>> inflation is still last year's story. >> there really are no real problem areas underlying our data that we are seeing. >> right now the evidence suggests it is an economy that is resilient. >> if we get this reduction, we will realize two more reductions this year. >> we now have a normal good economy. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning. bloomberg surveillance starts now. your equity market shaping up as follows. equity futures down by 0.2%. down by one third on the nasdaq.

small caps down by 0.5%. still close to all-time highs with bank earnings around the corner. the calendar for wall street shaping up as follows. jp morgan and wells fargo. tuesday, bank of america, goldman sachs and citibank. wednesday, morgan stanley. lisa: will they end up forming less and delivering less as interest rates come down and how much was ally financial the canary in the coal mine in terms of credit concerns and deterioration coming down the pike. jonathan: jp morgan already warning. then we had goldman sachs warning about trading revenue as well. just lowering the bar coming into these numbers. lisa: with a complete lack of visibility. that is what i have heard from a number in the banking sector. in reality, pipelines try them up as quickly as they come out. right now there is lack of visibility about what will get

done. how much does this have to do with the geopolitical overhang that seems to be overhangs over the past couple of weeks? jonathan: yields a little bit higher, two basis points on the two year. on the 10 year up by about three. just south of that level on twos. a big rally yesterday. yields were down about six basis points. still working through the economic date of yesterday. the upside surprise on cpi and jobless claims. lisa: yesterday was a fascinating litmus test. but was -- what is more important to the federal reserve and the market, inflation and the labor market? both are important but for different reasons. what you saw was more rate cuts being priced into the market by the federal reserve because of what we saw in the jobless claims. on the flipside longer-term inflation expectations went up. we saw that in the breakeven rates. higher, stick your inflation over the long-term with the fed

still willing to cut rates. jonathan: let's just sit on the front end. what is more important to the market is more important to the federal reserve and this belief that jobless claims will be more important even if we can dismiss them and talk about the hurricane effect. that was almost cemented from the comments we got yesterday from williams and others cementing the idea of the fed is comfortable with this disinflationary trend moving emphasis away from the high inflation print. lisa: basically how data will move around but they have confidence that they are moving down to the 2% level. it does not concern them or move them away from cutting by 25 basis points. rafael bostic opened the possibility that maybe he might not want to cut rates in november. that is the reason why in the market you can see skepticism with not even a full 25 basis rate cut being priced into futures. jonathan: cpi yesterday. ppi later this morning. equity futures pulling back by

0.2%. yields up by three basis points. coming up this hour, we will catch up with john stoltzfus of oppenheimer remaining bullish on equities. melissa seixas of duke energy on the aftermath of hurricane milton and john cassidy. earnings season kicks off on wall street. jp morgan and wells fargo set to report later this morning. "we expect investors to pay attention to the big banks this season. that can provide greater clarity into the u.s. economy, what lies ahead and how it might affect prices." john joins us now. good morning. john: good morning. jonathan: good to see you. how low is the bar for the guidance we got a few weeks back? john: the bar is relatively low for the banks. there is an understanding that is beginning to flow through the markets that this is a period of

transition. i think the numbers that we saw in terms of the economy from the july jobs number and the most recent jobs number, the disparity between the two, the inputs that are put into the economy, it is never very clear when you are coming into a transition, a normalization or whether you are getting into trouble. jonathan: do you think the bank stocks can perform well with the implied rate cut from the fed? john: i think they can. the banks today are more efficient than they have ever been before. it does not mean you cannot get a disappointing quarter. the markets always, they are often ahead of the reporting. the markets will weaken them. -- the markets will weaken. then if we get reports that are better-than-expected, -- the financials have done very well

this year. a lot of that is the impartation that things are getting better even as things remain quite uncertain. lisa: there is a feeling that it potentially becomes more difficult to make the same sort of net interest income as the fed cuts rates. that does not seem to concern market as the ally financial issue. credit deterioration among consumers that might be beginning to feel the pinch of a change in cycle, how much is that really the concern that people have that could shake some of the confidence? john: i think that is one of the major concerns. it is quite normal that you will feel that concern at a time -- we had 11 rate hikes, nine pauses at the high level before the first cut and then questions related to inflation being stickier than anticipated before. but likely, the hurricanes are likely to ameliorate that

somewhat. overall what really has amazed me 41 years in this business, i remember when volker was in his second term when i came on. when you get to this kind of a point, i have never seen the consumer so sophisticated relative to other periods. a lot of that could be the dissemination of information, the digitalization process of shopping and comparison-shopping . i recall a prior visit where we were speaking about consumer discretionary stocks will be held within the retailers, you just have to pick the ones that navigate this current period better than other ones, whether they have greater buying power than the smaller discount stores or what have you. the american consumer is remarkably resilient. the jobs number is resilient.

earnings have been resilient. let's see how the third quarter comes out. lisa: as you are talking i am thinking of someone we spoke to yesterday from bank of america who was talking about the resilience of the consumer and how you see ongoing spending in certain discretionary areas. in the past, banks for a leading indicator for the other sectors that might be reporting earnings. do you think this time around if they are better-than-expected in it comes to consumer performance, they also will be a leading indicator for the rest of consumer discretionary? john: they should be but there are so many more inputs today than we have had in the past. a lot of that has to do with the resilience of business. you look across the sectors and you see what is working with consumers and you look at the business is come in and out of favor quarter to quarter, sometimes day-to-day but the traders, but there is a general trend that is showing. there is an amelioration process, the digestion of the

interest rates and there is a sense that people have more money sloshing around in their savings accounts and different places than many people have anticipated. jonathan: 57.80 at the close yesterday. your price target is still 5900 on the s&p. john: it is still 5900 and will be until the s&p closes at or above it. that is our discipline. jonathan: how do you understand where you want to be in equity market with that in mind? john: still cyclicals over defensive. does not mean that we own defensive spoke be overweight the cyclicals. we like technology, communication services. we like consumer discretionary, industrials and financials. jonathan: within cyclicals, financials, or do they fit into this? john: the financials, we think the net interest margin will work for them. there is some volatility in the

yield curve that occurs the way things are going in the transitional period but when we settled to a more normalized yield curve, when the consumer feels more confident, we will have to see later on today when we get the consumer sentiment number that comes out later on today. it will be interesting to see. but the consumer can be very emotional on those ratings when the university reviews and does the surveys. consumers can be fickle. they warmed up for a while. the conference board was negative for a while. they warmed up a little bit. the university of michigan has gone back and forth. lisa: i love this. if they called you, they would definitely get emotions. when you express how you feel about inflation. i want to finish with this idea, if rates stay where they are, long-term rates, do you think it favors one sector over the other?

do you think it favors the ongoing cyclical rotation that we have been seeing? john: i think it does favor the cyclical rotation. there is a realization that is beginning to go through. it is still flowing through. it is that we are not going back to see the fed, if we have a crisis, we are not likely to go back to the zero but more likely an environment that will keep the 10 year to at least near-term with all of the changes happening in terms of the re-industrialization in the united states and different countries, the process of diversification with globalization and expenses related to that. we would say the 10 year would probably be in a range somewhere between 3.4 to five. jonathan: somewhere around that right now. we appreciate it. john stoltzfus of oppenheimer.

nobody wants rates back to zero. if so, we are in a bad place in the economy. jp morgan and wells fargo later. we just heard from blackrock, 11.4 trillion dollars. lisa: it is shocking. people were shocked about $8 trillion. the estimate was $11.2 trillion. they have exceeded that. this shows how much money has flooded into u.s. equities in particular. equity net inflows of $74.1 billion. the estimate, $29.5 billion. that gives you a sense of how much has exceeded the cash wall. the estimate was $58 billion. everything is exceeding that. they are capturing the picture from the other side. jonathan: equities being close to all-time highs on the s&p 500. a little bit softer by 0.2%. with stories elsewhere, here is dani burger. dani: 10 people in florida are

dead and more than 3 million are without power following hurricane delta. authorities are warning it could hit -- take days to assess the damages. they are cautiously optimistic that it will not reach the levels of hurricane ian in 2022. governor desantis said florida avoided a worst case scenario with a storm surge only half as high as forecasters feared. amd suffering the biggest stock decline in more than a month falling more than 4%. it unveiled new ai chips at an event in san francisco. investors were hoping for new information on customers and financial performance. amd is emerging as one of the biggest challenges to nvidia. up more than 11 percent this year. blackrock pulling in more than $160 billion of cash to its long-term investment funds this quarter. that means it has been pushed to a record $11.5 trillion in assets, easily beating

estimates. they are looking to become a one-stop shop for stocks, bonds and private assets, benefiting from this year's surge in stocks and cash flowing to fixed and private funds. jonathan: phenomenal numbers. thank you. more in 30 minutes. up next, determining the damage of hurricane milton. >> right now we need to make sure that in the 72 hours after hurricane milton has hit and has departed, we have to make sure that people really careful about trying to get back to their homes. jonathan: that conversation is next. live from new york city, good morning.

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by 0.1%. under surveillance, determining the damage of hurricane milton. >> right now we need to make sure that in the 72 hours after hurricane milton has hit and has departed, we have to make sure that people are really careful about trying to get back to their homes. they need to heed the warnings and communicate with local officials because this is where we have a lot of deaths occur when the storm has departed. jonathan: the latest, local and state officials assessing the scale and damage caused by hurricane milton. at least 10 people were killed and 2.5 million residents remain without power. bill joins us from florida. what is the latest? bill: good morning to you from siesta key. we are in one of the areas with no power or hurricane milton

made landfall. you can hear the generators behind us. you can see families furniture on the curb waiting to be picked up and heading to the dump for the second time in the span of about two weeks. some of these families lost everything on the first floor of their homes. the storm surge surge and flooding damage here at siesta key. we want to point out the tremendous economic toll we are seeing from these back-to-back storms. accuweather issued a preliminary estimate for the total damage of economic loss for hurricane milton. we are looking at $160 billion to $180 billion of damage and losses. jonathan: we appreciate your time. stay safe. bill wadell of accuweather. lisa: how do you protect yourself against the storms when it is unclear which aspect will be the most damaging? with hurricane helene, it was flooding. with hurricane milton, it was the wind as well. how do you gird yourself for a

multifaceted threat that is always somewhat of a surprise? jonathan: melissa seixas joins us, the president of duke energy. welcome to the program. fantastic to get time with you this morning. we have talked about the power outages pressure state. can you tell us how many are without power and how long does it typically take to restore it? melissa: as of this morning we have 845,000 customers without service across 45 counties that we serve. the hardest hit county is located between tampa bay and the gulf of mexico north of where hurricane milton made landfall. jonathan: when you look at how long it takes to restore power, what position were you in from hurricane helene? had you restored power to the customers previously or were you still playing catch-up going into this? melissa: we had completed our restoration for hurricane helene

on saturday. the hardest hit customers we were able to restore on saturday. by sunday, we were already in full activation for hurricane milton. lisa: can you give us a sense of what goes into reactivating energy? is it picking up downlines, redoing the circuitry to redirect to new areas? can you give us a sense of how much manpower is involved? melissa: it takes all hands on deck. from a resource standpoint, it is very diverse because we need line workers, a lot of vegetation management. you mentioned the wind takes down a lot of trees. we also need damage assessment which was a really critical step in the restoration process that we began yesterday as soon as the sun came up, getting eyes out in the field both on the ground and from the sky to help

us determine the extent of the damage. that informs and shapes our work plans for each and every day but we have about 16,000 resources here in florida to respond to our customers and get them reenergized. we start with the most critical customers. hospitals, 911 stations, water plants, those kinds of facilities. i want to emphasize we conduct damage assessment along with restoration at the same time. sometimes it is actually not much reenergizing but it is rebuilding. especially with hurricane force winds from a category three hurricane. these are highly skilled workers. we focus on their safety, the safety of our customers as well. concurrent to all of that work happening, we are really stressing and emphasizing our

customers to remain very steadfast and staying away from down power lines, always assuming that they are energized. there are a lot of moving parts underway. we expect to see a number of our customers restored today. in fact, we will by the afternoon divide our customers with an estimated time of restoration so they can make -- provide our customers with an estimated time of restoration so they can make plans. lisa: i know it has been an exhausting number of days and weeks responding to all of these subsequent hurricanes. i am wondering, as you reset, when power is restored, what does the business look to do to fortify the energy lines for the next perspective storm and the one after that? melissa: we in florida are certainly in a constant state of hardening our greed. we are able to do that through what is called the storm prediction plan in the state of florida. we have installed over the last

handful of years a variety of hardening the grid from substation flood mitigation to converting some overhead lines to underground stronger poles, stronger wire. we have already seen that payoff immediately. i will give you an example. hurricane ian, hurricane nicole and hurricane idalia, we were able to prevent 200 million customer minutes of outages. a lot of preventive outcome. we will continue to do that. we take lessons from every single one of these events. as you mentioned, hurricane helene was a very different storm in many ways because of the storm surge that it created up and down the gulf coast in our service area. this is the flooding you are seeing to the south of us,

unfortunately. milton was very much a wind event as well. with those winds coming across as a category three. so we have seen a lot of poles down, wires down, definitely flooding. fortunately we did not sustain the significant storm surge we had seen in hurricane helene. jonathan: we appreciate your time. we know how busy you are restoring power to those customers. melissa seixas, the president of duke energy, florida. your last question, lisa was interesting. do we have to rethink how we distribute power across these places? lisa: especially when you have wind, water, in some areas you have the earthshaking, i'm talking about california. at one point you have to fortify these lines. rebuilding the grid as the preeminent concern to making sure we can advance technologically. jonathan: think about how tough

it has been for these residents. they have only just restored power to all of those residents over the weekend from hurricane helene and then hurricane milton just days later. lisa: every single commentary, this is the worst case scenario, this is our nightmare. this is a bad situation we were hoping to avoid. one saving grace is you did not get another flood coming into the same areas in the same kind of way but it really highlights, is this the new normal? what does that look like in terms of longer-term planning for the regions that will be hard hit? i also thought, yesterday, we had an interesting conversation about the flood plans and how they are all dated to the 1970's and how do you bring them up to speed so we understand what zones are at most risk if something like this happened? jonathan: we saw jobless claims yesterday. maybe with the hurricane,, i wonder how it will shake. critically with the payroll report november 1. that could be so messy after the

numbers we have already seen. lisa: at what point does the fed look past this? when do we start to hear some of the rhetoric like yesterday, our goal is to gradually move down and right now, may data dependency looks different than the past. jonathan: they have a lot to go through at the next fed reserve meeting. up next, elon musk unveiling the robotaxi called cyber cab. we will check in with craig trudell. from new york city, this is bloomberg.

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jonathan: earnings in america just moments away. numbers from j.p. morgan and wells fargo in the next 15 or 20 minutes. s&p pulling back by .1%. still on course for a fifth week of gains on the s&p 500. the longest weekly gain, winning streak going back to may. the bond market yesterday was confusing. a bad data mix. where do you put the emphasis? for you think the fed will put the emphasis, and that is claims. yields lower. 397.85 this morning. lisa: the implication by the market is that the fed will put greater priority and weight

on the jobs figure that there's any sign of weakening. then you see inflation expectations tick up. we had a sense that maybe the option would be a difficult one. we had record foreign buy, record foreign direct. this was a strong, robust auction. if you're just just as he says i am, welcome. --just as confused as i am, welcome. jonathan: that's basically the reaction function. that is what the fed and market were looking at yesterday. we have a debate further along the curve. if they do x because of y, what is that mean further out along the curve? lisa: people can't decide. they don't know. that is what you see in fed fund futures highlighting this uncertainty. you see that with inflation expectations creeping higher. but i like the yield. i'm not that worried so they go

buy long bonds. it is a soup as people look for clarity. -- jonathan: the dollar index closing stronger for the longest daily winning streak going back to april of 2022. a little bit of weakness on the screen right now. over the last week some real strength. lisa: people are pricing out the prospect of aggressive rate cuts because the economic data has been so strong. i wonder how much this gets exacerbated if the ecb cuts rates by 25 basis points. all of a sudden it is the whipsaw opposite of what some of the people expected a couple of weeks ago. jonathan: next thursday look out for that. a potential 25 basis point rate cut. i would be fascinated but it looks like in the news conference. the dollar a little softer. down by not even 1/10 of 1%.

china inspected to announce the release of as much as 2 trillion yuan, for 283 billion dollars in fiscal stimulus this weekend. most investors anticipate the funding will come of the form of government bonds. the chinese officials after a monster rally over the past few weeks. lisa: not the headline amount but where the money is put toward. are they to build more bridges to nowhere and support property valuations or some of the other fiscally's miniatures people are looking for? i wonder how much that will determine the sense of whether truly this administration wants to support the economy and engender mystic demand, or if they're trying to make it look better ahead of next year. jonathan: the csi 300 has been all over the place. chinese equities down by about 2.8%. authorities want to get could take days to assess the full extent of the damages from hurricane milton, leaving at least 10 dead and power outage

-- poweroutage.us shows 2 million homes without power. elon musk revealing prototypes of the long-awaited cybercab robotaxi. the presentation lacked technical details. >> we expect to begin production with the cybercab, which is highly optimized for autonomous transport in probably -- i tend to be optimistic but time frames. in 2026. yeah. before 20 27, let me put it that way. -- 2027. let's go through that line. i'm optimistic with time frames. almost hesitant to say but in 2026. how optimistic is that timely? -- timeline? craig: optimistic is putting it

lightly. almost seven years ago now in late 2017 we saw elon take the wraps off a next-generation roadster sports car. we are still waiting on that one. that is a vehicle that we humans will actually drive. it is kind of all manner of products you have to be careful with with musk giving timelines. with respect to self-driving and autonomy, this is a topic that divides investors where some are keen to go along for the ride of his many promises he's yet to live up to. others are really nervous about the fact that he has gone all in on this and done so at the expense of cheaper teslas the company differently desperate this really needs to grow again -- the company desperately needs to grow again. jonathan: it was up by 70%

before yesterday. when you think about how much has been baked into the story, walk me through the competition and whether you believe this is a winner takes all scenario. cruise had their issues. we have this, whatever it will be in the future. who was in the lead? craig: that's a difficult question to answer. i do think when you look at what is actually on the roads and who is actually deploying, you have to say waymo is the clear answer. when you take stock of how waymo is getting there in the state of the business model is, it becomes a little fuzzy. the cars it is deploying our intellect areas, very expensive, and that has always been musk's counter. the idea of you can't achieve this technological breakthrough that will be required without

putting millions of cars on the road that are all learning. he is making a pet he can -- bet he can get there and turned the cars in the self-driving or get them to the point where we can check out i don't have to pay attention. he has not been able to actually follow through on that. there are real doubts as to whether or not he has this hardware necessary to pull that off and whether --it is expensive for reason. lisa: he should open up this particular set the parents with their children on a rainy day and charge them admission. i think he would do very well. i'm curious about the details he did not really layout, including any kind of addressing the regulatory overhaul or regulatory types of frameworks necessary to really get a self-driving fleet of cabs or cyber trucks or whatever. the other question is whether they would oversee this cab

system or van system or some deals would. which of those is most important for investors to understand? craig: there are questions galore left unanswered by this event. i think it was, you know, a slickly staged event. a lot of theater. in terms of answering your question, the regulatory one is the most important here. if you look at a competitor in the space, cruise, the unit of general motors, they had a hard time getting regulatory approval for a dedicated vehicle they wanted to make called the origin. you have limits as to how many cars you can make that don't have a steering wheel or pedals under u.s. law. the company went in the direction of rather than making the dedicated vehicle, just retrofitting an electric car they already have in the market.

whether tesla can avoid the pitfalls of what gm went through, you know, waymo has not tried to go down that route. they retrofitted other company vehicles that have a steering will and pedals, even if they're not used. there are questions as to whether or not they can pass -- the company can pass muster. when you have musk deals with regulators, a sharp elbowed way. jonathan: thank you. that is one way of putting it. craig trudell out of london. the stock is down 6%. jp morgan, wells fargo moments away. both expect a report by 7:00 a.m. eastern time. gerard cassidy joins us now. interesting guidance from j.p. morgan. how low is the barth that the reset themselves in september? gerard: it's interesting. as you pointed out in september they talked about consensus estimates for income from 2025.

they thought it was too high. the number was $90 billion. today when you look at consensus, our number included, it is $88 billion to $89 billion. i don't effect jp morgan to give guidance on 2025. during the question-and-answer i expect them to be asked what do you feel about the new consensus number. i would not be surprised if they still say it's on the high side. they did extremely well in rising short-term interest rates. they have always pointed out the following written varmint, the net interest income would come under pressure. that is what we are respecting today. jonathan: who do you think it will benefit between rates and what may or may not happen with the federal reserve? who will benefit and hurt? gerard: it is the $64,000 question and the right one to ask. it is one to benefit what we refer to as liability

sensitive banks. funding costs reprice faster than asset yields. when you look at the regional banks like fifth third or truest, those are examples of liability banks. bank of america has a long-duration bond portfolio and they were criticized for that. the stock did not perform well. they should probably see a benefit. on the asset sensitivity side, it is hard to say who will be hit the hardest. if you're asset sensitive, again, your assets will reprice faster. in the falling rate environment you know what that to happen. lisa: it strikes me there are a number of different issues people are curious about. they are not going to affect each bank in the same kind of way. we're looking at how interest rate income will adjust based on rate cuts. we are concerned about the consumer based on ally

financial's morning. which bank will be most interesting, most instructive in terms of these trends? gerard: lisa, that's a good question. managing income is a challenging line item for outsiders to predict due to the fact there are 70 moving parts. do your point -- so many moving parts. rates are changing. you can see an increase in loan demand which will impact net interest income. the banks used derivatives to as this line item. it is challenging but i think what you're going to find banks like wells fargo, jp morgan, both reporting today. bank of new york already reported. this will give us insights into what they are seeing. most of the banks have a good understanding. regions financial is a very good -- did a very good job explain the derivatives portfolio. on a credit side we will watch carefully. you have to ask yourself with

the allied financial warning on credit, is that idiosyncratic to them or is there new trend developing? we think it is idiosyncratic to them but we will hear about the consumer today from jp morgan and wells fargo. jonathan: we will come straight back to you. gerard cassidy will be sticking close. jp morgan and wells fargo just around the corner. other stories with your bloomberg brief. dani: warren buffett can take his time revealing trades and bank of america. berkshire hathaway's stake is 9.99% to shares outstanding, just below the 10% regulatory threshold that requires rapid disclosure. buffet cannot provide quarterly updates. berkshire has reaped about 10.5 billion dollars for sales of bank of america. even with recent disposals, berkshire remains the bank's biggest holder. i management shakeup at stellantis. the carmaker replacing its finance chief as part of a broad management overhaul. the cfo natalie knight will be

replaced by doug osterman. knight faced backlash over last month's profit morning a week after she characterized the company's margin target as ambitious. shares are down 3.4% in the italian trade. the boeing strike now heading into its fifth week. the company is taking a harder line with the union reps filing unfair labor practice charges, saying the other side has bargained in bad faith and undermined its own deal. the union has said it is willing to talk but boeing needs to meet them at the table and urged the ceo to insert himself more directly into the process. that is your brief. jonathan: thank you. up next, earnings season kicking off on wall street. >> i think the market is complacent on credit. what they are pricing into bank stocks is a manifestation of steep yield curves or deposit calls coming down. jonathan: results from jp morgan up next. ♪ ♪ each other rock stars.

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jonathan: under surveillance this morning earnings season kicking off. numbers dropping from jp morgan and wells fargo. sonali basak with us around the table. sonali: coming in above expectations. just weeks ago they guided the street was too optimistic for next year but this year still looks good. the provision for credit losses came in higher-than-expected. here come the questions about quite a -- credit quality. it included a billion-dollar reserve build. we will have questions about the outlook. jamie dimon has been warning about skepticism over a soft landing and next year. you also have investment banking coming in higher-than-expected

as well. jp morgan a behemoth in every major business line of investment banking. that is a positive, specialty -- especially you don't get fees until the deals close. the fact that it looks this good now is pretty positive. jonathan: the stock is up by .1%. this is always the case with jp morgan numbers. he have to chase the squirrel that jamie dimon starts talking about. we will get to the squirrel in just a moment. lisa, let's start with the numbers themselves. lisa: what is interesting is that it is the opposite story from what people expected. interest income came in better than expected. we saw this pretty much in other areas as well like blackrock. the provisions for credit losses ticked up. the idea that is the exact opposite problem. the allied financial on the margins was setting the tone in a better direction or a worse direction but more accurate direction than some of the net issues. jonathan: this is where things

were set up coming into this. the words of dan pinto, mr. solomon goldman sachs. they all set the bar that much lower going into this report. sonali: jp morgan is trading at almost two times its book value. we are seeing pretty record levels of where its stock has been trading. something to consider and why they are setting expectations firmly, the returns on tangible common equity at 19% is well over what was expected. it was 28% last quarter. this normalization and profitability of the banks is interesting, especially consider jp morgan is the behemoth. one more point. fascinating analysis by morgan stanley. a lot of their loans are floating-rate. as rates drop and the interest rate picture changes they are net-net according to morgan stanley. i negative here. -- a negative here from the floating-rate loans. when you see the provisions for

loan losses starting to build you start to ask about the credit card books. we did not ask about that a lot over the last couple of years. people are maxed out on credit across the entire country. how fast is that turn? lisa: i have to wonder what is signal and what is noise. it is partly the executive management and how they are looking at risks down the pike as much as it is about current risks that are building. i wonder if you pair jp morgan with wells fargo, provisions for credit losses were below expectations. the missed on net interest income. this is a picture that has to come down to execution and risk management expectation going forward. sonali: it is the cost of the net interest income, right? when you see them take provisions it is at the benefit of the higher net interest income. you also have to make the income income. you cannot lose too much money on it. for wells fargo, they don't have that credit card book jp morgan

has, that behemoth book. sapphire reserve. a lot of customers are not low income and middle income customers who have been struggling through this environment. there tend -- they tend to be wealthier customers. what is your first take this morning? gerard: the revenues are better-than-expected, which is positive. the provision was a tad higher. what is fascinating about the numbers is that the capital levels for jp morgan are extort nearly high. they have over a 50% -- 15% ratio. as you have been discussing, their return on tangible common equity is very high. it looks like on the very first quicktake the numbers are slightly better-than-expected. again, more in the q&a period during the earnings call that we will find out more about that 2025 number. lisa: can you put this in

perspective in terms of what this bank, jp morgan, has done in the past going into periods of potential turmoil? is this something that is normal? something that is analogous to things we have seen in previous years? or, is this unusually large? it was higher than our expectations. we were at 2.9. they came in at 3.1. it's an interesting point you are making. what we anticipate is credit costs are normalizing. we have to remember following the pandemic for a couple of years for jp morgan and its peers the credit costs were extort nearly low. when you look at the -- extraordinarily low. when you look relative to other time periods, they are very manageable. the important part is what you expect for the economy in 2025. if you're anticipating a hard landing, this could be the start of something. we are in the soft landing camp.

you saw the employment picture numbers over a week ago. very strong employment. we are in the view that the credit picture for jp morgan and others is quite healthy. lisa: i want to revisit the luxury of being the world's biggest banker. if this is something we will see repeated at other banks based on wells fargo. provisions came in lighter than expected. how much do you attribute this to not being able to lend on the riskier site or not able to extend as much the way jp morgan does? how much do you think this highlights the jp morgan is doing its own thing and preparing for something that maybe other banks are not seeing? gerard: it is interesting. wells have got the asset cap in place. it does make it more difficult for them to grow their loan portfolio. therefore you could argue maybe the portfolio could be in better shape. i point out a couple of things. commercial real estate. you look at the deterioration we

have seen, it's been manageable for wells fargo. the other important point is that the banks have been de-risked. they go through the stress test every year. the regulators are very tough. the industry today versus 2006 or 1989 or 2000, any of those periods where we went into hard landings, the industry today doesn't have the risk it had in the past. it's. we will see some credit problems but they are going to be very manageable the cycle because we don't see the hard landing in the next 12 months. all the banks will have good credit numbers even though they are starting to normalize. we don't see any mass deterioration in credit. jonathan: the big thing to watch this quarter. gerard, appreciate your time as always. sonali basak, lisa, this is what jp morgan is saying. $92.5 billion. lisa: these are income principal numbers.

these are massive numbers -- incomprehensible numbers. these are massive numbers. i'm wondering how much jp morgan's build of capital is because they can. why not build a fortress that can withstand anything at a time of uncertainty and not necessarily a signal of weakening they are seeing? jonathan: too optimistic and they beat expectations across the board. lisa: you love this game. celebrate. everybody loves it. jonathan: the stock is up by 120%. up next, kevin gordon of charles schwab, joe mathieu, savi syth and john lovallo. earnings season on wall street is underway. ♪

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>> inflation is still last year's story. >> there are problem areas underlying the data we are seeing. >> the economy is pretty resilient. >> we are probably going to realize two more 25 point productions this year. >> we now have a normal, good economy. >> this is "bloomberg surveillance." jonathan: earnings season is underway on wall street this morning. good morning, good morning.

bloomberg surveillance starts right now. we have had numbers from j.p. morgan and wells fargo. the week ahead will look like this. bank of america on tuesday, wednesday, morgan stanley. we need to start with j.p. morgan right here, right now. i will make it simple, net income, b, fixed sales and trading, b. lisa: off the charts, commitment 22.5 billion dollars versus the expectation, the one? is about the provisions of credit loss. did they have the luxury of stockpiling cash just in case? jonathan: there are two things you have to do with numbers from j.p. morgan. several critical issues remain,

fiscal deficits, infrastructure, restructuring of trade, miniaturization of the world. we hope the prevailing uncertainty is prepared for any environment. lisa: i spoke with jamie dimon this week and what struck me was his emphasis in his role as a risk manager. j.p. morgan has the luxury of being the ultimate risk manager. should there be a nuclear war, should there be a massive spike in interest rates, it goes back to zero, they need to be prepared. there is this question of how much is it j.p. morgan in time of great uncertainty versus visibility into something massive coming down the pike. jonathan: when we get these words from jamie dimon, people talk about the predictions of economic hurricanes. lisa: this is about his job

going to the board. is it really about j.p. morgan saying that it's about the world falling apart or j.p. morgan and jamie dimon saying we have the luxury of being the world's biggest bank, we are not going to fail, and we will make sure that no matter what happens? jonathan: up by 2%. we will keep an eye on the bond market all morning. up by three points, four points, getting closer to 4.4%. pvi, look after that after the expected print yesterday. coming up this hour, catch up with charles schwab as they kicked off the bank earnings. raymond james, airline earnings are underway. and ubs homebuilders are fading -- facing a devastating

hurricane season. j.p. morgan kicking off bank earnings. better-than-expected, not bad from wells fargo. charles schwab writing that the soft landing is a process, not a destination, and at some point the economy goes back into a firm expansion or a recession. kevin, it is good to see you. is wells fargo behind us? nothing to see, everything is decent? kevin: there's always something to see, the rest of earnings season to go. the rest of this quarter as we start to turn it into 2025 it's what does guidance look like? s&p 500 for the next calendar year, lofty, elevated. that becomes more of the needle mover in terms of the equity market. when you look at the array of valuation metrics that we track, whether it is price to earnings forward on the trailing basis or price to sales, we tend to look

at a growth rate with two quarters of a look ahead to. when you use that metric and you go back into the full history of the s&p, there are only two times that were more expensive, the late 90's in 2020 one. which is not to say we will repeat that, but there isn't as much juice to squeeze out of that multiple expansion part of the market and i think earnings need to do more heavy lifting. that is where i think the guidance becomes important. jonathan: and yet here we are, j.p. morgan revising expectations. how low is the bar? when we turn the lights off at the moment, and as we got back to a normal environment, there seems to be a normal bias in terms of companies let us know where they are actually going to

be. there is not as much of look forward as analysts can confidently say that we are not going to adjust it more. there is more than adjustment going on as you get closer to the actual earnings result. i think of it in similar terms as central banks because we are in a more supply constrained environment, where supply shocks have become more frequent. more detrimental to the global economy. lisa: with the idea of credit provision, they'll deal with it differently. as an investor, do they highlight the black box moment we are in? kevin: in general, investors have to link the time horizons.

it's beneficial. broadly we got over 40 million clients. there tends to be a good thing on the of time horizons as an investor. i think that's the case moving forward. looking forward this year, jobless claims and what we will see for the october claims jobs report, impact from helene, milton, union related or strike related, if there is a hit from the short-term impacts from climate or strike related, you will not get a full impact. lisa: in the time horizon, visibility doesn't get much better when -- until we start

talking about the incredibly cloudy policy question of the geopolitics of the moment and the inflation that we see. it's solid at a time of risk. kevin: you are not in an environment where you can see what the supply shop will do on a short-term basis and evidenced by the past four years where we have been in this prone environment with the middle east right now it's tough to decipher with a long-term approach. jonathan: i'm going to shorten the time horizon aggressively. the average stock, as you have pointed out, is better.

we have pointed out the change of the approach, but how do you do it when it gets muted? kevin: when we flipped the calendar to the second half of the year, the market activity has been the mere image of the first half of the year, the chart in rotation, aggressive under the surface. it has been a bit more of a grind. it's interesting that when we look at the all-time highs for theequal weighted s&p, that to me is indicative of a healthier environment. on a three-month basis there has been this significant lift in participation, breath, momentum down the cap spectrum.

it is almost a flip of the duck market in the first half of the year. it's looking calm on the surface , where you were paddling like the dickens before, now it's the opposite, the volatility is on the surface, rough at times, mid july to early august. things have improved in the extech communication services. jonathan: with more? kevin: it's market health, is probably going to look less excited at the average stock level, technically tomorrow, the bull market has been equal run. it's relative to the s&p and

following a non-recessionary or recessionary bear market. there's a lot more spectrum already. especially compared to the bull market. it's in alignment with our view that the alignment is imminent. the differential between what has happened at the mega level in the average stock level is pretty wide. it cap see you and puts you into a tepid gain situation for the cap rated index. lisa: some of us find it incredibly exciting. jonathan: records this year. lisa: equal weight? 44 on the s&p. moving on, i want to ask him,

finishing up on the appetite for risk among investors, that's another way of saying they care about the weight. jamie dimon talked about large fiscal deficit -- deficits, infrastructure needs, how many of your investors feel the same way and are less bullish then you would want them to be over the long term? jonathan: you know what is fascinating about the post-pandemic cycle and what makes it unique in nature in modern history? at times there is this huge gap between attitudinal measures of sentiment and behavioral measures of sentiment where on the attitude side you might see or hear folks, and we hear it all the time on the road, where they say they are bearish and worried about the laundry list of items, like geopolitical crisis, deficits and debt. but on the positioning side they don't make as many adjustments. that's fascinating to me because

when you look at the extremes of the sentiment environment in a bear market and you go back to june of 2022, there were almost a record low percentage of bulls in an attitudinal sense. you were not seeing it reflected. those points, i think, are important to distinguish when we are in an environment like today where people might say that they are bearish, but when you look at the equity exposure, it's still relatively high. depending on your metric it's right near the all-time high, so until that starts to change we can say that we are in alignment with sentiment from a behavioral sense and attitudinal sense, but right now it is definitely something to worry about talking about deficit and debt. jonathan: kevin gorton, good to see you, charles schwab there, the latest from j.p. morgan, up in the premarket. updating stories elsewhere,

here's dani burger. dani: j.p. morgan and wells are reporting both chairs up for j.p. morgan and wells. jp morgan third quarter beating across metrics, upgrading the forecast for net interest income . jamie dimon said the bank would maintain buybacks with results from a strong balance sheet. at the same time, wells fargo reported a miss on the income for the third quarter with profit boosted by a 37% jump in investment banking fees. former president trump is making a bid to boost the auto industry . in a speech to detroit he promised to make interest on car loans tax-deductible and promised to renegotiate the u.s.-mexico canada trade agreement to prevent chinese cars from crossing the border. he took a swipe at the host city, saying that the whole country would be like detroit if kamala harris was elected. this year the nobel peace prize

was awarded to a group of atomic bomb survivors in japan. the committee said the organization was selected for the prize of achievement in its efforts to achieve a world free of nuclear weapons and demonstrating through witness testimony that nuclear weapons must never be used again. it comes with an additional prize of $1 million for the organization. jonathan: very cool. more from dani in about 30 minutes. the costs of rebuilding. >> we are already underway trying to calculate the costs, we are not trying to mislead anybody, we want to make sure all the costs can be covered. jonathan: that conversation, up ext. good morning. ♪

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jonathan: bank earnings underway on wall street, just heard from j.p. morgan about 20 minutes ago . the stock is higher in the premarket by a little more than 2%. lisa: 92 point $5 billion in net interest income, i this a bank girding for an upswing, a o screen, or both? they have the luxury of doing what they want, so if they build more credit losses, is it a sign for other banks or just don't do it because we have the money? lisa: wednesday as morgan stanley, that's the canada for the next week or so. under surveillance this morning, the costs of rebuilding. >> the congress should be coming back and moving on emergency needs immediately. this will be a long haul, it will take several billion dollars. it won't be a matter of just a

little bit. we need to make sure that people have the emergency relief that they need. we will need significant amounts of money. we are already trying to calculate the costs. you don't want to mislead anybody. jonathan: president biden urging lawmakers to return from recess as florida faces a long road to recovery. house speaker mike johnson saying that coming back to washington would be premature. joe mathieu joins us from the neck -- nation's capital. why does the speaker's office think it would be premature? what's behind that? joe: they were talking about the saying that they want real numbers to write into legislation and he suggested that that couldn't be done until they came back after the election anyway. the calls are growing louder here, not just from joe biden. yesterday i spoke with kathy castor, a congressman from the district that includes the tampa

bay area who joined me by phone, she is one of the more than 3 million people without power. she is making that call. as is anna paulina luna, mag a representative. another representative from florida and a trump ally here, who says that congress should go into a special session and that they can get it passed immediately, it needs to happen, speaker johnson call us back. it's coming from both sides of the aisle and it will be interesting to see how the speaker navigates this. lisa: especially with the dueling priorities of people's lives, health, and happiness, and politicking. how do they make the argument that the campaign trail is more important than trying to provide funding to ameliorate the pain that people are experiencing down south? joe: that's a great question. what's better as a campaign move than to do the work of the people? that is exactly what members are doing right now. they have a weekend of events

lined up. every district, town halls and so forth, so that they can get their names out there and do the campaigning that needs to be done but we have four weeks to go here and obviously a trip back to washington wouldn't take too much time. it might be a week or two before we have real numbers, but a lot of experts say this to be handled before the election. lisa: in the meantime, we have had a lot of town halls between the candidates. what are they saying about the promises of tax cuts and similar? joe: we haven't heard a lot about funding from the candidates. harris has been involved in the hurricane briefings and has been speaking from the white house as a member of the administration, but on the campaign trail that has been an argument about misinformation and disinformation. fema is out there trying to

debunk rumors. the president of the united states himself fact checking donald trump live from the roosevelt room in the white house. i've never seen anything like that. they are concerned that people are not getting the help that they need because they are afraid of what they are hearing about fema confiscating property or selling them short on losses, something that runs across the southwest right now. fema saying it needs not only money but an honest shake so that it can get help to people where it's needed. jonathan: the former president yesterday, barack obama, started to go down a tricky road and it's a difficult path for democrats to start going down, addressing the misogyny within their own party. how are they going to do that in the days and weeks to come? joe: i know where you are going, indicating that young black men might not be comfortable for a woman, pointing to the polls that show that many young black men in fact favor donald trump. i don't know where you get on this. barack obama started last

evening a series of events in pittsburgh and he will be out for harris over the course of the month. when she was asked about this last evening, she said i'm out here to work for every vote and i make no assumptions based on my gender or racial identity here, so i guess this is going to be barack obama's job going forward. jonathan: how simplistic is it to put it down to misogyny and not policy? joe: this has been a personality context for weeks. donald trump is rolling out tax proposals with three weeks and change until the election. which one works? which one matters? the fact is, they don't know. it's a one point tight race in every state and that matters. both campaigns are trying everything they can to get to the middle and it's pretty unclear how many of the people left in the middle are undecided still. jonathan: you can catch joe mathieu every weekday on

"balance of power." the former president going down a tricky path. lisa: especially because this is something harris has tried to put on the back burner, making it more about policy. does this help or hurt at a time when ultimately, do you want to be focused on policy? do you want this to be a personality contest? there are difficult needles to threat at this moment because these candidates are trying to cater to each get specific constituency that all have competing potential goals. jonathan: we want to focus on policy, so we should focus on policy. a few more initiatives on the campaign trail at a time when we have a federal deficit running at 7% of gdp even though gdp is running pretty well. it raises questions about what on earth we are going to do when it's bad, what does it look like in bad times? lisa: this is the reason

everyone shrugs it off and says i will look at it when i have to. looking at each item, particularly from former president trump talking about cutting taxes when it comes to car loans, being an ex-pat, low earner or high earner, it raises this question of how much of a priority is this for the candidates who will be facing off in this difficult situation given the increasing entitlement payments and the fact that interest payments are not going down that quickly, as we have seen on the long end of the yield curve and if ever it's going to be politically palatable to say you are going to cut the deficit, it's to cut spending. jonathan: jamie dimon is in the headlines a lot. one thing i walked away from your brilliant interview thinking is the fixed income around that story, if it happened, if it started to correlate with the cycle in a more profound way, particularly with developed markets trading

inversely, that would be devastating for the treasury market and i think for global markets as well. lisa: the concept is that commodities are a supply and demand story that typically don't trade until there is a catalyst and increasing the treasury is a supply and demand story that may not be fully realizing the scope of the pain that could be suffered if there is a catalyst. jonathan: characteristics of medication, it's a big question. up next, the state of the airline industry. from new york, this is bloomberg. ♪ (inner monologue) my kids don't know what they want. you know who knows what she wants? me! i want a massage, in amalfi, from someone named giancarlo. and i didn't live in that shoebox for years. not just— with empower, we get all of our financial questions answered. so you don't have to worry. i guess i'll get the caviar... just kidding. join 18 million americans and take control of your financial future with a real time dashboard and real live conversations.

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jonathan: two hours away from the opening bell. equity futures down. .1% on the s&p. let's cross over to dani burger. dani: i want to read a where bank stocks are trading for the sector is higher. jp morgan, 1.7% higher in the premarket. net interest income 3% higher than the year prior. most forecasted being lower. the upgraded their view of net interest income for the entirety of the year. credit provisions higher-than-expected. wells fargo hired despite missing on the interest income. up 3.3%. it downgraded its view for the year, seeing a decline of 9% before they had a range of 8% to

9%. helping it was investment banking fees up 37% in the quarter, a beat for that metric. tesla. he was elon musk that said if you don't believe we will solve autonomous driving do not buy the stock. maybe the verdict is in. having their unveiling of the cybercab yesterday, saying it would be by 2026 in production. he joked about the timeline and his inability to hit some timelines. shares down 6.2% in the premarket. not a lot of detail in the report. perhaps telling uber and lyft up decidedly in the premarket trade. less competition from an autonomous driving tactfully from tesla. jonathan: 70% off the april lows. we pulled back by six percentage points in the premarket on shares of tesla. you heard the numbers from j.p. morgan and wells fargo. jp morgan is higher in the

premarket by 1.5%. wells fargo up by more than 3%. that quote from jamie dimon this morng. several critical issues remain, including lae fiscal deficits, infrastructure needs, restructuring of trade and re-miller's age and of the world. we hope for the best -- re- militarization of the world. we must be prepared for any environment. if you caught up with the man this week. that is on was exactly what you heard. lisa: talking about how he needs to manage risk and at the time of terrible visibility. he thinks the u.s. is the best place probably for growth and for ipo's and a host of other industries. the real question about whether m&a will be allowed to come back in a massive way. whether we get tariffs and what that will do. what national security provisions will do and how this affects businesses that consult with the likes of j.p. morgan in terms of what they develop and where. these are all massive questions. you wonder how companies are going to deal with that until we

see other types of cash build are hesitant to engage in big actions because of it. jonathan: corporate america. what does corporate america do? how are banks going to serve them? flying blind has been a big thing for this program and the last several months. we are months away from the election. i hear the same boilerplate on the south side that we hear every time we have an election. does not matter who is in charge, stocks will go up. nothing really changes. things could change in a profound way based on one outcome versus the other in a month's time. lisa: i do think about this. when people say it's about the consumer, we hear person after person say the consumer is doing just fine. they have a stockpile of cash, etc.. when do businesses save we need to be more conservative? we will not engage in massive hiring. we are not going to make a big move or attempt m&a because we don't know what the framework will look like. when does that have an impact on the economy itself? jonathan: more big banks have

been reporting this week. let's talk about some of the fed speak. raphael bostic saying he would consider skipping the rate cut at the central bank's next meeting. that's going against remarks from john williams, austan goolsbee and austin barkan who indicated rates could continue moving lower. bostic is the first to say the quiet bit out loud. lisa: does this: to question how quickly and how much we have to cut rates? to your point, other officials not saying that it all. this is what alstom goolsby had to say. the overall trend over 12 to 18 months is clearly the inflation has come down a lot in the job market is cooled to a level that surrounds what we think for employment is. clearly, this is the keyword. this is what the market had gotten complacent about. that inflation was debt and not coming back. now you see a little bit of a waking up on the margins when you look at breakeven rates on the long end. jonathan: raphael bostic is an

interesting fed speaker to watch. they all oversee different regions. regional fed presidents oversee different impact for the hurricanes. raphael bostic is sitting right on top of that story right now in the southeast. lisa: a tricky issue of how much the jobs picture is going to be clouded by some of the hurricane influences. we saw that with the jobless claims potentially. what this does to gdp. ultimately, you end up seeing typically growth fall off a bit in those regions. then search as every thing has to get rebuilt. how do you price that it is a fed official when you try to strip out noise and incredibly data dependent? you don't have a clear longer-term outlook. jonathan: no visibility on the election or with the policy looks like in and 25 and beyond. -- 2025 and beyond. donald trump pledging to meet interest payments tax-deductible in a speech at the detroit economic club. he's down to renegotiate a trade deal to prevent chinese cars made in mexico from being sold in the united states. we have to separate two things.

the policy and why we are talking about it and the price of it. we should deal with the policy. they will have to discuss this in government on either side of the atlantic. how are we going to help this industry? they are major employers in the united states and across europe. in europe, we will catch up with the stellantis ceo next week. the car companies are in such a bad position in europe. they have so much excess capacity. one thing that needs to happen, cut capacity aggressively and that will mean job losses. not politically palatable or good for the economy, or you get some help from the state. the president opened the lid on a bigger conversation that needs to take place over in europe. lisa: i'm glad you brought up that angle. that is what i thought when i read this. wow. given that volkswagen came out talking about china sales dropping 15% this morning and the warnings we have gotten from

them, from bmw, mercedes, the question of what has to happen to sort of if you put the thumb on the scale more for domestic vehicle sales and manufacturing. how much does a government want to get involved in central planning to counter central planning in another region that is doing it pretty efficiently? how much do you get involved and do this? i would raise another specter of this. how much room is there to do this? how much willingness will there be by bond markets to finance incentive programs like that to get a competitive edge? i'm not so sure. jonathan: on top of the other promises on the campaign trail now. we are running a budget deficit of 7% of gdp and a good time and not in a bad time. let's talk about earnings from american and united airlines, still ahead after disappointing guidance from delta. savi syth, welcome to the program. i would love your thoughts on

what happened with delta invite only took a small miss at the midpoint of guidance coming below expectations to trigger a selloff early on yesterday. what was behind that? was the bar too high going into earnings? savi: what i would say is investors are finally trying to figure out what is happening with the u.s. airlines. you are seeing an industry that was struggling over the summer with too much capacity. you see in a short order as the summer ended low-cost carriers and ultra low-cost carriers moving quickly to take capacity out and match the supplied to demand. what investors are trying to figure out is if this is having an effect. is this enough that the industry has done so we can get some margin expansion in 2025 in the industry. delta's guide from that perspective left a little bit wanting. they call that an impact from the elections. it is a little noisy here. the stock did recover a little bit.

i think investors are taking it in stride. there's no signal if this -- if enough changes have been done to drive the margin expansion next year. jonathan: that was asked this morning at a time you don't want to be away get. around 3:30. we had people asking the same question. was at an excuse or something you typically see around elections? is it more pronounced this time around? savi: you definitely see it around elections. we have been calling about this you're being noisy, especially this election period. it is within the fourth quarter and you get a little bit of an air pocket. if you look at what airlines have done. a lot have reduced capacity the week before and the week after elections in anticipation of this. it seems with delta is seeing is bigger than what we have seen in the past. giving them the benefit of the doubt, they say the trend -- there is a clear break in trend before and after.

there seems to be more of an impact this year than in the past. lisa: when delta catches a cold, does the rest of the airline industry have the flu? savi: it is a different position airlines are in. historically, ultra low-cost carriers have been more profitable than they are today. if delta is seeing weakness in this environment the rest of the industry, especially on the low-cost and ultra low-cost carrier side sees a bigger hit because they're not as profitable as they have been in the past. lisa: this has to go to the gap between people who have higher income and people with lower income. traditionally, we have seen the gap between delta and some of the lower income or lower cost carriers. i'm wondering, do you think that's the issue here? it is just a matter of discretionary spending across the board coming down or do you think this is having to do with structural gluts and the uncertainty you were talking about that's temporary?

savi: the reason the low-cost carriers are in a bit more of a profitable position today is the fact that costs have gone up for the industry. six points of margin have been wiped out just in labor costs. the ultra low-cost carriers and low-cost carriers added capacity coming out of covid assuming this was a normal recession type recovery. you could take a lot of market share and that was not the case. the airline industry, there's a slight difference in that they just added too much capacity on the lower end. the industry as a whole, it tends to be middle income and high income households that tend to travel. it is definitely helpful for delta and united that hiring -- there's is more demand for premium. there's more demand for international. that is definitely helping. on the flipside, there's too much capacity on the main cabin side. then he said get right sized and

not necessarily related to household spend. lisa: you are looking at potential vulnerability to different consumer trends and different commodity trends. i'm looking at brent crude which is up $10 in the past month to $78.74 at a time of that is one of the biggest costs for a lot of these airlines. how vulnerable is this sector should there be an additional surge in crude prices? savi: the interesting thing is brent prices have not come down as much but jet fuel prices came down before last week. what really drove that is refining margins. tt normalized it back down to 2019 levels or even a little better than 2019 levels. that has deftly given the industry some breathing room. you're right. it's about 25% or 30% of the costs. what happens in the jet fuel market matters for the industry. there are very few airlines that are hedged. the industry feels the same weight. the biggest will they have is to

t capacity to meet the new pricing environment they have to aspire to to keep margins higher. jonathan: appreciate the update from you. american and united in the next few weeks. savi syth on the airlines in america. following blackrock earnings. a record $11.5 trillion of aum. lord of the flows. the like that? lisa: that is so good. blackrock, you see their earnings and it's like a lot of it is passive flows. the passive flows in and of themselves were fascinating. john said it's interesting. a lot of people are not counting on social security being there. guess what? we will put our money into something that historically has been a provision of some sort of income. that stocks, bonds, and massive

flows that are blowing expectations of the water. jonathan: damn right we are not getting social security. lisa: how much of that is underpinning the flows in the market? jonathan: let's get an update on stories elsewhere with dani burger. dani: israel has stepped up its strikes on beirut and its campaign against hezbollah. official said 22 people were killed in a strike on a residential building that was targeting a senior member of the tier group. the country is yet to decide how to retaliate against iran for ballistic missile attacks last week. israel's security cabinet held a meeting last night. an official tells bloomberg and ended with no decision made. one person was killed and 12 others rescued after an accident at a gold-mining colorado. authorities say an elevator malfunction around 500 feet below the surface, dropping the group for about six hours -- trapping the group for about six hours at the bottom of the mine. they had water in means of communication.

is the first safety issue since the 1980's. official say in investigation will be launched. the yankees are heading back to the alc s after taking down the kansas city royals in four games. gerrit cole held the royals to just one run in seven innings. they will face either cleveland or detroit. that series is set for a decisive game 5 tomorrow. that is your brief. jonathan: thank you. up next on the program, the rush to rebuild. >> there are people lined up down the street and around the corner that will buy back in those coastal communities. it's amazing the land rush that happens immediate the after a storm. jonathan: talking to homebuilders next. live from new york, this is bloomberg. ♪ ♪

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jonathan: earnings season underway. jp morgan in the premarket obsession highs but still firmer by one will percentage point. everywhere you look on this business the earnings we got an hour ago. lisa: i was looking at things like headcount. up to percent year-over-year. a scope of helping big the company is. 316,000 employees. that gives perspective. $92.5 billion of net interest income. pretty phenomenal numbers. a lot of focus will be paid to the lookahead. that is what i'm most interested to hear in terms of the analyst calls. what pipelines are they looking at? what expectation for businesses? the lack of visibility is what came out to me when it comes to some of the credit cost build , commentary out of the c-suite. jonathan: one of the biggest private employers in new york city. equity futures little soft.

down .1% on the s&p 500. the rush to rebuild. >> you will have all them saying hi mage doubt. -- i am aged out. there are people lined up around the corner that will buy back in those coastal communities. they will build up. bill to the higher building codes and make the necessary investment to enjoy what is beautiful about living on the gulf coast where fan to coast. it's amazing the land rush that happened to be to the after a storm. jonathan: the rebuild starts now. officials assessing the damage sci-fi by hurricane milton. analyst begin weighing the impact on the housing market. john lovallo of ubs writing, "while we believe the storm could create a near-term headwind for homebuilder operations, we do any impacts to construction impacts as temporary." let's start from the top. which companies have the most exposure to this part of the country? two, how much inventory would be at risk going into hurricane

helene and hurricane milton? john: thanks for having me. obviously, a devastating storm. two devastating storms. our hearts go out to everyone in their areas. thinking about milton specifically we are talking about seven of the top 50 homebuilding markets that were in the direct path of that storm. tampa, bradenton, winterhaven, orlando, port st. lucie. they are all in that path. the big homebuilders all have exposure in these markets. i would say from the top, horton group does about 5000 units in this markets. 17% of their volume. lennar at 12% to 13% of their volume. d.r. horton, about 12% of their volume. very important markets across florida for everybody. their portfolios are diversified well outside of florida. the important point you bring up

as well, as devastating as this is, their focus absolutely should be on the humanitarian portion. there is going to be an opportunity for all these folks to rebuild and the builders will have a nice chance to step in. jonathan: they will be a rest for labor, for raw materials. that raises question about the price of labor and raw materials. do they have the pricing power to offset higher costs for labor and raw materials? john: there certainly is pricing in certain markets across the country. interest rates are high. home prices are high. the builders are offering incentives to get folks over the finish line in terms of affordability. there could be pressure points for sure throughout the value chain. i imagine resources will be brought in from other areas. the extent of that drives up home prices are hard to say. in areas like florida in particular the existing home stock which is old -- we have talked about this before -- over

40 years old. the challenge getting homes insured. jimmy was talking about building codes getting tougher and tougher. they need to get tougher to withstand storms like this. that is where the builders have a real opportunity to put a new product on the ground that will help withstand some of these tragedies. lisa: you talk about the new provisions, i'm thinking cost goes up and up and up. you think about insurance, rtifications, stilts, whatever you need to do to prevent the destruction. at what point is this flip the script when it came to people moving to the sunbelt and the southeast if you're talking about the increasing costs? people were usually going for lower cost. john: great question, lisa. at some point it becomes prohibitive. i would have to imagine. there are a lot of great things about moving into the golden horseshoe or the sunshine state. whether it is just the weather alone. more portly is job growth --

importantly is job growth. there's a lot of reasons from an economic standpoint and reasons because people in general like to be in those areas. this was a trend in place well before covid. the builders will adjust. the builders will figure out a way to put product into the ground at prices that are affordable of maintaining margins and returns. we are confident in that. the focus now is on just trying to assess te damage and hopefully things for less severe than initially contemplate a. jonathan: can you build on it more the prospect of providing an insurance product at some of these areas? how might that work? john: that's a little out of my sweet spot but what i would tell you from a homebuilding perspective, it is no secret that some coastal areas, whether it is florida, parts of california where there are wildfires, it has become increasingly challenging.

in some cases it is impossible to get a home insured. for florida and the storms, if you think about the older housing stock in the market today, that's a bigger challenge. they just on have foundations, the windows, the doors and things of that nature that are built at higher standards. the builders to the extent they can do this, those homes will be a much better place to get insured that something in the market for 40 years. jonathan: john, we appreciate your time. john lovallo from ubs on the latest with homebuilders in florida. we have said this a million times. not breaking news. the s&p 500 market cap weight record high so far in 2024, 44. the conversation earlier the program. the equal weight is not that popular that because people are not counting how many record highs we've had. lisa, take it away. lisa: kevin gordon, thank you for this. 20 all-time highs.

when you asked me next time how passionate i am about every record high i will have a tally and make a sign. i will hold up that side. i will celebrate it with all my might. jonathan: you will be counting from now on. i will ask for regular updates. coming up, scott chronert, sonali basak on the latest from wells and jp morgan. looking to next week. we will catch up with lara rhame with ppi dropping at 830 eastern time. we will speak to -- 8:30 eastern time. we will speak with leslie falconio. all that to come the third hour "bloomberg surveillance." equity futures on the s&p 500 with the smallest of bounces. we are softer by 1/10 of 1%. ♪

>> we think we are still in a good is good environment. >> it is not whether rates are going up or down. it is the broader backdrop. >> maybe there is an air creeping back into the market. >> more expensive stocks or higher rates. >> we are in a bull market at

peak tightening. it should be good for equities. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: we are heading towards five weeks of gains on the s&p 500, the longest winning streak going back to may of this year. equities of all-time highs coming into friday. softer by a 10th of 1%. the opening bell 19 minutes away. ppi after cpi came in hotter than inspected yesterday. futures a bit softer across the board. bank earnings this morning from wells fargo and jp morgan. jp morgan up in the premarket with basically essentially a beat across the board. up by 146%. -- by 1.6%. morgan stanley will round out earnings oll street. jp morgan kicking off earnings seain p recent what --in a pretty decent way. lisa: look at equity traders. 27% increase.

we have repeated this number many times because it's rather incredible. $92.5 billion up from the inspected $91 billion. you see net interest income up and easy credit provisions with some dire statements from jamie dimon. he has been known to make tired predictions. what is interesting is the stock pile of cash ahead of that. is that going to be a theme for the other banks as well. jonathan: evercore calling blackrock lord of the flows. $11.5 trillion. we will talk about them into the opening bell. the tension starts to shift and drift back to the economic data once again. a toxic make it -- mixed yesterday. see -- a toxic mix yesterday. lisa: the almost that it was a toxic brew. it had the question of whether you care more about the inflation ticking up or potentially the number that was

the biggest jump in initial jobless claims we have seen going back for a full year. whether that was telling you something other than just noise from the hurricanes. basically, the market is saying both. the fed will look at the labor market for longer-term and that could increase inflation on the margins which is what you are seeing in terms of rates. jonathan: inflation looking a little sticky. we will catch up with scott chronert from citi, lara rhame looking for the fed to pause and leslie falconio expecting a more bifurcated consumer in the near-term. stocks on hold as jp morgan kicks off earnings season on wall street was investment banking revenue and net interest income beating estimates. scott chronert saying the earnings set up looks solid, better-than-expected beads support our earnings resilience thesis. scott joins us now for more. welcome back to the program. let's get into that thesis. earnings resilience. is that true for a couple of

sectors, a handful of sectors, the whole market? where is it more concentrated? scott: it's true pretty much across the board from every sector, maybe with the exception of the energy component. generally speaking, yeah. it is the same scenario we have been talking for the past two quarters. expecting a typical beat with this quarterly reporting but there still enough noise and the macros, and geopolitical components of the market we expect most corporate will still be somewhat muted with their forward-looking guidance. jonathan: what is generating the beads? topline growth? doing a better job defending margins? scott: you nailed it. we are still seeing a decent revenue component but what is happening is we are seeing signs of margins improving, particularly across most sectors. that is creating a situation where in addition you are

beginning to see free cash flow increase notably. this opens up financial flexibility. you get a little bit of a topline improvement and a better earnings beat. you begin to see corporate still flexing their muscles via repurchasing activity. lisa: expect a lack of visibility from corporate executives any earnings. that is what we saw on the margins slightly from jp morgan. at what point concerns about uncertainty become reality and a lack of investment, a lack of bold moves. how mx. -- how much of a spec to see that from businesses looking into the abyss of the unknown. scott: our view is we have been expecting that with the q4 still containing a number of issues we will need to contend with in the market of 22% so far this year. we have to expect we will probably get a dynamic from many

investors and corporate are likely to be locking in their expectations for this year. as we look to next we have uncertainty with the elections. geopolitics and underlying macro conditions aretill weighing on the conditions. all told, when you think of the fed influence over the past two years now, it is very fascinating we have seen most corporate been able to whether w two years of a hawkish fed pretty nimbly. going forward is the component of yes, the fed overhang has probably kept most corporate investment activities somewhat muted. that begins to ease into next year. all told, what i keep coming back to is that for two years of fed hawkishness the fundamental improvement through the s&p this year is quite noticeable and importantly is clearly broadening beyond the mag7 into4 the othe -- into the

other 493. lisa: we were speaking with mike wilson yesterday. he was saying he expects that to continue. the places he expects to be less impressive is probably big tech that already had such an incredible string of gains. do you agree with that? is that would respect this earnings season? scott: it is interesting. if you look at the mag7, they are trading in the top 12th percentile of the 20 having your relative valuation history. the other 493 is more expensive versus that right now than the mag7. there is clearly an element where the broader market is increasingly paying for ongoing improvement into 2024. with the mag7 and the mega cap growth cohort we probably have more visibility of earnings growth next year. nvidia is projected to grow 40%. the other mag7, 20%.

with the 493 we have not found the bottom and full of full year estimates nor full year 2025 estimates. fall 2025 setting up for a high single digit growth opportunity for nextar, you are still seeing this rightsizing of estimates under the surface that have not yet found bottom. that is typical for this time of year. we don't think we get to that point until the q4 reporting period. yes, the broadening effect is setting up for next year. a lot of us getting priced in. that is what we have to be sensitive to in terms of the playbook into the end of the year. jonathan: annmarie would ask about the u.s. election. the corporate tax rate could drop to 50% or climbed 20%. it might stay at 21%. -- drop to 15% or climbed to 28%. scott: what i would say is that it's a frequent conversation in

discussions with clients. you can't get away from the election. the race is quite tight. what we have been doing in terms of bottling this out is what you said. when you look at each of the candidates, in our view from the fundament of perspective they are incrementally negative to u.s. equities. what you have with vice president harris is the risk of a higher tax regime. again, this requires a sweep more than a split congress. with x president trump, we have to navigate tariffs. there's talk of lower tax rates. and the regulation push underneath that. all told, the way we think it models out is that both are incrementally negative. we will have to keep an eye on it. this is a story into 2025. as stated now both policy platforms are mostly incrementally negative for the deficit as well. as we go into next year we

expect with the noise level amended to begin to pick up. all told, there's lots of discussion around elections right now. i think many people are waiting for post election to determine to what degree you want to begin the position for the expected policy outcomes. lisa: let's give a hypothetical. let's say the election happens and suddenly the bond market starts to trade like commodities and yields go up significantly on the longer end because people start to wake up to this idea of a bigger deficit. at what point is that started crimp some of the potential rally we would get in equities? scott: you see where this is setting up. it is spot on. we are using 5600 for the end of the year target. we are through that now by a couple of points. we are allowing that trade sideways to the unit of the year. more focus on the industry -- index sector level. we can talk about the broadening themes equal weight as well. our set of 425 is looking for

more muted upside. we are using 5800 for next year. we have a bull case that gets us into the mid-sixes. that will require a more aggressive earnings picture then we are projecting right now. what i would say is that coming back to the notion that we are paying forward a lot of these improvements, that is reflected in the index trading your 24 times trailing. as you look to next year the risks on the policy side become more front and center. what we think that does when you combine it with the risk of the bond market vigilantes returning after a hiatus and expectation of this ongoing deficit concern popping up, what it sets up for is a little more muted upside to the u.s. equities into 2025 despite a decent fundamental background and tailwind. lisa: give you put some numbers on what makes yvonne vigilante?

people are wondering why yields are higher. they shot higher last week and it didn't seem to matter for equities. they made record highs. how much are we looking at going forward changing the dynamic? at what point is that trigger the risk off feeling even though it might not necessarily comment and with we can dater? -- com e in tandem with weaker data? scott: you get a different set up in terms of your interest expense burden as a percentage of your tax receipts. all those are poised to move higher. we go into 2025 and will kick off with debt ceiling extension. the expectation is that will happen pretty naturally. it will begin to bring the issue back to the fore on the heels of the election. tc j expires next year. we will have the better part of 2025 regardless of who was in the white house that we will be

debating taxes, debating how to address the deficit situation. all of this will keep coming back to this. the good news for equities is when you look at our projections we expect for the s&p 500 -- this is important and nuanced -- to continue to reduce shares outstanding via buybacks by percentage point per year. the supply continues to come down. fund metals continue to improve. not a bad set up a supply-demand set up. you can't say that about the treasury markets for you expect incremental supply chain of u.s. treasuries that will have to be consumed by the market. that will happen in the context we're looking at this geopolitical situation globally and when you have is a situation where there's a strong alliance on the dollar maintaining its reserve currency component to essentially maintain the ability for the was government to issue

securities. what i'm getting at here is that we think it happens in fits and starts getting early next year and continues through the end of next year as we are debating tax policy in anticipation of the end of the tcga expiring. jonathan: what you said is so important. i'm going to go home and watch this interview again and go to the very end of it. there's an exit question for you. if you get the supply, demand dynamic, please it talks about the big who people -- from people who believe there will be no social security for them. can you describe this constant bid, this passive bid in the equity market, the tailwind for years to come? scott: i think we are probably setting up to see it for years to come. we have to be careful we are coming on the heels of a very strong equity market performance on the heels of last year's.

although they're not in euphoric place there's a level of confidence you need to be in the u.s. equity markets. you see this show up in the flow. particularly showing up in the flows on the heels of the first fed rate cut. we were talking about the etf flow dynamics. it's amazing the search that's going into c --surge going into core u.s. equity exposure and growth exposure. from a global investment perspective, u.s. equities and the s&p are viewed as a very safe neighborhood to be moving into. we expect that to continue but we have to keep in mind we are being lulled into a security phase which has been warranted by fundamentals and by the fed. i go back to your earlier comments. when you look at coming up the two-year hawkish fed narrative to something that starts at less restrictive potentially down an easier path, that is hard to

fight. we are expecting the s&p can maintain a higher than traditional valuation set up. premised on much more resilient fundamentals that many would have thought going into this fed hawkish narrative a couple of years ago. what that does do, it does make large-cap u.s. equities stand out as a very good place for longer-term investments. jonathan: scott, appreciate your time this morning. scott chronert of citi. bond vigilantes. this is what happens. if we get to a situation where the bond market dictates policy preferences down in washington, d.c., that is when the vigilantes are back. if we are repressing yields higher because cpi is hotter and growth is better, it's a very different story. if we get a market that says no, you can't do that and washington has to respond in turn, the vigilantes are in in a big way. lisa: that is what you need to

watch auctions. the buyers don't show up. what happens of the banks can't take it all down? all the questions that send a strong message that rhyme with liz truss. that is the issue. jonathan: gary, very different. let's get an update on stories with dani burger. dani: at least 10 people in florida are dead following hurricane milton. authorities warned it could take days to assess the full extent of the damages. governor ron desantis said florida avoided a worst case scenario with the storm surge only half as high as forecasters had feared. israel has stepped up strikes on beirut and its campaign against hezbollah. local health officials say 22 people were killed in a strike on a residential building that was targeting a senior member of the militant group. israel security cabinet held a meeting to decide how to retaliate against iran for its ballistic missile attack last week. an official told bloomberg the

meeting ended without a decision. shares of tesla are down in the premarket by more than 6%. elon musk revealing prototypes of the company's long-awaited robotaxi called cybercab. musk said it could cost less than $30,000 in production may start in 2026. investors were hoping for more details. that is your brief. jonathan: more from dani in 30 minutes. the morning calls, plus sonali basak with highlights from the jp morgan media call. that stock is up by 1.3%. ♪ ♪

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jonathan: one hour and 10

minutes away from the opening bell. equity futures just about unchanged on the s&p 500. barclays sticking with the equal weight rating t saying the robotaxi event was to light on details. the stock is down by 6%. raising the price target on nvidia to $150, citing continued ai demand. this stock is just about unchanged. evercore reiterating its outperform rating on blackrock after earnings, citing stronger revenue growth. lord of the flows is what they are calling it. let's stick with the financials. the media call underway after the bank's net interest income beat estimates. wells fargo rising after better than inspector profits. what stands out on the call? sonali: they are optimistic about the economy. jeremy barnum saying these results are consistent with the soft landing, if not a no landing. for the caution you normally see from jp morgan, things are

looking pretty good. even on revisions. they say this is a factor of them really expanding their evolving credit card balances. they are leaning in. they said things are ok in the economy. they are uncertain about the geopolitics. they are doing better than they expected on trading investment banking. it's interesting in for wall street it is nice to see they are making money in the volatility. sometimes when you saw what you saw in august, that can be gapping and send people away. jonathan: let's put a finer point on what you said. the caution utopia cleat -- you typically associate with jp morgan. how do those things stack up with regards the results we see this morning? sonali: the first two questions on the call where weeks ago you said things are going to be worse, then they were better on every business line you're talking about. one thing the cfo said was more caution.

the results will be somewhat challenged as normalization continues. they stay upbeat. this is classic jp morgan. they guided low and shoot high. lisa: to people shrugging it off and saying whatever you want but clearly you are making that up because estimates interpreted. sonali: i'm already turning the page to the next group because it was kind of a boring morning. everything was a pretty clean read. business as usual. life is pretty good. lisa: what are you looking forward to when we get the other bank earnings next week? sonali:sonali: it is choppy when you think about the smaller regional banks. the numbers bear really well for morgan stanley and goldman sachs which are leaning more towards that. when you think about the regional system, it is super choppy. not every bank has the credit card book jp morgan has. you saw at wells fargo on the revenue lines that was the only place he saw growth. you saw home growth.

only off really low levels. auto was tough. personal lending was tough. where are these banks going to get interest income? jonathan: the future of wells fargo in someone else's hands. the regulator. where are we with the asset cap? sonali: it seems like it is just around the corner. until it is done it is not done. one thing that's interesting about wells fargo's i think this is a classical american banking story. more and more banks getting out of court american lending businesses and individuals to businesses. wells fargo made that shift truly. you see it in the stock paying off as well. it is not like the net interest income beat but they did beat and the wall street businesses. jonathan: interesting. katie and matt miller coming up in 30 minutes. look out for that. four earnings. on tuesday, bank of america, goldman sachs and citi. on wednesday, morgan stanley. lisa: i am interested in bank of

america. some of that legacy book treasuries and how much it is getting less onerous as time does not, but also warren buffett selling out of a lot of his position in the stock. a question about why. we don't have a sense. now under 10%. a question of whether they address it anytime as they try to give forward-looking picture about why the largest shareholder has been cashing out. jonathan: nextel, ppi in about five minutes after hotter than inspected cpi yesterday. together with what we saw in jobless claims. the wrong sand upside surprise there as well. we are waiting for ppi. we will catch up with lara rhame and leslie falconio to react. just about unchanged on the s&p 500. in the bond market holding onto four. yield climbing just a little higher, up a single basis point

to about 3.97. lisa: interesting with ppi coming and the university of michigan sentiment survey. what happens if sentiment deteriorates and ppi comes in hot? how much does that change the narrative a little more? jonathan: we should ask people inflation expectations for five to 10 years out. i'm still waiting myself up lisa: people are fickle. what you think is going to be? jonathan: 10. that's a big difference between what it is and what they tell it is. lisa: you are one of those? a flat earther. ♪

it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college.

out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

jonathan: 60 minutes away from the opening bell. seconds away from economic data. ppi just moments away after cpi coming in hotter than expected yesterday. we are negative by not even a 10th of 1% on the s&p 500. on the nasdaq 100, down by about .2%. in the bond market, two-year yield of a single basis point. up by a couple of basis points on the 10-year, still north of 4%. ppi data. michael: this is the opposite of yesterday coming in lower than anticipated. flat for the month over month gain. the forecast was for a 10th of a percent gain. food and energy was two tent hs.

excess trade and energy are the super court of ppi, up .1%. that was a on a year-over-year basis at 120%, -- 1.8%. that goes from last month for the headline. core, 2.8% also higher than anticipated. 3.2% for the super court numbers. the overall -- super core numbers. the overall numbers and make a difference is the index for final demand services rose by .2%. goods declined by .2%. at this point it is kind of following what we had seen before. jonathan: the smallest move. we are just about to turn positive on the s&p 500 after being down by not even .1% going into the numbers. you look at the bond market. we take it back again. 10-year up right two or three basis points.

price action of the back of this. lisa: you're in a room and you see lots of shiny things, the more they put in the more you don't see anything. it feels that way with economic data as it comes out. it is noisy and getting noisier. people are like what it might posted do with this? that is what this feels like. does this negate what we saw yesterday? is it all about pce? it is not rocking the boat too much. jonathan: chairman powell said in 2023 navigating skies under cloudy skies. vestal holds. michael: i think basically what the inflation numbers over the last two days are saying is we are still on course. a little higher yesterday. a little lower today as we go forward. what is interesting is the services is where we saw inflation. what story have we been talking about all morning? jp morgan doing very well during the last quarter. the index for deposit services rose 3%.

thanks helping push the ppi up to the extent it rose. lisa: i want to dig in further. you did see a bit of again and services and goods a bit of a decline. i wondering how much you are seeing on the margins any kind of shift in the dynamic. in the cpi report yesterday we did see that with food and some of these other areas that had not been inflationary but becoming inflationary. ani like that in ppi that confirmed we are re-inflating certain areas that had been on the disinflationary side? michael: i'm not seeing anything in this when you look at the final demand for the ppi has three different indexes. you look at final demand for goods, less food and energy, it was up .2%. final demand food up a percent. yes, food was pushing us a bit higher this last month. take it out and you have a much better inflation picture.

we will have to see why that was and what it means going forward. no one had a great expedition other than maybe there was some hurricane related stuff or port related stuff. it could be a random move, a one-off. we will have to see next month on that. jonathan: no drama on ppi this morning. lara rhame, let's build on the conversation we were having with mike mckee. cpi and jobless claims out and ppi out. we're having difficulty understanding what to ignore and what to pay attention to. help us out. lara: that has been made worse by the fact we had a higher-than-expected initial claims number because of the disruption of the natural disasters that are so devastating to small areas of the economy and have a big impact on data. it is the payroll report, the cpi report. within that we are seeing just this continued stubbornness in

the inflation picture. i think mike is right. we are on track for the fed to continue to ease rates in november and december. there is a stubbornness to the services side of this. it is one reason why today the ppi numbers may be did not make as big of a splash. goods prices are back in inflation. inflation trouble is still in the services piece. maybe trouble is too strong. it is like a mild headache that's not going away. jonathan: how big of there is a -- how big of a gap is there between what you see and what the fed sees? the federal reserve is comfortable with this disinflationary trend holding. lara: i think maybe i'm a little bit more concerned about inflation. i'm concerned about it in the short term simply because i know we are going to have some data disruptions that are going to maybe create the noise in the food data, create the noise in some of the prices we are seeing

with cars. i'm also concerned about it in the medium-term. i'm looking ahead to some of the factors i think in them and elect year will give us stubbornly higher rent inflation. i don't how far you want to look out but when you put it together for the fed they are having to navigate their dual mandate in an active way that they have not had to in decades. we were either only worried about growth are only worried about inflation. today we are kind of worried about both the jobs picture and inflation. it is going to make us all really zero in on data and be more uncertain about the fed's trajectory. lisa: there was a signal yesterday that i thought was important. that the bond market was looking at the prospect of a fed cutting rates even with inflation that was messy and hotter than inspected. we have uncertainty about the path of disinflation. from that perspective do you think based on fed comments

there is a tacit understanding in the market and on the fed they will tolerate higher inflation going forward to keep any kind of weakness from getting a hold of this labor market? lara: i think they have to. inflation was so far below target for years leading into the pandemic. i think it is natural given the average inflation target over time to give them the latitude. that is on purpose to accommodate and make policy more accommodative, even if it is a little hot. it's not a bad migraine life 9% inflation back in 2022. it is a chronic headache to give them room to maneuver. if they go 100 basis points in total, that still leaves rates in restrictive territory. i think they posit the beginning of next year and reassess where things are going. i do think inflation will follow the neat path like it did before the pandemic. lisa: does it make the bond market look more or less

accurate on the long end in terms of reflecting that there is more flexibly when it comes to inflation rates in the fed's response mechanism? lara: i think it makes the bond look at look way more correct for the first time in a long time. the market has been trying to push into much policy accommodation into the forward curve. they have been making that mistake for two years now. this is not new. i think what it changes is that thinking about fed rate cuts, we are trained to think the whole interest-rate complex will continue to fall. in reality, the 10-year falls before the fed cuts rates. what it does after the fed starts cutting rates depends on the trajectory of the economy. if the economy does not go into recession, the 10-year floods back up again. that is what we are seeing and it's a reflection of a solid economic base. only and it can mental slowdown in growth. jonathan: we are up by three basis points. 4.1% moments ago.

lara rhame, appreciate it. as we were going into ppi data, with us around the data later is -- around the table is leslie falconio. i was going back of your comments previously the summer and it stood out to me that you were kind of dead on. the fed will cut twice as the economy slows. maybe we get another cut maybe we don't. 10-year would drop to about 3.9%. they are 20 basis point away no. how have your thoughts evolved over the last few months? leslie: when it comes to the 10-year treasury, it has not evolved that much. it will stay relatively range bound. we have had a bit of a rise in the 10-year yield. given the fact we have seen the employment data. we are looking for the long end to stay in a range of 3.8 to

4.25. jonathan: building what we heard from the federal reserve so far. has that changed? after that 50 basis point move there was speculation the bar was pretty low to go 50 again. last friday happened. blow up tables report from a big upside surprise, big conversation flipped the other way. are we going to cut interest rates of the federal reserve? leslie: we are still at 5%. we are still normalizing. we think they would cut and they would cut twice this year, four times next year. as a higher probability of a pause being put in. i doubt highly they posit november. i don't think you put the likelihood of them pausing in december on the city something like and qt -- end qt. we should think they are on the path to normalizing. we have the terminal rate, whatever that might be around 3.25 to 3.5. actually we think the market --

the soft landing market is really where we are supposed to be. lisa: it feels like engine history but i remember maybe 5, 6 month ago when any time people thought the fed was looking past inflation you would see the longing of the curve selloff, yields go up because people were thinking maybe they have deep are your inflation that lead to higher long-term inflation. is this sustainable? the idea that is no longer the case and people look past the idea of that it continue to say, like you're saying, they are so restrictive. they have a lot of room. leslie: i don't think so. look what happened when they cut 50. yields rose. i think the curve will steepen. that is our expectation. i do believe the backend will respond to inflation the same way refunds to higher growth in fact we do accelerate.

when you look at the five-year inflation swap, they are under 2.5%. this is not some large re-acceleration the market needs to be concerned with. there was the equitation you would not necessarily have a straight line down. you have the smaller blips we saw in cpi. reacceleration is not a concern. if it does become a concern, you will see that go back up. lisa: we were speaking with scott chronert. he was looking to the potential for volatility on the heels of the election. coming from the bond market and trickling out and equities, what are you looking at the happened in november? leslie: a lot of volatility. it depends on if it is divided. it depends on policy versus implementation and the timing. we know we will have these dangerous reactions the same we did at the end of june. if it is like a red sweep you will have it steeper.

if that curve sense going over skis we would push against it. that is what the market needs to pay attention to. have these extremes but is not necessarily go with. when it comes to the deficit and supply, at the end of the day it depends on what growth and inflation is doing. that is the primary. supply is secondary. you will have this reaction but it doesn't necessarily mean it's a go with. jonathan: let's, get a red sweep -- let's say we get a red sweep. what kind of numbers you step in that? are you looking for 10-year back at 5% again? leslie: during times like that, sell this during the june debate, the bears steepen 30 basis points by then had a payroll report that came and gave it all back. if you go easy 30 basis points on the 10-year, no problem but i don't get sustained. jonathan: leslie, good to see

you and appreciate your thoughts. lisa, a key topic for you going into november. lisa: this has been the topic. the bond market is a source of volatility or perceived source of volatility during the election because that is really going to be the question. neither candidate is promising either kind of reduction in the deficit. it is deficit expansion. a question about volatility. a question about do you go with it. a question around how much do we not know in terms of the composition and how much that will change and how significant the reaction is full jonathan: that is the problem/ let's take the republican scenario. you get the red sweep and the stuff the equity market cuts and the tariffs at the same time. what you do with that? i don't know. you get a selloff in the bond market because we are doing nothing about the budget deficit and yields client. if you get divided government under a republican president, you get into tariffs but none of the good stuff. you think about what it means for the democrats and kamala harris.

it is difficult and complex to figure out. lisa: who are each of the candidates going to put in their cabinets? who were they going to put around them? there's a lot of talk and a lot of it is dismissed as rhetoric to try to get each individual voter. who are they going to put around them that will have limit these policies? that's also a big unknown. we don't have any promise of a becoming anytime soon. -- becoming known anytime soon. jonathan: anytime someone talks about 2025 no one has any idea what it looks like. equity futures on the s&p 500 just about unchanged. with an update on stories is dani burger. dani: the bank earnings taking out this morning with j.p. morgan and wells. j.p. morgan up 1.25%. wells fargo up 4.3%. jp morgan reporting third accordin -- third-quarter reports that beat estimates. jamie dimon said the bank will maintain buybacks with results strongly back by a balance sheet

that is also strong. wells fargo reporting a miss on net interest income for the third quarter. the profit was boosted by a 37% jump in investment banking fees. food producer bruce paek recalled nearly 10 million pounds of poultry and meat items due to potential listeria contamination. the department of agriculture officials detected listeria in samples during a routine test. the company is ready that's company's -- company's ready-to-eat chicken is the source of the contamination. game 1 of the wnba finals was one for the ages after a stunning comeback for the minnesota lynx. minnesota valley back from a 14 point quarter deficit. they become the first team in history to come back from being down 15 points with under five minutes left in the game. game 2 tips off on sunday in brooklyn. that is your brief.

jonathan: this league was given a gift and it does not know what to do with it, do that? kayla clark. -- caitlin clark. lisa: how to monetize this, new interest in the wba and suddenly female basketball is the hot topic on the sport's landscape? jonathan: some of the players resent it. it's amazing to watch. lisa: celebrate the stars because that will bring the league with you. jonathan: of next, setting you up for the day ahead. you are watching bloomberg tv. ♪

jonathan: 40 minutes away from the opening bell. a bit of a snooze. a welcomed snooze but a bit of a

snooze. just about unchanged on the s&p 500. price action in the bond market at the long end of the curve. yields of another for basis points. a persistent grind. 41% on a 10-year -- four .1% on a 10-year --4.1% on the 10-year . waiting for a response from israel to iran's attacks. lisa: that is a big question mark. you can feel it every time there's a headline or rumor out there and you see the response of the oil market in a knee-jerk downward in risk assets. there is a feeling there is something brewing of people are trying to prepare for what it might be. jonathan: going into the weekend and next week is the week ahead. a little later this afternoon we get remarks from fed governor mickey bowman. on monday, more speed from governor waller. on tuesday, lisa sitting down with mary daly.

plus, earnings from bank of america, citi, goldman sachs and united airlines. on wednesday, morgan stanley. thursday, ecb rate decision. another round of jobless claims, get results from netflix and tsmc. a lot to get through. lisa: i don't know which is more important. the earnings of what is going forward or actually the ecb, of all things i think this might be one of the most instructive meetings given the fact they were counted out and encounter back real quick. a question of if they cut by 25 basis points. the market says yes. jonathan: if they don't, and we said this earlier, the news conference is must watch tv. how do you justify not cutting interest rates with the economy in europe? lisa: if they don't cut interest rates at a certain point is it rate differentials that causes? difference do we see the euro strengthened? what are they thinking? how that support an economy that

seems to be flat on his back? jonathan: a lot of these conferences over the years. i finished with that response . mike, let's talk about the fed speak. mickey bowman, the sole dissenter. is she feeling better about that with the incoming information in the last week? michael: we have not seen indication she has changed her view that it's ok to cut rates, just do so much -- don't do so much. we will see what happens. it does not look like most of the people who have spoken have changed theiews. we saw in the minutes this week that the fed was very divided at the last meeting. there was a big camp for 50 and for 25. jay powell kiss credit for leading with the 50. we will see what happens next time. each one of these people we will go through hearing from them and

the sorting hat comes out from harry potter and puts them in their camp. we will see from there where they go. we are watching with mary daly to see whether she is a half a puff -- hufflepuff or griffindor. lisa: we will see if they have taken over left dominance when it comes to people's expectations for the economy. they don't know more than we do in terms of the crystal ball and whether the economic data is actually a little more simple then maybe we are making it out to be. it is fine. the consumer is doing well. things are chugging along and people want to worry and they don't see anything in the future. they do like the lack of visibility. , otherwise it's ok. michael: that is what jay powell was trained get across at the meeting. we can do what we want to do because the economy is so good. we don't have to do 50 because the economy is bad. we can to 50 because the economy

is good. we are tighter than we need to be at this point. that is their message for us going forward. the data still seems to confirm that. we will see retail sales next week. jonathan: what you looking for? michael: the economist consensus is for a small gain. the second measure retail sales index shows the last couple of weeks have made significant declines in retail spending. we will see where that comes out. people have been counting on a strong retail number for september to keep that 3.2%. jonathan: will be said that his hurricane-related again with helene? halloween characterize that after the number we got from jobless claims? michael: it could be. you can break it down by category. you can see what did not sell. that was some of the stuff that did not sell. it will have an impact on retail sales. both hurricanes will have an

impact on retail sales. when you have no power and the roads are blocked you are not going shopping. a lot of that is just delay. this is september numbers. it probably did not have a huge effect on this retail sale but it will for october. jonathan: appreciate it. have a good weekend. thank you. up next on monday, kate more of blackrock and stellantis ceo carlos taveras. do not miss that conversation on monday morning. that is a big one. it is a difficult time for that company and industry. lisa: the cfo out. what do you have planned as the questions swirl over executive management? jonathan: you have a good weekend. lisa: youtube. -- you too. jonathan: to all of you at home, have a wonderful weekend. ♪

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matt: all right, bank earnings kicking off the last day of the week. the minutes until the start of trading. katie: bloomberg "open interest" starts right now. sonali: coming up, big bank earnings with jp morgan reporting beats on investment banking and net income. matt: baton must dreams. tesla drops after elon musk's robotaxi launch falls flat. katie: let's not forget blackrock. the investment giant hits 11.5 trillion dollars in assets amid a big push into private markets. all of that and more coming up,