>> the u.s. equity market has done so incredibly well. it's been a strong performing market. >> corporate earnings are doing well. >> valuation matters, it's not dead. >> valuation discipline is the most important thing to have at this time. >> focus is so much on the mega seven and following the trend that a lot of these different top -- pockets of the market are seeing some fundamental momentum. >> this is "bloomberg surveillance." jonathan: live from new york

city this morning, good morning, good morning. "bloomberg surveillance" starts right now. coming into wednesday on a two day losing streak on the s&p 500 for the first time since early september. equity futures are negative, down almost one third. on the earnings calendar today, at&t, ibm, boeing, coca-cola in focus this morning. big disappointment over at starbucks. suspending 2025 guidance. the stock is lower by 5%. lisa: this is coming after a slew of bad news for starbucks, new leadership and a question as they strip out and say they will suspend guidance for the full year. does this clean this trip -- the slate or indicate more material at a time when they need to fundamentally change the business model with baristas complaining about not enough

staff, too many products, and other questions. annmarie: it's going to be some tough quarters moving forward. jeffries, tough road ahead, re-accelerating traffic worldwide. morgan stanley, doing remarkably poor. what's interesting is that transactions in the u.s. are down 10%. that is the steepest from the depths of the pandemic when everyone was home and isolated. jonathan: we need that foot in the u.s. to perform and it's not happening. in china, the numbers were dreadful. this is what l'oreal had to say. mainland china, the beauty market is already continuing to deteriorate. lvmh last week, you remember this line, consumer confidence is back in line. the pandemic, covid, things are not great in china. lisa: there's a real question

about how much you see the continuation and luxury goods. apple being a distinction, tim cook was in china for the second time this year talking about the commitment to the area. how much do executives have to go kiss the ring in order to get some sort of money into their coffers. there is the issue of the product mix and whether consumers in china are buying or not. jonathan: mcdonald's is negative by 7% in the premarket. e. coli outbreak linked to a quarter pounders over at mcdonald's. lisa: this is particularly in the center of the nation and out west. a question of whether it is linked to the onions, with one supplier -- i know this is ridiculously specific, but that is the level of specificity. it's an unfortunate blow for a company at a time when ultimately there are real questions on the consumer level about how much appetite people have, how much liability people

are willing to put up with when it comes to their quarter pounder's. jonathan: not much. equity futures are down point 25% in the s&p 500 and in the bond market, the grind higher continues. lisa: these are the highest levels we have seen on 10 year yields going back to july 25. i have to wonder how much we are seeing d rotation in equities. we talked about cyclicals, small caps, all of it coming with a beautiful decline in yields. everyone saying that inflation will come down. that has been a challenge. how much is it challenging an entire narrative with a market yield at its highest levels in two months at the same time that you are seeing rotation back into the big stocks. is it a blip or a trend? jonathan: is it the economic data or the politics.

yesterday we noted the global move. we saw this in europe and australia, not just the u.s. there is divergence between germany and europe. on the german curve, the two-year is down seven basis points. when it comes to the election and the policies we can see from a trump presidency, wouldn't you assume that would lead to a disinflationary shock in europe and lower interest rates and the prospect of higher interest rates at this level in the u.s.? further divergence with one day that we have to keep our eye on. lisa: especially talking about china, where will they sell those products into europe? i was thinking about this overnight. how much can you see a divergence between the u.s. and european bond markets? even if the ecb is cutting rates, how much is the global bond market linked? otherwise, how can you explain

yields going higher in certain regions with economic data being stronger in the u.s., not europe? these are the questions you have to wonder about in terms of the bond market globally. jonathan: coming up in this hour, we will catch up with ben got a ridge and seth goldstein. jordan will have more on the so-called easiest job in washington. socks on the losing streak for the first time since early september. the pace of fed cuts continues to weigh on sentiment. writing -- we are seeing resilient growth, moderating inflation and more accommodative modern -- monetary policy. a generally supportive mix for equities. let's talk about one of those challenges. the election. how do you expect to trade over the next few weeks into that one? then: there are multiple

outcomes at different colors and different mixes. one would expect the market to have a tantrum towards one outcome, could fly on another. over the fullness of time, markets tend to fade extreme reactions. i would say such is the dynamism of the u.s. economy. quality of management, innovation within businesses, despite hedge funds picking up and taking off trades from day-to-day, stock markets can get through this in a positive, would get through this in a positive fashion. jonathan: how much of a constraint is the bond market right now? ben: it is not a constraint just yet. i think that once the fed in the market still believes we are in a cutting cycle in that growth can remain resilient to that,

alongside that, markets can continue to perform. as expected, the markets will check themselves and showcase volatility as the pace of cuts slows and there are questions about whether hikes come back to the table. the trend remains disinflationary and therefore supports a cutting cycle and therefore, i think, markets could deal with yields at this level. lisa: let's define markets a bit when we talk about markets dealing with rates where they are, even as they climb a bit. i say this because we have seen a challenge to the rotation trade and the idea that small caps and the rest of the 493 in the s&p can perform and outperform. we have seen a challenge to that as yields go higher. do you think it sticks? ben: to us it looks like there

isn't an imminent catalyst for yield reversion. of course, growth looking better gives a reappraisal of how dovish the reserve might be. certainly, focused on the supply of bonds given the political agenda of both parties. better growth. you know, it does look as though yields will be well supported at this level. we would call that higher quality. the funding challenges high yields bring suggest higher quality businesses might continue to shine in this environment, but ultimately we return to a disinflation narrative with a softer landing and resilient growth that becomes the focus once again. in time there is a catch up trade, but that is not the immediate position to take today given the nervousness about the

high-yield environment. lisa: as john mentioned, the high-yield is global and we have seen it tick up even when the data might not be as obviously supportive as in the u.s. how much is the u.s. setting the tone, the rest of the world gets subjected to it, and that's it? ben: i think that is the case. i'm sure it's not quite such a surprise for everyone that that is the case. i mean it's interesting at this moment, as you said, europe is going through an appreciable growth wobble at the moment. certainly the manufacturing weaknesses weighing heavy on the european economy. yet bond yields are moving higher, dragging higher by what's happening in the u.s.. such is the dominance of the u.s. economy, and there is such a that avoidance of recession in

the u.s. on the global economy that it's dominating. for sure, the growth challenges would look more precarious in europe and therefore, the opportunity for duration for buying bonds and the opportunity does look more apparent at this moment in europe. annmarie: one place in europe that you like is the united kingdom. why do you view that as a hedge? ben: valuation looks interesting. you tend to get a bit of eye roll on that, it has been trotted out for the last 15 years or something. it certainly looks interesting relative to global comparators. certainly dividends are always interesting. it's a very downbeat expectation growth that could impress. look, the hedge reflects the commodity rich components of the u.k. markets. thinking about a geopolitical hedge in and amongst the valuation hedge makes it a

reasonable portfolio complement to the more substantial position in u.s. equities that we harbor. jonathan: good to hear from you there, ben. when i first moved here, they said europe was good for vacations and not investing. i was personally offended. one year in, i realized they were right. lisa: even last night, when you look at the earnings coming out of the european region, in the u.s. things are looking ok, even though it's disappointing we can raise prices and it will be fine . in europe, big questions, don't know about china. consumers uncertain. stocks go into the tanker. this is sort of highlighting the differential between the regions. jonathan: 1% of the ftse is tech. 1%. it's like nothing.

lisa: there is this idea for jurassic park. that's your comment. i wonder how much you start to see this idea of revival on re-industrialization of the world. jonathan: that is his argument and we will see if he is right. updating stories elsewhere this morning with your bluebird brief, here is dani burger. >> the cdc said that a severe e. coli outbreak linked to mcdonald's quarter pounder's has killed one person and second dozens. most of the cases are in colorado and nebraska. onions have been identified as the likely source of the outbreak and have removed of the quarter pounder from their restaurants. starbucks down in the premarket, reporting their steepest quarterly sales drop in for years, pulling their guidance

for 2025, they said that withdrawing that guidance would give the new ceo an opportunity to solidify a turnaround plan. the lakers made basketball history last night when lebron james and his son became the first father-son duo to play in the nba together. the 39-year-old superstar and his 20-year-old son played for almost 2.5 minutes. the elder james finished the night with 16 points, his son was held scoreless. the lakers beat the timberwolves 110 to 103 to tip off their season. that is your brief. jonathan: up next, jamie dimon's next move. >> things that were bad, they hurt the lower 20% and i reserve that right to vote and say what i want. jonathan: the latest reporting

on that, up next from new york. good morning. ♪

jonathan: two days of losses could become three on the s&p. futures are negative, bond yields are up a single basis point. the 10 year, 4.2197. under surveillance this morning, jamie dimon's next move. >> a lot of the things we are done -- we have done our bad. in the name of good? the lower 20%? we have to be clearheaded about how to accomplish what we can do to help all of america. i can vote, i can say what i want. i've never been much for

endorsing candidates. i'm thinking through what i want to say or do, things like that. jonathan: jamie dimon telling associates that he supports kamala harris, but fearful of blowback, he has not set a publicly. he has made it clear that he supports harris and would consider a role, perhaps the treasury secretary, and her administration. kailey leinz, that's "the new york times" reporting. what else are we hearing? at >> there has been pushed back from forbes that jamie dimon is not considering being part of either administration, whichever up one we end up with, pushing back on that suggestion in the times, that he would be open to serving as the treasury secretary for harris. it is noteworthy that jamie dimon is a registered democrat. the times saying that he's not being vocal and public about his support for harris over fear of

retaliation. that was what was dominating conversation here, that was the premise on which him he was choosing to keep silent over concern of potential retaliation against not just him but the public company that he leads and potentially shareholders by extension as donald trump has not made secret his feelings of retribution. we were just hearing the interview from earlier this month in which he talked about not just the withholding of an endorsement, which he has not made publicly, but some of the ideas of what he would like to see out of a future administration including potentially representing on the cabinet someone from the private sector or someone from the opposing party of whoever the president is. on that note, we have seen harris supportive of that idea, on multiple occasions saying that she would consider report -- appointing a republican to her cabinet and she has been campaigning with republicans for a few weeks as she tries to court those endorsements but it

is not a public endorsement that he's making. individuals -- annmarie: individuals i spoke with said they don't forget the comments he made about trump and davos. could you see any wall street ceo being the treasury secretary under a democratic administration? kailey: it's certainly possible, although it's hard to identify, if not jamie dimon, who that person would be. a lot of conversations i've had recently about the current undersecretary, deputy secretary, someone who is young but could be elevated to the role of treasury secretary and a number of others who could be considered here. when you are considering the democratic party as a hole in the kind of pushback that might come from the left from people who are more skeptical of wall street, some of the very constituents harris would need, the coalition she would need to

elect her president, there could be blowback there, but a lot of people will tell you that when considering cabinet conversations with less than two weeks to go, that's not the primary focus at this time as they are just trying to turn people out at this point. annmarie: and trying to make sure that they get the fundraising, that game is entirely in play. that brings us to the next story, saying that after decades of sitting on the sidelines of politics, bill gates has said privately that he would donate 50 billion dollars to nonprofit organizations that support vp harris how significant is this, given that bill gates has been known to be quiet for decades on his political standings? kailey: this was also supposed to be quiet. the donation that he made was to the nonprofit arm of future forward, a dark money organization that does not have to disclose donors. it was not necessarily supposed

to come to light. he did not confirm the donation or outright endorse harris, just saying that he views the election is different, with unprecedented significance for americans in the most vulnerable around the world. this is obviously a sizable donation and it is worth pointing out that we are seeing some of the richest people in the world having an outsize role in this campaign, including on the others where elon musk has donated $75 million to america pac, giving out millions to registered voters through sweepstakes if they support a petition to support the right to free speech and bear arms, so money is certainly playing a role at this stage in the game, but where it goes is where it's starting to shift. it's not just paying for advertisements, it's about being able to invest in the ground game and having people knock on doors. trump has been outsourcing his ground game but that hasn't been the case with harris, who has raised a billion dollars over

the summer. 2500 staff across 350 offices around the country, trying to turn people out to vote and in a race with margins this tight, the ability to contribute to turn out is what could ultimately make the difference. lisa: linking these stories together, we talk about not knowing who the cabinet will be if harris were to win, but we have some signs with donald trump as we have a number of people we are talking about who could be potentially considered as treasury secretary and we have talked about the transition committee led by howard let nick. do we have a sense of who the characters could be that could be her right hand people? kailey: there are people close to her and they might be similar faces to what we've seen in the biden administration that she has been a key part of. leo brenner, currently at the

national economic council, in the mix. there is a question on moving forward into a potential harris administration that she has tried to articulate, this idea that her presidency would not be a continuation of joe biden's, though she hasn't necessarily clearly defined how the differences would manifest themselves, just that she would have new ideas and new faces. we really haven't seen it come into focus to the same extent that we have seen on the part of donald trump. many of the surrogates out there for him, the people who ran against him in the primary cycle, they have been vocal in their support of him, making the rounds, doing the circuit, including the people who could potentially be treasury secretary. you mentioned howard let nick, but there are other names, like members of the senate, senator hagerty of tennessee, there are more people who are still

potentially serving roles in government on the trump side compared to harris, who is leaning heavily on people who have already exited their government roles, like president obama, who has been on the campaign trail in recent days. jonathan: squeezing one more income up the big one, joe rogan . is that official now? kailey: donald trump had said that he would be sitting down with joe rogan and that is our understanding, that interview will be happening on friday. both of the candidates really hitting the podcast circuit. jonathan: and that is the biggest one, maybe. kailey leinz, there, you can catch up with her weekdays at 12 p.m. and 5 p.m. eastern on "balance of power." that is the one the trump campaign has wanted for a while. annmarie: and there is potentially a beef between joe rogan and the former president,

because joe rogan was very supportive of rfk junior. it's basically kamala harris going on call her daddy. the more interesting interview would be if kamala harris sits down with joe rogan. jonathan: up next, tesla results are around the corner. we will speak to seth goldstein at morningstar in just a moment. s&p futures softer. down by .2%. bond yields are a bit higher, off one single basis point. from new york, this is bloomberg. ♪

jonathan: the stock market rally stalling to start the week, down a bit on monday, same on tuesday. negative by .2% on the s&p. the first back-to-back losses since early september. on the nasdaq, softer this morning. five days of gains. tech is holding up in the face of high yields, so let's talk about higher bond yields making a move this morning on the 10 year, up one single basis point. lisa: put these ideas together,

the outperformance from big tech, underperformance from everything else, particularly the russell 2000. you have to wonder about these yield sensitive areas retracing these gains and how far it could go. is this a bet on higher inflation or is this a hedge against the election at a time when volatility in bonds is at its highest this year? jonathan: september 18, the fed reduces interest rates by 50 basis points. the 10 year is adjusted higher. check out the fx market. dollar-yen, the lowest per year on dollar-yen. two days before the federal reserve cut interest rates by 50 basis points, here we are at 152 point 63. remember the japanese yen making

a comeback? and here we are. lisa: that was after policymakers getting leeway after disappointing data. now there's this question a bond yields. did you see the 40 year yield in japan? just a real question about how much they have really tamed, or not, some of the losses they previously had. jonathan: looking at euro-dollar, it's a real divergence. we talked a lot about the growth differentials kicking in this morning. the two-year is down by seven basis points, north of 2% at the same time that the two year is up a single basis point and the spread gets wider. lisa: how much can we widen out? unless we get a real change in the dynamic of the fx transmission mechanism, you have

to wonder whether basically u.s. yields are going to rise because of strength and european yields won't go down as much as they should to stimulate the economy because it is a global bond market? that's the issue they've got to deal with. jonathan: starbucks this morning, delivering disappointing earnings after sales plunge for a third consecutive quarter with the coffee chain reporting a 7% decline with the weakness evident in the united states and china. starbucks down 5%. lisa: and at the same time they are dealing with a real existential question -- what is the business model? how many baristas will they have in each store? can they continue charging seven dollars for a pumpkin spice latte? these are the key questions as they try to figure out the price point. parents might be trying to

deploy -- restrain their children from aggressive cash halls at starbucks, but it's a real question for the ceo. annmarie: the interesting point here, they are being hit on both sides. you cannot make up the growth in china, down 14% according to the latest earnings report, and you need to be growing and have that traffic continuing in the united states. what hit me is that this is the worst quarter since the depth of the pandemic. is this the bottom for starbucks , or is there potentially more room to fall? jonathan: the new ceo has a massive job in front of them. elsewhere, texas instruments saying the timing is right following eight straight quarters of revenue declines in three of their main markets rebounding with their biggest sales sources, industrial and automotive chips suffering from excess inventory. if the back of that is to stock by 3.5 percent, something that

lisa pointed out, the difference between supplying the ai story and everything else. ai is fine. everything else is not growing at all. lisa: this doesn't make sense after a while. for ai to continue being its behemoth, it has to trickle into autos and the industrial sector. there has to be an application that goes beyond cloud and that is a gap that needs to get bridged that we are not seen just yet. annmarie: china keeps dumping on other markets, but the weakness in the auto sector outside of china is where it is the weakest . they are still able to sell into china and they are doing well, but everywhere else is going downhill. jonathan: mcdonald's quarter pounder is linked to a severe e. coli outbreak. dozens in the u.s. falling ill,

mostly in colorado and nebraska, with one person dying. slivered onions were the likely culprit, they removed the hamburgers from the restaurants in the affected areas. annmarie: very sad, what's going on with this severe e. coli outbreak. cdc said yesterday that 10 people have been hospitalized, including a child. incredibly sad given the fact that there are mcdonald's across the united states and people go there. mcdonald's has been under a lot of political pressure is well with democratic senators saying they are price gouging with too many high menu items. jonathan: corporate profits months not -- must not come at the expense of peoples a bail -- availability to put food on the table. lisa: i think the e. coli is more serious, not just when it comes to health but when it comes to reputational damage. we saw that with chipotle for years. jonathan: the latest earnings

from at&t, there had been an estimate of 57, free cash flow at 5.1 8 billion, now going through these lines, lisa, what jumps out for you? lisa: revenue came down almost 1% year-over-year, but it's a beat. what i find interesting is that it was a beat led by the u.s., so we are going to go through the numbers to see what's going on. they continue to reaffirm expectations for the year with shares lower as they underperform in certain areas. again, i'm sorry, you have to think about all of the mrs. in europe, all the beats in the u.s., you start to feel the headlines and jonathan: see the theme. jonathan:i didn't know that this was another opportunity to take a dig at europe, but here we are. i'm not getting defensive. tesla preparing to report third-quarter earnings and investors looking for details about the cyber cap this month

and any updates on cheaper cars in the works. seth goldstein with a second-quarter earnings call and management maintaining its timeline for a more affordable vehicle next year that will likely. -- drive double-digit delivery growth in 2020 six if production begins in 2025. seth, do you expect any details on that later? seth: i'm hoping that we get an updated timeline. last quarter, elon musk said that we don't do product reveals during earnings calls. those are separate events. we might not get details like price, range, or other specs, but i'm hoping that this year production will be maintained or if not, that there is a new timeline for the vehicle to enter production. jonathan: the first thing i will be looking for is how things are in china, given how it's been. starbucks overnight, saying that things aren't great. then we had reports that things

were ok with the iphone. what's your read on what i consider to be the most competitive auto market in the planet? seth: it definitely is that. we have seen tesla, reports from the cam saying they saw delivery growth in china in the last couple of months, so i expect that china will be stabilizing and improving as we see consumers demanding more new energy vehicle sales where ev's and plug-in hybrids are now more than 50% of all new autos sold for the past two months in china . this benefits tesla and i think that china is not as bad as it was say one year ago or earlier this year. it has been stabilizing and improving for tesla. lisa: for months we talked about how tesla is an independent automotive company, not a car company, giving you robots to

serve you dinner. then there were questions after the wii robot incident and that lack of progress and clarity around when we start getting the autonomous vehicle capability. how important is that in the earnings report? seth: we will need to see more data points. i would like to see miles driven as growing exponentially, which is what management needs to see. remember, to get to the rowboat taxi from the self-driving software, there needs to be the launch of the unsupervised software for current drivers that keeps improving to be able to enable the robotaxi, the cab and the van to be deployed and deployed safely in a manner that doesn't get them quickly on deployed from the roads because of an accident. so, the first step is the initial launch. it tested in california. to get there, we will need to

see that software continue to be trained with exponential miles driven growth in this report. so, i'm hoping we get that data again this quarter. lisa: how crucial is it, to maintain that fairly valued assessment of shares? seth: i don't have much weight as far as robotaxi valuation in my business, but my differentiator for tesla to grow deliveries to under 5 million vehicles in two thousand 30, the differentiator for tesla to get there is going to be self-driving software. even if that is just a software that allows for current owners to have a better and easier driving experience, that will still be a differentiator meaning that the software has to improve from where it is today. annmarie: when you think about tesla exposure to china when it comes to batteries, the market pricing is potentially prompted

by the white house or a red wave . what does it mean for a company like tesla with walls going up around china and, may be, that idea of their inflation reduction act being pulled back unless -- with less subsidies for electric vehicles in the united states? seth: tesla is well positioned china, isolating them potentially from potential tariffs and trade wars or protectionist policies. i do think that even if the inflation reduction act were pulled and tesla no longer got that subsidy, what we are likely to see is a near-term dip in ev sales and longer term i would point to the newer more affordable vehicles set to hit the road from the likes of tesla, ford, volkswagen, with the infrastructure funding the buildout of higher chargers on highways and in cities as the long-term catalyst for sales

growth in the u.s. longer term, i see no impact no matter who wins the presidency. should trump win, there could be a near-term hit ev sales. annmarie: does it concern you that the c-suite of tesla is so close to the politics, currently? seth: what i would look for, if i were to be concerned, this is affecting sales in the u.s.? are they turning away from tesla because of the close relationship between musk and tesla? so far, the data hasn't shown that. we've seen models grow in sales. we have seen slower decline in model 3, but that's consistent with vehicles in price category telling me that higher interest rates are the major drivers. if the data showed we were seeing sale steps with tesla

losing share to other ev's in the same categories, that could be a cause for concern. the elon musk donald trump relationship could be the catalyst for it. jonathan: seth goldstein, good to hear from you there. no drama this morning. updating or news elsewhere this morning, here's dani burger. dani: steve schwarzman believes the u.s. will avoid recession regardless of who wins the white house. he said that both candidates have policy proposals that have healed growth overall and he has a relatively positive outlook for the economy and is rates fall he is seeing improving environments for deals and exits. qualcomm shares falling premarket to 4.4 percent. the british chipmaker revoke a license allowing qualcomm to use ip designing chips.

they've been given a 60 day notice for the cancellation. the move would roil the smart phone and pc markets of two of the most influential companies in the semiconductor industry. frontier airlines is exploring a renewed bid for spirit, reporting that the budget airlines have had recent discussions about a possible merger and those familiar said that the talks are at an early stage and if a deal is reached it would likely be part of spirit restructuring debt liabilities in bankruptcy according to the people talking to the journal. that is your brief. john? jonathan: so that deal will go through? annmarie: potentially, the fcc wasn't keen on it, but maybe things were so bad for spirit that they have to let it go through? lisa: so it's a threshold where if you are bad enough that you won't survive it's fine? jonathan: ok, that is where the bar is. up next, the easiest job in

washington. >> it's the greatest job. government. you show up once a month. >> hard-working people, i can assure you that they work super hard every day, not just once a month. >> that conversation is up next. ♪

jonathan: session lows at the moment. big moment for earnings. equity futures on the s&p 500, down by .2%. big afternoon for earnings. tesla after the close. next week, we hear from the major players in big tech. lisa: that will be the big question, is the heyday pass them?

can they not beat the rays that they had in the past? if that's not the case, can you imagine how many people rotate back to big tech? jonathan: i said the biggest names in tech, but i should've said with the exception of and video. under surveillance this morning, the easiest job in washington? >> i think it is the greatest job in government. you show up to the office once a month and you say -- let's see. everybody talks about you like you are god, what will he do? jonathan: i took that personally. that is kind of what we do every month. throwing shade at jay powell. christine lagarde jumped to his defense. >> he should come and visit us, you know? i have thousands of hard-working people, economists, jurists,

computer scientists. i can assure you that they work super hard every day, not just once per month. i won't speak for jay powell, but i'm sure that is how he's sees his job. jonathan: i'm kind of speaking for jay powell. christine lagarde yesterday, i want your opinion on the following, who has the easiest job in central banking right now, christine lagarde or jay powell? >> depends on what you mean. if it's macro, growth below potential with inflation below target? all of the signals suggested won't get better. for them making that decision on cutting rates or not, it was difficult in september and it is much more obvious now that it is october, they should be cutting rates at every meeting. that's the ecb. the u.s., much more cloudy. even though it is waning, you don't have that fiscal spending in the u.s., europe, so christine lagarde doesn't have

that option of inflation bouncing back. that's a low probability. the fed has the risk and the labor markets continue to surprise us even though the data says from the surveys that they should be getting worse and they keep getting better. i think that the fed has a harder decision on macro. in terms of the ecv, they have 19 central banks to deal with. different speeds, no harmonious union. focusing -- jonathan: focusing on the dollar side of the trade to begin with, let's say you have to confront the prospect of a red sweep. let's say that that is not how things play out overnight the fifth into the six. do you think that bond yields will be higher? i assume you do. dollar negative or dollar positive? jordan: that's the easiest question, dollar positive. you are throwing tariffs.

the eurozone would be in the sort of crosshairs of trump if he were to come in. china is the clearer one. when tariffs come into place, that lowers the competitiveness of the euro end of china with currencies devalued versus the dollar, boosting it to offset it. free trade agreement partners. mexico has great guacamole and a great free trade agreement. trump wants to target those cars coming into the u.s. there is the risk for 200% tariffs on mexican exports of cars. that probably won't happen. it is a sort of positioning for the position of u.s. mta by trump, but you are looking at dollar next. looking at euro-dollar and dollar-yen. remember, these countries have the risk of tariffs. jonathan: interesting that you call that an easy one, some people don't agree. from my perspective, you went straight to the trade story and didn't talk about the deficit story, which is where my focus

is. if you have a government issuing a ton more debt and we get the strike in the bond market, i'm wondering if we actually get the dollar strength. what is your pushback on that? jordan: tariffs require no congressional approval. the usmca on china terrace, trumka do that, but you need congress to get most of it done. the difference between liz truss and donald trump is that it is quite a long process to do the fiscal spending. that planning going into it will take a few weeks, a few months, and by that point there probably won't be a strike to have that size of fiscal spending. with liz truss, she just threw the budget out there. it probably would get through if she had the opportunity before stepping down. a very different political landscape. the u.s. is the reserve currency of the world, but that's not the case here with a buyer strike and in the treasury market you will see a steepening of the

curve with fiscal fear, but it won't be a buyer's strike. the global financial machinery uses u.s. rates. lisa: at the same time you might wonder if it tempers the yields rising, but does it also temper how violent the yield could be in fx? even if people believe the u.s. could benefit more and that other companies could suffer more from potential tariffs, people aren't going to be as aggressively going into the dollar because of, maybe, these concerns. jordan: split to the election, it's clear the dollar has to keep rising. one, swing states are moving in trump's favor. the data supplies in the u.s. are healthy. the third is the tap on the shoulder moment. if trump wins the election and you didn't hedge for it in your book, your boss will tap you on the shoulder and ask -- what were you doing? a consistent amount of hedges. after the event, i agree it's

more tricky. we know the outcome, a red sweep has a high chance for tariffs coming into place and the dollar continues to strengthen. 103 in the euro. into next year, i remember 2017, we got that start when trump had just won in november, everyone was balled up on the dollar and it turned lower and went lower. that is the risk. it might be the case that he so positions on tariffs. it might be the case that his plans don't get through congress. next year could be a lot harder and the dollar strength could continue when the tariffs probably happen and in q3 i think that the european chinese data will be bouncing back from lowes and things improving. jonathan: interesting. jordan, you can run away with aston villa. congratulations on that. evan ross smith at slingshot

strategy with george ferguson at bloomberg intelligence, matt hornbeck and the latest numbers from coca-cola, just around the corner.

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> the move higher in yields is more about a growth pick up than it is about anything related to necessarily concerns about inflation. >> taking the totality of the data in the mosaic still tells me that we are in a no landing scenario. >> there are abnormalities in

the economy. >> don't get over your skis, the market is not contemplating a growth slowdown or re-acceleration. >> this is "bloomberg surveillance." jonathan: we are poised for a third day of losses, potentially. muted losses, but losses. it's a big morning for earnings in america. numbers from at&t, ibm, boeing, coca-cola, tesla, just moments ago. lisa: coming out and beating across the board the earnings-per-share. revenue coming in at $11.95 million versus 11 point 6 billion expected. this is basically a similar story to what we saw at heineken , where weaker unit sales were made up for by the increase in price. this from james quincy, the ceo of coca-cola, our business

demonstrates resilience in the face of dynamic external environments. talking maybe not about weakness, but that ability to raise prices standing out. jonathan: things that the starbucks ceo would love to say this morning, but cannot. they were down hard in the premarket following numbers from that company that were not pretty. suspending 2025 guidance. u.s., down by 10%. china, down by 14. lisa: the bigger more xers sit -- existential question for starbucks as brian nichols takes over as ceo and maybe clears the decks, what is starbucks going to look like? will there be fewer stores? more but reese does? cheaper lattes? have they reached the tipping point where people are saying you are not buying another seven dollar latte? i'm going to get angry. annmarie: this is going to be personal for your children, but

is this the autumn for starbucks or are they potentially going to have more quarters of just less growth and less transactions? looking at the research, morgan stanley, remarkably poor. jeffries, tough quarters moving forward. feels like they are not out of the woods yet. jonathan: the coffee has always been too expensive, that's not the problem. the consumer experience is trash. dumpster fires when you walk in there. for years. lisa: it's that question of who hangs out there in the bathroom, but also how many more baristas can they get in? annmarie: you both sound like my boomer father. one, the issue is if you order starbucks now, you do it on the app. walk in, it's waiting for you and you spend less than 10 seconds in the store. jonathan: that experience is trash. i've been in there, people

lining up for plastic coffee. you think that is a premium experience? annmarie: it's efficient. jonathan: clearly my view. i drink decaf. but clearly my view, i'm not lonely on this point. sales were down. transactions were down 10%. you look at me like i'm nuts, the numbers speak for themselves, numbers were lower. jonathan: and the people who work there -- lisa: the people who work there said they are understaffed, overwhelmed, they have difficulty managing everything and that is a big issue they are working to address. annmarie: i think it is idiosyncratic to the starbucks that you visit. i only go to two. i use the mobile app. i know everyone there. jonathan: let's see if you get a free cup later. charles schwab, evan smith, closing arguments on the campaign trail. matt hornbeck on why trump 2.0

may not spell disaster for the bond market. we begin the hour with stocks and bonds heading for a third day of losses as concerns continue to grow over federal reserve policy. looking at one more potential liability, saying that frothy sentiment is likely the biggest risk for stocks right now and animal spirits are not back to their highs and they have moved into extreme optimism territory. kevin? how do you gauge and measure that, extreme optimism? kevin: we take the attitude of behavioral metrics so that you can look at everything from ai to what investors are saying on a weekly basis to the actual fund flows into etf's. i know that we talked about this last time, the spread between the attitude and behavioral universe and there has been a pick up on the attitude side to match the frothy sentiment on the other side.

if investors had said they weren't as feeling good about the market, they are positioning it. you are not back at that optimism a peak euphoria. it makes the market more vulnerable to negative catalysts. economic growth related, you can take your pick and it's not that favorable backdrop of trading in the pessimistic territory where you are not getting as much of a hit. what -- jonathan: what are you advocating for? kevin: the election can be a volatility driver. it's coming up to the index and it isn't just below the surface at the individual stock level in the midsummer, that's been a

good thing. the coiled spring of volatility, the bond market, much more volatility than the stock market if you are comparing the move to the vix. it's a better environment where some of that has bubbled up to the surface. it is not great to go through the drawdowns led by tech where it fell by 15%, but it has been rotational in nature where every drawdown so far this year, every weakness has seen offsetting strength from other parts of the market and it has ultimately kept the indexes afloat. the trend under the surface has a better way to go through stealth corrections in the market. lisa: is the two-year-old bull too legit to quit? kevin: probably, right now. it's unique and so many ways. in some ways it's the unique asked -- the weakest in history. it had been outperforming on its

trailing one to six month basis, but in the first year to the day , two sectors were down in the s&p. staples for utilities that weren't terrible, they were defensive in nature, but you never really see that in a bull market. even the defense of parts of the market rallied during strength in the first year of the bull run. so, the fact that it changed in the second year where they are catching up, it's a relatively constructive backdrop that shows catch up momentum that has some legs. i think that looking to the third year, historically you get more drawdown activity and is less exciting when you look at that earnings backdrop. so, i still think there are legs to this, but you could get a bigger pullback associated with what has been a strong momentum trade because the momentum factor is having its best performance since 1999.

lisa: we've been toggling the idea of at what point bond yields return on equity valuations but for small caps and equal weight there has been underperformance in tandem going back to july 25 and at what point does that torpedo the thesis? kevin: whatever the level of yield is, it depends on how we push it there. if we get there at a rapid pace, 5% on the 10 year was much more about inflation concerns and the economy overheating. i think that is a more sinister scenario. what has changed this time is two fold. number one, the relationship and correlation between stock prices going back into positive territory. it's not as hostile every day with that rise in yields and a subsequent decline in stocks. second, you are approaching it from a stronger and healthier

standpoint. you have still got, even after yesterday and the day before with weakness in the s&p, 76% trading above the average. that sort of 65% to 80% range for that metric this year has been a firmer backdrop and i think it sort of helps to keep you out of the mud a bit if you get hit with these corrections and catalysts on the downside, which is what you have seen this year, max drawdown, that's pretty great. as long as you stay in that environment and you have some grass to catch up from some areas of the nasdaq, it probably keeps you in a better spot, even if the yields are creeping higher. annmarie: what if the u.s. election is not clear cut? two weeks, americans go to the polls, 20 million having already voted. what about a contested election, what's the impact on the market? jonathan: the tough part -- kevin: the tough part about that

is we don't have a big sample size. there was the 2000 election and that is an interesting and -- interesting analog but a non-analog in my opinion where the bear market started in march of 2000 and didn't end until 2002 with a recession sandwiched in between there. automatically right there i think that sort of puts that aside as a clear analog, i don't think that we can use any point in history -- i know it's the knee-jerk reaction of investors to do so, but it is a totally different economic environment. even though the election set up the possibility of a house-senate flip and for the president to become maybe the former president again or the current vice president now. there are so many nuances and differences that i don't think you can look back in history and use it as a guide. annmarie: do you think that the hedge fund managers coming into

talk about trump trades are getting over their skis? kevin: i get confused about trump trade versus harris trade. looking at it from a sector perspective, it's been discussed on this program before a lot, but there was this conventional wisdom that when you had the trump administration that it would be pro-energy. looking at the rhetoric and the policies, but from inauguration day to inauguration day, energy was the worst performer, the only sector that was down. vice versa, flip that on its head to, energy being the best performing sector since biden took office. that argument by itself is the clearest way of saying i don't necessarily know what a trump trade or harris trade is. you can look at the industry leadership throughout both administrations and it doesn't really add up.

jonathan: is it interesting to see the status quo versus the bond market? kevin: if you tie it to the deficits, bipartisan, it's who cares when it comes to spending. so i don't know what the impact is going to be. plus we have done a lot of work on this. my colleagues and i collectively wrote an article back in the summer about looking at a lot of relationships in the bull markets that we cover. looking particularly at bond yields and inflation related to debt and deficits. no matter how you slice or dice it, there is no strong correlation between that and yields or inflation. i do think it is something to worry about, by definition it's unsustainable in terms of trajectory, but as far as market impact itself, it's hard to tie that back to particularly the bond market and inflation. jonathan: final question, how

defensive are you about starbucks coffee, as defensive as annmarie? kevin: i drink bloomberg coffee. jonathan: the best coffee. [laughter] updating your news elsewhere, here is dani burger. annmarie: earnings to get -- dani: earnings to get through, hilton shares in the premarket, revenue rising falling short of estimates despite adding new hotels, lower travel demand hurt hilton and levered their outlook with a third quarter hit by worker strikes and hurricane helene. coca-cola shares lower this morning, two point 5%. according to moments ago it was a volatile session thanks in part to price increases with unit volumes falling, lifting the adjusted organic revenue for the year to 10%. in their release the ceo said the business continues to demonstrate resilience in the

face of dynamic external environments. tim cook is meeting with top technology officials in china. in his second trip this year he pledged to deepen the investment in the country and reportedly discussed cloud services and cyber security. china remains their most important market outside the u.s. iphone sales are up 20% compared to last year's model. jonathan: dani, save me, they are dropping f bombs around starbucks around the table. dani: you brought it up. [laughter] jonathan: more on coffee? annmarie: i'm user, like you say. coconut cappuccino, i love it. jonathan: closing arguments coming up on the campaign trail. >> i'm focused on the working people of the middle class and what we must do. >> four more years of kamala harris, north carolina will be an economic wasteland. no country could take that.

jonathan: that conversation is up next. ♪

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you people are (guitar noises). hand over the air guitar. i've got another one. jonathan: equities in the s&p 500, down by .2%. other stories this morning, closing arguments on the campaign trail. >> my plans are focused on hard-working middle-class people. his plans are about giving massive tax cuts to billionaires and big corporations. >> four more years of kamala harris? north carolina will be an economic wasteland. that's what's going to happen. your companies are moving out.

everyone knows that. smart people know that. no country could take that. jonathan: harris and trump looking to sway voters with less than two weeks until election day. the best testing closing arguments against trump are those that emphasize the lack of support he has from his former cabinet and numerous republicans. evan smith joins us now. good to see you. i see commercials like that absolutely everywhere, begging the question -- if that's the best testing case, why is this race still so tight? >> the race is tight because the electorate is tight. we have a structure right now where democrats are over performing at the national level to even have a chance at the swing states. every poll shows at closing up to a tight race. this is what every pollster has been saying for months. a 50-50 race, really tight, but now we are living that reality.

annmarie: you say it's the best test and it comes at a time when john kelly is speaking to the new york times, calling trump the definition of fascism. is this diluted in the sense that we have heard this for years from members who were a part of trump 1.0? evan: this was the best testing closing argument in terms of going after trump. the language that you saw from her about her goals around the economy, working people, and donald trump, the wealthy and who could cut taxes and the undertone to that. that is still the best thing for her to say about herself. yes, many people in the electorate are worried about this. nikki haley voters, people who supported her in the primary, republicans on primary policy, they are not worried about things like the former chief of staff saying that the guy is a fascist. annmarie: they've been doing a

lot of events with liz cheney and then you hear from tim walz saying that they want to give this idea to republicans that it is ok, you can vote for harris, at the same time he said they won't take any of that foreign policy advice. what are you getting if you are a nikki haley republican thinking about kamala harris? evan: a sense of security that the democrats are not this foreign entity where it would be forbidden for you to cross over. in our polling, nikki haley voters are real republicans on economic policy, immigration policy, on just about everything. they love george bush, condoleezza rice, they love that era of republican politics. there is a lot of push out of the publican party from donald trump. they don't like donald trump. but they have to establish pull into the democratic party if they are ever going to cross over. they voted against trump once.

now they have to get them to vote against him a second time. you have to make them comfortable doing something that they have rarely done in their lives, vote for a democrat for president. annmarie: when harris was asked what separates her from joe biden she said nothing comes to mind. how bad was that? evan: annmarie: annmarie: very bad. why wasn't she prepared for that question? evan: i think she was prepared. she has hang ups, and i don't think they are ill considered or dismissible around how it is perceived for a vice president to be disloyal to their president. for the first female vice president to be disloyal. for the first black vice president. she has now been tasked in these final weeks with this supreme act of disloyalty against joe biden, that is pretty messed up. she has dialed the answer in,

right? we saw it yesterday in that nbc interview, giving a more pointed answer about price gouging and housing prices. so, she has gotten more comfortable with it, but she is a loyal and dedicated member of this administration. lisa: would it be a good idea for her to go on joe rogan? evan: absolutely, great idea. any time she goes out and does an interview and talks to people, it works. we tested all sorts of clips, even moments from the first round of thing she did like with oprah and 60% of anyone who saw clips of her doing interviews thought it was great. even if those of us in media and politics would have tweaked things. when she goes on these media appearances, it works for her. lisa: at this point the polls seem to favor donald trump. you are nodding back and forth. the last time that you were on, you said you thought that pollsters were so self-conscious

, that they are overweighting him. do you still think that? evan: the odds of a polling error, there are a couple of pieces of evidence to support that. the last time we had a black candidate at the top of the ticket, barack obama, pulling at underestimated him by six states the six points in any given swing state. it's good at establishing what an electorate might do, but it's not always good at establishing changes. like the high turnout that you might get. and the last election that you had, that was a polling mists in favor of republicans, right? it overestimated republican support. people like to talk about these mrs., but the last national election that we had was a large multi point miss that overestimated republican support. i think there is plenty of reason to believe that if there

is a polling error -- and by the way i don't think there necessarily will be, but if there is one, that harris would be the likely beneficiary rather than someone punished. jonathan: we have to squeeze this in. harris is in texas. donald trump, around the corner in madison square garden. what's that all about? evan: it's the attention war. you can go to wisconsin and north carolina 20 million times but you have to get into the living rooms of people. not just getting out to a rally to see your favorite candidate. you have to get attention, you have to get chiron's. you have to win the news. doing a big rally or a big appearance, it might be in houston and that could be a way to do it. these people have jets. they can go back to those swing states in five minutes. winning the attention battle and

then going back to the campaign trail isn't simple. jonathan: it's getting a lot of attention, that's for sure. after the commercial break, an update on the health scare over at mcdonald's, the stock down by almost 7% in the premarket. from new york, s&p futures are negative by .2%. bond yields are up higher, the two-year out to the 30's with the tens at 4.04. from new york city, you are watching bloomberg tv. ♪

♪ jonathan: numbers from boeing dropping any moment now. equity features down by .2%. on the nasdaq down by a third. on the russell down by a third of one percent also. we heard from at&t and coca-cola already. no real drama from either of those names. lisa: what you could see is at&t getting pressured a little bit of equipment sales i want to dig through that to understand what their iphone sales and financing is like and their partnerships there. with coca-cola, they are able to raise their prices to offset some lower volumes. that is pretty interesting. jonathan: tesla coming up later

after the closing bell. boeing just crossing at the moment. reset priorities and create a leaner organization. lisa has the numbers. lisa: revenue for the third quarter is $17.84 billion. the estimate is $17.89 billion. the third quarter negative operating cash flow was $1.35 billion. the estimated was $1.99 billion. less of a loss than expected. the new c.e.o. said they need to improve execution discipline. to me what this really highlights is it sort of staves off some of the worst case scenarios. the third quarter negative adjusted free cash flow was $1.69 billion. the expectation was for less than that. still some issues. jonathan: that stock is down by about .5%. i'm pleased to say is george ferguson. lisa went to that straight to

that free cash flow number. what are you expecting relative to what we got? george: i thought it was decent numbers. i think the market's really focused on cash flow. i think cash flow could have been worse than about that negative $2 billion when you have the free cash flow line. i think we are very concerned about the amount of money they need to run the company. we knew they were about $10.5 billion in cash balances. that's about the bottom of what they need to run the company. that's why we have seen them file the shelf offering for the $25 billion. i think they may wait and see if they get a union vote, positive union vote today to decide how much they want to go into the marketplace and raise equity. there will be heavy devolution. you raise $25 billion that's really -- that's over 25% dilution. you don't want to do the

existing shareholders. frankly, revenue numbers not bad. the second quarter wasn't bad for deliveries. it was lighter than we expected. the longer the strike drags on, the more we get concerned it's hardtory restart the supply chain and get moving back towards 30 plus, 737 deliveries a month. for kelly, all the action is tonight. and it's all about how that union vote comes in. whether or not they can restart some plants, try to get half the union workers back into the factory. lisa: we can see the shares are luck wait -- are fluctuating wean gains and losses. as people try to understand the expectations that have been lowered again and again. when you look at the line items this is not great performance across the board. a miss for defense 135eus and security revenue. a miss for global service revenue. a miss for negative operating cash. a lot of questions here about how much you end up with a

company that has cut costs, not necessarily paying some of the workers who are on strike. but really don't have any growth. how can kelly give a sense of what this company is is going toe look like, what the growth engines will be in a couple years' time? george: today he can't. again i think the whole path forward, the entire recovery is all built on getting those union members back in the factories, getting them back in at a wage rate and benefit level where you can still make money in this business. then he's got to start to build 737 airplanes. that's the whole path. like i said, a lot of 2q is rear-view mirror. it's getting this union contract done. you got to think about this, these airplanes are almost cost to made. there is automation on these lines, these are skilled workers that put these airplanes together. he has to get them back into the

factory and happy and excited about making boeing airplanes. not just drag their men barely. that will be a lot of the challenge, too. as he gets an agreement goes for an agreement with the union. lisa: 5 p.m. seattle time. that's when the fireworks are going to be. do you think the agreement that's been discussed gets it done? george: it's close. the union members have been out of work for about a month. i don't know that i could survive a month without a paycheck. without health care. they got 35%, i think they may have wanted 40. it's darn close. they gave them a sweetener on the 401-k. i think he's going to get it. it's close. jonathan: we'll see later on. appreciate the update. george ferguson of bloomberg intelligence. the big decision really, bigger than the earnings, is whether we can can strike a deal. and that company trying to get back to producing planes. based on this morning maybe in the future design a new one.

lisa, this goes to your point and you have been focused on this the last month. the defending the investment grade credit rating. this came from kelly, i'm confident we have a good path forward to manage the realities of our miss byes and retain our rating writing. lisa: especially a time where they need to raise capital. we saw that with the stock share sale. how much will end up in the sort of spiral downward where their costs of interest payment are going up. at the same time they need to borrow to invest to start creating that new model that you are talking about. that's some is of the hangovers this company has to deal with even as they try to get production back online with the workers. jonathan: after the bell when we find out outcome of the vote. two other names, mcdonald's, under pressure after an e. coli outbreak turned to the quarter bound hand burringers sickening customers. one person is dead. the stock is down by close to

7%. starbucks pulling its guidance for 2025. with sales plunging for a third straight quarter. demonstrating the scope of issues facing new c.e.o. i brian nickel. that is down by 4%. joining now is michael. we split the two stories up because they are different. we'll get to starbucks in just a moment. mcdonalds, stocks are get being ham heard. how quick -- hammered. how quick can the company move past it? mark:they are going to be in a penalty box. a ton of bad press around it. the most recent one we can look to was chipotle. their same source sales dropped for five straight quarters. they dropped 20% in 2017. i don't think this will be as bad because starbucks was kind of unique. there was rolling issues right after the e. coli and nor row virus started to pop up in

different stores. that caused the issues to extend a bit longer. also it was a more complicated situation at starbucks. their food is out in the opened behind the sneeze glass. there is more opportunities for pathogens to get into the food make line. whereas mcdonald's we think this could be easier solve. if you start grilling your onions that would take a lot of the risk out of the situation for them. what we wrote yesterday was that we think sales and traffic will probably be impacted for about a year. lisa: a year? you are saying it's not necessarily the same as chipotle, chipotle had a longer runway in terms of needing to heal some of its relation was its customers. for mcdonald's how much does this race a question about supply chain issues and what kind of scrutiny there is over some of the suppliers since this was a specific supplier they believe who supplied the sliced

onions? michael: there is no doubt that this is going to have to be addressed. management has to do a good job on the upcoming earnings call. making people aware. also through their p.r. arm making people aware they are doing the correct things in terms of food safety. to make sure that the food that they are serving is ok. listen, it's unfortunate that it happened. it's a big risk in this industry. it's one of the worst things that can happen for a restaurant chain. they are going to have to pay their penance and prove to customers on the street that they are doing the right things to make sure that their customers are safe. lisa: also bad when it happens to companies people wake up realize $7 is too much to pay for a vanilla bean latte. that's the question. how much do they have to completely rejigger the business model at a time where sales are slumping.

10% in the u.s. 14% over in china. yes the new c.e.o. suspending guidance. what's your take away of how significant the overhaul of the business model has to be in order to bring it back to its former dominance? michael: listen, it's a big lift. this preliminary earnings release doesn't make me -- doesn't change my opinion of brian nickel or his ability to turn this around. it doesn't make me any more concerned. to me this is old news. he's been in the role for a month. anyone who has been following this story knows how bad the last few quarters have been. we have been writing for over a year now about weakness this fiscal year. so this wasn't a surprise to us at all. if i'm brian nickel, actually it's not a bad thing at all. he's got easier comps to lap for next year. by think that they can

postpositive sales growth here in the u.s. and china. partly because they are lapping weak results from this past year. also by instilling a culture of accountability, transparency, trust. getting the right members of management in the right positions. he made a switch in china. they just hired a chief marketing officer. they are also going to ramp up the marketing once they get the operations right. yesterday on his video he talked a lot about reducing the number of skews and the number of drinks that they are making because as i'm sure you have heard over the last year, there's been a lot of new items added to the menu. a lot of new limited time offers that made ba reese at that's jobs difficult. annmarie: maybe too many. what market do you think is easier for the new c.e.o. to

turn around? china or the united states? michael: i'm going to say the united states because he has a ton of experience in this market. i will go with the united states. i say china's a little bit more difficult because the gap between their -- price gap between them and their competitors is just very, very wide. they are selling coffee that's sometimes three times more expensive than k coffee. china will be a tougher turn around than the united states. jonathan: appreciate the updates. that stock recovering a little bit. down by about 3% in the premarket. under surveillance this morning boeing reported third quarter results, the missed wall street estimates in the first public presentation, c.e.o. kelly saying the company has some really big rocks to get behind us to move the company forward. workers will vote on a contract proposal later today in hopes of prevents ago five-week strike.

elsewhere secretary of state antony blinken in saudi arabia as the 5d mcmorris rodgers continues to push for a cease-fire. blinken reit ratted israel shouldn't retaliate after iran's missile attack. lisa: you have the secretary of united states going to saudi arabia. see the prime minister. his 11th trip to the region, he's come back every single time. we are less than two weeks out from the u.s. presidential election. i think the administration is buying time. i think that crosses the line. maybe when he leaves. jonathan: we have crossed a lot of lines over the last few months. that's for sure. annmarie: it would be very convenient if this got resolved and the middle east had a peace deal before november 5th. don't think that's necessarily going tobacco so easy to get right -- going to be so easy to get. jonathan: one final story.

the long time partner qualcomm to design chips. rapping up a legal battle and threatening the semiconductor industry. qualcomm sells hundreds of processors annually. both names down this morning. lisa: it goes to the question of apple trying to integrate artificial intelligence versus samsung. and the android. qualcomm provides a lot of the a.i. related features for android phones. if they can't use this key feature, how much does that diminish their ability to ininvestigate a.i.-types of technology at the same time that cristiano said we are on it. everyone will have a.i. on their phones and we'll be the leading ones. jonathan: don't have much a.i. on my phone. don't know about you. lisa: a personal assistant f it can make coffee. for $4. i would put it on my phone. jonathan: back to the coffee again. update on stories with the bloomberg breevment here's

dani bulgerrer. dani: moynihan is is urging the fan ed -- fed to be more measured. >> we have to get back in line. so they are on that path. there are late to the game. they have to make sure they don't go too far down. that's what they are trying to figure out watching the data. dani: moynihan said he expects the to cut rates by 350 basis points. 3.2%, reported positive third quarter earnings that helped overshadow the u.s. chipmaker's tis appointing forecast for the fourth quarter. texas instruments c.e.o. said the time something right for recovery. holding eight straipt quarters of revenue decline. neilsen says name give of the wnba finals was the most viewed in 25 years. viewership peaked at 3.3 million viewers in the decisive game between new york and minnesota. overall numbers for this year's finals came in up 115% compared to last year's. fans who tuned in were treated to an electric overtime finish.

that saw new york take home its first ever title. that's your brief. jonathan: thank you. appreciate t next on the program, dissecting a bull market selloff. >> i think that move higher in yields is more about a growth pickup than it is about anything related to necessarily concerns about inflation. i think the market's going to get back to what is the foundational elements of the markets that we are seeing today. jonathan: that conversation up next. live from new york city this morning, good morning. ♪

jonathan: treasuries down once again this morning. yields high up by two basis points. unsurveillance this morning, dissecting a bull market selloff. >> i think that move higher in yields is more about a growth pick up than it is about

anything related to necessarily concerns about intblaition. it would seem unlikely that the bond market and equity market would be pricing in today a more complete picture of how this election will unfold. there is going tonight knee-jerk reaction as there always is. we could get a bear steepenner of the yield curve in the event of a trump victory. but then i think the market's going to get back to what is the foundational elements of the markets that we are seeing today. jonathan: the latest, 10 year treasury yields trading their four mount highs as investors confront better economic data and prospect of a trump 2.0 presidency. morgan anally's matt hornbach writing many investors see the republican sweep outcome as most bearish for u.s. treasuries. we think any rising treasury yields would be more contained than in 2016 based on a comparison between expectations for fed policy today versus then. i'm pleased to say good friend of ours matt hornbach joins us live.

give me more detail on that. the bigger difference now between now and 2016. matt: the differences extend well beyond what people expect the fed to deliver over the course of the next couple years. but certainly the fed is a very big part of the story. in 2016 we have to remember that janet yellen said was about to embark on a rate hiking cycle, the second time they were trying to start it up. and investors generally expected the fed to be hiking rates very gradually going into that election. in the wake of that election, of course, investors changed their minds very quickly. over the course of the next year, revised higher their expectations for fed policy to the tune of about 1 1/4%. that doesn't sound like that big of a deal today because we have

just lived through 525 basis points worth of rate hikes in 2022 and 2023. but back then 125 basis points was quite a big deal. so if we take that number, jon, and apply it to today's environment, that would essentially be the same thing as saying that investors would go from expecting the fed to cut rates modestly, to no more rate cuts in this cycle. that's a leap that i don't think investors are going to make in this particular cycle. which ultimately means the bond market selloff will be more contained. lisa: there is an argument this time it's different because the deficit is different. it's significantly bigger. we just had a cycle where we essentially got fiscal stimulus into a growing economy, healthy economy by many measures. why is is the deficit issues not a concern for you? i'm not talking about the short end or the specific rates tied to fed policy, but the long-term rates that are more hinged to

the fiscal outlook potentially. matt: i'm really glad you asked me this question. i have a strong view that in the end what moves the bond market are how investors change their expectations for fiscal policy or for treasury supply. if you ask every investor in the marketplace today whether we are going to have bigger deficits in the future, irrespective of the eyeks outcome, to a person you will hear the view, yes, we will have larger deficits. it's already expected by most investors. therefore it is already in the price to a certain degree. the question then is, what type of deficits do we get over the next five years relative to what people expect already. that's going to be the most important part of the bond market reaction to this election. in the end, it's how people's

expectations change vis-a-vis the deficit is what ultimately moves bond markets in any gave period of time. lisa: that said, matt, given how some bearish people are getting on bond yields and and the special actation from t row price, how aggressively are you buying longer term bonds right now. matt: i certainly think that there's value in the treasury market. a lot of that value depends on knowing an outcome that at this point in time is unknowable -- unknowable. we tell investors hug their bench marks tightly, wait for the opportunity to arise in the wake of the election. an outcome of which is is very uncertain -- of which is very uncertain. the timing of knowing that outcome is uncertain and therefore i think investors are best placed to hug their benchmarks tightly.

in terms of the duration exposure, lisa, it really about where you think any additional treasury supply will come. and in the end, when the treasury increases coupon issuance, they don't do so just in the 30-year treasury bond. they increase supply generally across the yield curve. for investors out there who are worried about higher deficits, who think that those deficits will be larger than the marketplace is priced for, my recommendation is to be underweight the immediate sector of the yield curve, not necessarily the long end. in the end when the treasury increases supply, they are going to do it across the curve. so the weighted average that have supply is going to hit most strongly in the intermediate sector of the curve five to 10 years. jonathan: 40 seconds left i want to squeeze this in. dollar stronger against everything in the g-10. the interrate chart a slow and steady march to the right.

152.96, about to break 153. what's story? matt: i think the u.s. economy has once again proven more resilient than fears had suggested. as a results of the interest rate complex moving higher taking real returns in the u.s. higher, that's going to attract capital into the u.s. it's going to put outward pressure on the u.s. dollar. just like there's some degree of pricing of potential election outcome, there's probably something going on in the dollar just the past week that is perhaps putting some higher probabilities on an outcome involving tariffs. a lot of investors think that the dollar he going to go up on tariffs. jonathan: close to 153 on dollar-yen. republican senator tom tillis of

north carolina. and toy of f.s. investments. third hour just around the corner

>> u.s. equity market has done so incredibly well. it's been an incredibly strong performing market.

>> do you i still think corporate earnings are doing quite well. >> valuation does tend to matter. i don't think it's debt. >> we think that valuation is probably the most important thing to have at this time. >> focus is so much on the mega7 and following the trend there that a lot of these different pockets of the markets are beginning to see some fundamental momentum. >> this is bloomberg "surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning. good morning. 19 minutes away from the opening bell. the third hour of bloomberg "surveillance" starts right now. equity futures on the s&p 500 softer. down by .2%. the first back-to-back losses on the s&p since early september. didn't realize it's been that long. that's a stretch. the s&p this morning softer on the nasdaq, down .4% with totals about the earnings. the calendar is packed. after the closing bell we'll hear from the likes of tesla,

i.b.m., already heard from boeing, at&t and coca-cola. lisa: disappointments. boeing is in a world of hurt and they continued that with disappointing numbers, in particular free cash flow more negative than people expected. at&t marginal disappointment. i thought it was interesting what we got out of some of the consumer facing brands. the idea we do see on the margins some negativity. even unit sales in coca-cola coming in soft. they were able to raise prices in order to offset that. again, still pricing pressure. but consumers, don't know. the $7 latte. i don't want to go back to that. jonathan: doing the latte so defensive about starbucks this morning. i have no idea why. we'll get to that later. back to the macro. through the week you're going to hear more and more headlines from central bankers and government officials from the i.m.f. world bank meetings in washington, d.c. this is how they kicked it off by lowering its global growth forecast for next year the risk

of building up to the downside a growing uncertainty in the global economy. lisa: they talk about the $100 trillion in global debt anti-fiscal overhang is creating a problem. they also talk about geopolitical concerns. not necessarily down grading u.s. growth and whole overall year forecast in line. how much do they present a remedy to it at a time where some of these global organizations don't have the same kind of clout. you hear about what's going on with the brics conference and putin talking about how this is truly a multi-power world. annmarie: and this bullish momentum right now, but tuomasive catalysts. one geopolitically. the u.s. elections, city directionless. they have left the markets without a clear direction. some people come on saying it's a trump today traid? really, is it? there will be a loft spending.

jonathan: a quote that jumps out from the i.m.f., there is a rise of protectionism. protectionist policies, disruptions in trade that could affect global activity. for who? it made me think yesterday. after we just had a conversation talking about a no landing in u.s. economy. none of that stuff came up. i thought, our policies, your problem. that seems to be the message from the trump campaign to washington, d.c. and the i.m.f. world bank. lisa abramowicz wall street strategists say that's what's going to happen. that's why the dollar will strengthen. that's why people are looking how to build out in the u.s. it raise an awkward moment to have these meetings in washington, d.c., for the i.m.f. talking about protectionist policies at the same time that that has been carried through with this administration as well. that i think is going to be a real tension that needs to be touched out. annmarie: when you have them coming out and say tariffs will be bad. bad for the rest of the world. this administration also kept 25eur riff -- tariffs in place. they might be more drastic under

the former president. you can't say there is not going to be tariffs or export controls or idea of an ally not being able to buy as you us company under the democrats as well. there is protectionism across the board. jonathan: have you noticed it's a tax when they do it but national security when we do it. annmarie: branding. jonathan: there is a branding difference in washington, d.c. equity futures on the s&p 500, 0.25%. alicia lavine as market pause on fed cup fairs. north carolina senator thom tillis on hurricane helene recovery. we begin this with stocks lower and bond yields inching higher as investors rethink policy and prospect of a second trump presidency. alicia lavine, writing markets have not lived up to the september dread and october flush. as previous years. we think the market melts up into the end of the year with volatility around the very close election. markets like certainty.

alicia joins to us provide that certainty. good morning. get into the election. how much of what we are seeing, foreign exchange, bonds is the so-called trump trade making a comeback? alicia: won't say it's a trump trade. it's the polls have moved slightly in trump's favor. so the trades are being put on. if you look at what happened in 2016, the dollar strengthened, the banks skyrocketed. that's already happened before the election. so the trade's early. i think some of the bond yields as well we have seen in the last couple of weeks is also part of thinking about some of the inflationary aspects of whoever win this is election. there is inflation on both sides of this. i think there is -- to the extent that people may be doing a trump trade, i think it's overdone given the 50-50 nature of the polls. the pollsters are telling you they don't know who will win. jonathan: you remember the morning of 2016. >> long night.

jonathan: the equity market was down, hard. acceptance speech and he utters things like infrastructure spending. this market just rebounded. the trump trade was off to the races. everyone got onboard. do you see less chance of that happening this time around? matt hornbach of morgan stanley made the point like you did we are bert prepared than 2016. alicia: we are more aware of it. the market has priced some of it in. you are not going to get those sectors or that immediate reaction because if it's already priced in it's not a surprise. markets, they price -- if they price it in, the event itself is selling the news. i don't think this is going to be a great momentous thing. i think that we have been telling our clients never to invest with your politics. or what you think the politics are of the moment. ultimately if you take two steps back and look at the markets

over a cycle, the politics of the political configuration does not affect your assets or asset classes or the stock market. that is a very important thing to keep in mind as we head into the last two weeks of this election cycle where people are feeling hot, depressed, thrilled, the combination of both. worried. it doesn't matter to market performance. it's the fundamentals of the u.s. economy and earnings and interest rates. that's what we focus on. that's what we try to keep our clients. lisa: you see buy on the rumor and news. buy maybe more tonight news. at least in equities. is the same in the bond space at a time when you have been selling on the rumor? some people are speculating you sell more. matt push back we all know this. how much can you get that rally in stocks if you don't get a commensurate rally in bonds? alicia: don't think the bond move will be dependent on who wins the election.

we just moved 60 basis points on 109-year, that's dramatic. one could state move has been done as relates to pricing in what's going to happen with the election. ultimately, i think the deficit and debt are bigger issues than who win this is election. as i said, if there is a divided congress, neither of these two candidates whoever win also get their full spending plans through. it's not going to happen. there is going to be a little bit more of a ceiling on what each candidate can do as they win. that's with a split congress. lisa: it goes to this question of we have seen the rotation rotate back a little bit with big tech outperforming the past few sessions. is that the new trend? the new sort of narrative in markets if we do get a sustaining of these types of yields. alicia: as we have spoken about many mornings at this table we see tech both as defensive and offensive. right now it's playing the defense because of the cash flow

and the earnings and the margin and being entirely not connected to what's happening in the bond market because they can run their businesses without borrowing. to that extent, if you look at the beginning of the fourth quarter, tech has outperformed. it's outperformed because it's sort of been the third quarter was all about cyclicles, value, it was about financials coming back. you saw that -- tech take over again for the fourth quarter. i think you are likely to see that until the end of the year. if there is any uncertainty at all on outcome or policy, it's the safety trade. these large cash flow generating companies that can protect your portfolio. that's where investors will go, i think, until there is some certainty on outcome and policy. lisa: basically if there is uncertainty for a few days, the outcome of the election, or contested election, tech does well? alicia: it does well. lisa: do you think this drags on for weeks or months? alicia: we don't do election

trades. we think the market will be fine because tech -- between communication services and tech, i.t., hasegawa almost 40% of the s&p. we think you are protected. this is why you shouldn't sell the market if you are nervous over election results because the strongest and best companies which play defense in uncertain markets with strong dollar and high yields can do well in that environment. that's where investors go. it supports the index. lisa: last week see wee saw the oil markets, speaking of hedging and protection, we saw them pull back 8%. even though we have serious risks going on arne the world, especially in the middle east -- around the world, especially in the middle east that could have supply disruptions. do you see it's underprized. that risk premium? alicia: no. we have enough supply. it seems that the china stimulus may not be enough to really grow the economy in the way that the markets have been pricing in in the first excitement in the first week or two right

afterwards. unless you see a huge impulse from china on the growth side, i think you are going to be fine on oil. in the end, if you go back, last geopolitical events. then you look at the performance of the stock market. three and six months later. unless there was a financial shock associated with it like an oil price spike, markets recovered and were higher three and six months later. the geopolitical risk is a talking point. but it doesn't really -- it should never affect your investing because it doesn't work as an independent variable signifying what are you going to do or afterwards. the one year risk is the oil market. that's what can affect the markets. that's how geopolitical risk tends to get mediated into the markets as the russian invasion of ukraine was in 2022 when we had $120 oil. jonathan: crude soft they are morning. good to see you as always. thank you.

equity futures on the s&p down by a quarter of 1% with an update on stories elsewhere. bloomberg brief with dani burger. dani: kelly warned boeing will need to overhaul its culture to end its multiyear crisis. he laid out a four prong plan to move forward saying it will, quote, take time to return boeing to its former legacy. as for the earnings themselves, boeing reported a negative free cash flow of $2 billion in the quarter. jpmorgan is in talks to trade physical ln.g. the bank has held talks to secure a long-term l.n.g. supply. and at least 3 protects are under development in the gulf coast. j.p. and has been pushing in recent years to get back into trading. some of those physical commodities it abandoned in 2014. secretary of state blinken has arrived in saudi arabia after meeting with israeli prime minister netanyahu and the

president in israel. they both agree the killing of hamas leader has opened new possibilities for ending the war in gassa. made no -- gaza. made no indication on a plan what comes next. this is his 119 trip to the middle east since last year's attacks on october 7 and his last before the presidential election. that's your previous. jonathan: more from dani in 30 minutes. next on the program, the morning calls plus. republican senator thom tillis of north carolina. that conversation around the corner. from new york, good morning.

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and todd... well... he's practically euphoric. practically. so, let's get to work. (♪♪) jonathan: the opening bell 1 sln 40. treasuries lowered down for a third consecutive session.

yields higher. up by almost three basis points. your 10 year, 423.36. time for morning calls. downgrading mcdonald's to new tram. reports of e. coli outbreak could affect consumer sentiment. cutting the price tag on starbucks to 105 pointing to weaker than expected results. down by 3.3. j and p securities upgrading snaps to outperform. expects ago stronger earnings report. stock up by 2.5%. turn to the election. more than one million people have cast early votes in the key swing state of north carolina. as communities there continue to grapple with the aftermath of hurricane helene. polling anches in the state showing trump holding a league on a half percent an point. joining us is the north carolina senator tom till thank you for joining us. good morning to you. what a difficult moment for north carolina. can you walk us through the

devastation that you have witnessed over the last month? thom: i think it's important for everyone to understand we have seen the images of asheville. it's a profound problem there. it's an impact zone roughly the size of the state of massachusetts. what you have seen in asheville i can take you to a dozen other places where people are suffering. communities cut off. no drinkable water in asheville, yet. it may take a few more weeks before they can start boiling water. it's a crisis that we have never seen in the mountains. we have never in this country seen a hurricane impacting the mountains. basically maintain the integrity of a hurricane. went up into north carolina, dumped 30 inches of water on several river basins, simultaneously. we have a long haul. we have 20-mile segment of i-40 that will be shut down for a year or two. $1 billion for that piece of infrastructure. 80 miles of railroad bed. hundreds of bridges and roads. we have a lot of work cut out for us. one of the things we have to do

is recognize this recovery is very different from any other storm. it's going to take longer. we are going to have to have exceptions generally only last for a year or two for probably four or five years. lisa: are you getting everything you deserve and you need from the federal government? thom: i think at this point we are doing ok. hi some differences with the governor about surging d.o.d. resources from fort bragg -- fort liberty. the 101st airborne. slow to respond. but i think they are doing a good job. the relief effort on the ground, fema resources, american red cross, all those folks are doing extraordinary work as they always do. annmarie: the vast majority of the counties hit vote republican in 2020. what does it looking like now getting the individuals to the polls? thom: they are doing an extraordinary job. yancy county, one of the hardest hit, had an amazing turnout. one of the things we are doing. we are doing early voting differently. normally north carolina is one of the first states to vote,

that's in september for early voting. we got delayed for a variety of reasons. one of which was updating the ballot. they are coming out. we just got to make sure they have that opportunity. the legislature has passed laws two weeks ago that allow them to vote in various locations so they are not as stringent if are you in a disaster declared county. we are doing everything to make sure the vote counts. lisa: do you think the hurricane will have an impact on donald trump being able to maintain his hold on north carolina being the red state? thom: i don't think so. i think president trump wins by a margin about what he won in 2020. i was up for election in the same year. i think president trump carries the state. lisa: meanwhile, you have been focal about how you see things back in d.c. especially as we head to november. sort of hard pivot, i apologize. i am curious to get your take, not only in november will we get a presidential leaks, but minority leader, mitch mcconnell, stepping down. are you in the running? are you going to be the --

thom: i'm going to vote for a guy named john with all due respect. jonathan: carry on, please. thom: they are both silent leaders. both good friends of mine. i think they'll do a good job of leading the conference. we'll have that in a couple weeks. lisa: a lot of pushback saying we need new leadership, different brand. old guard ever republican rule or governance in washington, d.c. it seems like the donald trump camp is -- has been at loggerheads in the past with that particular leadership group. do you think that his coming back to the ez presidential office -- to the presidential office would challenge either of those johns, john thune or john cornyn, if people are wondering? thom: i forgot. i don't think so. the senate is a weird thing to understand unless are you part of t we like to be led by people who have election certificate who are senators.

we tend to elect our leaders from within. we don't like outside influences. the arguments that were set forth by one of my colleagues, mike lee, are arguments we have to distinguish between the senate rules and the qurches rules. --conference rules. what mike or senator lee is doing is the conference rules which would unilaterally weaken our leader as they match up to the democrat leader. if we want to have a discussion about changing some of the senate rules, count me in. i have a long list. but that's going to require bipartisan agreement to make the senate more efficient. it makes no sense to unilaterally disarm against a very powerful leader model in the democrat conference. lisa: do you think either of these senators named john are basically going to be a continuation of mitch mcconnell and his style and leadership? thom: don't think so. the other thing that's funny about mitch mcconnell. i have a dog named mitch. i'm big fan of mitch mcconnell. jonathan: was he named after mitch? thom: he's about four years old.

named after mitch. he's an extraordinary dog. mitch is an extraordinary leader. people get it wrong. you don't go into the office and get assigned a legislative initiative by mitch mcconnell. you go get a good idea, sell the leadership on it, and run with it. i would just argue for people who think that's how it works to open their eyes and realize if you step up and you lead and you have something that you can build support for in the conference you can move t that's how he operates. lisa: talk about the way the senate operates that's traditionally. we are dealing with an election right now where there have been questions about whether some of those rules would be questioned or undermined not necessarily with the senate, certainly with federal employees. what we have heard some of the proposals from former president donald trump. i'm wondering if you think that his style clashes with the style that you are talking about and that you have been a part of. thom: no. the president trump's style is

what we need. i was a management consultant, partner at price waterhouse at organization transformation. you need people that stretch. and president trump sets stretch goals. you need that kind of friction between the two branches of government, i think, to really get moving more quickly. to get things done. not just to continue to promise every four years this is the four years that's going to get done. as long as we have exercise paish wednesday the executive branch. the executive branch has to exercise patience with us because we need to get legislation out the door that has enduring quality. the only way to do that is through bipartisan results. we are clearly if we run the table going to use reconciliation. simple majorities, no democrat votes. to extend the tax provision from 2017, etc. we should never take our eye off the ball of working with democrats as i have multiple times on significant legislation to actually do the hard work in the senate. lisa: you are from a purple state. your governor right now i

interviewed a few weeks ago, roy cooper. annmarie: you have to work with him a lot. i want to ask but leading north carolina. what do you make of your republican candidate for the governorship? thom: mr. robinson and i have a disagreement. mine was more rooted in the credentials for the job. we are the ninth most populous state and we are one of the most popular states to move to for business. we have to have proven executive leadership there. i served with josh stein. i believe he's a ploa tax, pro-liberal. i wish we were matching up a candidate that could defeat him. don't think mr. robinson will get it done. jonathan: final question. madison square garden, donald trump campaign. you attending? thom: i am not going to. jonathan: wondering if that's why are you in town. thom: i will be back in north carolina. jonathan: good luck with the rebuild. thank you, sir. senator thom tillis of north carolina. next on this program we catch up with frances donald and troy gayeski of f.s. investment.

your equity markets shaping up. s&p down .2%. bond yields drifting high up by three basis points on a 10 year right now for 423, almost 424. foreign exchange stands out for me this morning. dollar-yen takes out 153. bear in mind, the lower the year was two days before the federal reserve cut interest rates on september 16. that was the low at 140. that is a month turn around in dollar-yen. from new york city, this is bloomberg. ♪

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jonathan: one hour away from the opening bell. equity futures just off session lows, down just a touch. we are negative by a quarter of one percent. good morning, manus. manus: mcdonald's is off its low point of the day. grappling with the e. coli breakout where you have dozens of illnesses and one death. the question here is about containment, control, and convincing the investor they have a handle on this. jpmorgan say the stock is night trading on emotion and worry.

this break will not engulf the united states of america or go international. you want to buy the selloff. morgan stanley said its a knee-jerk reaction. through two big houses on the street that caution and downgrade the prices. 290 on a downgrade. and goingen hiem cautious on this stock at 285. it depends on whether you believe containment and control has been delivered. revenge tourism the narrative of 2022, 2023, is it fading in 2024? hilton lowers it's outlook. is revenge tourist trading. in europe it's up nearly 7%. here there is just a little bit of a leveling off. strikes that they have worked their way through and hurricane helene. 33,000 new rooms a record for hilton. expanding into a slow down. qualcomm, this is the nuclear

option that we are going for. they scrapped the design license with qualcomm. 60 days to get a deal on this dispute. it impacts both of them. looks like arm's gone to the nuclear option. jpmorgan say they'll probably negotiate a deal. some context. qualcomm sell about 100 million into phones, android phones and p.c.'s. do not underestimate, qualcomm is 11% of arm's revenue. this is a battle that will brew for 60 days. good morning. jonathan: good morning. appreciate t i haven't heard that phrase for a long time. revenge tourism. revenge spend. i remember chris of wells fargo came out after the pandemic. he said john it will be spring break for adults for the next two years. that's what it was. lisa: it was. then it was get back to the office. spring break is over. we have seen that increasingly. what did you say earlier that you invest in the u.s. and you travel and tour in europe? jonathan: not my line. i have heard that a few times. lisa: that's what he explained.

jonathan: i'm not going to name the guy who said t i found it offensive at the time. investors are way too fresh economic data this week looking for further signs of economic strength. frances donald, the u.s. is in a k shaped economy. certain seg segments of the u.s. economy are doing well. others are empirical recessionary. frances joins us now and got a round of applause when she walked into the studio. congratulations on the new seat. frances: thank you. jonathan: how do you set policy for that economy? frances: you have to set policy for the aggregate. when you have folks on this show talking about the whole penny-wise and pound-foolish of --whole size of the pie. it's going to be difficult in 2025 to get two quarters of negative g.d.p. if you are doing anything else in this economy, if you are a

small business owner, picking stocks, you have to go beyond that g.d.p. number. you have to look under the surface. when do you that, what you will find is that it is not just a dual mandate for the federal reserve, it is a dual economy. we have pockets of extraordinary strength and resilience, big companies, high income consumers, then pockets of real weakness. small businesses, low-income. when folks say there are recessionary signals, they are right. when they say the economy is resilient, they are also right. i'm like a mom at a football game. everybody wins. everybody is correct in this environment. it depends what your target will be. jonathan: work with the aggregate for the purpose of policy. in august we just come off the july jobs report. not great. chairman powell goes to jackson hole. delivers a speech. the conversation changes quickly. there are major concerns about cracks in the labor market. maybe this horrible cycle where this unemployment rate feeds on itself and we start to approach five quickly. two months later we have guests

debating whether this economy is re-accelerating. frances: extraordinary amounts of uncertainty. i know we talk about it all the time. there is an extraordinary uncertainty tax on this economy. it is come interesting the election. huge amounts of surveys are telling us businesses are saying we can't make decisions until we know the outcome. there is a pause occurring. revisions in the data. how oven are we talking about massive revisions that change the story. who knows? maybe we could get a big revision over last month's data. we have very low response rates. our ability to navigate month-to-month is certainly declining. that's why we have to focus on some these longer six to 12-month themes. my sense is the federal reserve is going to have to do this, too. they are aware of how limited their visibility is as well. what they should be looking at is the unemployment rate has been steadily rising since january of 2023. the trend is going in the that direction -- going in that direction. they are going to focus on massive amounts of deficit and debt at the federal level.

how that offsets or the risks there has to be a pullback sometime in the next few years. they are going to be focused on normalizing those rates to bring them back in line with where the general sense of the economy is. i hope this federal reserve is not going month-to-month off the data when we are seeing this level of revisions, uncertainty, and low response rates. lisa: you said something i want to pick up on. the uncertainty tax is excised over this economy. if that's the case then what's to say once that uncertainty tax is lifted we'll know who, ostensibly, gets elected. that's past us and some of these other levels come down. won't that reignite the confidence and c suite, especially of companies that do have cash that have been waiting on investments and hiring plans? frances: that depends on the outcome. elections and policies being put forth. we also may be in a period of your honor certainty between november -- a period of uncertainty between november and january as well. it's going to depend on that outcome. meanwhile, behind the surface,

small businesses, the least common they have been since the great financial crisis. that's not a little thing. they have their highest uncertainty and lowest confidence. small businesses employ 80% of americans. in the background there are these six to 12-month trends gaining steam. the fed has to get in front of that in order to stick the soft landing. that's why we continue to think they'll be easing policy into q1 of next year. lisa: you talk about a k shaped recovery, economy. talk about this with consumers and talk about this with specific sectors. i'm wondering we have seen the industrial sectors in recession for quite a while. there is some thought that maybe they are emerging from it. now there are questions about whether some of the consumer facing service sectors are going to see some declines after really go-go days of the post pandemic era. is that how you see things? frances: i'm happy you bring up the industrial space, manufacturing. as much as we are talking about the labor market, one of the most interesting facts for me in the u.s. economy is industrial

production is smaller now than it was in 2018. the u.s. manufacturing segment is going through one of these what i call real pockets of weakness, or almost recessionary environments. we are seeing that globally as well. we are going to have to see a pick up on that if we want that side of the economy to start re-accelerating and supporting the consumer side. the down seumer will come down to wages and employment. what concerns me now is employment momentum is not going to the right direction. we need something to arrest that. hopefully that turns out to be fed cuts and a little bit of certainty out of the election. lisa: where does all the industrial policy money from washington, d.c., gone? frances: it's not in the date. month to month we are not seeing it at i.s.m. data. we are not seeing in the aggregate pie. economists like to say we are not political. we don't make political statements and i'll hold to that. it's been interesting to me in this particular election that we see the econdata over the past five to six years coincident and on the same sort of themes as we see the political discourse.

annmarie: do you think with either one of these candidates potentially you won't see a pickup in the manufacturing base in the united states? potentially one talking about tariffs going around the wall of the u.s. frances: it will depend on the outcome of the composition. meanwhile the u.s. has a small share of its economy on manufacturing not so true for the rest of the world. places like germany, no k shaped recovery there. we can use hard landing for places like germany. and just to rhyme on that k shaped theme, it's not just the u.s. economy that's in a k shape, it's the global economy that's in a k shape. and that upper lever, the winner is by far the u.s. economy because it is more consumer levered, less of that manufacturing exposure. lisa: you mentioned something, i'm not going to threat go. this idea that you see people's political views as economists borne out by some of their expectations, economic expect'ses. are there economic expectations and projections right now that are coming out from either bent

that seem overplayed to you or gaining a lot of popularity. might not be as rooted in economic theory. frances: here's what i see. i turn on the tv. i watch bloomberg every day and i hear the economy is resilient. g.d.p. is fine. the unemployment rate is really low. if are you a low-income consumer in the u.s., the federal reserve just published data showing this, your spend something about half the growth the high income consumer has. you are not seeing the same real wage growth. there is a disconnect between that aggregate conversation and what many individual experiences are feeling. problem matically the top 20% of americans feel 40% of growth. it's no surprise to me that we see perhaps a sentiment disconnect or confusion over how come the experts who talk about g.d.p. and payrolls don't reflect my everyday experience. that only takes an extra 10 minutes in the data to see that big divide. i think it's something we need to pay attention to in this particular cycle. jonathan: that speaks perfectly

to the disconnect we have seen over the last 3 1/2 years some of the messaging we have seen out of the administration and people feel on the ground. many times they felt like were gas lit by the administration. annmarie: sitting at home going to the grocery store and they are paying more and wages have not kept up. maybe it's on the economic data. what are you talking about i see in the polling data. especially when individuals have a chance to write in how they are feeling about certain sectors of the economy or administration. they are not feeling what this good data is showing across the bloomberg terminal screens. frances: here we are saying had a a, inflation is down. prices are 20% higher than before covid. most folks in their day-to-day life. this vegetable i bought today is this amount 12 months ago. they look and what things cost. it's not the econdata is wrong. foift has to set policy based on

the aggregate. it's not wrong to talk about that. if you go a layer deeply, more deeply, you'll see why there seems to be a disconnect in the data and why some data points, for example small business confidence, seems decked from standard models. jonathan: this was a clinic. we missed you. thanks for being back. frances donald there of r.b.c. equity market on the s&p 500 softer here, down by a third of 1%. rolling over a little bit f you check out the bond market board, yields grinding higher more. taking out 424 on a 10 year. joining us now is troy gayeski of f.s. investments. what is this bond doing at 424? troy: what we have had happen here clearly is we articulated over the last one to six months, when the fed goes to cut as we expected them to towards the end of the year, and the economy comfortably avoids recession, are you going to have a twist of the yield curve. historically the spread between 10 year and fed funds has been somewhere between 125 and 150

basis points over a full cycle. there have been times where it's been 200, 300 basis points or higher. we always question that thesis from the bond permeables. the fed's going to cut and the back end will drop. that never made sense to us. if anything, we should have a steeper yield curve because we are in a hire for longer inflationary environment. we are going to issue over $20 trillion treasuries. over the next 10 years. they have the worst stock to flow by far over any major asset class. $20 trillion is 72% plus of the existing stock out there. i think anyone that jumped on the bond duration train is having regrets right now. lisa: they might be having regrets, the flip side we don't see what's on the other side of this. we have a number of people, including matt hornbach, saying maybe people are overreacting or expecting one to a potential election outcome. sensibly we are going to see that disinflation continue. troy, at one point do 10-year yields become attractive to you

understanding what you just said in terms of just bonds losing some of that ballast reputation? troy: when you look forward -- we have probably bottomed from inflation for the time being. we expect a modest re-acceleration next year. nothing like 2021, 2022. think core in the high 2002s, throw threes. from our perspective take the front end of three, as soon as we see that happen is the summer of next year. latest is the ends of 2026. roughly around high fours, 5%. which is sort of where we were in october of last year when we were having the issuance panic and that big gap in yields. then you start to get to a point where because of the roll down yield curve and additional yield, you have attractive yield. you have hedge protection. and you have roll down yield curve. for the time being it's difficult to get overly excited about duration. especially when there are so many other alternatives like private credit or senior

personal real estate lending. annmarie: you go to private credit and other types of alternative one thing. lisa: are you saying that stocks also have similar kinds of hair on them in terms of evaluationish -- a valuation issue? troy: when you look at equities. we are going to get growth. u.s. economy, last guest was dynamite discussing the k shaped progression. lower income consumers have been behind. upright consumers great shape. shows up in the polling data more supportive of the current administration. if you think about equities the problem is is not growth but valuation. are you 22 times forward earnings. when you have 20 multiple or higher, we are sympathetic to the fact we should have a sustained higher multiple. given the concentration of markets. the incredible free cash flow margins of negative cap tech. you tend to have much more muted forward returns. clearly there's been a little he over extension in the short term.

in the event that yields keep going higher, we could have a mini repeat of what we saw multiple times the last two years where higher yields are driving multiple compression. then locally, lisa, the only fundamental problem we see with valuations going into next year, not tied to long term performance but near term, not all g.d.p. has slowed. we expect we should continue to slow. markets are pricing nor market acceleration and also a 10% margin expansion. we can get there if the market becomes narrower and narrower. the megatech. magnificent seven minus tesla. that just seems unlikely given how much broader this reality has become. those are curious data points. 10% acceleration operating margin, re-acceleration of revenue. that's a high hurdle to me. forward returns are going to be much more muted.

volatility is not going to be as high as 2022. it should be higher than it's been since october of 2022 through today. jonathan: good to hear from you as always. god to see you. we start the conversation on the bond market. siem pleased troy went there. i think this is important. we have had a move of 40, 50 basis points on a 10-year yield since the federal reserve reduced interest rates by 350 basis points on september 18. troy's points the lower rates are leading to high yields is is important. lisa: the idea because the fed is easing, because -- adjusting policy, they are allowing growth to be moreau bust over a long erm t actually allowing -- a longer term. actually allowing inflation to be higher over the long term which is something are you sighing in the break even rates. perhaps that's what's being reflected in yields. jonathan: 424 on the 10 year. update on stories elsewhere with bloomberg brief. here's dani. dani: frontier airlines is

exploring a renewed bid for spirit. the budget airlines have had recent discussions about a possible merger. people familiar said the talks are at an early stage. if the deal between the two carriers is reached, it would happen likely as part of spirit restructuring its debt and liabilities in bankruptcy according to those people familiar. starbucks has pulled its guidance for 2025. the qufee chain reporting its steepest quarterly sales drop in four years with weakness especially evident in both the u.s. and china. starbucks says withdrawing guidance for the current fiscal year will give new c.e.o. an opportunity to solidify a turn around plan. microsoft co-founder bill gates throwing his support behind vice president kamala harris. "the new york times" reporting that gates said privately he recently donated about $50 million to pack harris. gates made his donation to future forward, the main outside fundraising group supporting harris. in a statement to the times gates said this election is different. that's your bloomberg brief. jonathan: thank you.

thanks this morning. next on the program we'll set you up for the day ahead. you're watching bloomberg tv.

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jonathan: equity futures down by a third of 1% on the s&p 5 hundred. check this out in the bond market. yields up again up by three basis points. just persistent. keeps going. lisa looked into the bloomberg waiting for to drop. lisa: i'll be on the train to washington, d.c. jonathan: reporting earnings after the closing bell. tomorrow another round of jobless claims. plus we'll get earnings from u.p.s., southwest, and american airlines. on friday consumer sentiment.

saw palo, brazil, the bloomberg new economy forum continues today. joining us is bloomberg's jymana. this is the one we wanted to be at. phenomenal conference. walk us through what's coming up. >> hi, guys. good to see you. out of context. it's all kicking off. there are plenty of events happening here. g20 in a month's time. next month rio is hosting c.o.p. we hear the title of today's forum is bracing for new reality. of course the world has adapted to so many pressures from climate change to geopolitical risks, war, conflict. in addition to advancing in technology. but this is really an opportunity to bring together some of the leading voices policymakers, industry leaders to discuss some of these challenges. top of mind of course is the growth outlook. yesterday you may have noticed out of all the advanced economy,

and developing economy, brazil was upgraded with their growth profile for next year. increase of 0.9%. does that change in a world of protectionism, potential new tariffs coming out of the u.s., a lot of talk about the upcoming presidential elections. you also will recall president trump was close to the former brazilian president who is the current rival of president lieu la. that's one fact to take into consideration. how will relations change should there be a change in the white house administration. also talking about the digital disruption that's taking place. i have a panel on this later with the google president of brazil. again here you may also remember that the brazilian regulator had a bit of a run-in recently with elon musk over the social media platform over concerns it was being used to spread disinformation. one of the questions we are going to be posing is how do you get that balance right between regulation and innovation. last but not least, we'll be talking about deep push towards

low-carbon. we are in brazil. home to the amazon. it is considered to be the lungs of the earth. but at the same time, this is a statistic that i didn't know before i came here, 93% of the electricity generated in brazil is generated from renewable sources of energy. how do you take that template and how do you make it upscale and mobilize the sufficient amount of capital into these types of technologies so that we can move towards a more cleaner and greener energy transition in the future. those will be some of the questions posed here. jonathan: thank you. thank you very much. i'm not jealous at all. i know where i'd rather be this morning. i love you guys. lisa: but. that's just a city. also that particular hotel. jonathan: one of the best in the world. lisa: i have never been. jonathan: coming up tomorrow on friday, here's lisa's lineup. in washington forks the i.m.f. and world bank meetings. speaking with the south africa reserve bank governor, the beun

disbank president. and the city chairman, john dugan. have you got favorite? lisa: that's like picking a favorite. not saying a child. i think it's going to be interesting to get both of you from policymakers and central bangers and the big executives from banking industries. we are not only going to have john dugan. we'll have an interview with christian. an interview with sergio armani. a number of different executives. particularly in the european banking sector. curious to see how the ties go together at a time when there are economic questions on both sides. jonathan: no favorites but the bank c.e.o.'s apparently. tomorrow, deputy national security advisor. former house speaker kevin mccarthy, and deutcha bank. from new york city, thanks for choosing bloomberg tv. this was bloomberg "surveillance."

>> we could be in for a third day of losses. 30 minutes until the start of the cash trade. i'm matt miller. sonali: i'm sonali basak. >> and i'm katie greifeld. "bloomberg open interest" starts right now. sonali: there's unappetizing food at fast-food after an e. coli outbreak is linked to mcdonald's quarter pounders. matt: and the tire man of europe is warning about another trump presidency. a conversation with christian lindner in just a