they are waiting for a to buy -- a dip to buy? jonathan: it is always the same. lisa: what is a dip? jonathan: price action on this name? maybe it is 10, 15% in the coming days. anyway, national security advisor jake sullivan wrapping up a three-day trip to china, meeting with xi jinping as a look to stabilize relationships. the biden administration saying that he will have an upcoming conversation with his chinese counterpart in the "near future." sullivan has been meeting some high-profile figures the last few days. lisa: which at that was the most interesting aspect. we have a lame-duck president,

and he's been given a high audience at a time of a lot of international stress. i wonder how much the discussion is, if you make things easier with russia, it is likely will have kamala harris donald trump, but there is a question in my mind, which is which would you prefer? it is unclear in terms of who he would like his partner to be in january. jonathan: and they have growth issues and their own problems, mystically, europe and china have their own problems, and you could make the case that europe is a derivative of what is happening in china. i mentioned the ups forecast, they have gdp in china at 4.6% this year, and ubs now seeing growth at 4%, down from 4.6% previously. that is the direction of travel for economists looking at the economy. lisa: this china tried to create better relations to export goods?

or do they become more hard-line and go do some more ideological policies and just steer clear of economic projections? jonathan: maybe they are saving fiscal farmhands to see the outcome of the election and what they will have to spend in 2025 to cushion the economy? kamala harris and tim walz will sit down with cnn this afternoon, top of mind is policy. heidi crebo-rediker says it is likelier than not that a harris white house would build out foreign policy a focus on international leadership, nurturing ties with partners and allies, including nato, and trilateral japan and korea, and critical partnerships in the g7. she joins us now. welcome back to the program. can i start with this, you are incredibly welcome in washington, d.c., how much

daylight is there between harrison biden -- harris and biden? heidi: i think you are likely to see quite a bit of continuation in the foreign policy agenda of a harris presidency, and they think probably the most important area will be the relationship with allies and partners because trump has really shown he is a go it alone president, and in this day and age, the world is far more complicated than when trump was president. you have an alignment with russia, iran, north korea, and we have to do it with friends and partners to lead, and that includes bolstering supply chains and resilience. you cannot do that alone. i think in the broadest sense, you would see a continuation of many of the features of biden. jonathan: when it comes to china

specifically and the issues there, to think they can make the case a multilateral approach has been more effective the last few years, or the what we saw under president trump? heidi: absolutely. you have a more complicated geopolitical backdrop, where you have china helping russia's war economy, where you have much more cooperation across for those four key countries who are geopolitical rivals right now, so you need to have friends, allies, you need to have doubling down on the existing many laterals, the new many lateral between the u.s., japan, korea, building on the quad relationship with australia, japan, india, and the united states, and also building out the critical minerals partnerships with what we are going to need from energy

transition and defense. also, the traditional forms, like the g7, they take a lot of work and nurturing, and we did not see that during the trump administration. lisa: we talked about how unusual it is that sullivan went to china got a high audience at a time when joe biden is a lame-duck president and there are questions on who is going to be the head of the country, early next year? why do you think he went out and got such an audience? heidi: i think it is important to make sure that there is a channel of communication when there is any change, where there is uncertainty, which is running pretty rampant in the global geopolitical space right now, as well as the global economic space, so knowing directly from

the national security advisor what is the likely harris agenda, what is coming potentially down the pike before the election were after the election with regard to any rumored expansion of export controls, how to manage competition in a way that sustains sort of strategic balance and safety, we have had a number of run-ins with china in the south china seas and trying to make sure that we don't have any unintended consequences from some of china's more aggressive military actions of late, so i think just maintaining a senior dialogue at this critical juncture is crucial. lisa: i think a lot of people

will be watching tonight when we hear the first televised interview of a major media outlet of kamala harris and tim walz. i'm sure china will also be watching to understand what some of the policies may be, as well as other international partners of the united states. what are you expecting tonight or not? doesn't matter if we hear nothing in terms of policy? heidi: i think this is about politics and policy. we are 70 odd days out, harris is sitting on momentum. she said she would do an interview before the end of the month. i don't expect her to break any news in the interview but it is important to watch and you are right, everybody outside of the u.s. will be watching this to see if there are any policy insights, and this has been a policy light campaign on both sides. trump has had this project 25

home -- tome by others and not himself on many issues, and she is the first candidate to be specific, and bill clinton was criticized for far too little on specific policy issues, and then secretary clinton, when she ran for president, was far too specific, so at this stage in the game, we are really close to election day. she has an advantage, harris has an advantage that she did not have to go through a primary process and did not have to define her views and take some harder policy positions, so she has an advantage right now, i think she will not squander it. and i like the fact that she is doing it together with governor tim walz. this will be an attempt to really show their personalities, human side, the way they

interact, and he also gives her the out of not getting cornered by somebody, not pointing fingers, but looking ahead at the press, desperate to figure out specifics, she will try not to get cornered and that is smart. lisa: you said a lot of people will watch internationally in terms of china trying to understand what a harris presidency would look like. would it bother them if they get no specifics? heidi: i don't think so. she would like to win. i think there has been a lot of criticism of not having drilled down on specifics. i don't think she is trying to play to an international audience in this interview. this is a chance for her to talk to the american people and voters, so you might hear it less on international and may be

more on domestic and what she and governor tim walz would need for some of her domestic economic agenda. jonathan: we have got to leave it there. come back soon. good to catch up. heidi crebo-rediker on the council on foreign relations. certainly out for consumption, as it should be. lisa: is the master consumption challenging kamala harris with respect to policy or is it media members who would like more specifics so they should -- can analyze the? we have gotten conflicting remarks. jonathan: republicans are frustrated with this because it is working. it is working. lisa: and that is why heidi was saying, why should she do anything other than not break any news, show her human side, however, rodriguez tim walz, dominate headlines and that -- show her partnership with tim

walz, dominate headlines and then move on? jonathan: sales keene out again for the first time in six months on strong demand in europe and japan as it faces recall issues in the u.s., and the typhoon shut down all of its japanese plans this week. dollar-yen tumbling in the premarket. for four year sales forecast, a sign that it has turnaround efforts and that they may not be doing enough to fend off competition. 23.4%, down. and shares of best buy up the premarket, the company raising its annual profit guidance with the demand for electronics that could be improving, saying that they "capitalize on the demand for an upgrade." that stock is up seven, another example of the contradictory signals that we tell in america

-- of retail in america. lisa: could you say best buy is more discretionary spending and dollar general caters to more lower income individuals, and they tend to be feeling the cramp more than others? i'm reading through and it looks like it could be idiosyncratic, a word that i disliked, but it sticks out to me. pick your poison. you have a different story, for earnings and economic data. jonathan: it is a return earnings season. next on the program, all eyes on the labor market. >> i'm not saying that the rate will go into the fives, but it is pointing to a deterioration and a direction that suggests a higher unemployment rate. jonathan: what would cause the fed to cut 50 if the unemployment rate remains at 4.3, estate project, they are likely to cut 50. if unemployment falls to 4.2%, the fed might only cut 25 unless

payroll growth is also soft. from new york, this is bloomberg. ♪

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jonathan: equities near all-time or rather session highs. still very comfortable, are we to percent away? lisa: we've been to percent away for a while -- 2% away for a while. jonathan: list session highs on the s&p 500. foreign exchange, stronger dollar today. five weeks of dollar weakness. this could have been week six. the euro-dollar, 1.1099. under surveillance, all eyes on the labor market. >> there has been a deterioration of labor market in the u.s., it seems to be evident in the data coming out in the latter part of the second quarter, continuing to the third quarter. i'm not saying that the rates will go into the fives but it is

pointing to a deterioration and direction that suggests the higher up rate. jonathan: weekly jobless claims set to provide the latest rate on the economy in over 30 minutes. be why writing the following -- by writing the following, unless labor conditions deteriorate in the coming weeks, we continue to expect a majority of a 25 basis point rate cuts in september,. november, december" lydia, from the program. i would like to build on the numbers required for a 50 basis point cut, what would you need to see today, this morning september 5? lydia: in terms of what we would need to see for the 50 basis rate cut to be on the table, we would need to see the deterioration in labor market conditions when we look at the job report for august, job gain

below 100, and a trend that rate would put the 50 cut on the table. we would also need to look at other labor market indicators. the focus will be on the jobs report, the fed will be looking at data, at control data, as well, and if we were to see the deterioration in the labor market, i think that would put 50 basis points on the table. at the same time, we know some fed officials are more reluctant to with bigger rate cuts. another reason is divergence of views with some fed officials favoring more easing, and we know a 25 basis rate cut was on the table at the july meeting, so you are likely to see the consensus converging toward the 25 cut. jonathan: the estimate on our survey for payrolls is 160, we

have seven estimates so far and the number could shift and things could change, but let's go with 160. shouldn't i just chop off 70 from whatever the number is in go with that given the recent revisions? lydia: the revisions we have seen over last week and the revisions showed essentially that job growth has been softer than expected and it was still positive, and that is important to remember. we are still in an environment where we have seen a slowdown in labor market gains, and what we have to keep in mind is the slow down has played out for a number of months. we have seen the gradual slowdown in job growth, we have seen the moderation and less labor market insurance, and most of the labor market indicators have pointed to a gradual softening in labor market conditions. the key question is whether we continue to see the gradual

softening in labor market conditions or if something more serious materializes. so we will be looking at that. if we were to see that play out, that is going to lead the federal reserve to consider a faster pace of tightening, but given the current conditions we are looking at today, which is gradual deterioration in labor arc it conditions, showing resilience, i think the federal reserve will go with 25 basis points at the next meeting. lisa: how concerned are you that this time is different, given the fact that we are now pricing in something that historically is an anomaly? lydia: the fed has been lucky enough to have that culmination of resilient economic activity, bringing them closer to the 2% target. i think what is outreaching as we are not seeing the fed ready

to lean against the labor market risk. last week, chair powell mentioned the fact that there is room for policy to respond in the event of deterioration in labor market conditions, so that is going to be important. the fed essentially showing willingness to lean against the labor market risk. jonathan: we have got to leave it there, lydia boussour ahead of ey. the next big stop for the market. lisa: i wonder how much people are watching this or how much they are seen it remains stagnant. what you think will be a bigger surprise, upside or downside? jonathan: that is unfair. for this market now? i think a big upside surprise. the kind of weakness that would change the conversation. that is what we got august 2. lisa: it is weakness, not strength. jonathan: don't get me into trouble. good news is good, bad is bad. lisa: maybe.

jonathan: coming up, anastasia amoroso, william stein, and earl davis of bmo. ♪

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>> we are in a fairly sweet spot that has been priced decently into the market. >> this is an environment where you have to look at the fundamentals. >> i think investors should go into a multisite approach. >> we are still having the mother of all debates between the bowls and the bears. announcer: this is "bloomberg surveillance." jonathan: things are a little bit,. 30 minutes away from jobless claims. equity futures are positive by .25%, and near-session highs on the nasdaq. with nvidia in early trading a racing yesterday's afternoon's losses. negative by 3.4%, but still questions about supply-side difficulties and what may happen on the demand side. lisa: this is a tempered and rational market. people who are expecting their 10% move, although we can see

there is volatility, to me the fact is people are looking at pricing out multiples. this is not about a wholesale fear or armageddon or a broader commentary on markets, which is the reason you are seeing calmness morning, even with nvidia failing to blow expectations out of the water. jonathan: not exactly a great read on the economy even how many times we have been told this is the secular growth seed of the economy. we have all got the same question. what would it take for this federal reserve to go with a 50 basis point rate cut in september, versus 25? i can show you the estimates for payrolls next month. payrolls next month is about 160,000 on headline. we are looking for unemployment to come back to 3.2 percent. andrew hallman horse published moments ago. he said, you stay at -- he says,

you dropped to 4.2 percent, more likely to go 25. alix: lisa: the fed would go potentially more significantly without some sort of dramatic downturn. timmy is the real big questiyout 25 to 50, but to me it is sort of, the risk assets do with these rate caps? what the risk assets do with an economic backdrop people are assuming will be benign? to me it is less about the fed's trajectory and whether they will be good cuts or back cuts to a market that is very much hedged to a soft landing. jonathan: i ask the question about 15 minutes ago. do you think there will be some people to take whatever the payrolls number is and drop 70,000 jobs off of it because of the revisions we have had over the previous year? why wouldn't you? lisa: i think that is completely legitimate. there was a story this morning talking about how regional fed surveys are starting to show some real risks to the u.s. job market. the peripheral commentary highlights some of this week is

in a way that makes people wonder how accurate some of these surveys are. especially since response rates have not been great. jonathan: you see a strong number, is it strong? you see a weak number, must be really weak. that is going to be the fear. lisa: i agree with you that an upside surprise to jobless claims would very much have a disproportionately large influence, and a negative one, on equities and other risk assets. a lower-than-expected number people could choke shrug it off. jonathan: the number drops in 26 minutes. into the bond market, lisa is going through some of the supply we have had through the week. the 2-year went ok. five years softer. lisa: $44 billion worth. we will see whether we see the same kind of general softening around the margins. not trying to paint this with overly-dramatic overtones. point two me his get the sense that people are willing to move

out the curve three to five years. are they willing to go beyond that, given some of the other concerns and the fact we have not got an answer from fed officials about what the neutral rate is? jonathan: not just concerns about the fiscal deficit, but the rally we have already seen at the longer end of the curve and the argument we heard yesterday that you need the curve to normalize to really unlock that cash at the front end of the curve. you have to incentivize them to go out along the curve. that is the view we have heard from a few people. was it blackrock yesterday that made that point? lisa: and charles schwab. at 3.8% maybe you can hold it for the carry but it is not going to have the same kind of massive price appreciation. jonathan: coming up this hour, we will speak to anastasia amoroso of icapital as investors reassessed the post-nvidia earnings. william stein of truist on why he is bullish on the chip giant. and my computer lease on why the worst is let -- worst is yet to

come for the labor market. -- michael puke police on why the worst is yet to come for the labor market. nvidia disappointing, dampening the outlook for tech stocks as investors began to question how long the ai party will last. anastasia amoroso is with us for more. anastasia, get super tactical short-term if you want to. is this a buying opportunity for you? is this weakness you would lean into? mike: i think it is weak still lean into in the semi conductor space. it is interesting you talked about this being a break moment for nvidia. i would not characterize it as such. i think it was a strong earnings report, but against very elevated expectations. what investors have gotten used to is that nvidia delivers blowout earnings report and then overnight follows a slew of analyst upgrades to the stock prices and that is what is dry -- that is what drives at higher. got a modest beat, and it did not have the follow-through you

typically have in terms of upgrades. that is why it is called a disappointment, but it is a disappointment relative to very high expectations. when you take a step back from that and say, does this mean the ai investment cycle is not happening? the answer is no. the ai cycle is absolutely happening, and it is not just nvidia that is participating, by the way, in the ai cycle. it is a lot of other companies. have heard from amd and taiwan semi conductor that is trained is still very much ongoing. we have heard that hyper scalars are investing and sizing up their investments in ai. this is why i would use this moment of weakness. either way, i think 50 day moving average -- to step in. jonathan: we talked about chipmakers and customers. let's sit on the customers. do you think they need to

demonstrate in a much bigger way a return on this big ramp up in capex we have seen over the last year? mike: -- anastasia: i think they do. i think about what places i would be buying i don't actually lead with some of these hyper scalars because it is exactly right. they're going to be the ones out laying the cash to make this investment, and the return on investment may follow, but with a lag. you cannot carry this forward and say, does the second derivative mean they will slow down the investment and that is going to adversely influence the semi conductor chips? the answer to that is no, because as we have heard from the likes of medlock, hyper scalars -- meta, the hyper scalars would wait on that turn -- return for investment. that is why i selectively say i would buy a semi conductor skate -- space. they will continue to benefit from this investment cycle. another nuance there. there is the ai scale within

semi's, but the optic in units sold in semi conductors. the last year or two years we were running at negative year-over-year numbers in terms of unit revenue. but we just flicked into year-over-year positive territory. i think there is more to that, and we have also heard from other semi's this reporting season and we have seen some demand uptick in auto, industrials, and others. i like this combination of ai intact, but also potential for cyclical pickup in semi's to continue. lisa: so deliberate in your words. the idea, does this by the weakness for nvidia? he said, yes, you need to buy the semi conductor space. i'm wondering if this is the moment where high flyers, the one you are not as interested in getting involved with, or that you will be holding, whether that trade -- i don't want to say is over, but has seen its

biggest gains and it is the broadening out people have been waiting for? the people who are using the technology? suppliers to nvidia that are able to raise their prices because nvidia has so much cash that they can keep unleashing. that the way you look at this trade now? anastasia: that's right, lisa. i think we have seen the bulk of the earnings surprises for some of the mega-cap companies. if you look over the last year and a half that is what has driven their performance. the magnitude of their surprises when nothing was surprising to the upside. but as we look toward the year -- by the way, as we look toward this earnings season we saw companies outside the magnificent seven deliver earnings that were double with something like 9% year-over-year earnings growth versus 4% that was expected. that is why i do expect more performance from some of these hyperscalers. by the way, a lot of the

analysts following nvidia were talking about the positive read through's to the tech ecosystem. that is where you have to look, is within the hardware, within the optical equipment, within the rest of the chip space. the other reason is there is a broadening out. as important as nvidia is it is not as important as it was a year ago to the broader market. because we have seen stocks like utility, for example, financials, regional banks, as well as small caps, hold up a lot better than the tech trade has. that is where investors are really focusing. how did they position for the thing we know is coming next month, which is the fed delivering its first rate cut? lisa: do you think it is sort of a question mark as to why the fed is suggesting a significant rate cutting cycle at a time where other companies that have more leveraged the economy seem

to be doing better and we have not really seen that weakness, even in what we are expecting to see in 19 minutes time? anastasia: the fed has to look at the unemployment rate and inflation. if they look at those two things, certainly the rate cutting cycle is warranted. inflation has come down a long way, and of course we get the core pc number tomorrow. we are looking for 2.6%. that is a far cry from where we were. very close to the fed mandated level. if you look at the unemployment rate, you know, there has been obviously weakening and loosening in the labor market. and probably the biggest take away from jackson hole for me last week was the fact that fed chair powell is now not welcoming any further weakening in the labor market. that actually provides even more potential support for equities because it means that should we see further weakening the fed will be likely to step in and maybe do so in more full force. lisa, in the last nonofficial

mandate, but if you look at where the fed funds rate is, it is well above and over what the neutral rate is. so, the fed has a lot of basis points of rate cuts to potentially work with. why not start with some of them given the direction fulfilling the mandate right now? jonathan: anastasia amoroso of icapital. using this as a moment to lean into this weakness a little bit. a little bit of weakness when it comes to the likes of nvidia. how many times have we heard this? powell's shift is back? neil. a said it repeatedly -- neil. i said it repeatedly. lisa: why also thought was interesting was the high flyers maintaining their mantle as the high flyers. i don't want to say it is over, but it is getting there. that is the reason why the broadening outrages gaining steam. that is one of the question marks i have. how much of that is the idea that the magnificent seven are

not going to be a magnificent seven in the upcoming 12 months? jonathan: jobless claims in about 17 minutes away. 232,000 is the estimate. let's get you an update on stories elsewhere. the fbi providing more information about the attempted assassination former president donald trump. officials saying the gunman had searched information about explosives over the last five years. investigators have conducted nearly 1000 interviews, but still do not have a motive for why the 20-year-old shot at the former president. benevolence planning to restrict asml's ability to maintain it semi conductor equipment in china. the decision coming after pressure from the u.s. and is a potentially painful blow to china's efforts to develop a world-class chip industry. finally, shares of super micro computer falling in premarket falling yesterday as following yesterday's plunge. the company saying it will delay

its annual financial disclosures and will need additional time to assess its internal controls. we are down another 4%. talk about red flags in the last 24 hours. lisa: especially after an activist investor went after them, saying they are not going to file their 10k's after the hannah burke report, talking about how they were overstating certain aspects of their business. not a great look and the market is responding accordingly. jonathan: we will hopefully get some answers. next up, the morning calls. lots of nvidia, plus william stein of truist, who is still bullish on that name. new york city, this is bloomberg. ♪

jonathan: one hour, and let's call it 13 minutes away from the opening bell. futures up by .2%.

just a little bit of a lift on the s&p 500. let's get some morning calls for you with what stock and focus? nvidia. jp morgan raising its price target and keeping an overweight rating. the analyst saying the company maintain -- maintains a lead ahead of competitors. raymond james raising the chipmaker's price target to 140 and maintaining a buy rating. the analyst noting that lack while delays seem better than fear. wells fargo raising its price target on nvidia to 165, keeping its overweight rating. the firm finding it hard to see negatives in earnings and guidance and recommending buying the pullback. the size of it right now, we are down by almost 4%. joining us now is william stein of truist, who has a buy rating on shares of nvidia. you upgraded the price target going into the print and lifted the target going out of the print as well. did you like yesterday? william: it is easy to look at

the stock and say something is terrible here. it takes quite a bit of hunting to find the problems, right? they beat on revenue, they beat on earnings, they beat on revenue and earnings in the outlook as well. if you are consistent in terms of applying multiple to the stock you would be raising price targets here. our checks reveal that demand was good and that is what actually came to fruition and that resulted in this price target increase. jonathan: can you build on some of the supply difficulties and then we can talk about potential demand problems? the supply difficulties, are you encouraged by the interview we had with jen-hsun huang sitting down with ed ludlow, that ultimately supplies going to pick up? was that sufficient for you? william: i think even the quarter was sufficient in this regard. they announced that there was a mask change in blackwell.

there is some debate as to whether this is really a delay or not. my perspective i don't consider it a delay. from my point of view it is sort of similar to my telling you all that i will show up at 8:00 and i show up at 8:00. the fact that i got up late, earned my breakfast, you know, had to change my close twice, all of that is in the background. if i show up on time i show up on time, and that is what is going on with black. it is still ramping in q4. having to redo masks along the way is not some very unusual process. i think someone got wind of this. it round up guarding a lot -- getting a lot of attention in the press. management acknowledged it on the call, but i don't think this is some unusual consideration in semiconductor manufacturing. especially considering how sophisticated the processes are that nvidia is deploying. lisa: let's extend the metaphor.

let's say there is someone who always wakes up on time, always has a perfect right fist, and always gets there at 7:55, and then suddenly this person burns his breakfast, wakes up late, and gets in just at 8:00. people start to lose faith that they will be able to start showing up at 8:00. i think that is the fear with nvidia. how much can they depend on this company to continue our performing at a time when they are facing off with new competitive landscapes as well as higher input costs from the suppliers that are raising their prices? william: i think that is an excellent follow-up question. i don't think that there is a question about nvidia's ability to deliver. i don't think that is what has come into question here. are the transitions from architecture to architecture owing to be as smooth and flawless as perhaps hopper was war another one that went, you

know, perfectly well? they are not all going to be like that. i don't think it calls into question nvidia's ability to manage those transitions. they have done it many times in the past and we have many more to come in the future. i think the second part of your question is really the issue here, which is, there seem to be some higher costs. i think that is the effect the mask change had. that is part of what is causing this gross margin degradation in q3 outlook and comments about q4 gross margins. i think that relates to the blackwell mask change. but also increasing input costs. i think that is the one legitimate gripe about the quarter. you are searching for the problem, you are searching for why the stock is down, it is the gross margin down ticket and bigger down take in q4. i think it relates to black out, but also input costs. tsmc is probably trying to take

more of the margin stack here, and high-bandwidth memory is also a higher input cost as well. i think those other factors. lisa: can we recast the move in markets. less the bears coming out of hiding and slamming this company and more people wondering how long this company can keep performing just out of this world incredibly and continue having astronomical stock price increases? in other words, how do you justify evaluation at this level , given how much we have already priced in, and can they grow to that expectation? what gives you confidence that they can and then some? william: sure. this is relatively easy to answer. for very rapid growth stocks, you know, we would expect to see an even bigger multiple. people ask, is it priced for perfection? that is similar to what you are asking me. this is now trading below 40 times, certainly. every 35, 36 times out your

earnings. that is not a multiple that implies perfection and unbelievable growth. are we seeing growth fade here? certainly. they're not going to grow at 250% forever. you know, a high double growth rate is amazing for a company this large. and we think that is something that can persist over time. let me take the other side of it, though. is there going to be a period where they slow down and post negative year-over-year growth? with certainty? that is going to happen. we don't think is going to happen in 2025, but it happened very recently before this big growth spurt started about a year ago. and it will absolutely happen again. we just don't think it is happening now and we think it is very easy to justify 40 times earnings for a stock growing at this pace and having this sort of forward look on their business in ai. jonathan: before you go, have

you got a decent framework to help our audience, a historical parallel for what you think this moment is like? william: no, that is tough for me. it is hard for me to, you know, tell you exactly what the parallel is. to me this is just people over-interpreting the effect of a gross margin starter step. we do think they will work through that problem, and we think the revenue growth trajectory is very strong for this company. we would by the weakness today. jonathan: thank you for showing up at 8:00. william stein of truist. i hope you did not burn your toast. that is important. what did we hear from dan ives? goldrush moment? lisa: yeah, industrial revolution. the railroads. talking about the telephone. maybe an edison moment. jonathan: internet. lisa: internet is almost small potatoes. it is potentially going to revolutionize thanks. i would like to get a handle on

how. jonathan: truist buying the pullback, wells fargo, by the pullback. we have heard this repeatedly. jp morgan, one to two steps ahead of competitors. anastasia amoroso moments ago, by the weakness. lisa: anastasia amoroso was by the week is, meaning by the weakness in other companies related to the semiconductor trend. it was not by nvidia. that is important. how much do you need to see that broadening out to fuel the ongoing gains that we have seen? jonathan: he was very specific. coming up next, jobless claims around the corner. we will catch up with mike pugh billy see of wells fargo -- mike ugly sea wells fargo and earl davis. this is bloomberg. ♪

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jonathan: one hour away from the opening bell. equity futures up by .3% on the s&p 500. the next stop for this market, seconds away. 15 to be precise. mike mckee is in the studio. he is ready to break this down. the scores in the bond market shipping up as follows. 10-year at 3.8330. there is mike mckay.

mike: we get an improvement. 231,000. that is down from 233,000, the revised number from a week before. continuing claims, 1,000,003 had at 8000. that is up a little bit from 1,855,000 two weeks before, with continuing claims. what we are looking at is a jobs market that has not changed a whole lot. that you give the fed some reassurance. other numbers are right now, gdp, the second revision -- first revision, second output from gdp -- goes up, which is a bit of a surprise. it was expected to be unchanged. instead it is 3% as personal consumption -- americans are spending a lot more -- goes up to 2.9%. very interesting change there. the gdp price index, 2.5%, up from 2.3%.

probably those numbers and are really going to affect the fed since they were second-quarter numbers. they are revisions. tomorrow we will get the numbers for july. which will give us the latest data overall. jonathan: put it altogether, growth decent, claims contained, that is a recipe for this market to look ok. equities up .4% on the s&p 500. good news is good news. check out the russell. lisa, the small-cap is up .8%. that is where your outperformance is in the equity market. yields up at the front end of the curve, approaching 3.90 all over again. just to exacerbate the trend of the morning, euro-dollar down to 1.1079. lisa: everything is awesome. you have more disinflation than we thought when you look at the revisions to gdp and core pce. initial jobless claims come in and-online. jobless claims went down noticeably across the board. it was revised downward across

the board. there is no sense that the economy is falling off a cliff or the employment market is falling out of bed, which raises the specter of the right kind of fed rate cuts that a lot of people are expecting. jonathan: we will get another read on claims next week going into the payrolls report on september 6. michael, i'm going to t up two quotes. one from morgan stanley and the other from citi. morgan stanley are looking for 180 5000 next week on payrolls and they say in the weakness of the july jobs report some was weather, some was noise, some was a slowing trend, but we expect a reversal in august. citi said, the rise in unemployment rate is not a weather-related distortion, it reflect a slowdown in hiring which will likely continue and eventually worsen into right layoffs. how do you view this weather debate?

mike: there is a question about whether hurricane beryl affected the figures in july. generally the bls said it did not. economists have come to the view that it probably did not but there could have been other weather affects because it was a large number of people who were off work because of weather who did not show up in the jobs numbers from texas. so there may have been other areas of the country where there were weather issues. the biggest issue is there was a big rise in the number of people on temporary layoff, and that may have been connected to automobile retooling, factories. we will see if that reverses. if that reverses then we get a better number, and that is kind of what the consensus is looking at at this point. let me say this. it doesn't matter. as long as we get a reasonable number it is the unemployment rate that is going to matter to the fed. and whether or not -- and the -- this gets back to what morgan stanley said -- if the unemployment goes up it is

because companies are starting to lay people off. the claims numbers do not suggest we are seeing layoffs. lisa: jon said something earlier and i thought it was an interesting point. how much are people looking at this data and are going to be looking at the jobs number and subtract 70,000 from that given where the revisions are? i think that is a valid point in a broader context as well. how reliable is data moving around a lot? i'm looking at the revision of the second-quarter results. it was revised to 2.9% from 2.2%. these are pretty big revisions and it is something we have gotten used to across the board. mike: they do their best, but the problem is response rates have gone down and the pandemic created unusual situations where we have not seen data come in the way they used to do at the bls. they are trying to change some of the statistical methods and get private-sector data in to make this more accurate.

the fed has today with the numbers -- data it has, not the numbers that are going to be revised. i don't think i would subtract 68,000 from the numbers, because that is based on what was happening through march of last year. and we often see that revised again between august when we got that number and january, when we actually apply the figures and it is usually revised lower. 118,000 may turn into something lower than that. there are some goldman sachs exit will go down. jonathan: so i should take off 90,000 on the payrolls report next week? mike: you might take off 9000 or something like that. let me just mention here -- jonathan: lisa, i'm confused now. [laughter] lisa: i think it makes sense, that they think it is a smaller revision downward. we have doubt about the numbers. carry on. mike: profits. since we are talking about

nvidia and 50% margins is not enough, second-quarter profits is the first time he comes out in the gdp numbers. up by 46 point $4 billion for domestic financial corporations. -- 46.4 billion for domestic financial corporations. that was a decline of 47.1% in the first quarter. economies made more money, this includes everybody, including private companies. jonathan: let's start with jobless claims. 231,000 the estimate, to 32,000. jobless claims are contained. -- 232,000. jobless claims are contained. i perform on the s&p, up .3%. in the bond market yields creeping higher following that economic data. across the curve on a two-year at the moment, 3.8753. push that through foreign

exchange, you have got a stronger dollar, a weaker euro. we are negative by .1% on the currency pair. joining us now, michael pugliese of wells fargo. your view on the jobs data so far? i think people can make the case that payrolls have overestimated the strength of the economy. could you make the case that claims understate the weakness? right now it is hard to make this stuff up. michael: the way i think about it, there has clearly been a slowdown over the past year or so. you see this in market data. you see it in the rising unemployment rate. even see it in claims. but it has been orderly, right? has been a gradually -- gradual and fairly controlled cooling in the labor market. when i hear fed chair powell and others talk on the fomc, their concern is any further week starts to get more nonlinear.

it is cooling gradually until very suddenly it is not. so far so good. i think we see that pretty much across the board, that gradual slowdown, but the worry is, what if it comes nonlinear you see -- and you see much broader layoffs than we have seen? lisa: how reliable is this data? we were just talking about that, this idea that we have seen pretty big revisions. there are fewer respondents to some of the surveys. doing the best they can but kind of getting messy. michael: the data is certainly reliable. it is revised. the revisions have gotten trickier post-pandemic for some of the seasonal-related issues michael was talking about. but just more broadly at think it is important not to miss the forest for the trees and what is happening on trent. we might get a bounce back from the week july numbers we got. be it is weather-related. and is something else. the trend is very clear here in payrolls, in the employment --

unemployment rate. even the survey data. more consumers reporting that jobs are scarce. fewer consumers reporting that jobs are plentiful. and i look at the totality of the data there i think that is very reliable, even if week to week or month to month on payrolls you get this noise from a whole bunch of factors. lisa: i guess there is this question for people concerned about, this time it is different and that existential fear that it never happens in a linear fashion, which you can feel at the federal reserve, i wonder going forward if the strength we are talking about when you add two hundred basis points of rate cuts through the end and thanks dear, whether we start to worry about a re-acceleration in inflation or whether that is off the table. whether people believe we are back to pre-pandemic norms? michael: that is the tight rope the fed is trying to walk, right? it has eased enough to keep this expansion going but not so much they find themselves in the problem they had three years ago. you heard raphael bostic

highlighting that yesterday. in his view he does not want to be in a situation where they have to hike again. i don't think that is likely. inflation is at 2.5% right now and given the slowdown in demand we are seeing that will continue to decline for bottom-up and top-down reasons. but sharks happen. get commodity price spikes. have an election in a few months where fiscal policy changes whole lot. the fed still has to be on guard, and that is why they want to proceed toward neutral but not necessarily to accommodative fed funds rates of 2% like you would see in a recession. jonathan: adam posen has made the point for the peterson institute that they should be prepared to pivot from the pivot if the former president gets another term. because of issues around immigration, because of issues around tariffs as well. you think the political considerations are strong enough that that might actually be an outcome in 2025? michael: i think what the fomc

is going to have to do is wait to see what happens. you go back to 2016 as an example and look at what they were talking about after that election at the december meeting that your they were not sure. they didn't know if we were going to get a lot of fiscal stimulus via tax cuts and they did not know what some of the policy changes were going to be. they had to proceed with caution. i think you would see something similar. i don't think you would see a proactive, knee-jerk response because that would be uncertainty about changes related to trade policy, tax policy, spending policy. if you got a fiscal policy change, more spending, lower taxes that give you faster economic growth and inflation i would expect a fed response. jonathan: thank you. i could puke lacey of wells fargo on the latest. michael pozen says don't wait. that doesn't mean don't act. that means start talking about. he was incredibly controversial at the bank of england under government -- under governor carney when he said what it could mean for the supply side of the economy. if i remember the language it

was something like, the speed limit of the economy would shift, we would be more prone to inflationary shocks because of the supply-side issues. there was a view that ultimately this could be a scenario, this is what we think about said scenario, this is our belief. adam thinks the same thing should be happening at the federal reserve with regards to the politics of the next year or so. that can be controversial because you were waiting into a topic that there are a certain set of individuals don't want you there at all. lisa: there is an economics discussion around tariffs not being had in the open, where people really lay out exactly which tariffs could be potentially negative. you are seeing in on the margins from certain think tanks, but not fed officials. because it becomes political and then they worry about political independence and fears of accusations on that front. nonetheless, you have to imagine that in the regional feds they have got to be doing scenario analysis, because that will absolutely affect how they look at rate policy next year. jonathan: equities doing ok, up

.25% on the s&p 500. some real outperformance on the russell small caps up by .8%. if you look to the bond market we look like this. on a two year and 10 year, yields creeping up higher. on tens, up by three, on the back of jobless claims coming in basically in-line. 231,000. this is what this market wants to see. just contained jobless claims. lisa: contained jobless claims and an upgrade to the gdp revisions, as well as downgrades to the inflation reads from the second quarter. it basically is the perfect scenario. this is basically soft landing nirvana. jonathan: earl davis, unequivocally dovish. your view of chairman powell last week. it is time to go long anywhere on the curve. can you build on that? why anywhere on the curve? earl: because what we will

experience actually is going to be a full steepener. your two years will outperform your teens and 30's, but it is our preference to go long tens and 30's because the volatility will be lower. from a sharpe ratio or risk-adjusted ratio it makes more sense to go long tens and 30's. jonathan: this time yesterday we caught up with collin martin. he said the treasury yield plunge makes duration less attractive. how do you think about that? just a valuation proposition? earl: i fully agree with that statement. that is why we are only calling it a five on 10 long on the market. the thing with this market, all of the evaluations have gotten arguably ahead of themselves for now. you never know when the next spike lower will be. i have been in the market 30 years and of timing was my strongest suit i would not be on the show right now, i would be on the beach somewhere. [laughter] i was want to make sure i'm in the position i want to be, but

i'm looking toward 4%, where we really add to our longs and go fully long into 10-year yields. lisa: you would be calling us from the beach. he would be wanting to talk to us. jonathan: i would not be here either. [laughter] right there with you. lisa: he said something that volatility is less in tens and 30's. that is one argument for going into them. is that true? at a time when a lot of people are talking about a new environment for yields more broadly, but especially duration of more volatility there, especially with the election coming up? earl: i didn't say there was going to be no volatility. there is going to be volatility everywhere but this is why i love being an active manager. this is why it is the perfect time to be in the shoes we are in. we have our expectations. we expect yields to go lower, but the market, we also expected to go higher. that allows us the opportunity to get long. this is the difference between passive and active, and it is the perfect time from an active

manager perspective to monetize that volatility. our team has been doing that for the past two years. you have heard us before. that is an example of the volatility in the two years. now we think we will see it in the 10 year. lisa: is there a contradiction in the bullishness across this curve in bond markets, with the strength of the economy we are seeing? earl: there is no contradiction. it is similar to the weather argument you brought up before in regards to the unemployment number. i would expand that whether argument to the markets. there are so many credible, plausible outcomes in this market in regards to rates higher, rates lower. but this is why it is important from our perspective as an active manager. don't get caught on where you think rates will go, because you were going to miss the volatility, and that is where you can monetize. i think all of the arguments are credible. our team, we have a process where it has been validated in terms of outlooks and reviews. that is why we do see lower

rates from here. but it is not going to be a straight line. it would not surprise us if we see 4% 10-year yields. we feel that is a level where you start backing up the truck. jonathan: the destination for fed funds, it stood out to me friday, you said once easing starts you believe the target is neutral at a minimum. what is neutral to you, i guess? what do you think the fed thinks it is? are we talking about 200 basis points of cuts over the next 12 months, 18 months? earl: it is a good question. i would argue that neutral to me doesn't count because i am not the one doing the easing. i try to listen to the fed governors speak. i would say it is somewhere in and around 3%. which says there is 200 basis points coming over the next couple of years, all else equal. the market is only discounting 100 right now. that is why we saw the speech as unequivocally dovish. the path and timing, that is the

uncertain part. what we see a move toward neutral. the interesting thing about this, there is three things we are looking at that will add to volatility and impact our positioning. one is the employment rate. we think that is important. the second is the election, and that will take on -- be more amplified as we get toward november. the third one -- this is the important 1 -- is those risk-off moments that can come from edo socratic actions. -- idiosyncratic actions. it is that third one, neutral is 3% but the fed put is a squarely on the table now. we saw talk of 50 in the market when we had the japan selloff. that has not gone away. we might be long. we like seeing rates go to neutral and now we think we have a free option on the fret -- on the fed put which could go below neutral. jonathan: appreciate it. it -- earl davis of mo. we should not have favorites,

but he is one of mine. lisa: 100%. i love the scenario analysis he has and the range. 4%, back up the truck. jonathan: bond yields just a touch higher across the curve. get you an update on stories elsewhere. here is your bloomberg brief. the u.s. economy is holding up well. jobless claims coming in at 231,000 for the past week. ddp for the second quarter revised higher, partially reflecting an upward revision to consumer spending. chinese smartphone giant huawei posting a six-straight quarter of growth. company gaining market share against apple. smartphone shipments jumping 50% in the june quarter. apple dropping to sixth place in the chinese market. finally, shares of salesforce rising in the premarket. the company reporting a strong profit outlook. reporting second-quarter results that beat expectations and offering a strong profit outlook. the stock is up by 4.5%.

your opening bell, 40 minutes away. up next, the calendar for the rest of this week. we will catch up with ed ludlow, following his conversation with the nvidia ceo. ♪

jonathan: the opening bell, 37 minutes away. equities improve, up .3%, doing better on the small caps following better-than-expected numbers on the u.s. economy. the calendar for the rest of this week. pending home sales coming at 10:00 a.m. eastern, plus gap and dell report earnings after the bell. friday we will get pce and

michigan sentiment. for us, digesting numbers from nvidia. the stock is down 3.2%. ed ludlow sat down with jen-hsun huang in an exclusive conversation. walk us through your big takeaways. yesterday when you are conducting a conversation the stock was in a very different place. ed: i think jen-hsun huang was frustrated about that. at the beginning he literally just stops and cannot believe the decline because he felt during the call they had explained the situation of next-generation product quite clearly. but i think that is the main tank, you know, that he tried to hit the market over the head with the idea that they made a commitment to bring a new chip to market every year and black elk, the minute focus of the street, is going fine. will ramp in the fiscal fourth-quarter. supplies improving and it is just a few words, but he said next year, as in the fiscal year will be a great year. i think that has a lot of

people, this morning in the markets. lisa: there is also a question about the broadening out in potential buyer base. and whether that can change. what did he have to say about that in terms of state act airs, as well as others? ed: i tried, lisa. i really tried. i really did not get more than we already knew. the hyperscalers are 45% of the data center business, and jen-hsun huang was at pains to point out they have many different types of customers. there was some thin evidence that business, what they call sovereign ai, which is either selling directly to governments or to entities or regional units backed by government money, think like chips act money, is picking up steam. high double-digit revenue in this fiscal year. i still get the sense that the data center operators are the stories still. jonathan: ed ludlow, fantastic coverage in the last 24 hours.

congratulations. leading our coverage on the west coast following a conversation with jen-hsun huang. have very different place yesterday afternoon compared to where we are this morning going into the opening bell. lisa: it is barely down. if you listen to dan ives, it will be up by the end of the day. to me the frustration was interesting. we delivered everything to you. we thought we explained why we did what we did with blackwell. it is coming out and still you are down. to me the question is going to be margins. i think that is a lot of what people were picking up on. jonathan: more from and and the team later on this morning. 11:00 eastern time alongside caroline hyde, "bloomberg technology." if you want to find the interview you can find it on bloomberg.com and the terminal. coming up, helen becker and claudia sahm of new century advisors. from new york city, thank you for choosing bloomberg tv. good luck for the rest of the trading day. this was "bloomberg

surveillance." ♪

katie: futures regain their footing after nvidia's rocky reception yesterday. 30 minutes until the official start of trading. i'm katie greifeld. sonali: and i'm sonali basak. matt miller is off today, and bloomberg "open interest" starts now. katie: coming up, nvidia pays the price for lofty expectations. eeo jen-hsun