>> of the street is even more bullish on trump winning than the markets are. >> the most bullish for the dollar is a red wave. >> yells are moving higher based on the election. >> to have a closely contested election would be unsettling to the bond market. >> staying stubbornly stuck where it is no matter who wins. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: coming into wednesday with tech earnings and focus. good morning, good morning. bloomberg surveillance starts

right now with equity futures up across the board. the s&p up by .2%. the nasdaq 100 is higher by a similar amount. yesterday, we had numbers from alphabet. a blowout report from them. today microsoft and meta. tomorrow amazon and apple. lisa: we are seeing ai coming to actually be profitable. to me, that is the take away from the google results. ai is what help them gain market share when it came to their cloud services against microsoft and aws. annmarie: the fact that the cloud is doing so well, they are leaning into ai because of that even though in this competition on google search also advertising money is really remaining resilient for this company. jonathan: that stock is up by something like 6% in the premarket. boeing is higher by .4%. the union putting this out on the website. a couple of phrases. productive face-to-face meeting addressing key bargaining

issues. are we getting closer? lisa: maybe. this is what we saw before. this is them running out of cash, burning through $14 billion of cash is the estimate this year. this needs to end to put a floor under some of the cash they've seen. annmarie: what number gets this done? they had a vote in the raise was for 35%. 64% of union members rejected that. previously, the raise that boeing came back to us 25%, and more than 90% of workers rejected it. are they going to go to the full 40% that the union workers are demanding? jonathan: 33,000 of them. this is key for payrolls on friday as well. the last 24 hours we've had really mixed economic data comparing the jobs report for september to consumer confidence for october. make sense of that. lisa: i can't.

it is choose your own adventure. you can look and see something good or hiring and say something bad or firing and the quit rates went down. is this a fickle indicator or that telling us that the current conditions are moving quickly upward in a positive direction? jonathan: job openings the lowest since 2021, consumer confidence the highest since the start of the year in the federal reserve will set their week from tomorrow and try to make sense from this and decide whether or not to cut by 25 basis points. the s&p 500 is positive by .2% in the bond market off of the back of the data yesterday. the yields decline. they do so again down three to four basis points, 4.2162. we will catch up with katrina of franklin templeton following strong tech earnings. terry with the trump campaign and damage control mode. scott as google's ai bet pays off.

getting a boost from better than expected google earnings after the closing bell hearing from meta and microsoft. katrina dudley writing that people are worried, cautious, and bearish. we disagree. tech company earnings continue to be strong. how can you be bearish with alphabet numbers likely softer the closing bell? katrina: i wrote that statement before the alphabet earnings came out. if you look at some of the earnings out of these technology stocks, it's really positive. don't forget, it is positive surprises on top of earnings growth which is very different versus a positive surprise when you're expecting earnings to go down and they go down less. it is very positive, but we are worried because everyone is bearish. the soft landing is like, well, that's fine. we are generally more optimistic. lisa: are you worried or does it give you confidence you are on the right track of everyone is bearish?

there is more upside for you? katrina: there is upside in the market and some of the indicators is, look at the productivity data. the number was 2.5%. we haven't seen that type of growth for a long time in terms of positive productivity. the bearish people are pointing to the fact that we are not counting the immigration numbers correctly and they are driving all of that productivity. we take a slightly different bent. we think this is one of the outcomes of the supply shortages and reduction in the labor, tightness in the labor market. people are actually doing more with less and that is productivity. lisa: people. is this the tech companies are everyone? particularly when the earnings, auto manufacturers and consumer facing companies have been not great. they are not the same blowout results we are seeing from google. katrina: i don't like talking about this, but if you look at the low end consumer, that is where you are seeing a lot of the weakness. if you look at the mcdonald's numbers -- we obviously had the

e. coli issue, but you combine that with the negative foot traffic. we are seeing the low end consumer under some stress here that is going to show up potential he more in the election versus actually showing up in the stock market. even though there are a lot of people in the low end consumer, it is not a big driver of spending. even though they are starting to see pressure, i'm not necessarily sure they are going to derail the economy. lisa: if you see this overarching momentum that could lead to higher yields meaning that a growth economy is on the table for next year, at what point does that create downside valuations for equities? or do you ignore it and say stop being so bearish to the bond market? katrina: we think in terms of valuation the markets is reasonably fairly valued. what people are getting wrong is the earnings growth number. the fact is, even if you hold

that multiple flat, if we continue to deliver better-than-expected earnings the market could work, because we have the growth in actual underlying economy. that is what we think that the market is missing. they're so focused on the valuation level. we think the higher valuation is a reflection of some of the benefits of the network effect, which is driving some degree of concentration in the market, which is positive. annmarie: our politics playing at all in your bullish view? katrina: we are in the countdown and it is an interesting thing. the non-consensus view, if we look at the data, there is possibly a 60% chance that we have one of these candidates with over 300 electoral votes, which would be a landslide victory. it is too close to call which candidate is going to be that way. you've seen some of the betting data that is favorable to one candidate over the other. we are not necessarily trusting that data. a landslide victory would be really good for the stock market

and economy. therefore, in terms of the november seventh fed decision, i think that will also weigh in. annmarie: a red sweep or a blue sweep? katrina: unfortunately, i think we will have a sweep and a fairly definitive outcome, unfortunately it could swing either way. however, i think that you need to stand back and look at the fact that we are going into this election with so much uncertainty that just the fact that the entire country coalesced around one candidate will be very positive in terms of bringing the country back together. annmarie: you think that will be positive for the stock market even though they have in some regards very different policies? katrina: yes. if we have a trump victory we need to look at the language he has put out there regarding tariffs. the bearish expectation is that you take him at his word. that would be very negative in terms of the tariff levels that

he is talking, the 10% and higher levels of tariffs on china. i think that he is a negotiator. i think it is also within consensus the fact that he is just positioning and won't go that far in terms of what his language. i think that in terms of outcome is going to be more positive. we don't see that negative downside scenario. going into cameo -- going into kamala's policy, looking at mcdonald's come you may want to start looking at some of those regional gaming companies as well. there's definitely some beneficiaries. you need to look for those beneficiaries in unusual places. jonathan: we are talking about a sweep, the difference between a 15% conditional tax rate and one going up to 28%? katrina: he likes round numbers. we are at 21%. first, we were at 35%. 35% to 21% is significant.

if he goes anywhere it is 21% to 20%. jonathan: what about 21% to 28% on the blue sweep scenario? katrina: it will be a headwind to corporate earnings. you can't understand that. her tariffs are not as extreme and you have some of the support for the low-end consumer that she is talking in terms of some of the transfer payment metrics. the concern we have is this the corporate tax rate increase come in fast enough offset the fiscal deficit? jonathan: are you looking forward to seeing the back of this next week? katrina: i am actually enjoying it. this is interesting, because this is what drives markets and makes our job interesting. ifi come back in a week 's time we will be talking about 2025. jonathan: i hope we are still not sitting here figuring out who won the election. negative futures on the s&p up by .10%.

on an update with stories elsewhere, let's crossover to dani burger. dani: ubs posting $1.4 billion profit in the third quarter, nearly double what analysts predict. in an interview with bloomberg, the ceo warned of risks from the u.s. presidential election. >> the markets are pricing in a trump victory. i think that if this is confirmed it remains to be seen if it is a classical sell on new s event. how he wins will determine, if he is in control of the congress. if kamala harris wins, some of the traits that are ongoing for trump will probably have to be reconsidered, and therefore they will create rotations in the market. dani: going on to tell us that consolidation in european banking is necessary. amd shares are falling in the

premarket trade down more than 8.5%. the chipmaker's fourth-quarter revenue forecasts missed estimates with ai sales growing more slowly than some anticipated. the company expects to get more than 5 billion dollars in sales from ai accelerators this year. some on wall street were looking for an even bigger bump. the yankees are still alive after beating the dodgers in game four of the world series. new york was facing elimination after falling behind 3-0. they managed to rally around anthony volpi. the wind keeps the yankees from becoming the first world series team to get swept since 2012. they need to win the next three games to win the series. that is your brief. jonathan: the one thing more volatile than the bond market is the price of yankees tickets. are they back up this morning? lisa: i haven't checked yet. i'm scared to check because i would love to go tonight. it was an incredible game. the most incredible moment is bad for yankee fans. did you see this? jonathan: taking the ball out of

mookie betts' glove? lisa: bad sportsmanship. annmarie: maybe bad sportsmanship or they were so excited at this moment that they were potentially going to catch this ball. they had more fight in them than we have seen from the yankees the past few nights, but obviously very dangerous and you should never do that. jonathan: nice save. damage control. >> no idea who he is. someone said there was a comedian who joked about puerto rico something. have no idea who he is. jonathan: damage control on both sides around the corner. from new york, good morning. ♪

jonathan: live from new york city, equity futures right now are up 5.2% on the s&p 500.

in the bond market, the rally continues for a second day with yields lower by three or four basis points, the 10-year 4.2162. under surveillance, damage control. fmr. pres. trump: i have no idea who he is. someone said there was a comedian who joked about puerto rico something. i have no idea who he is. never saw him. never heard of him. don't want to hear of him. i have no idea. jonathan: donald trump distancing himself from remarks about puerto rico made by a comedian at his msg rally. president joe biden lashing out at trump supporters. pres. biden: just the other day, a speaker at his rally called puerto rico a floating island of garbage. the only garbage that i see floating out there is his supporters. jonathan: the president saying i referred to the hateful rhetoric about puerto rico by a trump supporter at his madison square garden rally is garbage. is anyone buying that?

kaylee: it is not being sold well to trump supporters. there saying that this is like in 2016 when hillary linton called them deplorable's, a similar thing that president biden is saying. if you look at the transcript it says supporter's in reference to this specific comedian. he then goes on to say his actions are deplorable. it seems like he was referring to one specific individual, but this isn't the kind of gaffe that you need in the 11th hour with less than a week before the election following last week president biden at at one point saying donald trump needs to be locked up, and correcting himself quickly to say locked out politically. thought hit -- lock him out.

this may be why we are seeing the harris campaign distancing joe biden from the campaign trail. he is not joined her as we may have seen historically as they try to create separation from the political liability of gaffes like this, but separation from the unpopular policies of this administration as they try to make kamala harris a change candidate and make this a referendum not on joe biden but on donald trump. annmarie: summon in the harris camp wanted to point out to me that last night. why was joe biden doing anything when it's was supposed to be kamala harris' moment to stick landing? kailey: he was doing a virtual call with a group focused on getting latino voters to the polls. he wasn't at the ellipse last night, even though kamala harris was 500 yards from the oval office front of the white house, lit up at night.

joe biden was not there while they were trying to make her look presidential. sources said that last night wasn't about harkening back to january 6, given that donald trump spoke at that same spot before his supporters storm to the capital, it was about making her look presidential, like some of that the american people could see serving in that role. noteworthy that the current president in that role was not there alongside her. it will be interesting to see if there is a communication with the campaign and the white house to see by then pull back in his activity in the final six days as every second matters and any second questioning his specific language into it might be referencing isn't helpful to this campaign. lisa: how calcified are voters right now? how much can they be susceptible to some october surprise six days from the election? kailey: the basket we are talking about is very small, less than 5% of the electorate has yet to make up their mind. given the early voting numbers that we are seeing, almost more than one third of the electorate to this point has voted. that is true in some of the battleground states we are watching like north carolina where i spoke with the secretary of state yesterday and she told us well over 3 million

people have voted, 33% of north carolina's electorate. how much messaging from here could help, whether kamala harris' remarks at the ellipse or donald trump in allentown, pennsylvania. it will be interesting how it affects turnout from those who have otherwise been apathetic and chosen to sit on the sidelines. if you look at puerto rican voters in particular, what was being referenced in that clip of donald trump's interview with sean hannity, their 500,000 of them in pennsylvania. even if some of them decide to partake in this process and vote against donald trump because of that rhetoric at madison square garden, knowing the margin in pennsylvania in 2020 was less than 81,000 votes, that could make the difference. it is not about getting people to switch their vote, but about getting them to vote at all. jonathan: you can catch kailey leinz every weekday at 12:00 at 5:00 eastern on balance of power. sometimes you have to call it out for what it is. ridiculous. at the same time they want to

attribute the words to a comedian. they don't want you to believe what you heard, they want you to read the transcript and said. annmarie: the transcript has a very useful 's talking about actual garbage of supporters in the ocean. when you look at it it sounds like the president is saying that his supporters are garbage. jonathan: axios had a report that president biden wants to campaign for vice president harris in the final nine days in the campaign keeps responding, we will get back to you. we had another data point as to why they keep saying, we will get back to you. annmarie: this time is precious for any campaign and you don't want to put out an individual that she needs to be distancing herself from to win over parts of the -- parts of the electorate and who is gaffe -prone. similar to when hillary called donald trump supporters deplorable in 2016.

jonathan: there is a difference when the president says it and when a comedian does. that is the problem this morning. welcome to the program. you have been saying that harris has the edge? a week away, has harris got the edge? terry: she does a better job of turning out her voters and her voters have more enthusiasm, frankly. the saturday night live writer in me wants to say that harris should say that i am the candidate of change. look behind me. look what biden is doing. look at biden and trump, i am the candidate of change. she does a better job getting her people out, and that is the name of the game. it is a trope, but it's true. annmarie: her speech was about democracy. the polling, if you ask about democracy it is partisan. if you are republican democracy is important for different reasons. those individuals cite voting by

mail, immigration, the doj. is that line going to land? last night was a week out from the election. terry: that lined is a better job playing to her base than to undecideds. when -- what you see in both of these campaigns is knowledge meant that they think that their base is weak. trump does the same thing for there isn't a lot of outreach to the middle. that's one reason why terrorists barely ends up with the better argument at the end of the day. annmarie: was she able in the speech last night and other outreach able to bring on moderates and independents, potentially nikki haley republicans? terry: i'm glad that you brought up haley. i will get her in the -- in a sec. that speech alone did not.

the vast majority of it was about trump and how terrible he is. the unifying stuff came on at the end. that stuff is sliced and diced and put into ads, that sort of thing. a useful contrast last night. hailey gave a long interview on fox. nikki haley confirmed again, and i keep hammering on this, but confirming they -- trump has not talked to her since june and they aren't planning on using her in the campaign at all. they are writing off at least 20% of their own voters. trump's campaign is. that's one reason why you have harris hammering so hard on what i will think of as the liz cheney argument. establish republicans are giving swing voters permission to actually vote for harris.

i think that on margin that also helps her. lisa: there is a question that katrina raised that the chance of a full suite one way or another is greater than people are giving credence to it. you think that that's the case? terry: i don't the reason i don't comes down to the house. on the senate, i always say a tiny republican majority in the senate. in a world where there are not a lot of swing voters anymore, i can see senate totals going up slightly. ohio is a perfect example where trump is comfortably ahead yet democratic senator brown clings to a small lead. could trump voters push democrat brown out of office? sure, that is plausible. at the same time, and the house you have a situation where there is a tiny republican majority today. democratic hopes of reclaiming that majority have to do with

taking back republican seats in heavily blue seats like new york and california. that was on the cards the day after the 2022 election. it doesn't really matter with harris. what you end up with is about a 70% likelihood of a split government. jonathan: always great to hear from you. this market is starting to lean and aggressively to the trump trades over the past few weeks even though the polls have barely moved. we will catch up with citi. maybe it's time to take some of those trump trades off the table. next, we will catch up with scott devitt. from new york, this is bloomberg. ♪

it's mine. you, ok? yeah, are you ok? we're fine. my serve. maybe we should stop. this pinewood pickleball champ stops for no one. we got our melons checked. she had a concussion. admitting i was wrong is worse than losing at pickleball. saving your brain is a definite win. don't mess with your melon. if you hit it, get it checked.

jonathan: equity futures on the s&p 500 up by .20% after the first back-to-back gains going back about two weeks. big tilt going into yesterday's sessions. the nasdaq up by .20% this morning. alphabet numbers pretty decent, more of the same after the bell later. lisa: sales rose 15% year-over-year. you look at cloud revenues at 11.4 billion dollars and 10.8 billion dollars, they are gaining share and seemed better

ad revenue than they thought, all the time when people talk, well, can they really eat that much? the answer is yes. jonathan: yields are climbing for a second session. down three or four basis points at the long end. the four year, 4.2182. you put more weight on openings or job confidence? lisa: yesterday, i would have put complete weight on the 70-year option. that came in so strong, it is one of the strongest options we have ever seen. you start to wonder, there is actually demand for long-duration paper, even some of the less luxury since like seven year. that gave people some confidence. jonathan: after an auction to kick off the trade. that is the bond market. the euro looks like this, sterling, as well. the euro, positive by .20%.

bringing down the temperature for the u.s. dollar, euro-dollar positive by .20%. and the pound sterling, 1.2984. we start coverage in the u.k. and in the united kingdom, that is the coverage we will be watching. so that is 12:15 and 12:30 local. the budget is a big one for chancellor reeves. lisa: talk about the difference between the u.s. and britain. we will be hearing about cuts, about anything to avoid a liz truss moment, whereas the u.s. is saying the pursestrings are open but it is a matter of how much we will end up spending. annmarie: that is why you see bond yields going up and saying it doesn't matter that this is a trump trade, but maybe trump spends more or inflation is higher because of tariffs, but look at what is on the campaign trail. we are talking payment on downpayments of houses and basically every tax cut under

the sun. jonathan: the privilege of behaving recklessly, a privilege the u.k. does not have. boeing and union leaders representing 33,000 striking workers holding productive talks. the two groups addressed key bargaining issues in a face-to-face meeting from julie sue. annmarie: she is doing a lot of work, part of the last negotiation, as well, trying to get this over the finish line, especially head of the election. 33,000 workers still remain on the picket line, not getting paid, not getting health care benefits. i go back to with the vote count was prior. 35% is not able to get done. in terms of raising wages by a percentage. 64% of union workers said no. one it was 25%, 90 5% said no, they are asking for 40. is outward boeing has to go? the workers are back. lisa: i would like to see some new planes in the air because

i've seen a lot of old ones. it raises concerns and delays because of the maintenance. jonathan: how old are those flights? lisa: i looked that up, they all have to have ashtrays, it is a mandate from law, some relic. there needs to be at least one ashtray through regulations. i looked this up. jonathan: is that actually a real thing. lisa: i will look it up again, but yes. jonathan: never heard of that. boeing is up by .20% in the premarket. we have to double check that fact. wells fargo posting its least profitable quarter since the pandemic, operating profit plunging and the third quarter, results coming as they make drastic cost-cutting measures out of germany. have we faced this kitchen sink moment for this manufacture and this industry in europe? lisa: the fact the shares are up suggest it may give them the

wherewithal to go ahead with the cuts, which might be the beginning of a kitchen sink moment. it is up half a percent after losing 20%, so early days. annmarie: mercedes-benz ceo called it a darwinian battle. that is what the industry is facing. look at the margins on bw, it is the core. 2.1%, tesla's double digits, you are getting absolutely crushed. you cannot remain competitive with margins that low. jonathan: this'll be a class in public policy for decades, how not to run the government in germany. the last 10 years has been terrible. lisa: although the did just avoid recession, so better than expected people are cheering on that, but what is the plan going forward for growth? starc inferential a lot of european governments and the u.s. is remarkable. jonathan: bw up by .60%. alphabet shares rising after the reported third-quarter results that beat expectations.

expending on artificial intelligence paying off with cost for ai boosted search falling 90%. the stock up by close to 6%. lisa: are they taking share away from amazon and microsoft? we will find out in the next coming days, where some of the earnings are coming out, but this was the behemoth they were trying to get into, can they basically say there ai makes a cloud superior? and that has been one of the proper drivers for all tech companies. jonathan: confirmation from the control room, airplanes are required to have ashtrays for the simple reason that some people still try to smoke on board. lisa: yeah. jonathan: that is shocking. i was thinking really old planes with ashtrays by the arm trace. lisa: you once called me out and said, well, what you are talking about, i saw, outrageous. i lifted up. jonathan: i was talking about

really old planes. annmarie: he was talking about a battalion flight. jonathan: like decades. annmarie: i know those planes you're talking about. they serve good food but they have tons of ashtrays. now i'm going to look out for an ashtray. jonathan: we wanted to talk about alphabet. it stuck out for us all. coding. more than one quarter of alphabets new computer code is written by ai. how big is that and how much bigger could it be in a few years time? lisa: you race the point with respect as companies get bigger in sales. how much we are looking at that, and when you take a look at the number, you can see that the biggest client in job openings was white-collar jobs. i was starting to see this happen where there are certain rules that are maybe less intensive or skill oriented than are going to get eliminated or at least change as the transformation takes place? lisa: the cfo said they plan to build more cost-cutting efforts around ai streamlining and

manage headcount and accompanies physical footprint. that is a question going forward. jonathan: i really worry about how far behind colleges are. college graduates are being told not to use this stuff, but when they go into the private workforce, they need to know how to use this. lisa: as the mother of two kids who will be part of the youth hopefully employment market, i think at this point, the focus shifts and you expect to see how they incorporate ai and that has to be one of the most talked about psa and the importance of education. jonathan: that stock is up by close to 6% in the premarket. mother and microsoft reporting after the closing bell this morning. scott devitt expects results to keep up the momentum, raising estimates on meta and keeping

in outperform rating on microsoft. can we reflect on what we heard from alphabet? how impressive has the turnaround story been for that company? at the start of the year, there was a feeling that they were out for lunch. now we are 10, 11 months into the year, and there is a feeling that they are on top of the story. you sure that confidence? -- you share that confidence? scott: we do. we have a willing alphabet narrative on whether it is positive on the business, and our view was that over the long term, as the building ai capability and benefits from ai and its progress, it ends up being a positive. as you mentioned on the show already, the ability to refine the business model and cut costs as the company invests allows margins to rise as the invest. stock trades are at under an s&p 500 multiple and operating

margins that are standing that are about two times the rate. lisa: so there are two aspects, and one is brought up, are they going to have a smaller staff? even with a bigger business because of cost-cutting measures? scott: i think that is plausible. we will end up having his engineers being moved into other activities that are more valued, but as the company continues to grow, i would assume that they can be much more efficient and at new heads to the mix and given the commentary on the call last night and the natural transition of ai, that is a positive backdrop for alphabet. they are notorious for running less lean and other area companies, so the ability to take that incremental capital, whether it is operating expenses that are not labor related or engineering related talent coming more efficient, it gives the company a tremendous amount of money to spend and kind of hide that investment as they

make the transition. lisa: how much of an upper hand they getting versus microsoft's dozier or their aws? how much are they eating into their competitive advantage when it comes to cloud services because of the ai component? scott: google cloud at $8 billion of revenue for the first time in history as far as we can tell. they beat expectations for growth by 600 basis points, so it was definitely a strong quarter at gcp. what i would say is that aws and azure are strong platforms and it is more of an indication that the category of ai and cloud are doing very well as the economy is recovering versus taking a significant share. because alphabet is the smallest on a percentage basis, it will show that it is gaining share, but in terms of volume growth,

you will see azure and aws with strong quarters. annmarie: what is going on with search? volumes go down. they have chatgtp, huge competitor, but they are still making a lot of money off of it. scott: we have gone through this evolution a few times with alphabet. amazon prime launched in 2005 and investors thought that would be problematic. you had meta-, which went from zero to over 100 million revenue over 14 years going back to 2010, and alphabet survived and whether that. and ai is the bigger of those two, but, ultimately, alphabet is going to hold its model and has a dataset that will allow its position for continued growth, and i think we will survive this threat, as well. there is senseless -- centralization that happens during this time, and alphabet is a healthy company.

it sometimes gets positioned when being discussed. annmarie: what do you expect from meta this evening? they've had a massive push into the ai space. scott: collaborating growth but better towards the high-end of the 1% to 30% revenue growth with discussion around spending for ai, but in a positive manner. zuckerberg talks about the commercialization of the technology, so i think it will be well received, and i think the alphabet advertising results bode well that it may surprise positively. jonathan: i would love your thoughts on leadership and how they are handling the upcoming election. you remember the mark zuckerberg interview months ago referred to the assassination attempt on donald trump and his response to it as bad, and some of these leaders have called it,

including the alphabet ceo who suggested the mcdonald's campaign effort over the last few weekends was one of the biggest hits they have seen on google, what do you think is happening there? diplomacy we have seen from silicon valley towards the former president. scott: i think the industry is growing up and learning how to operate in a political environment with information that flows freely in ways where it is eight years more mature than the last time around. it does bode well for the future, and i think it is a positive move for the technology industry. jonathan: appreciated, scott devitt on the latest alphabet numbers out yesterday, meta and microsoft up later. we got numbers from caterpillar, down in the premarket by 6%. it is a miss on revenue, lighter on eps, and the outlook is not great. lisa: weakening demand for

construction around the world, but this goes to a debate we've had a maybe they will have in industrial sectors, mining, and other core areas necessary to build out energy infrastructure. why is caterpillar doing so poorly? is this international or u.s.? jonathan: down by about 5%. as an update on stories elsewhere, with your bloomberg brief, dani burger. dani: another earnings result, shares of reddit surging nearly 24% in the premarket. sales and forecast beat expectations. they had already more than doubled in value this year, even before the report. have invested in advertising tech to monetize the large audience, suggesting that efforts are paying off. elon musk's artificial intelligence startup xai is set to be seeking new funding. a source says funding discussions are an early stage and details could still change.

elon musk aims to double the computer power, which she claims is already the world's largest. the supreme court has denied to remove robert f. kennedy, jr. from ballots in key swing states of wisconsin and michigan. entity has sought to remove himself after pledging his support to donald trump. the states argue that removing his name is impossible at this point in the race. more than 2.5 million ballots are already cast between voters in all states. jonathan: more from dani burger in 30 minutes. next, taking trump chips off the table. >> enacting real policy change takes time, so despite the rhetoric, first of all, we thanks checks and balances remaining in place to whoever gets in the presidential seat. jonathan: that conversation, next. ♪

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jonathan: s&p 500 futures positive by 0.06%. coming into wednesday, the nasdaq composite up with all-time highs. the dollar is stronger and then weaker out this move in the bond market, yields lower by three basis points. the three-year, 4.2182. this morning under surveillance, taking trump chips off the table. >> enacting real policy change takes time, so despite the rhetoric, first of all, checks and balances remain in place. probably that means some of the more extreme proposals, or there will be more difficult to getting them passed, so real changes on the mac narrative will come around areas like taxes, perhaps on a terrorist front, and maybe in terms of immigration policy, longer-term. jonathan: many investors lean

into trump trades, some warnings begin to build. city suggesting it may be time to take profit with writing, despite investors concluding trump would be the victor. the polling is only moderately in his favor, and we therefore take profits in trump biased election trades. dirk willer joins us for more. which ones would you take off at the moment? dirk: thank you for having me on. i think there is a lot of consensus that trump is already won. it is still very close to call still, therefore, it is not really a form of inclusion, even though the odds are in favor. as you know, there is a lot of concern that a trump administration would be more in favor for several reasons because of the immigration policies, the tariff policies

and expansion. so the inflation market price is truly higher pretty much across the curve, and we think that is really quite mature and that could have a meaningful backlash if trump still takes off. the other is in the dollar. of course, it is for two reasons, one, the mac change is very strong, and that changes the sentiment around the dollar, but the second thing, tariffs being bullish, trump being bullish dollars, and then it is a year off trade. jonathan: that is what makes it slightly more complex, we need to figure out what drove the trades to begin with. why do you believe this was more about trump's prospects than

fundamentals and economic data and managing policy, too? dirk: we have not yet figured that out fully because even if you say the dollar moved its rates, well, rates moved with trump, but i would say the extent of dollar buying that you have seen was much more extreme than what you typically get if it is just a change. it really was a backlash. you can also see where it happened in dollar china, and dollar china, of course, is the single biggest trump tray that there is. and we have structure that could benefit after the election, and we kept it, and the reason is i think that the pboc is really the investors friend and call me down the volatility and making sure that dollar china does not always sure up too quickly, too

fast. but in general, i would like to question where the dollar buying happened. lisa: i don't think any of your compatriots are interested in playing in bitcoin. dirk: yeah, i don't cover that, but bitcoin is also a trump trade, similar to gold. gold also had a very strong move. gold is quite curious because usually the dollar goes up, and that is a terrible divide for gold. this time around, we have the gold rate, and the reason is inflationary as it clears with a trump administration, and even more so, it's inflationary fears not going over if it was higher

inflation, and the higher inflation is vying for gold. so that explains the paradox. annmarie: why do you think financial markets are taking cues from the penny markets and not pulling? dirk: i think what is happening is markets love momentum. in the polls, they are, of course, have moved in favor of trump and have shown momentum, and they jumped on the momentum train. that is markets all the time, and that is how people use the polls, and it might be right. based on momentum polls, that is what you are seeing. at this stage, trump has the upper hand, but the extent to which he has, and the confidence has an outcome i think is under the markets. jonathan: appreciate your time, thank you, dirk willer of

citigroup. a few places the last few days, we have found a snapback the other way, particularly if harris wins and trump does not. lisa: even if there is not that much uncertainty, goldman sachs talked about how people are overplaying the volatility, even if we don't get some sort of definitive answer as to who the president is going to be. jonathan: how much of this is the politics and trump trade and how much is the data? we calculate almost 40 basis points have occurred on days of strong economic data. strong suggestion that it is the data more than maybe it is the politics. next, jack caffrey, jp morgan, charles myers, of signal global advisors, and we will speak to craig trudell and clete williams. alphabet up nicely and cap down in the premarket. this is bloomberg. ♪

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>> neither candidate has really expressed any interest at all in deficit reduction. >> whoever wins, they better hope for divided government. >> harris when at this point, i do think marcus would be surprised. >> the two candidates will be separated by ask u.s. 10,000 or 20,000 votes. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: a huge focus on the

earnings after the bell yesterday and through this morning. before we get to more economic data, tomorrow we get jobless claims, and later, meta and more earnings from the mag seven. equity futures on the s&p up by close to .10%, nasdaq 100 by .20%, the nasdaq composite at all-time highs after alphabet was knocked -- alphabet knocked it out of the park. lisa: evidently, there is more to do and potentially with job cuts, they continue to push into their dominance of cloud and ai in general. the question here, are they taking it away from each other or is there at the incredible overlay of growth driving this market? annmarie: companies. of ai products is now operating at scale and being used by google's billions of users and creating a virtuous cycle. ai is starting to pay off big time. jonathan: we will hear from

microsoft and meta tomorrow, amazon and apple. let's talk about short-term issues. caterpillar is down the premarket by 4%, lower than that, a base on the top and bottom line in the outlook is not much better. i wonder how much the election uncertainty is playing into stories we are seeing this earnings season. lisa: if you look into the details, when you strip out the energy of the structure, things were week. how much does it speak to the industrial recession we've seen for a while, and what is the hesitancy in making big moves out of the election? annmarie: if you go to the conference board yesterday, dana peterson talked about this. the response about politics, including the election, was unchanged. we have seen the consternation on concern about the election, waiting on the sidelines, worried about jobs, wages and inflation. they say the lowballed 2020 and

2016 levels, maybe the american electorate is so over this. jonathan: the labor market data and the consumer confidence numbers really make it confusing. you narrowed it -- nailed it earlier, the most encouraging things on the bond market yesterday was the seven year option at a time when people were worried about the bias struck. but when you get into the economic data, the contradictions, the september jobs report, it is completely counter to the payrolls report we saw for the same month. lisa: you saw jolts firing and hiring, and people look at it with people's confidence that th can get another job, falling to the lowest rates we have seen. go back to 2015. are we seeing strength? is this a normalization, or does this speak to the struggling race, even though you have

people with no landing. annmarie: those who said jobs were plentiful, that rose, and that metric is now the widest it has been since january, which shows signs that this is a healthy labor market. so the totality of data doesn't really make sense. jonathan: it has been deteriorating most of this year and then suddenly improved. the two-year down a single basis points at 4.1% rate we will catch up with jack caffrey of jp morgan, we will speak to charles myers, and clete williams on a trump 2.0 economic policy. strong google earnings support equity markets. investors are looking ahead to meta and microsoft. jack caffrey putting the on corporate results. earnings need to deliver now and into next year against a set up of earnings expected to accelerate.

earnings matter with the overall valuation cap by a 10 year yield but sold off by 50 basis points the past month. jack, good morning. let's start with that relationship between the bond market, fixed income and equity market, and more poignantly, the relationship between the nasdaq with a compass it at all-time highs and bond yields elevated. does one speak to the other? jack: academically, they have to speak to each other in terms of thinking about what a discount rate is. when we think of the nasdaq, historically, we would have thought so much would have been delivered against the future, and when we look at results later tonight, we are bringing those results into the here and now, so there is a nasdaq with unruffled companies, you have a leadership, where you talked about the magnificent seven, which i would suggest recently has been more than mad seven when you look at the lack of progress, anyone has a week or

two of witness, and then the others are doing a whole lot of nothing. jonathan: the numbers from alphabet yesterday, after the close, there were worries about the capex spending. it seems that they have been varied. should they be? jack: people have made peace with the amount of capex the next year or two, but there are projections for massive continuing to ramp over two or three years, and i don't know that i've seen the same expected profit growth out of those people expected to spend that money. yesterday was a tale of two cities because you had great news out of alphabet, which has tied itself to the ai trade and has tied itself to look at how large the market is going to be. maybe we are going to be back into this more narrow stock selection that we have talked about wanting to have all year,

rather than a few deal with obesity or ai, hop on. lisa: obesity is another point, but this idea that you could have this concentration that continues to generate big gains for the overall index, how much are we seeing that with respect to the outperformance of google and the underperformance of the likes of caterpillar outside of these issues of ai development and the infrastructure that comes around it? are we seeing the bifurcation continue? this makes it a company that is confusing to understand. jack: i wish it were easier. i would sleep better. we almost wind up having to take individual themes apart, so ai works, and one of the reasons ai continues to work is that customers for the underlying technology is profitable. understanding how customers use the ai to drive revenue has been trickier, and you have seen some pressure on ai consumers rather

than the ai beneficiaries. we have an election in a week, i'm sure you all heard that. annmarie: less than a week. jack: vote early. underpinning that election, there will be issues for labor supply, there will be issues with respect to paths of inflation for some of the underlying heavy industry spending that has been on pause when we look at how bad the pmi has been, so some people are thinking, what i like to spend money? we have talked about our utilities and growth stock, are they defensive? utilities building out the power for ai, they wind up being their backup power, feeding into a caterpillar, so i need more to lay the foundation, but if you are not sure what is going to happen, it is easier to say that i will get to it in a week or two and it is not you like i'm fighting the way i did into a 21.

lisa: when you take a look at the themes, because of that, people are saying stocks in some ways will be less volatile than bonds when it comes to the election. what is the relationship at this point between bonds and stocks? jack: and the shorter term, the idea that stocks are cheap, cannot really make that case anymore. i think equity investors have looked at credit market and have said credit is not sensing a problem. credit spreads are back to heights of 21, so nothing to worry about. i do think that credit spreads have spread but not in a good way, and i think it will come back to why are yields rising? are they raising for good reasons like the economy is building and we have ample

employment gains? real wages are catching up, although people have not seemed to feel it right now because price levels remain elevated even if they have not accelerated, or are yields rising because we see a path that will cause more economic shocks? i think the bond market is keyed in more to what will happen on tuesday and it may take several days after tuesday to figure out one and recount and recount them, and i think the election warbled are really well in the fourth quarter. for those looking for a short-term job posting. ultimately, at some point, there is a relationship between what do i get from a bond and stock? 10 years ago, you could have out yielded bonds for equities today, the dividend yields at 1.5%, not necessarily competitive. annmarie: i wonder what you say about businesses and investors waiting on the sidelines, seeing what the election results are

going to be. do they need clarity or to the actually want to know who is going to be and what positions to understand policy? jack: people are policy, so to some extent, we have to think about what the majorities look like, who is confirmable, who is not. we have had interesting names floated in terms of having very interesting and influential roles in government, something that i admit would terrify me going through that. annmarie: like who? lisa: you really would like to get into it? annmarie: both sides? jack: i think i'm more likely to get continuity out of a harris administration going forward. i don't really know that i would like to eat roadkill. annmarie: a harris administration, even with a blue sweep in congress or with gridlock in congress? jack: i think harris with gridlock, you get little change because people will probably

stay in the seats under concerns that they would not be confirmable. by divided congress, i think you just mean republican senate because ultimately they are the gatekeeper. annmarie: is this your base case going into tuesday? jack: the polling would say, yes, the likelihood with the greater certainty. but, you know, no one is responding to poles anymore, so it feels like i cannot really rely on those. we realize there is the equivalent of we have it influencing the buddy markets. lisa: if we get an outcome -- we are going to get an outcome in a couple of days. jack: that i have confidence in. lisa: do you think there will be a relief rally if we have an outcome within four days of the election or three days? 49 hours. jack: we go back to 2016, you

had the median selloff and then you realized, wait, you have a surprising presidential outcome, and we had a presumption of what policy might look like with unified republican government. paul ryan was clear with what he would have liked to achieve with control, so you have that rally off of traditional republican policies. republican policies today are different than the republican policies of 2016. and i think trying to understand what is a press release, what is a meme and what is actually implementable remains a big question, but i would not be surprised if we see a rally one-way or the other. it depends on if you are a bond investor. it is interesting to say, from january until july, it never

touched a smooth measure of volatility. and that is below the moving day average of volatility, so equities remain twitchy overall. you have to respect the fact that investors have strong views that are being lightly held in terms of their willingness to embed them. they have been on a nice, long, steady decline and have spiked higher the last month. thanks income invest -- fixed income investors are worried about tomorrow's unemployment report. jonathan: jack caffrey looking for a boost. good to see you. let's get you an update on stories elsewhere with your bloomberg brief. dani burger. dani: shares of eli lilly tumbling 6.5%, lowering its full-year guidance. the blockbuster weight loss job is well short of forecast. and shares also turned around,

and are falling in sympathy this morning. toyota sales are falling and the homemakers market of japan and china. toyota is struggling to shake off a series of challenges in the rising competition from the e brands, domestic scandals and recalls abroad. overall, vehicle production fell in september compared to the previous year. shares of donald trump's media company or falling in the premarket. they rallied for five straight weeks, shining that can that grace between him and vice president harris. the rally added more than $7.9 billion to their value. trumps paper gain in the company is up near $6 billion. that is your bloomberg brief. jonathan: more from dani burger in 30 minutes. next, the stakes are high. >> these united states of america, we are not a vessel for the schemes of wannabe

dictators. the united states of america is the greatest idea humanity ever devised. jonathan: that conversation next, live from new york. good morning. ♪

jonathan: equity futures on the s&p 500 positive by .10%. bond yields down three basis points. 4.2182. under surveillance this morning, the stakes are high. >> and those who came before us, they did not struggle, sacrifice, and lay down their lives only to see us cede our

fundamental freedoms. we are not the vessel for the schemes of wannabe dictators. united states of america is the greatest idea humanity ever devised. jonathan: here's the latest, kamala harris attempting to paint the former president as a threat to democracy is markets pricing a victory for donald trump. charles myers is pushing back, saying that broad consensus out there is for a trump wayne, but they have a pretty poor track record of predicting outcomes. we still believe harris gets over the line with higher turnout by women, black and young voters. charles, welcome to the program. can we start with what is behind the move in markets where that comes from? what is underpinning it? charles: it started about a month ago when harris peaked in the polls and belatedly trump got momentum. a combination of everything from

bobby kennedy's endorsement of trump, one of the unions not endorsing harris, governor tim walz's week debate performance and president trump gaining his footing and attacking her on the border, the cost-of-living. all of that happened around the same time she peaked in the polls, and he started to gain the markets, and now i would argue the financial markets and the trump trade is back on. where we come out on this is polling is tied, literally tied in the swing states. she is ahead nationally. the markets, whether the equity market, the trump trade or the buddy markets, they have gotten ahead of themselves. this is a tossup and the markets are pricing in a decisive win. annmarie: if pulling for harris is underestimated, where is it coming from? charles: a couple of things. because pollsters got play 16 and 2020 wrong, including underestimating trump and many instances, although he lost in

2020, there was a possibility that polling companies have overcompensated in trump's favor to not get a wrong or underestimated a third time, so what is interesting is i think polling may be underestimating trump. the reason harris has done so well is she has unified the democratic party and has been running on a message of defensive democracy, as well as the opportunity economy. a pretty compelling message. annmarie: yesterday, she ended her speech trying to be a unifier, saying she would like to bring bipartisanship back and would like to hear from all walks of people. at the same time, biden is calling trump supporters, even though they are trying to walk back this cleanup job, he is calling trump supporters garbage. will that hurt her the final stretch? charles: i think it was a poor choice of words. anytime you attack anyone's base or even any group of voters, as, either way, was done sunday at the madison square argan rally,

where some of the trump speakers and comedians really went after parts of the overall base, anytime you do that, it is not helpful or constructive. but in the final start, all most every american has made up their mind. 53 million have already voted early. i'm not sure that biden's comments will change anyone's minds the last six days. annmarie: i'm glad you brought up madison square garden because trump had to talk about the comedian who said puerto rico was garbage. and there are 300,000 puerto rican voters in pennsylvania alone. when you look at these campaigns and their errors, where can it hurt the most? charles: when you go after a specific group, especially a racial or ethnic group. i think the damage for the comments around puerto ricans, latinos and offensive comments about blacks, black people at the trump rally, it could hurt a little bit, and where you see the impact is it my drive

turnout by some voters in those demographics who would have sat out. if when the end we see higher turnout by latino voters in the swing states, it is higher-than-expected and that is where we will see the impact. annmarie: can you talk about the gender gap we have seen as one of the hallmarks of the entire election season? the idea that men and women have never been more divided in terms of their support for each candidate. what does that mean when it comes to who turns out for voting? charles: this is the central question, it is something the markets are missing as they price in a decisive trump win. if you look at early voting, we will see higher turnout by women, and what we see so far in early voting is that women are turning out at 54% versus men at 44%. that is consistent with the turnout, the percentage turnout in 2020. if this 54 to 34 holes, harris

wins. we think actually within the 52% of women who have so far voted and ultimately will vote, we think the breakdown will be 54%. women this cycle, more women within that percentage will vote harris or democratic, and she is going to win in the electoral college the reason is straightforward. after the supreme court decision overturning roe v. wade, 41 out of 50 states imposed a partial or complete federal ban on abortion access. this is a big issue on the ballot, and also how the democrats outperformed in the midterms two years ago, which based on polling and everyone else in our world of financial services, or convinced it would be a republican sweep. that did not happen because of higher turnout by women. if harris wins, it will have been a higher turnout by women in large part because of the reproductive freedom issue. lisa: the trump campaign is wise to this and has tried to encourage people to vote early

and to really get the base energized to vote. we are seeing signs that is having an effect when it comes to early voting in a number of states. how much does that change the calculus against harris? charles: president trump took credit at every opportunity for the supreme court decision for a very long time and realized that now the election is turning into a massive liability and he cannot run fast enough away from what the supreme court did. the truth is, he tried to anyone's his position on this, and american voters see through this. i don't think he is changing any woman's mind about voting because they suddenly think he or, even worse the republican party has shifted their position, the official position of the republican party with the ban on abortion. i don't -- i think everybody sees through the. jonathan: you believe that is the official position of the

campaign? that is not what we hear from donald trump or jd vance on the campaign trail at all. charles: i think what they are trying to say is but excluding a federal ban on abortion, and not mentioning anything about marriage equality, if you actually dig deep into everything they stand for and everything they have called for, i think every american voter believes they would continue to allow states and support states in imposing more restrictions on access to abortion. think anybody for a moment leaves to republican party changes their position. jonathan: certainly not if they keep losing elections. ♪

jonathan: the first back climb on hundred and around two weeks. equity futures added a little more weight to the rally, up 0.1%. the back 100 is up by 0.2%. two hours away from the opening bell. >> good morning to you. check driving higher. the story in alphabet is one of growth, efficiency, and catch up. dig into the numbers and you will understand revenue up 35% at just over $11 billion so that is where the muscle of the

growth is but then you look at the efficiency being delivered here, reducing the cost of the ai by 90%, 25% overall at google written by ai. this is efficiency written large so you will not have massive adds going forward and they are doubling down. that gives you a nice perspective on alphabet. when it comes to eli lilly, guiding lower on the year. they have had two upgrades on their earnings this year. they raised the guidance twice. why? wholesalers had a higher inventory of the weight loss drugs. you now have inventory. we have gone from a stretch of getting a hold of it to inventory. everybody's customer is on reddit. up 25%. in profit for the first time since the ipo.

how do you monetize viewers on reddit? it is with technology. it is by joining up and offering big data access at reddit to some of the big ai players. jonathan: thank you. appreciate it. two hours from the opening bell. under surveillance this morning, president biden on the defensive after comments. to call donald trump supporters garbage making reference to a comedian who referred to puerto rico as an island of garbage in new york city on sunday. biden responding saying he was calling the rhetoric garbage. what is garbage is to be gas lighting the american public about an'. that is not where you want the campaign to be. lisa: to have that comment six days out from an election when your vice president was making a pitch to the people that she will have individuals of all political backgrounds at her table, undermining her message in that moment.

apostrophe catastrophe. lisa: why is he even speaking? why is biden out there in the first place? he is increasingly a liability. i understand he is the president but what is the point of this? jonathan: if you were in the trump campaign, that comedian overshadowed the whole event. in the harris campaign, you are angry biden was talking at a time when the speech should happen center stage. annmarie: and they are. they sent governor shapiro out on cnn that he does not stand by those comments. their issues they will have a lot of cleanup to do on this and it undermines kamala harris. the reason why he is doing it is i think biden is still quite bitter that he is not the individual running in this campaign. jonathan: so he wants to be heard, or he is deliberately railroading think? annmarie: i don't think it is deliberate, but you should be

careful about what you plan to say in the week leading up to a presidential election that you yourself called the most important election in history, saying it is to "save democracy." jonathan: that is the latest on the campaign trail. here is another one. amd tumbling after revenue forecast missed estimates. amd looking to catch up with nvidia in the race for chips which develop and run ai services. also facing supply headwinds. that stock is down 8%. lisa: so which is it? how much is this a supply-side issue? i am glad you mentioned this. how much is a lack of demand? they see demand is very strong. they are making inroads. but a question, is this a matter of not being able to make it quickly enough or the gravitational pull is to the biggest and dominant player in this race? jonathan: nvidia results about a month away. have to wait three months for them. elsewhere, microsoft reporting

earnings after the closing bell. as always, ai expected to be in focus. investors still waiting to hear how the billions of dollars in ai will flow through profit. no doubt off the back of what we saw from alphabet. lisa: what we saw from google was them able to monetize ai in a different way and gain clients on the cloud computing services civilly because they were able to unroll a host of different ai features. so the question becomes, how much is the ai story going to be increased revenues for the big behemoths and how much will be cost-cutting that the ai tools can replace a lot of what current humans are doing? that is what i will be listening to. annmarie: for me, this evening with meta, i want to know how much they are making off of china advertising. this is a company that can operate out of china but ahead of the u.s. election, how much is china trying to advertise on all of these platforms? last year, 2023, it was 10% of

the revenue. jonathan: let's turn to the eu imposing higher tariffs on ev's, the move likely ratcheting up trade tensions, presenting difficulties for chinese producers. the terrace will hurt sales in china. they are already hurting. craig, just how bad are things right now? i feel like we do a weekly update. how bad are things right now in europe for the automakers? >> you are spot on that they are already hurting. we saw the latest fresh indication of that out of volkswagen's earnings this morning. they have their worst operating margin since the pandemic, so more than four years. it is to the point where the management have pushed for plant closings in germany, something we have not seen this company do

in its history. a lot of that has to do with the challenges this company is having in china. it used to be the case that it could be tolerated that the volkswagen brand had really week profitability because that is ok. porsche and audi are doing well and we are making lots of money in china. that is no longer something management is happy to tolerate in part because that is no longer the case. they are no longer making lots of money in china, and porsche and audi are struggling in addition to the vw brand in that market. jonathan: you are in berlin. if tesla wanted to cut jobs, they would cut jobs. what happens in germany and vw when they cut jobs? how difficult is it to do that? craig: this will be a weeks and months long ordeal. we are probably headed for walkouts before the end of the

year, and it is going to be the case that there will be a lot of pressure not only from the labor side, from their german state that owns a stake in volkswagen and also in control of board seats. there will be pressure from that perspective. i think this is very likely a case where management is starting from a position of asking for quite a bit and negotiating back from there. i do think it is a testament to just how strong the unions are in this country that we have been through this for so long that the vw brand has been so challenged may profitability perspective and factories that have been underutilized for quite some time continue on. whether or not that can last i think is the question here. lisa: that is the domestic picture as you look at how expensive it is to manufacture

things and over manufacture things in europe. as a question of what this 45% terra on chinese autos coming into the euro region will do for these automated factors. will it help them in the long run or hurt them by reducing their businesses in china? craig: i do think there is real valid concerns that these companies are raising, particularly the germans in that they are really concerned about only a sort of muted effect from implementing these tariffs on chinese imports. i do think there is concern about retaliation here, particularly china has warned they would increase tariffs on large engine vehicles, which would particularly hurt the likes of porsche and other very high-end brands that import into china from europe. in terms of whether or not this is a band-aid on a flesh wound,

i think you look at what the chinese manufacturers have planned for localizing production in europe and they would look to get around these tariffs. that is part of their long-term thinking. lisa: you happen in this industry for a long time covering many factors. we get a headline that byd beats tesla in quarterly revenue for the first time ever as an ev company. we are talk about trying to reduce china's dominance in the ev space but is that a predetermined path delay already achieved it and now large markets will try to completely isolate? craig: i think it is still the case that there is plenty to prove these manufacturers. i would say byd, even byd as much as they have had remarkable success the last few years, they are trying to move upmarket and i think it is really of great concern for the german

manufacturers, but also a company like toyota and their lexus brand, hyundai, genesis, they are basically following the playbook of coming in with more premium vehicles but at a more palatable price and putting pressure on the mercedes and bmw's of the world. i think that is still something that while there is a lot of interesting indications that those vehicles are competitive, it will take time for them to build the sort of brand recognition and value that it took lexus decades to build. there is still a lot to prove here. i think byd for some time has sold a lot more vehicles in total that tesla and on a per vehicle basis, that was the reason why they continued to trail tesla in terms of revenue. for the most part, they still sell the lower end cheaper vehicles, but i think the world

-- the automotive world is waiting with baited breath because we have not seen that this company is slowing down in meaningful way -- in a meaningful way. lisa: under $10,000 for an electric vehicle. are we going to see price cuts for ev's from tesla, bmw, mercedes? craig: yeah. i think some of these price points definitely grab headlines in terms of some of the entry-level vehicles. you do have some manufacturers in china, like one that is in part general motors takes part of the venture that comes in at these price points of $10,000 or $15,000 equivalent or less. i've cautioned that some of those vehicles are really small. in general, i would say it is not quite as extreme, the price differential between other parts of the world. these are sort of lower speed,

maybe not quite as safe they would be unlikely to pass crash test standards, but to your point, i think there will be price pressure. we have seen tesla the last few years really dramatically slash their prices. this is going to be a really intense battle and one where the chinese government is more than happy for its companies to grow by way of pricing and not necessarily be too hung up on whether or not it's industry is healthy. they want growth, even if it means low to no profitability for companies. they want to take over the world. jonathan: just amazing headlines in this industry over the last few weeks. appreciate the update from berlin. the latest on some of these players. lisa, you are on top of it. horses and barn doors. the horses are galloping around

europe like we better shut the door. come on. lisa: it raises the question, how comprehensive of a solution do they have to come up with? what do they want their industry to look like? rather than going piecemeal with what the chinese are doing, we have seen them make the inroads. are you creating the trojan horse model where they will come to factories in different places in europe or are you succumbing with your own industry flat on its back and not a lot of other places to buy cars from? jonathan: trojan horse with a big sign saying we are here. let's get you stories elsewhere this morning with your bloomberg brief. dani: top israeli officials are weighing a deal to end the conflict with hezbollah in lebanon. the proposal would see is vilified as move away from the southern border with israel. it would bring a pause in hostilities with working on deals. hezbollah's position on the deal

is unclear. reaching a nine-year high for a london bank. they also announced plans to return at least $8 billion to investors in the coming years. the dodgers leading the yankees 3-1 in the world series, and it is japan superstar shohei ohtani's first appearance in the fall classic. 12% of japan's population are glued to their screens but one group is missing out. traders in tokyo are not allowed to watch the games on their mobile phones or tv's. when they are in the so-called dealing room, they cannot have mobile phones on them to prevent leaks. which leaves them no options for checking in on the game. that is your brief. jonathan: thank you. appreciate it. up next on the program, markets anticipating trump 2.0. >> we had the best economy in history. we will make it much better.

we will give him companies the lowest taxes, the lowest energy costs, the lowest regulatory burdens, and free access to the best and biggest market on the planet. jonathan: that conversation up next. new york, this is bloomberg -- from new york, this is bloomberg. ♪

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jonathan: equity futures on the s&p 500 fading a touch. just about unchanged. use are lower, down by two basis points. markets anticipating trump 2.0. >> we had the best economy in history. we are going to make it much better than even that. we are going to bring all of these companies that left us because of stupid politicians on our side. they allowed it to happen. they are all coming back.

either that or they will have to pay tariffs like they never have to think about before. i will cut your energy prices in half within 12 months and bring back millions of jobs. we will get our companies the lowest taxes, the lowest energy costs, the lowest regulatory burdens, and free access to the best and biggest market on the planet. jonathan: so here is the latest this morning. former president proposing a number of economic initiatives, including a 20% tariff on all imports, 60% duty on chinese goods, and a tax on u.s. companies that send jobs overseas. welcome to the program, sir. i want to start with process and priorities. i want to lean on your experience in trump 1.0. you got on board just as they were kicking off the trade war. can you walk us through where the emphasis will be on which side of the policy agenda if they get another shot at this? >> sure. obviously as you are hearing from the remarks and president

trump trade will be a day one top-tier priority, and i expect people get into it pretty quickly. i think from a process standpoint it is important for folks realized there is a couple things you can do almost immediately very quickly, and there are policies he will probably want to talk with the team a bit as well as consult with other policymakers like congress in washington. on the first list, the things he can come out of the gates every quickly on his china -- is china. we already have an existing mechanism under section 301 where we have tariffs on china and he can move those up, down, around in order to try to force china to comply with the phase i deal or address unfair trade practices so that can happen quickly. i think on digital services taxes, the u.s. started investigations into 10 different countries. france is probably the most prominent, a country that has been unilaterally taxing u.s. digital companies.

there is an existing mechanism on that that he can turn on probably pretty quickly, maybe within 60 days and start putting tariffs on their products if they don't comply. some of the things we will have a little bit of a longer timeframe and fuse are the across-the-board measures as the president works with his team and figures out exactly how he wants to implement that. i think he will take a very serious look at it and the process will start very soon, but implementation may take a little while as they figure out the final points. annmarie: tariffs would raise $500 billion, one said. where does he get the $500 billion from? clete: i don't know exactly where that figure is, but if you look at the china tariffs we already had in place, they have already collected hundreds of billions of dollars, and if you put that over the 10 year horizon, which is what everyone is talking about in order to pay for the tax cuts, you could get a figure close to that. one of the things i am hearing

from friends in congress is they are taking very seriously this idea from president trump about using some of the tariff revenue to help pay for the extension of those tax cuts, so i really think you could see those two things coming together next year. annmarie: but how much are the tariffs going to cost the united states if it is a tit-for-tat scenario like in the prior administration, trump 1.0, and there were billions of dollars given to farmers because china was no longer accepting their goods? clete: i think you need to look at these tariffs as part of the holistic economic policy. tariffs are one part of the equation that will fit together with tax cuts, deregulation, or energy. i think it is dangerous to say in isolation this is the impact of a single tariff on the u.s. economy. it is part of a much bigger picture. in terms of your question about retaliation and how all of that is going to work, i think it is going to depend on how other countries respond.

and ultimately, the u.s. will make the case to other countries that, look, your measures, you are tariff rates by and large are higher than ours. you are doing a lot of things to keep u.s. products out of your markets. the president asked to focus on the eu and the reality is we have a massive trade deficit in the eu in agricultural trade products because they do not buy our beef or pork or chicken and they give excuses for why that is the case but the question will be when president trump says you have barriers on our products, we will put barriers on your products, how do they respond? i don't think we can sit here and predict that today but those are the kind of questions he will try to force. annmarie: but you don't honestly think that will not be retaliation. we already saw retaliation the first time. clete: i expect countries will respond but what i would say in return as we have an average tariff rate of 3%. if you go to europe, it is about 5%. if you go to china, it is higher

than that. if you go to india, it is 18% of us of response to the united states is we will try to both have equivalent and fair trade measures and that is what the president will try to achieve. lisa: there is a belief a lot of business executive areas believe that former president donald trump will respond if the stock market sells off in response to one of his proposals, that if he proposes really big tariffs and the s&p tanks, he will say just kidding, i will pull that back. is that true? clete: i don't know about the just kidding part, but as i mentioned before, i think you really need to look at these things holistically and think about how they fit together. when you have all of these other things going on and taxes and regulation, that will be part of the equation. on the trade front, i don't want to put this in terms of what the market does one day or another, but the objective here is all beasley to try to promote more manufacturing in the united states, to try to get fair terms of trade abroad, and i think the

president can successfully execute on that and that will be good for the market and our economy if there are less barriers to our exports, less chinese subsidies distorting our markets. i cannot say on a day-to-day basis how the market will fluctuate, but there is a longer-term strategy here that needs to be looked at holistically. jonathan: many thesis have been written about the hurdle in europe, about food, and whether that is protectionism or not. we can have that argument another time. thank you. big takeaway there. trump 1.0, taxes first, trade later. this time, you can see both at the same time. it will become let's and hard -- that will be complex and hard. annmarie: we need to know whether or not we can see how much taxes they can cut. jonathan: a potentially very long negotiation. in the third hour of "bloomberg surveillance," claudia sahm and

kushma. from new york city, this is bloomberg. ♪ ♪♪

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>> the significant amount of uncertainty in the risk-free asset class. >> i think the bond market is

being used by people to protect portfolios. >> the potential for an inflation boomerang is actually rising. >> this idea we are getting a soft landing has almost tradition to the idea we are getting maybe no landing. >> there is still room for the fed for a few rate cuts from here. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: 90 minutes away from the opening bell. equity futures on the s&p 500 paring gains over the last few hours, just about unchanged, even with a big lift for alphabet after the closing through this morning following some peace and earnings from them. on the nasdaq 100, posited by 0.8%. on the russell, the small caps down a third. on the earnings front come alphabet yesterday tomorrow, amazon and apple. all the data front come a little later this morning and 30 minutes, another read of the gdp for you. tomorrow, you will get jobless claims and the big one on friday, the payrolls report.

just to give you another sneak peek of things, 110 is the median. 254 is the previous number. and the range of estimates is still really wide on wall street. lisa: as is the range of ideas on how relevant this will be to the fed and everyone else give and how much it is due to the hurricanes and strikes. we also get adp in about 14 minutes but i am curious to see whether that shows the same kind of confusion we saw in the data at a time when it raises the question, is the fed on autopilot to cut 25 basis points truly twice more this year? annmarie: consumer confidence really confusing. jobs are hard to get. they are telling different stories. citi saying we expect 90,000 payrolls growth with downside risk and unemployment rate rising. the unemployment rate rises for 4.23% or regardless that is something the fed can easily lead into 48 hours after a

presidential election where they may not know the result. jonathan: this is meant to be the hurricane disruption numbers. these numbers are meant to be distorted, noisy, which brings the question, if we get a strong print friday, how does the federal reserve response to that in the meeting next week? lisa: if they cut, you end up with a situation where the fed cutting rates leads to a tightening in financial conditions. if you take a look at the rise in the long end, that could continue if they cut rates at a time when you are seeing ongoing strength in the labor market and coming to me like this from the royal caribbean ceo. you do not anyway see anything in the ingredients that say we are hitting a ceiling. if anything, we see continued demand acceleration for our business. that is the reason why i think this is a really interesting moment with how the fed responds. jonathan: "bloomberg surveillance" refused to go on a cruise. we have not hit the ceiling yet. not happening. in the bond market, yields lower by two basis points.

on the 10 year, 4.23% after reaching 4.3% this week. the nasdaq it's a new record high -- hits a new record high. with treasuries on track for their worst month in two years, we begin this hour with stocks pushing a little higher on the nasdaq. investors digesting big tech earnings and looking ahead to more economic data. emily of john hancock staying conscious saying we are not making big bets and would rather rates -- rather wait for some value in markets. putting cash to work in bonds. emily joins us now for more. good morning. emily: morning. jonathan: let's talk about some of the weird inconsistencies in this market. bond yields are up, the dollar is still stroking it how do you make sense of all of this? emily: it all comes down to the election and we are processing of the limited investors when we look at the backup and bond yields. is it commodity driven?

are we seeing inflation expectations increase? there is a lot of signs of disinflation right now. we look at things like wage growth going from as high as 4% on average are really earnings down to 2%. initial claims still continuing quite elevated. so the days of leaving your job and finding another want to make more money i think are behind us at this point. another under covered story is the housing inventory. inventories are up 23%. year-over-year. we think that shows continued disinflation in housing. shelter has been responsible for 60% or 70% of the gains in core cpi, so that is another element. and then commodity prices with wti now hovering around $70, that is not that bad. if you want to see another 1970's style increase in inflation, you need to see that accompanied by a rise in oil prices but we are not seeing it. jonathan: we are sympathetic to investors.

do you want to step in front of this before next week? emily: we do because there is an opportunity to lean into areas of the market that are mispriced. look, there are some things we don't know like who will win the election, and there are things we do know. we know that right now bonds are one standard deviation sheet to their 20 year average with the aggregate bond index yielding 7.4%. we know stocks are expensive. only two times forward earnings. i think that is being supported. i wanted to tie together what you were saying with consumer confidence. the biggest categories that's a positive responses was, do you think the stock market will be higher a year from now? are you planning to take a vacation to europe? we are starting to lose one of the assets this market has had, which is a lack of bullish sentiment. so we think about markets being priced for perfection and bonds aren't. lisa: they might not be priced to perfection but they reflect something that does seem related to the fed meeting because two days before that september fed

meeting we saw the cycle lower at least in the last few months, and it was just a straight moonshot for yields higher on the long end. do you buy the idea that some way the fed's 50 basis point cut actually tightened financial conditions because people are saying they will cut rates, keep rates at a higher level going forward, a higher neutral level because this is an economy with much more potential? emily: it absolutely did and the biggest tradition mechanism you are seeing is through the stronger dollar. the dollar strengthened rapidly. there is a political sentiment to that will as well. you are seeing tightening financial conditions. does the fed need to continue to cut rates, especially if we see more fiscal spending? that has been one of the biggest negatives and drivers of this move in bond markets. maybe they don't come up because of the political backup remaining uncertain, it is hard to handicap with the fed is going to do next at this point. lisa: but if the fed cuts by

another 25 basis points next week, do you end up getting less bullish on duration because of this idea that in some ways they will allow growth to be a lot more robust for longer? emily: not necessarily because it was another component to the total return component for bonds. you may have to wait to get paid on duration, but i am ok waiting. we have talked before about bonds and i think that is appropriate for this because the income is so elevated. you are looking again at a competition of high quality bonds. i am talking about mortgage backed securities, treasury bonds malec single day, nothing wild here, and that will get you income close to 5%. i am comfortable getting paid to it because even if bond yields rise modestly, maybe there is a little bit of a growth impulse after the fed cuts again. eventually, we see bond yields falling and are willing to be patient. annmarie: you are concerned about the election, the risk leading up to it.

investors want to potentially wait on the sidelines. is it because they want clarity or they need to know who will be in congress and the white house? emily: i think it is both. certainly markets love clarity and you've seen the statistics that markets love to rally once the outcome of another should is known. we are seeing massive risk-taking going on right now. things like cryptocurrency, and you guys have talked about djt and risky or unprofitable corners of the market seeing this bid. investors are becoming a lot more optimistic here. we want to be back to the chill kind of part of this story. maybe i am thinking about this because there is a lot of states trying to legalize marijuana. i am not true but maybe you want a portfolio of high-quality stocks. maybe when a portfolio of high quality bonds that can help us really navigate this tricky environment we will be in the next couple years. annmarie: if trump does win, is there more to be priced in? emily: that has already

happened. we look at the market action post 2016. a lot of the move happened after the election. small caps is one example. they were up 30% six weeks after the 2016 election. bond yields move meaningfully higher but because the markets are really betting on the betting odds, we are seeing a lot of these moves already in the price so there may be a buy rumor, sell the news element here. lisa: give us a sense of what chill looks like for you right now. is it basically, go to work, by some 10 years, setback go to lunch? emily: that sounds nice. we are legalizing psychedelics in massachusetts so that is another. no, i am getting. jonathan: a senator warren initiative. emily: we could talk that may be on another show, but what we are looking at right now, i think this earnings season is reflecting what has been working in portfolios and where we have been overlaid, company's with great return on equity tons of

cash, great balance sheets, a better ability to maintain margins. we have been overweight u.s., u.s. quality, mega cap tech. that is where earnings are coming from. stock prices follow profits. that is where we are looking at in portfolios and getting out of riskier areas in the credit space, moving into high quality bonds. i think that is the narrative for the next stretch of time. jonathan: when you speak to the posters, they will tell you this race is still close and market participants are looking at the same market and it looks like a classic example of price selling narrative. that is what it feels like and financial markets. it feels like the price is setting the narrative around the election and when you speak to people paid to follow the election, they will tell you it is close. lisa: and there are people manipulating the price to set the narrative and have a cyclical prophecy, but that is why people are pushing back now. annmarie: we have seen that before in the past. romney lost.

he never saw the west wing. you have to take this with a great assault. jonathan: not sure about stocks, but yes, europe and vacations. emily, thank you. had to squeeze that in. here is dani burger with your bloomberg green. dani: byd knocking a win against tesla. the chinese automaker putting revenue that beats elon musk company for the first time since the pair have gone head-to-head in global eb sales. revenue fell short of estimates but still beat tesla. byd has been more insulated than tesla as demand for ev's has waned. boeing and striking workers zoomed talk yesterday in an effort to end the seven-week strike. the union said it had a productive face-to-face meeting with the company to address key bargaining issues. the strike is taking a toll on boeing. instead of generating cash in the fourth quarter, the company expects to burn through around $4 billion. 26 northbound are an multi

sports team owner josh earnest joint david rubenstein for an interview marking the 10th anniversary of peer-to-peer conversations. they discussed how he is preparing for the u.s. presidential election. >> do you -- you have a candidate that is more regulatory or might affect certain industries like energy or health care differently. the antitrust policy could be different and effect acquisitions, so you have to think about all of that and be prepared for it. i think that if there is no clear outcome, it could create some volatility. that might be a buying opportunity. emily: to see more -- dani: to see more of that interview, tune in tonight at 9:00 p.m. eastern on bloomberg tv. that is your brief. jonathan: up next on the program, the morning calls plus. we will get you some adp data coming up next on the program. ♪

jonathan: just to mix things up, an adp report for you. michael: good morning. 233,000, which is a significantly higher number than anticipated. the forecast was for 111,000. the september number revised up to 159,000 from 143,000. we had a major increase in jobs in the months of august and september where we saw jobs rise by 223,000 in private payrolls. that is the comparable to the adp, so this is a number that suggests some real strength in the labor market that may has not been expected. jonathan: what happened to the hurricane noise everyone is

pricing in for friday? michael: here is the thing about the hurricanes that we don't know, the timing effect. hurricanes hit on either end of the reference week, which is the week that includes the 12th of the month, so if you work at all , if you worked one hour, you would be counted as employed, so it is very possible the people from helene got back to work. a number of them and the people from milton had not yet lost their jobs in the meantime, so that is something we will have to keep an eye on on friday when we get the numbers. usually the bureau of labor statistics puts out a little note that says how much they think the hurricanes impacted the jobs report. lisa: this is above all estimates by bloomberg. this is the highest level for adp going back to july of 2023, and we are looking at a time when people are wondering what the overlap between adp and the labor market report we get on friday is. and what kind of a tell factor

this is going forward. what is your meat, especially with the new methodology for adp, in terms of how significant it is for broad or macro data released by the u.s. government? michael: what adp has that is backed off of the idea of trying to predict what the labor market report is going to be and it sets this up as a separate data series that in many ways is similar, constructed in a similar way. it just uses adp's payroll numbers instead of the surveys that the government does, and so it tracks much better what we end up getting, but it does not give you an exact number. you cannot say because this was 233, we will get a very high number. but it does suggest we make get a higher number than is anticipated, which is at the moment 110,000. jonathan: unlock some high heels at the front end of the curve. unwinding some of the rally we saw further out along the curb.

the 10-year had yields lower by three or four basis points this morning. yields now higher on the session. we have been looking for 111 and got 233. this is precisely why the range of estimates is so wide. wide by about 190,000. -10 at the low-end end from bloomberg economics. lisa: you asked earlier, but with the readthrough be of the markets if it was an upside surprise and that is an increasing possibility we have to think about with this adp report that indicates the strength that we also saw depending on what you wanted to look at yesterday's data. michael: you mentioned hurricanes. we also had the boeing strike. 19,000 manufacturing jobs off of the payroll which could be related to that and 37,000 additional construction jobs, which could be related to hurricane helene. jonathan: mike mckee on the random number generator this friday. we are looking forward to this. this will be noisy.

equity futures on the s&p 500 just about unchanged. let's get you some morning calls. first up, morgan stanley raising its price target to $205 of alphabet. the stock is up by close to 7%. the second call from barclays its price target on the tech giant. while the ai story is progressing, chairs could remain shopping. finally, alphabet lifted to 205 from baird. let's stick with tech permitted more results coming after the closing bell, including from microsoft. joining now to discuss is a guest from bloomberg intelligence. what do you think the readthrough is, if any, for the likes of microsoft a little later? >> yakima for both microsoft and amazon web services, they need to beat by a big number to show they are also getting the benefit of genai workloads. jonathan: some of the

improvement to product of the we have seen already has been absolutely staggering. this came from alphabet's numbers yesterday that new computer code is written by ai more than a quarter of it, more than a quarter. we are seeing big changes not out of these companies but inside the companies. anurag: we have been seeing this for a while, that when you look at generative ai, the biggest one in our view is cogeneration by some of these copilots. we recently had amazon web services on one of our podcasts, and they talked about a massive shift in productivity on their backend as well. lisa: at this point, how much of a tell is google for meta, for the likes of microsoft? anurag: i think when you really sick about it, when it comes to the benefits of genai, cop providers are one of the biggest ways to look at this stuff because there are companies that cannot run these genai workloads, which is they don't have the capital to go and buy

gp use, ai servers, heil people that hire people -- hire people to do this internally. lisa: are you saying that google's gain is also a gain for microsoft and will be a gain for aws of amazon? are you saying it is who can be the best at ai to really attract that type of a clientele? anurag: yeah. our thesis is when you look at the space, i think the entire space balloons up or expands in markets. any of the top four vendors, and i include oracle in that, would be beneficiaries of this shift as more and more people work there workloads -- move there workloads from on premise to the cloud. jonathan: can we spend some time on that? how many people are these guys going to higher in years to come? how much will unemployment be in years to come because of the initiatives they are developing and pushing across the companies across silicon valley and beyond?

anurag: you are absolutely right. that is one of my single biggest issues right now. i am not seeing the same level of hiring that comes with the revenue growth rate. if you go back a few years, and i am talking before pre-pandemic time period, there was a correlation between revenue growth rate and headcount growth rate, but for the last year or so, i am not seeing that and that is a bit concerning for me. not just for unemployment or employment, but also for application software companies that really sell their software to not just technology companies but other companies as well, the likes of salesforce that are priced on a specific basis. jonathan: you will see this on wall street too, and this goes back to a conversation we had from brad moynahan from bank of america at the start of the year. this will help you grow revenue. how intense will that be?

basically the pushback will be pretty clear. we will not have to hire the same amount of people to generate the same revenue we will see potentially over the next few years. lisa: he sent his staff will be the same size, even as business continues to grow. the real question here about what kinds of jobs are going to be necessary. jamie dimon talking about how he does not know exactly what that would look like for j.p. morgan, but he knows the mix of jobs will change and he is already seeing that now. jonathan: great to catch up. on the latest from microsoft permit other jobs front, no problem with jobs according to adp. 233,000 the number. the estimate, 111,000. i wonder how many people bump the number up after heaving from adp this morning. lisa: adp used to be dismissed as non-predictive, so people would not pay attention to it. now increasingly, it has taken on more important as attract better once you look at the revisions.

a real question about whether we continue to underestimate the strength of the u.s. economy at a time of ongoing readiness in all of the data. jonathan: mike mckee, you got a final word on the data you just saw. michael: we saw a bit of a herman cain effect in east south-central part of the united states, a loss of 13,000 jobs. so that is probably hurricane related, but we lost 6000 jobs in new england. i am not sure what that is about. the weather was really nice in september. jonathan: how did you process the data from yesterday? for jobs to be that work at a time when the people numbers that once were so good? michael: it is a reflection of it. if more people get hired, there will be fewer job openings. they do not match up exactly. jonathan: you don't see this as a reflection of technical weakness, the numbers we saw yesterday? michael: it was just one number. what was interesting was consumer sentiment. why is that rising? maybe it is due to the election and the fact that everyone is happy it is almost over.

lisa: i am sure a lot of people would be some of that it with that but which is more accurate, the jolts data or the consumer sentiment? this is a far cry from what we saw the last period. michael: i would focus on the jobs diffusion, jobs hard to get versus jobs easy to get, and the jobs easy to get went weigh up -- went way up. a 20% response rate so it is not as accurate as it used to be. jonathan: stick around because we have the latest numbers from the treasury. from new york, this is bloomberg. ♪ ging) [narrator] not all multi-millionaires built their wealth the same way, you have... the fearless investor. the type a cpa. the bootstrapper. the bootmaker. yeehaw [narrator] but many do have something in common. we all trust schwab with our wealth.

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jonathan: moments ago, about 15 minutes ago, we had a big upside surprise on the adp employment change report that came in at 230. the estimate was 111. the latest numbers from the treasury refunding announcement. equity futures on the s&p 500 shaping up as follows, just about unchanged. likewise on the nasdaq get as for the russell, it little softer by a quarter of 1%. yields up at the front end. 4.13%. unchanged on the session now at

4.25% on the 10-year. michael: 2.8% for the third quarter is the initial estimate, just a touch below two point 9%, which was forecasted. one of the things that happened, we had a 3.1% forecast from the atlanta fed and the problem is we had that big trade report yesterday as everybody tried to bring in inventory ahead of the port strike, so that is probably subtracting from growth. we will get that number for you in a moment. personal consumption very strong. 3.7%, up from 2.8% in the second quarter. americans are still spending money. the gdp price index is quarter over quarter so that is important to the fed. 1.8% for the gdp headline index. that is down from 2.5%. we are in the ones now there. core pce on a quarter over quarter basis, down from 2.8%.

the information we want to give you is the quarterly refunding from the treasury department. this one has very little change in it. it will not be very exciting to the folks on wall street who pretty much called this. 120 $5 billion will be offered to marie -- offered, refunding $164 billion. modest reductions in december and an increase in january. treasury does not anticipate increasing auction prices the next few quarters, and what we have for refunding is three-year notes and the 30 year bond, $25 billion. we got the standard warning from the treasury borrowing advisory committee that the debt limit which we will hit the beginning of next year and has to be passed again could screw everything up in the treasury. jonathan: we might be turning the volume up on those in the

next 12 months. so americans are consuming and investors are selling bonds. let's call it 4.14% right now. on the 10 year, up by a bit to 4.27%. we have seen a six-day run of high-yields but it was news this morning on the back of a surprise and a pretty punchy consumer number. lisa: the 12 punch -- 1-2 punch coming out just goes to this feeling, are we not seeing the strength in the u.s. economy that keeps surprising to the upside? the economic surprise index continuing to climb to the highest level going back certainly to earlier this year, going back to april of this year , so it raises this question, army also underestimating what we could potentially be getting on friday amid the noise?

also tomorrow with core pce, but that came in slightly higher. jonathan: this is why it is difficult to understand and unpack what is driving bonds here. the data, a series of upside surprises going back to april, or the politics, and the reason matters. this was the essence of the piece on bloomberg opinion yesterday. most analysts agree on the list of potential contributed to this unusual development but there is little consensus on the relative importance. we forecast the future well-being of the economy and the sustainability of this year's impressive stock market performance. everything we just discussed over the last 15 minutes, good reasons, or bad reasons to mobile reason about deficits and big sweeps leading to more debt? lisa: do we see the markets trading to their own music? that is the question jack was try to unpack, and a real question about how your yields in and of themselves cannot door

peter -- cannot torpedo. michael: we have reasons for people to bet on the strength of the economy, although the headline number was a little lower than anticipated. personal consumption is very high, but business investment is also strong. 3.3 percent down from 3.9% but still relatively strong for nonresidential private investment. structures down four, and that was forecast because we had a lot of structure rebuilding, factory building. now people are buying things to put in the factories with purchases up 11.1%. the difference is what we saw in trade. imports were up by 11.6% of goods. what is interesting is they do not really show up in inventories so we are not sure where they are at the moment. inventory, 16.2 billion and that should mean strengthening in the fourth quarter. government spending was up 5%. national defense, a large part

of that. we are sending a lot of stuff to israel and ukraine, so we are buying a lot of stuff like that, but the final line he would look at is final sales to domestic purchasers gets rid of the inventory and trade numbers and we are up 3.5%, which is the strongest since last year. jonathan: bond yields off the back of that up five basis points. the front end of the two-year, 4.15%. joining us now is claudia sam, a good friend of this program. welcome back to the show. let's get into this economic data how would you characterize the economy in america? claudia: good news is good news. this is excellent on the gdp, particularly when you look at the consumer spending. it is not just one quarter. we have now put together for quarters of about 3% growth in consumer spending. inflation-adjusted. as michael said, you put that together with business investment, that is what we are looking for.

this is a really good report and it is not one to be afraid of. the fed is not going to be afraid of this report. we have supply coming online, productivity higher. this really is good news. lisa: they might not be afraid of the report but they could be concerned about the response to the report in markets. at what point does it get the fed's attention that longer-term yields keep climbing on the back of an ongoing string of better than data? claudia: the fed will pay attention to what markets do regardless of whether it is what they are expecting or not expecting. it is hard to play three dimensional chess with markets. there are a lot of factors that move markets begin the fed is an important player in the mix but not the only, but it absolutely will be looking at interest-rate sensitive sectors, places where it could go in and if there needed to be some support, cut rates, get some support, but that is not what we are seeing right now. we are seeing a very strong economy and the fed has to look

for any signs of it overheating. consumer spending is the demand outstripping supply. at this point about we really do not see signs of it. and we have not for several quarters. we are in a trend place that is much better than frankly we went into the pandemic with. lisa: there are two different arguments here. what is the question of whether we are overheating and that is causing the fed to stop cutting rates, and the other question is are we underestimating the neutral rate we could potential he be looking at in an economy that keeps chugging along, even with rates that the current fed says are restrictive? which is it? because they are different responses on the fed side to those two potential outcomes. claudia: at the end of the day we want to neutral rate as high as possible because a high neutral rate is a sign of a healthy economy. the low interest rate economy we went into the pandemic with, that was not a healthy economy. it created a lot of distortions

but it is a sign. interest rates are a price telling us something about the economy and if it turns out this economy comes out with higher put to growth, higher underlying trend, we would expect that to show up with higher interest rates and it is an interest rate we would tolerate. it would not be restrictive. we would have a stronger economy. it is too soon to say that is what we have moved into. this still could be working through some of the temporary disruptions of the pandemic, and we could go back to a lower trend growth, and i think europe is very much a cautionary tale. they are not having this conversation of, how we got to the higher trend level? there is still a lot in the mix but where our star lands, it is perfectly fine but we are in the process of discovering if the good news will stick with us. lisa: when you say good news is good news, does it marginally increase your base case, the

best guess of where we end up? is it likely what the fed is projecting? claudia: i don't know if i would go as high as 4%. into the solid 3% is what this looks like. particularly again if the implicit productivity growth that goes with this gdp number and the labor market that while still solid has slowed down quite a bit, so we are getting a lot out of the resources we are putting into the economy, so if that continues, then yes, i think something in the mid-3%, maybe even higher would make sense, but i think that is what the fed -- they have their first 100 basis points like the next 100 basis points are pretty safe in that is restrictive and we can chip away at that. you get into a conversation when you get past that of, ok, is this where the economy wants to rest? lisa: if we are going to live with higher interest rates, what

does that mean for the market? claudia: again, a higher interest rate environment when it is behind it is productivity growth, you also have higher income growth. right? interest rates are priced like house prices are another price that people face and at the end of the day what matters is the affordability. do you have the resources to afford those homes? of course, higher interest rates run into the fact that we have had a housing under billed for quite some time so if you think that -- if we will try to fix that with just market prices so the adjustments of the interest rates, that will be tricky but there are certainly policy proposals on the table at various levels of government to try to work on housing supply and not think of it purely through interest-rate mechanisms and what the fed might be doing. annmarie: right, but that could take years to come to fruition, so if you are sitting on a 3% mortgage and rates will be higher for longer, but impetus

is there for those individuals to give that up? claudia: there is not. there are always -- if there are big ships in the economy, there will be winners and losers in terms of where they sat on the bet, on the information when everything changed, so that is just a reality of how the economy works. housing market went into the pandemic in a place of disruption because of the under billed and it has been throughout this entire period in different forms of disruption, whether it was really fast-paced demand about really low interest rates, low inventory of housing. that is a really disrupted sector, not just because of interest rates, and i agree with you there is no magic wand in that market. it is going to take time, and it is an extremely important one to get right sized. jonathan: one thing on that for sure is it was personal to

embury. she just wants to buy a house. annmarie: it feels like the boomers or those who timed the market correctly, lisa, are the winners and those younger trend to get in the housing market -- jonathan: are we calling ambro a bloomberg? -- a boomer? annmarie: i called her a winner. claudia: i bought in 2020. jonathan: just real quickly, we know you are in your own personal battle right now, and i want to say on behalf of all of us in the whole financial community as well because i had a ton of messages just before you appeared with us, are all thinking of you and we appreciate your time and are lucky to have you this morning. thank you so much. claudia sahm of new century advisors. if you are tuning in, welcome to the program. we had an adp report coming in with strong upside surprise. mike mckee was brick and gum gdp and within that number, personal

consumption really strong as well, so the front end of the bond market, bonds down, yields up a touch. michael joins us now for more. michael, good morning. we have seen a big move and higher yields over the last month. do you want to step into this before we resolve the issues we have on the table next week? michael: it is challenging because they have been rising for all sorts of reasons. data has been surprisingly strong. market was long going into the september fomc meeting given the information the fomc and powell providing about what would likely happen so the market was overextended in terms of yields where they were and then you have to sequence the reversal of all the data and not have weak data at a time of back market positioning and you throw in the election, the rise of trump in the polls again, the trump trade, those kinds of things. premium rising, taking out rate cuts, everything in the bond market. jonathan: can you break down the individual ingredients by measurement? how much of it is one versus the other? do we know? michael: the first bit was data.

4% feels like the center of gravity for 10 year yields all year long. we start the year with 3.90%. 4% is not that different despite the roller coaster along the way. rising since then. we got 4.30% on monday. auction sized deficits. secondly, the potential that former president trump may win again and implement deficits, higher inflationary policies in general. lisa: do you think it has gotten over its skis in terms of the election-related trade? michael: i think we will see us a lot of 60 basis points in a matter of weeks when the fed is cutting interest rates, extremely unusual, and this gets back to fiscal monetary policy since the pandemic. one of the reasons why we had this surgeon inflation is super easy monetary policy and fiscal policy. since then, monetary policy has

had to work again roughly easy fiscal policy so it has a headwind to work with, which is why higher your writeup not caused as much economic weakness as anyone thought several quarters ago. lisa: how do you parse out whether this is the bond vigilantes coming back and raising concerns about the deficit versus yet another overreaction that is an incredible buying opportunity? michael: we don't think it is an incredible buying opportunity but it is back to reasonable levels. 4.50% on 10 year treasuries looks good in a long-term perspective, even if you think the neutral interest rate is 2%. throw into percent inflation -- throw in 2% inflation and it looks decent. it is hired to that, at least the initial reaction. annmarie: how much higher? michael: we almost got to 5% before we get weaker inflation data and everything looked rosy again. i think 5% is the absolute worst

it can be. annmarie: so if harris wins, there is gridlock, or a sweep, how much do yields fall, or they don't because people are pricing in fiscal stimulus regardless? michael: if either party wins or takes control of things, you will get deficit reduction going forward. both parties have platforms to stimulate the economy, to help various components of the economy based on their agendas, and that is probably not going away one way or the other, but the simulations i have seen, you take the platforms and implement fully each platform. trump policies are little more inflationary, a little worse for the bond market, may be up to 5%. it does not mean the economy will not do ok but the interest rates will be along those lines. if you are harris, a little less but interest rates a little higher. term premium is really suppressed. term premium bond yields went down a lot during points of the financial crisis and now we are seeing it gently with slowly

rising term premium which may not go away so the upward pressure could come in fits and starts and it could be a part of the process of normalizing things. lisa: what gives you confidence that this type is different with response to bond vigilantes coming back to the markets that have been off of the market for some time? michael: think about it. central banks including the fed, plus foreign investors own most of the u.s. treasuries, the global risk-free asset, the global store of wealth with billions of dollars. no alternative to that, so you can suffer some if you can move shorter in the unit. but there is no real alternative to treasuries, and that will keep -- yields could be gently rising but it will not disrupt the market. jonathan: something you do not hear much on the camping trip. in the u.k., the chancellor delivering the budget saying it will raise u.k. taxes by 40 billion sterling.

yields are falling by seven basis points. the picture for the budget and fiscal prudence is different in europe, isn't it? the approach is shifting big-time. michael: the u.k. has been sensitive since liz truss was prime minister in september of 2022 when chaos erupted in the market in the u.k. on the backup touchup fiscal responsibility. other countries pay attention but germany over pays attention to it. they do the opposite. they are too conservative. jonathan: a lost decade of opportunities in germany, big-time. good to see you. we could talk about that a long time. let's get you an update on stories elsewhere with your bloomberg green with dani burger. dani: alphabet shares jumping 6.7% premarket. the google parent company reported healthy gains in revenue and profit. the company showed its expensive foray into ai is starting to pay off or get a quarter of new code

at google is being written by ai. drove more usage for its flagship search engine. shares of eli lilly on the other hand tumbling this morning newly 11% after lowering its full-year guidance. sales of a blockbuster weight loss drug coming in well short of forecast. eli lilly blamed inventory issues for the mess. regardless of the outcome of the world series, fox and mlb are looking like the winners. game three averaged 13.6 million viewers, beating monday night football. it is the most-watched world series in years, averaging 14.4 million viewers per game according to fox. in japan, this humans is averaging almost 16 million viewers, even more than in the u.s., equivalent to 12% of the country's population. that is were brief. jonathan: thank you for this morning. we will set you up for the day ahead and look ahead to big

earnings touch base with ed ludlow in just a moment. ♪

jonathan: the equity feeding a touch over the past few hours, slightly negative on the s&p 500 with the open 36 minutes away as we count down to the opening bell. meta and microsoft reporting after the closing bell thursday. results from apple, amazon, intel. we'll also get a boj rate decision and another round of jobless claims and core pce on friday. the people's report, the u.s. presidential election on tuesday followed by the fed rate decision just two days later. investors in the meantime keeping an eye on big tech earnings after the bell. ed ludlow joins us for more.

let's look back a touch. what are your big takeaways scum the highlights from alphabet? ed: you would be forgiven for having a sense of deja vu because the calculus is the same this quarter as the last time we spoke last quarter. here is the money we are spending on ai in capex. for google, they had something to show for it. $2 billion of operating income for the cloud unit and topline growth. it is cultural. it is kind of ubiquitous, but we have a better sense of why they are doing well, which is why the strategy unclouded is to talk to startups run by people that used to work at google. there are evidence that use of google search is actually having higher value through the investment. it is fascinating and they delivered. jonathan:jonathan: you see tailwind for ad -- jonathan: did you see tailwind for ad spend? ed: the consumer is strong.

the retail segment for google is strong and there is a tailwind from election season. did not quantify it but this is important stuff because we are less than a week out and people look for information. you would think google would be the main beneficiary of that. jonathan: we will see if this shows up in meta later. bloomberg technology at 11:00 with caroline hyde. lisa: i think that is a fascinating point. how much do the social media sites get benefited by the ad spend? for me, it is six days to the presidential election and i will look more unforced errors on both sides of the campaign. jonathan: coming up, i guessed from rbc, pimco, and goldman sachs joining us tomorrow morning. from new york city, thank you for choosing bloomberg tv. this was "bloomberg surveillance

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>> all right. we had a big beat yesterday by google but the chip stocks are disappointing. 30 minutes until the start to have trading, i'm matt miller. sonali: i'm sonali basak. katie: and i'm katie greifeld. "bloomberg open interest" starts right now. sonali: and coming up, alphabet's a.i. bets starting to pay off. but amd has a disappointing forecast. >> a shocking myth from eli