♪ >> it ultimately comes down to whether or not we see in unexpectedly higher cpi number. >> if inflation suddenly starts to reverse that could cause a pause at the december meeting. >> if we get a stronger meeting you would see them still cut into december but say we might be at the way where we would slow the pace of cuts. >> we think there is going to be a bit of excess rise in these numbers. >> even sideways having a risk of inflation beginning to move higher. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> this is the day you've been waiting for, to our 30 minutes into the most important data point of the week. a key read on u.s. consumer inflation.

futures edging up after two straight days of losses which is the first time we seen that in almost a month. jonathan ferro is off this week. dani burger joining anne-marie and myself around the table. right now not necessarily setting up for some sort of big cpi-related shock, but just a hint of concern with yields creeping up for three straight days which is the longest streak in almost a month. dani: and i wonder what reverses them. presumably you need a big surprise to the downside because what we are expecting still should not give the any comfort. as i know you know very well, we are going to have to take a long bond option. lisa: speaking to the choir, dealing with 10-year note's being sold at a time when there is a real existential question about how much inflationary pressure is in the works. one of the key questions is the geopolitics of the moment. we've been talking about syria but there is a new kink on top of it.

you were reporting overnight about potential measures with the biden administration. biden is still president. as dani: they are looking into this potential glut in the softness in the oil market right now. potential that we could get the biden administration coming out and going after portions of russian crude that they will sanction out right. this is not an oil price cap. think of the way the u.s. sanctions parts of iranian crude. that could potentially be a risk premium you see on the oil market. the timeline is they have like six weeks to do this. the timeline is very short for them to get this done, but the market is saying potentially now is the only time they would be able to make such a sweeping move. lisa: which is the reason why i think it is fascinating and great reporting when people are discounting the price of inflation. how vulnerable the market is to a shock whether it is coming from oil or from something else.

that i think if the reason it is so important. annmarie: if inflation does make a comeback it may be centered around tax cuts and tariffs. there are so many unknowns that we can see in 20 funny five. lisa: and this is the reason it is notable that there have been two straight days of losses. it really highlights the vulnerability at a time with so much euphoria being priced in. we've brought forward a lot of the positivity without the negativity. dani: all this fear might be simmering in the background and then you get this small business optimism survey which sees the biggest jump since 1986 and it was remarkable to look at what the ceo said, basically saying we are going to have scaled-back regulations, high standards trade agreements and avoiding overly broad tariffs. we are pricing in the good stuff and overlooking the bad stuff. lisa: right now we are looking at a market that is trying to claw back some of the losses

from the past couple of days. coming up, marvin low on that losing streak. capital management ahead of key inflation data and the 2025 outlook for the airlines. people just keep traveling. stocks taking a breather, but trying to inch higher. u.s. cpi at 8:30 eastern. the fed will continue to normalize rates, cutting next week even as it likely further debates the neutral rate. that that outlook will remain below market expectations of terminal even as it raises long-term again. the market will just agree to disagree for the time being. right now the market is disagreeing sort of. at the same time you are seeing this complacency around the idea that overall, the u.s. is on a disinflationary trend. how vulnerable is this market to

an upside surprise in inflation? >> i don't expect upside surprise to the degree that is going to derail the story that the fed has to continue to normalize, and there is room to get there. but we are getting their really fast whether or not we look at it from the market perspective. and then what? it is a very different environment than when we were talking about interest rates that were neutral at 2.5 and a 10 year that could continue one and a 3% world. that doesn't exist anymore and that vulnerability on whether or not we are really pricing it. after we get a lot more clarity on this administration is certainly a risk, but the market is very happy with the fact that soft landings stole the story. things are cooling in the right ways, and for the moment, u.s. exceptionalism is a story that is really hard to push back on. lisa: we are going to get to the whole question of what the trump

administration is going to do but even before that, there is a lot of disagreement on where we are right now and that is one and i am really struck by, or people disagree fundamentally on how much inflationary momentum there is without the tariffs, without some of the potential tax cuts. what do you make of that, where do you stand on that debate? >> it definitely is looking at the best part of the story. when cpi comes, you start cutting it up. the fed used to cut it up in a way that they don't now. something that was so important and has been rising in the last couple of months. it used to be the number, if you will. there is enough disinflation on the good side of things to keep the story going, if you will. short-term measures don't look as good. nowhere near the 2% target number, but overall you do have

those bigger components that are still going in the right direction. but again, whether or not we stop at three and three quarters, four, that is a big question that potentially is not as attractive to risk as the broader disinflation themes that the markets grab hold of. dani: because the fed has also grab hold of that. the recent speeches saying we are cutting not because we are worried about the labor market, but because disinflation is taking hold. does that mean that if we don't know where neutral is going to be, we don't know whether we are restrictive enough, that they could end up cutting too much especially as animal spirits are getting reawakened by what kind of policy we might see in 2025? >> it's always a risk. the interpretation of what tariffs are. are they just temporary inflation, the way the teal buffet everyone talks about

cents, or is there a bigger downward growth asset? all of that is in the midst right now. we are going into this administration with a very different economic environment cycle then we had back in 70-2018. but the market is assuming as it has throughout this entire pandemic cycle that everything looks exactly the same. and that has not proven to be true. dani: what do you think is the biggest disconnect in that regard that we are assuming will be the same, but will not be the same? >> the immigration component is the biggest unknown in the biggest concern that i have. even with the labor market is, given the fact that for entrance into our labor market is critical, and we don't have economic models that really understand what the type of deportation policy in this administration is talking about, is incredibly stagflationary and that is ultimately one of the worst environments for a central

bank or economy to deal with. they should increase rates because you got wage pressure. on the others you got the growth concerns and that is all in the next right now. annmarie:annmarie: when it comes to sequencing, what is your base case? we might actually get some insight. speaker johnson saying he is going to go to this army-navy game and that is going to be what they discussed on the sidelines. >> 2025 is very complex from a fiscal perspective. the tax cuts, however they approach it, i think all the other promises, maybe we should all try to get our wages measured in tips. all of that stuff, if you will, plus the debt ceiling and tariffs as part of that is a bigger pool of decisions that they've got to get there next year. for me, understanding how they approach the whole physical side of things and whether or not we

start to see tariffs as a means to an end or an end goal itself in terms of reordering trade will give you a sense are they looking to cut deals? a lot of the comfort you get in tariffs is deals were cut, so we don't import from here but we could produce someplace else where a deal was cut. usmca is going to be key to that. i don't think it was random that mexico and canada were some of the first -- annmarie: but that won't have a renegotiation until 2026. >> my understanding is that parties can exit if they wanted to. so i would expect the administration to start saying that we are going to start to rework this and if they cut deals as part of this 2026 deadline or maybe even earlier, we will get a sense of this administration cutting deals the way they hadn't in the past. annmarie: if they are going to go with tariffs, do they need to do that alongside the good stuff?

>> they do, they do. the first 100 days, first six months is going to be action-packed in terms of a market that has, as you mentioned, grabbed onto all the good stuff. it needs confirmation of the view that it has. lisa: in the meantime, what we do see is one trend that continues. what we have is a twofold kind of turbocharging of it. on one hand you have a report out of reuters talking about china maybe having a weak yuan policy at the same time we've been reporting the bank of japan doesn't see that big of a downside when it comes to holding off on the rate hike over the bank of japan. so you start to wonder how much to other countries use the strong dollar to either juice their imports, potentially help their economies, and how much to the extent that it dampens inflation in the u.s. does also dampen growth on some level?

how strong is too strong? >> ultimately, a stronger dollar with the role that the u.s. dollar has as a reserve currency causes a lot of problems. but what level that is is ultimately anyone's guess. i think that really starts to raise some eyebrows because it will get through the levels that it has not been able to get through before. but it is hard to fix through a reason not to really like the dollar. it is the cleanest kind of risk concern, tariff concern, administrative policy asset class that gets you are you want to get to. lisa: marvin lois state street, thank you so much. when i was looking at them of the stories about whether it is china or whether it is bank of japan, how much are people changing their views on what they think of a strong dollar as maybe we could use that? dani: i think this underscores

that trump's desire for a weaker dollar and some sort of quasi-night court, it's not going to happen. these countries want to weaker currencies versus the dollar and europe, we are going to get an ecb decision tomorrow. europe desperately needs a weaker euro. here is your bloomberg brief. yahaira: the suspect in the murder of the united health care ceo is being held without bail in pennsylvania after fighting extradition to new york. authority to new york have gathered evidence against him including surveillance video, autopsy results and written commissions. they are seeking is returned to new york to face second-degree murder and weapons charges. he is due back in court in pennsylvania on december 23 unless he is extradited first. the biden administration is weighing harsher sanctions against russia's lucrative oil

trade just weeks before donald trump returns to the white house. annmarie and other ci bloomberg are reporting the biden team may target some russian oil exports as fears these over a spike in energy costs. the outgoing administration has also moved to ramp up military and financial support to ukraine as it prepares to depart. and california authorities say the franklin fire near malibu has spread to at least 3000 acres. it is forcing the evacuations of at least 20,000 people while shutting down a stretch of the pacific coast highway. at least 1500 firefighters are racing to fight the blaze which is being fueled by dry conditions and santa ana winds. the fire is 0% complaint -- contained as of tuesday with no fatalities. lisa? lisa: we do hope that it comes under control even more so in the next few hours. up next, blocking the steel deal. >> steel has been an iconic

american company for nearly a century and it should remain that. >> will not let u.s. steel be sold to japanese. >> that conversation coming up next. this is bloomberg surveillance.

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♪ lisa: two straight days of losses and even though they don't add up to even 1% decline, what you are looking at right now is a market that has not seen two consecutive down days for almost a month. trying to claw back some of that, s&p futures up about 1/10 of 1%. a whole host of regions from china to japan, even more amenable to the idea of a weaker currency. yields rising just a touch ahead of cpi. this morning, blocking the steel deal. >> u.s. steel has been an iconic american -- american company for more than a century and should remain totally american. >> i would not let u.s. steel be

sold to japanese, by the way. i would stop it if it hasn't been completed by the time i'm president. >> president biden is planning to formally block the $40 million sale of u.s. steel to nippon steel. sources telling us here at bloomberg at biden plans to cite national security concerns when the deal is referred back to him later this month. josh joins us now. a question of just how much of a surprise this is, given the fact that what we just heard was both biden and trump talking about have a plan to block the deal. >> in some ways this is a story of consistency across both parties. of course back in september there was a lot of coverage around this when the deadline was approaching and then it was essentially punted, a maneuver to buy time and push things past the election. since then, out of people have been watching and wondering if joe biden is going to change his mind. the election is over, maybe the circumstances have changed.

meanwhile, governor shapiro of pennsylvania is, at least according to nippon steel, working behind the scenes to get the parties to the table to see if the union and nippon steel, the japanese buyer could come to some kind of agreement. it just doesn't seem like the union has gotten there yet and our reporting is that the president's mind hasn't changed either. we are also reporting that another delay isn't expected, so in other words this can is not going to be kicked further down the road to president-elect trump, as you heard him say. so we think that is not going to be the case. we are also being told that litigation is likely here. whether that works or not, who knows. but this thing has been bouncing along for almost a year now. late december last year when it was announced in of course this is an unusual case to become a bit of a lightning rod. these reviews are normally aimed at china. lisa: republican lawmakers telling the need to keep the

biden administration, has been used for political interest, not national security concerns. do they have a point? >> we think biden has made up his mind here. they are at least hinting at that. that might be true. it seems also true that president-elect trump has made up his mind here, so regardless of whose thumb it is, there's going to be allegations of one form or another view on the scale. the process here is secretive and includes ultimately a panel of advisors. many of them include members of biden's cabinet, so the question is sort of what they will do in this process. the white house saying on the record for our story that president biden believes it is "vital" that u.s. steel remain both domestically owned and run. that sort of signals any solution that sums are proxy board, they don't seem to be signaling openness to that.

also saying the process is ongoing. what we can infer from that is that the bill has not yet landed on the president's desk. the deadline for that is december 22 or 23rd. after that, a couple of weeks to announce. lisa: trump valley to speed up regulatory approvals for investors spending $1 billion or more in the united states. at the same time he is saying that he would block the nippon steel-u.s. steel deal. so how does the trump campaign transition team square that? >> i don't know what to say. when that landed it was like ok. regulatory rollbacks, there is a bipartisan issue for some time. things like infrastructure projects, energy projects will be a big one for that. so in some ways, not surprising to hear him call for that.

but what is clear is that, as is always the case with trump, everything is sort of a case-by-case basis. at least as of now, his stated position most recently including just last week was that he would block this deal if it does indeed come to it. the mechanics of that, i resources are saying that won't be the case. i don't understand how it could happen, the mechanics would have to be tricky, the companies would probably have to agree to revalue it. it is not clear to me and the people we are talking to whether that would even be feasible. dani: just on the point of companies investing $1 billion, it reminds us of the time when trump makes these posts that are quite sweeping left to his cabinet, his advisors. can we understand what something like this might actually look like in practice when as you

say, d.c. for some time has been trying and failing to remove some of the red tape around these issues. >> we don't, and the reason you are enduring my central casting hotel situation background here is that the reports here in west palm beach covering the president, we are sort of sitting around waiting for the puff of whitesmoke from mar-a-lago. and it is sort of trickling out with a couple of announcements last night, and then came this truth social post about the regulatory plan. they have not specified yet where it would be. they have the trifecta right now, so all these things i think our signaling as republicans in congress really started to get down to brass tacks of how they are going to sequence things, what legislative tools they are going to use, what is the priority and what is not. if anything, this is a signal of

one thing that he wants to be wrapped up in any sort of big package that moves quickly. annmarie: dani: the other announcement we got yesterday was trump's pick of andrew ferguson to lead the ftc. how different of an ftc would we be grappling with? >> one of the advantages as he could be there on day one because he's already on the ftc. we on folk hero for many of the democratic party's, particularly progressive her up interventionist approaches. he's pledging to not follow the signals and support from certain parts of the populace. including senator jd vance who has serta made more critical savings and other republicans have. i think there will be elements

of the antitrust populist agenda that overlap with both parties, but i think it is pretty clear right now that the trump administration was not interested in continuing with lina khan's approach. so now this is where we are going. but i would not expect khan 2.0. lisa: good luck at the hotel, i'm glad that you brought up and your ferguson because right now we are looking of a potential for a rash of m&a. we see the announcements and a whole host of different mergers. we did just get kroger and -- being halted by a federal judge. you wonder how many of these companies are going to re-up some of these cases. dani: they very well might put some of these ongoing cases started in the trump administration, things like pursuing google. they might be reversed, goldman sachs' ceo has been talking

about it. there might be a moment next year we pause and say it might not be as great and sunny as we all expect. annmarie: that is the thread. it is going to be big tech and that is one of the things trump highlighted when this announcement came out. andrew has a proven record of standing up to big tech censorship. handbags, groceries, maybe this ftc is going to allow it to go through. lisa: coming up, we are going to have that conversation with justin d'ercole of iso-mts. you are seeing an effort to bounce back after two straight days of losses. this is "bloomberg serveillanc " ."

lisa: two hours until cpi. futures trying to tick upward after two straight day of losses, led by the nasdaq which has been performing the past few weeks. yields continuing their climb. this stands out. there have been three days of at the close yields being higher. a time when people are wondering how much they might be underpricing the risk of inflation being stickier. dani: we could get everything as expected, .3%. the fed will be cutting. we need to have a serious conversation about inflation next year.

this number comes before we understand the trump administration. it comes as we are dealing with more bond options. there are some serious questions that need to be answered. lisa: especially when there's massive geopolitical overhang. there's a question of how much oil prices and gasoline prices could increase if sanctions go through with respect to what biden is talking about on russia. annmarie: they are discussing harsher sanctions and we have seen -- then we have seen -- than we have seen. they see this as a moment that it could be a moment to give ukraine the final push. this would be sanctioning. portions of crude, the same on iran. potentially coming after more of russia's shadow fleet. something the u.k. and european union have been doing. lisa: we have a dollar when you

have china and japan making noise that maybe they are not as concerned about a strong dollar. the japanese falling again. 152 versus the yen. the bank of japan seems to be amenable to the idea of waiting. there are reports that china is going to maybe pursue a weak dollar policy. something that has the attention of every parent, every executive. luigi mangione is being held without bail in pennsylvania. he's fighting extradition to new york where he faces murder and weapons charges. everybody is glued to this story at a time a pretty significant implication. dani: there was a cnn and time story saying the new york pd had a document saying please are concerned they will see this man as a martyr, an example to

follow and likely view him as a hero. i think the discourse has been extreme the concerning. you see some of that bubbling up online. nothing is justifiable for this type of violence. you have people online who are salivating this. it has led to cvs taking that images other ceos on their website. corporate america is fearful. annmarie: they are starting to look at the security around their top executives. what is so interesting is this investor conference day, there was a lot of security inside the building. no one was with the ceo as he was walking in. lisa: why people are wondering what happened on multiple levels. the biden administration is going sanctions on russian boil. before trump returns to the white house, sources told bloomberg details of the possible measures are still being worked out. the team is considering

restrictions that might target some russian oil exports. annmarie, wonderful reporting. there is a question of what the biden is trying to do ahead of its exit. they goes with respect to potential sanctions and beyond that. annmarie: it is the timeline. it is finally after the election they can go for some harsher measures they did not think of before the election. it's before the incoming trump administration. would he come in and offer waivers to russia? probably not. if oil prices are higher, that will be concerning as he ran on the president that contained inflation. we have seen incrementally the administration want to be harsher on russia. they rolled out last month sanctions on gas -- gazprom bank. this would be going after the crude. not a price gap.

within a cap and the price the west seems doable. this would be going after actual crude. this could be higher oil prices s if they come to that decision. lisa: general motors is getting out of the robotaxi business. they will combine their two units with respect to the waymo and cruise and some of the technological teams associated with it into a single effort focused on developing autonomous driver safety and technology. dani, i'm trying to understand with the motivation could be for this, especially when we are seeing tesla fly high. dani: you can say not surprising. they are scaling back their ev, restructuring and china, going on a cost-cutting operation. i think you are right. the timing is odd. even techcrunch reported

employees were blindsided. they learned about this when everybody did with the press release. you have a time where a lot of companies are racing to join this exclusive robotaxi club. what this does to valuations. we have talked to how many people that say the reason tesla should be bid up because the future of promises? lisa: this is the self-driving car unit and the technical teams. is there a strategic advantage because musk has the ear of the president? annmarie: proximity power is probably helpful. if that means this could rollback regulation, and and that space would likely be lifted up, not just tesla and elon musk. what if the robotaxi business does become profitable? four they look back and say we should have stayed in that? gm pulled the plug on their attempt at a commercially viable electric vehicle in 2003, the same year tesla was founded.

while maybe the cash flow helps now, i wonder if hindsight will save maybe we should have stuck with it. lisa: it is less than two hours to the latest readout on consumer inflation. the question is whether traders are overestimating or underestimating the inflation forces in an economy distorted by pandemic affect? justin d'ercole joins us now. you have a contrarian view when everyone is welcoming the disinflation that seems to be incoming. you think there is a stickiness and pervasiveness to this inflation most people are not recognizing. please explain. justin: i continue to believe that the right way to think about this is to look through the lens of what you have been hearing over the past several months. i would say the risk management cuts. that was the term people were using as it relates to what the fed should be doing in august of

this year in anticipation of this unemployment rate increase that manifested itself due to immigration. my view is that the market right now, pundits, the sell side, etc., are fighting the last war. mike mckee made mention of this. what i mean is, there is an unconscious bias going on as to happen to inflation. born out of 10 years of post global financial crisis of low rates, low growth and no inflation. what continues to happen is the natural behavioral response is impairing the ability to see what is actually happening. what i believe is actually

happening is that the disinflation, a big chunk of what we got was down to china's economy rolling over harder than anybody anticipated. and, a normalization of supply chains. now that those are behind us, the other thing but was born out of that was goods prices coming down. what you will see in the cpi's goods prices are now inching back up. when you talk offline to street sell side economists i think they are wary of the fact when they look at the basket -- when some things are getting better, some things are getting worse. lisa: before you keep going, there's a question of how offsides markets are -- offsize markets are. where you see the most offsize?

justin: the biggest risk is the pre-float of treasury coupon notes and bonds. the longer dated part of the market. the recent test the risk is look at the shape of the curve. everyone has been waiting for a steepener. that's entirely correct but the risk is if you look at the amount of treasury securities effectively available to be traded now as a percentage of gdp relative to three years ago before the fed starting qt and before the massive deficit spending that has inflated the deficit and the debt, you now have this extreme risk. that risk is exceptional volatility across all asset classes. if the treasury market is the basis upon which the financial markets are built and you see uncertainty associated with rates and where nominal rates

are, those two inputs feed vol. it is not universal anymore than it was the summer, which was mistaken. i continue to sense a belief we will go back to living in the post-global financial crisis environment. dani: what happens at a time when that's occurring and around the world there is discontent, in europe, asia? it has led to this narrative the reason we are buying u.s. bonds is because there is nothing else. justin: germany tried to avoid the sidestep, the debt break. that is why they will have an election in the second quarter. germany believes they are the growth engine of europe. the fact they are underperforming on the gdp basis -- spain and italy suggest to me they will do everything they possibly can to get that thrown

back. the amount of spending is actually at risk of accelerating. the answer to your question ultimately is likely near shoring globalization item. think about what china said about nvidia yesterday, what their focus is. this is building. the pieces keep concurrent -- keep coming together. my focus on banks -- the key point is the difference between a post global financial crisis period and now, if the banks are the engine to the economy, the portal through which fed policy flows, they had terrible capitalization after the financial crisis. they were terribly unprofitable. the opposite is the case now. the other thing you can say is the economy has a significant

incremental support system. dani: i'm also curious. we have to contend with what happens next year, the big unknown. before that we have vibes and animal spirits. the small business optimism survey jumping the most since 1986. plans for hiring, plans for capex, expected sales, all are up. at what point do vibes at what point do -- dustin: summer, early fall, the risk management cuts was mistaken. the answer to your question is, we now have two years of data that supports the neutral rate is higher. you only know the neutral rate ex post, after the fact.

what did inflation do and what did growth do relative to a policy rate, all else equal? we are growing at over 3% using atlanta fed in the fourth quarter of this year. 3% in the fourth quarter. the policy rate has been about 4% for two years. it is not debatable anymore. this is the nuance. i'm so sympathetic to people like torsten slok who comes on and does a great job. this summer he looked like a total outlier. when is the future the present? that is what people need to ask themselves. at what point do we accept gdp for what it is as opposed to saying it will roll over for these reasons? it does not make sense to me. the risk is getting higher and higher and higher. credit spreads or other titus levels since 1997.

-- are at their tightest level since 1987. lisa: thank you so much, justin d'ercole. a passionate explanation of why he sees this as currently the new normal and an acceleration in inflation ahead. here is your bloomberg brief. yahaira: donald trump has picked andrew ferguson to chair the federal trade commission. ferguson has a proven record of standing up to big tech, censorship and supporting freedom of speech. ferguson, already one of the ftc's commissioners will replace lina khan. eli lilly is planning to start studies to see if it's blockbuster weight loss drugs are also effective at controlling addictive behaviors. the ceo sat down with david rubenstein yesterday at the economic club in washington.

>> you will see lilly start large studies and alcohol abuse and nicotine abuse, even drug abuse. we will begin studies of anti-inflammatory conditions. you don't think of that with weight but there is a strong signal in anti-inflammatory. yahaira: he addressed the imbalance in drug prices between the u.s. and other countries. he said patients abroad should not pay more for their medicines. apple's next smartwatch can send texts via satellite. you can send messages even when they are off the grid. this is part of a number of upgrades to the smartwatch, including a long-awaited feature allowing users to check their blood pressure. capital hopes this entices hikers and health-conscious consumers to upgrade their devices. that is your bloomberg brief. lisa: weekend minutes are our step count anywhere we go, even death valley. annmarie: the point of going off the grid is the you cannot be in

touch with people and get away and calm down. lisa: i have not been to death valley. supply trains weighing on travel. -- supply chains weighing on travel. >> although next year will be better financially, it would have been better had we not faced these problems that haven't going on for some time. lisa: this is "bloomberg surveillance." ♪ ♪

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at t. rowe price we let curiosity light the way. asking smart questions about opportunities like clean water. and what promising new treatment advances can make a new tomorrow possible. better questions. better outcomes. lisa: markets with an optimistic tone of head of -- ahead of cpi. 90 minutes away from that print. supply chains weighing on travel. >> what's impacting the industry is the supply chain problems. we are looking at a percent

growth next year, but -- 8% growth next year. quite a lot of moving parts. although next year will be better financially, it would have been better had we not faced all the supply chain problems that have a going on for some time. lisa: a record number of people to travel next year despite supply chain issues, putting pressure on the sector. sheila kahyaoglu of jeffries writing, "passenger revenues are respected dissipate -- are expected to expand next year. " is a shorthand for tickets are going to cost you? sheila: it will. when you are going across the atlantic i think you are seeing pricing really tight. it is driving some profitability in the forecast and it's back to peak levels in terms of

profitability margins. lisa: how much of a premium can you imagine on flights based on restrictive capacity over to europe because a lot of airlines have been unable to receive their boeing airplanes? sheila: that is the pitch of the airlines and why you are seeing outperformance in the sector since september. for domestic prices we are seeing neutral pricing in the second half. internationally we are seeing ticket prices up significantly. they don't quantify the numbers but margins for the network carriers are 20% on the international side. that is helping drive double-digit profit margins for airlines which we have not seen in a while. dani: when it comes to supply chains we might get answers very early next year, whether it is trump saying he wants to start tariff proposals or the strikes from the port workers that would also put stress on air cargo, what rates are we talking about? will the peak be higher?

sheila: certainly not. boeing and airbus, we are forecasting 450 deliveries. our forecasting is terribly wrong or the supply chain had an issue. i think it was the supply chain and the boeing strike. if you think about the global forecast, 8% air travel. you estimated -- we estimate you need to thousand airplanes a year to provide replacement and new growth demand. we are at 1250 this year. we will see the supply chain slowly ramp. we saw that a little yesterday with boeing's deliveries. zero in october. production rates, nine in november for the max. though should be in the 30's. we will slowly see the rate of change or quickly see that improve. that is why investors have started to look at boeing's equity. dani: i was struck by the wall street journal story about jetblue. the turnaround plan, cut costs

by removing various routes but focus on the high-end. give people ultra luxurious lounges, expand first-class. will he be an environment where that is still the model where it can help someone like a jetblue turn around? sheila: it seems the premium offering is where airlines are outperforming. jetblue are looking at delta and united and seeing the profitability margins, which is mainly international travel. trying to replicate that with jetblue or southwest adding more premium seats, adding legroom. that extra legroom can be defined as three inches. i don't know what kind of premium that warrants in terms of a ticket price. it is up to one to decide what they are willing to pay for the ticket. for me, on time travel is the most important. annmarie: the jetblue-spirit merger that collapsed, could we expect more consolidation in the airline world in 2025-2026

because of trump? sheila: that is what management teams are hoping for. do we necessarily need that capacity? when you look at u.s. domestic capacity, we had 6% -- 7% increases in the number of planes taking off. ticket prices were down mid single digits. there was somehow access capacity because everyone was going to the same area. you had travel going to florida or excess capacity on flights folks no longer wanted. probably for the best whether it is the regulation are not. lisa: sheila kahyaoglu thank you so much. if we are paying by inch, i will get really sad if we start saying if you have two extra inches you have to pay, what, $25? $50? dani: even though i have a stream the short legs i have paid up for extra legroom. maybe i was only getting three inches and it was all in my head that it was somehow more roomy.

lisa: every inch counts. what is next? premium access to the toilet? will you pay for the oxygen? if you start paying for the oxygen -- let's move on. we have stuart kaiser, monica guerra, republican congressman french hill to have the financial services committee, and dana telsey as we await numbers from macy's. that was pushed back after an issue with some sort of malfeasance around shipping costs. you are seeing markets churning ahead of the cpi print. this is bloomberg. ♪

>> the long-term potential and a lot of excitement around ai is hard to deny. >> everybody is bullish on the growth outlook in the u.s. >> we want to embrace equities. >> expectations are just very high into many places. >> 12 months from now, we are in a higher place but it might not be an easy ride to get there. >> this is "bloomberg surveillance." lisa: good morning. 90 minutes until the key data point of the week, the last major inflation read ahead of

next week's meeting. we are looking at futures on a broader level. what you see is a question around how resilient and strong the consumer is at a time when there's been incredible divergence between the winners and losers in the retail space. as we drumbeat towards the cpi print, macy's comes out with their delayed earnings following a suspension earlier in the month. the question here is, what went wrong? revising downward the full-year earnings forecast. talking about the full-year adjusted earnings-per-share of $2.25 to $2.50. on a larger scale how much can they blame a lone employee and how much does this speak to the difficulty for the losers in the retail space at a tenuous time? dani: they are blaming that employee. they are saying this is what we have to revise things. shares down decidedly.

macy's has other issues it is struggling with. maybe this is just an example of credibility and strategy lacking at the company. macy's has an activist investor wanting various things to happen . wanting them to spin off their luxury offerings and a real estate unit. how much of this is financial engineering versus a real strategy shift that needs to happen? lisa: this is something we have seen consistently. the winners of the earnings season in the retail space get celebrated, shares pop upward. when you have a disappointment, they are penalized significantly. macy's down more than 8%. the question about how vulnerable consumers are to further bouts of inflation. how much they are pushing back against some of the price increases we saw, whicwhy people have conviction maybe this disinflationary trend can urs being more choiceful, but they are still

spending. look at the latest survey data. it has almost flipped. when it comes to inflation, how political it is. republicans think the economy, inflation, we are in a good place. democrats are saying we are not. you need to look at all of the data to decipher what kind of consumer we are dealing with. lisa: that is why cpi is important there are disagreements whether we are heating up or on the precipice of something more significant. it feels like this is a market leveraged to good use which is why we have seen a couple of days of stalling out as people worry maybe the stickiness isn't going to be present. dani: you can get inflation numbers coming in that confirmed the fed will be cutting in december and still be worried the path of 2% will be a complicated one. .3% was expected. if we get that everybody will cheer.

that is not exact leak comforting figures. also not ahead of a fog around 2025. lisa: maybe the year beyond. coming up, we have stuart kaiser of citi. monica guerra as biden defends his record on the economy. congressman french hill on president-elect trump's plan to boost industry. stocks higher as markets wait for cpi ahead of the fed decision. stuart kaiser weighing in. "if inflation matters, it is probably bad news. cpi has been priced as a smaller vent than payrolls and fomc. that reflects that downward trend in inflation. the backdrop means a downward surprise with far -- will be far less impactful then surprisingly strong inflation." thank you so much for being with us.

how off sized do you think the market is not pricing in this significant move? stuart: it's only offsides if the data comes in hot. at the last fomc, chair powell was trying to hammer home inflation is on a downward path. there are economist that's a 25 basis points is a little below cpi. equities will take that positively and rally. two the upside you would a massive surprise in inflation and the constitution of the print to disrupt markets. you might need multiple of those to change the fed's stance. lisa: some people are looking at a couple of pickups and -- hiccups in the last couple of days. this is a market that is fundamentally underpricing inflation.

are you saying it's a clearheaded market looking at the components and isn't that susceptible to an upside surprise unless it knocks your socks off? stuart: the consensus is we are on a downward inflation trend. the fed believes we are in a downward inflation trend. you need something to significantly disrupt that. the fed does not seem worried about inflation being a little sticky. if that is your view of what the market is underpricing, i don't think the fed will care about that or the market will care about that. if you have a tariff impact, that is a separate discussion. i think it will take a lot to take the fat off their core view. -- take the fed off their core view. dani: insane flows into u.s. equity funds but at the same time cash holdings continue to go to an all-time record. is this a euphoric market or something different? stuart: i think sentiment is pretty good. etf's are the thing that is really shifted over the last

couple of months postelection. retail is getting aggressively involved in u.s. markets. that's an investor base that's probably less sensitive to valuation or the right of ups price in the next year. sentiment is positive, but it is positive for a reason. there is a view that the deregulatory acts from the trump administration will be positive. i think sentiment is positive. if i had to summarize it, people are long u.s. versus the rest of the world on the equities. it will take something to shift that trend. dani: we should be clear, it is good sentiment around the u.s.. the etf figure has been outflows for the rest of the world. what does shift that? is this going to continue to be a u.s. exceptional market and europe and others will struggle? stuart: the concern about europe

is more they are consensus underweight. you have a dynamic that can disrupt that but you need a catalyst. what is that catalyst going to be? a lot of elections are coming up in europe. you could get large china stimulus to support things. from an equity investor perspective, is there going to be follow-through? if you look back to china six weeks ago, they surprised the market. the market was very excited. they just did not follow through enough. for europe and china you can have episodic periods of outperformance. the question is follow-through. if you don't have follow-through, the u.s. will be back in the driver seat. annmarie: this is all consensus right now? stuart:, positioning perspective, if you rewind, this was the case and small-cap. everybody was deeply underweight and short small-cap. the fed guided to rate cuts and then you had this massive positioning driven rally. same thing in july.

we got the friendly inflation print. the sentiment set up is a little offsize. the problem is one that comes up the next question is, what do i own instead? that question is hard to answer nowadays. it is hard to convince someone to sell u.s. and buy european equities. it does concern us. fundamentally it kind of makes sense. annmarie: what if trump gets his entire wishlist? stuart: 30-year bond risk is the number one market risk. those are the things we are trying to manage. belonged equities but hedge bond term premium dislocated to the upside. it's a massive risk and that is the key market risk out there in the system now. dani: what about cash flows? they are going higher. what if we have companies that

will face pressure to be investing in the u.s. and domestic industry? stuart: we will have to see what the capex outlook looks like. generally speaking, large-cap u.s. corporate so the safest balance sheet in the world. they have the capacity to do that. are they getting forced to do a spending program that's inefficient and destructive to margins? if that is the case, you have risk. if they are being encouraged to invest and incentivized to invest in the u.s., that is not necessarily a bad thing for the market. lisa: how much of that is signal and how much of that is noise with the recent rotations away from some of the small caps into large caps away from small caps? you talk about how the positioning shift indicated euphoria. why are tech stocks outperforming small caps by so much in the past few weeks? stuart: good question.

last week was one of the bigger weeks of growth outperformance we have seen in a long while. it reversed a little bit this week. the evan flow of markets and positioning -- the ebb and flow of markets and positioning. the demand source focuses on larger equities. foreign investors want to own large-cap u.s. tech. etf's go into things like that. some of it is the type of buyer we are seeing generally gravitating towards that. lisa: 2024 has been an amazing year when it comes to stock returns. why does it feel so exhausting and ready to end? stuart: i would like to blame it on politics. [laughter] annmarie: what about the market? 6, 7, 8 fed rate cuts. we had two. stuart: you have had some data

surprises. a little bit of politics as well. the weather has been bad. lisa: stuart kaiser of citi, thank you so much. hopefully 2025 would be a brighter year, at least for the weather. here is your bloomberg brief. yahaira: macy's shares are falling in the premarket. the company reporting third-quarter earnings that missed slightly on revenue and net sales. macy's seeing its full-year adjusted earnings-per-share coming in at a lower range than expected. the results coming after a week long delay after an investigation revealed an employee had more than $100 shares of u.s. steel are up slightly in the premarket, .3%. that is after plunging yesterday when we reported president biden plans to formally block the $14.1 billion sale of the

company to japan's nippon steel. he plans to do this later this month citing national security concerns. u.s. steel said the deal is a lifeline and warned it may shudder some operations if the merger collapses. kroger's $25 billion acquisition of albertsons has been blocked by a judge saying the takeover would lessen competition for u.s. grocery shoppers, citing --siding with the u.s. trade commission. kroger is considering an appeal. the company spent two years attending to merge with albertson's and become a bigger player and compete against larger nonunionized rivals like walmart. that is your bloomberg brief. lisa: up next, the weather. just kidding. biden taking aim at trump's tariffs. >> steep universal tariffs on all imported goods brought into this country. i believe the approach is a major mistake.

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lisa: 75 minutes until the cpi print. will it be an upside surprise? that is what people are trying to figure out. this is from bank of america. the market is underpricing cpi risk. we believe cpi matters more this time. don't tell that to s&p traders. you can see the bigger outperformance on the russell 2000. yie ticking up for a fourth straight day. dolly strength ready much across the board -- dollar strength pretty much across the board from key signals out of china

and japan. biden takes aim at trump's care plan. >> he's determined to imposing -- to impose steep universal tariffs on a mistaken belief foreign countries will bear the cost of those tariffs rather than the american consumer. i believe this approach is a major mistake. lisa: president biden saying donald trump's plan for broad tariff hikes will hurt american consumers. biden taking an economic victory lap after his policies were seen as contribute to the democrats' election loss. joining us now is monica guerra from morgan stanley. happy holidays. i wanted to start with what you make of president biden trying to put certain things into place, rushing to do so ahead of president-elect donald trump taking office. monica: this is about legacy setting. i think that is pretty clear.

trying to get as much done in the next three weeks, four weeks as possible. what we are likely to see is a move towards trying to keep jobs in the u.s. that's essentially what biden is trying to do. trying to say i have a strong economic legacy despite with the electorate might think. although he might be stopping this deal around u.s. steel, we are likely to see a prodi regulation -- pro deregulation agenda that might flip that on its side. biden is try to get there is much through as possible without strong legal structures in place. that can still easily be unwound by the next administration. annmarie: they are looking on fresh sanctions, harsher sanctions on russia. waiting into the last minute to put trump in a rock and a hard place but also give more support to ukraine. do you think we will see more those kind of actions on the foreign policy front before they

leave office? monica: we don't have a view on sanctions. i want to make that clear. what you are likely to see is biden reaffirming our commitment to ukraine. trying to reaffirm channels with nato. essentially reminding everyone how different policy-wise the biden administration is from the trump administration. that is the dynamic we will see over the next four weeks. providing the public, from -- reminding the public and the world what his legacy is. one thing we saw in the last 24 to 48 hours was a move towards reaffirming his ira bill, the inflation reduction act, and getting money out the door. while the trump administration has had a very aggressive rhetoric around anti-climate change, pulling back on clean energy tax credits, etc., it is our view that clean energy is likely to do well under trump.

what we saw during the trump administration is clean energy outperformed traditional energy. it was vice versa, converse underneath biden. even though they had all this fiscal spending and tax credits being offered, clean energy underperformed. a lot of the clean energy sector functions like a growth stock. that is what we are focused on. even though there is legacy setting happening and one president or administration might have a priority, look at market technicals and global demand. annmarie: let's look at something trump said last night. if you have $1 billion investment in the united states -- i thought about isn't that nippon steel? what is he mean by this? is it something he wants to throughout their for a vibe? monica: we have to see how that would actually be interpreted. what are the deals? if we are backing off on m&a aggressively as far as monitoring that through the ftc, that could allow for a faster

permitting, faster deals moving to the legal system. that's a bigger picture umbrella structural change. i don't think it is all smoke and mirrors. it reaffirms his commitment to that pro growth strategy and policy. lower taxes and the deregulation play. this is part of that narrative. how it plays out we have to see. i don't know with those investments are. we don't know what agencies are involved and what permitting might be involved. we have to see how it goes but it's essentially -- annmarie: are they american? are they foreign? monica: it sounds like foreign, bringing investment to the u.s. it would be offshore coming to the u.s.. progrowth, america first policy. bringing jobs here. that is what you see in the conflict between biden and trump. biden is saying i will not let u.s. steel go offshore.

that is one method of trying to save american jobs and be progrowth. if you have the other, the trump strategy we talked about. dani: that pro growth strategy has the soft data ticking up a lot. there was a survey and ceo optimism is the highest in two years. the details were interesting. they pointed to what you're saying about progrowth but he will avoid the overly broad tariffs. our ceos -- is corporate america ready if there are some serious tariffs put in place? monica: sounds like they are not. that is what the survey says. it sounds like folks are not preparing for that. what we have to track when we think about investors and clients is, if this is sweeping, what does that mean for the consumer and the constraints? if not, where the risks and how can we signal ahead of time and get ahead of it with clients? that is what we are focusing on

when interpreting the tariffs. dani: what about regional exposures as you interpret the various picks for various positions? what fears the worst? -- fares the worst? monica: asia would fare worse. this continuation of the aggressive u.s.-china tariff regime. i think the mexico-canada-usmca tariff could be soft. that's part of the broader renegotiation in 2026. i am not as bullish on the 25% on canada and mexico. asia will be a primary target for nutley trumpet also rubio -- not only trump but also rubio in their international affairs. lisa: one of the test pieces is andrew ferguson to head the ftc. i wonder what that means with

respect to handbags and grocery stores. not necessarily for big tech. do you think andrew ferguson will be more amenable to the deals getting through and reinforcing the optimism we are seeing about m&a? monica: i absolutely agree. it could reinforce that m&a boom across the board. we are looking at not just how we have tended to think about it would also for our own industry, financial services. there will likely be m&a activity there. it will be sweeping and it will be a top-down order. much the same way when lina khan stepped in she changed the tone of the agency. this is his opportunity to reshape that. annmarie: if there is a thread that follows them in terms of big tech, that is something we have seen trump talk about and trump's ftc in the first iteration were the beginning of

some of these big tech crackdowns with the likes of google. monica: one thing about big tech i like to emphasize from a policy perspective is the biggest players in the room have the ability to respond to the doj, the ftc, any actions that can take because they have enough revenue to respond. it doesn't hurt their valuations over the long run. where i would say the real risk is on tech would be if they continue to focus on smaller companies. the deregulation play will help growth more significantly. obviously on the upper ends you can be toppy already. lisa: the ramifications of the chessboard in washington and mar-a-lago. we are watching macy's shares fall more than 8% after downgrading the full-year forecast.

our real question about how much this goes to a fundamental weakness versus simply an errant employee. dani: is this just another excuse like people are not willing to pay as high prices anymore that masks over a strategy issue more broadly? lisa: by you have activist investors circling the story. coming up, more on what we see going down and washington, d.c. congressman french hill as president-elect trump looks to boost american industry. this is bloomberg surveillance. ♪

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lisa: just two hours away from the cash open. one hour away from a key data point ahead of next week's fed meeting. stocks trying to claw up some gains after two straight days of losses. let's get some specifics with your morning movers. manus: admitting you have an internal and material weakness in your control, that is what macy's has admitted to. it had a consequence. they closed off their accounting issue and lowered their full-year profit outlook. this is to do with the earnings-per-share. they will have a nip at the margins as well. this is the intentional hiding of $151 million in expenses.

they raised their full-year outlook. they are contending with an activist investor who wants buybacks and optimization of value. that may mean rethinking the strategy and separating off the real estate as well. there is a lot to contend with in the announcement. think about the gear maker. they say we have wide orders that are flat. the data centers are chewing up energy from gas. gas is the number one driver. 24 hour power delivery to the data centers. that is driving gas over wind. reliability is the issue. they will be time before the energy the data centers want really rely on wind. gm rectifying some of the strategy here. this stock -- she scrapped the robotaxi business she bought in 2016. it is called cruise.

it will save them about $1 billion a year. just think about whammo. you have tesla coming into that space. yes, mary barra put $850 million into cruise. this is the truth and reconciliation moment. the talent that was driving cruise will be folded into autonomous driving and other teams for advanced safe driving. that is the latest from gm. lisa: i appreciate it. we are focusing on stories elsewhere. president biden saying he will formally block the $14 billion sale of u.s. steel to nippon steel. sources telling us he will cite national security concerns when the deal crosses his desk at the of the month. you can make arguments about this takeover and the viability of u.s. steel alone. there's a question of the way

this has gone down. annmarie: this looks very political. this is supposed to be about national security concerns, not an election year and you're trying to shore up votes of union workers in pennsylvania. president biden and president-elect trump both said for protectionism they would block this deal. nippon steel should not beal the takeover u.s. steel. what i find -- should not be able to takeover u.s. steel. it feels like a last-ditch effort. nippon steel announced a plan to offer $5,000 bonuses for every steelworker if the takeover closes. last-ditch effort i don't think is going to work. dani: they wanted the union on their side. there is this irony. the idea that if you had waited a little bit maybe you could have gotten this done under trump. trump does not want this but he said if you spend more than $1 billion, we will speed up

permitting. this is a case where nippon steel was trying to do just that. it speaks to the difficulty of navigating a business environment in 2025 when you can have these broad sweeping statements and some of the details don't play out that way. lisa: that's why people are looking at national security to do the heavy lifting when investment is a priority. donald trump also selecting andrew ferguson as his pick for ftc chair. trump saying, "enter has a proven record of standing up to big tech censorship and protecting freedom of speech." ferguson serves as an fcc commissioner. one of two republicans on the five-person panel. to me this is fascinating at the time when we are talking about a resurgence in mergers and acquisitions. dani: but where is the question. where will we see that resurgence, clearly when it does come to national security and tech he might let some ai run.

we should have a getting ai a lot of scrutiny at this moment. she give it time to develop. he can. a putting regulation on the airline industry and day after kitty hawk. ai develops more quickly. he wants big tech to get away with the censorship and crack down. on the other side he wants ai. there are different pieces and we don't appreciate where they fall into line. lisa: a federal judge blocks kroger's takeover of albertsons, saying it would lessen competition in the grocery space. a question about how much this is going to be the status quo and whether it will stay or some of these deals will get revived under the new administration. annmarie: definitely a parting gift to lina khan and terms of her leaving the ftc chair. she has come under criticism from republicans and business groups about deals like this. not when it comes to big tech but deals like this, about albertson's and kroger. the handbag style.

deals most people thought sitting on the sideline went go through -- would go through. maybe that is what you would get with angie ferguson. lisa: donald trump looking to boost u.s. investment. "any person or company investing $1 billion or more in the united states of america will receive fully expedited approvals and permits, including but in no way limited to all environmental approvals. get ready to rock." french hill rocking the green tie with lots of dogs on it. i want to start with this question of how available congress members will be to implement some of these proclamations on true social. you are up for leading the house services and financial services committee. what would your priorities be on day one? rep. hill: first, great to be with you.

i think we have to coordinate with the incoming trump administration about their regulatory priorities. number two, roll back the most egregious burdensome part of the biden-harris regulatory agenda. the cfpb or the sec or through the bank regulators. we want more clarity and transparency, less cost while preserving safety and soundness. we need to pursue something that's unfinished business, to create a market structure for digital assets and bring up that clarity for innovators, for coders, venture capitalist and the next range of investment in the web. web 3, which has blockchain as a critical feature. those of the top realities among many. annmarie: that is if you get the gavel. i have been told it's very competitive to lead this committee.

we will see the vote in the next 24 to 48 hours. how close do you think you are to leading the committee and getting the nod? rep. hill: i have worked hard in the last few months to talk about my vision for the committee. my ability to be ready on day one to implement president trump and house republicans financial services priorities and regulatory rollback using budget reconciliation and making community banking great again by legislative and regulatory changes. i have talked about my experience. i was a private sector bank ceo. novo bank founder and ceo. a public company director and worked in the executive and legislative branch. i have talked about why i believe on the best candidate based on that management experience, the ready to go vision i have for the committee and the work i have done in the house. annmarie: when it comes to the first 100 days, there's a

debate. john thune is talking about doing two bills, border and energy and tax cuts and another. your colleague in the house jason smith wants one large package with immigration, energy and those tax cuts. what you think is the best path forward? rep. hill: annmarie, we have to be on the same page. senate leadership led by incoming majority leader john thune, mike johnson and the incoming leadership in the trump administration need to have their own view and be a consistent and combined view for both the house and senate. that maximizes the leverage we have for using budget reconciliation. you have to navigate the parliamentarian and the senate, have a clear plan, but most of portly we have to make sure -- importantly we have to make sure we have republican votes for that. that is why all three parties,

the republicans need to be on the same page. lisa: we talked about the sequencing next year and how things are going to get through from president trump's agenda. people talk that probably we will get tears first. we see a great willingness to do that. do you understand the mechanism by which tariffs bring revenue into the country and away that could offset the deficit? rep. hill: that is a big step to make the assertion that tariffs are somehow going to offset a $2 trillion deficit that is projected to be at that level for the next 10 years. this is much more about setting long-term spending reform and spending priorities as opposed to balance the budget three revenue mechanisms. we need to get serious about prioritizing discretionary spending, but that is only a third of the budget. we need a bipartisan, bicameral

process to make long-term spending reforms in what we think and call the mandatory spending programs, which is 80% of the budget. we will put america's financing on a more sustainable course. that will be the ticket to countering china, meeting domestic priorities and having a long-term future that does not continue to indent the next generation. -- indebt the next iteration. i think he wants to use tariffs as a major cudgel and bringing people to the negotiating table. one of the priorities will be make sure the u.s. mci -- usmca, which negotiated -- he negotiated, is working the way it should. maybe we can strengthen it. make sure people don't take advantage of it inappropriately. perhaps we could add countries to it which is an exciting prospect to use that as an

inducement to get more partners for the united states, canada and mexico. that would be a real ticket to bring foreign direct investment into the u.s. dani: is it your expectation we will not see sweeping tariffs? it is simply a negotiating ploy? rep. hill: i think it is a principal cudgel the president has bringing people to the table to get better open access for american products entry our services and merchandise fairly and make sure we can get into other countries on a fair and equitable basis. that is really deteriorated. that's the purpose of using tariffs. you will not dump your products in our country and subsidize cheap prices. we went access to your markets -- and we want access to your markets. lisa: one question is how much of the doge committee can push through some of the efficiencies

that can help offset a number of the expenditures? how willing do you think congress memories are going to be to sign off on some of the -- congress members are going to be to sign off some of these cuts across the board ? rep. hill: the exercise led by elon musk is a good one. getting outside voices looking at the calcification and particles built upon the hull for decades is important. they will have ideas that can be done by executive management on being more efficient and procurement -- in procurement or policies about implement. a lot of the tough changes will have to be vetted by congress and approved by congress. on the house republican side, tremendous enthusiasm to see these two successful business guys brainstorm, work with the cabinet secretary's and make constructive recommendations for making the government better,

more efficient and less costly to the american people. lisa: congressman, thank you so much. we look forward to speaking with you after that thursday vote. congressman french hill of arkansas. let's get you an update of stories elsewhere this morning. yahaira: senate republican leader mitch mcconnell is set to be fine after a fall yesterday. colleagues say he tripped following a lunch and suffered a sprained wrist and a cut to his face. a senate spokesperson saying he is cleared to resume his schedule. mcconnell is the longest-serving party leader in the senate's history. he will finish his term through 2026. senator john thune will take over as majority leader next year. the value of elon musk's spacex jumped $350 billion. according to an emailed, investors agreed to purchase as

much as $1.25 billion of the rocket and satellite maker's common shares at $185 apiece. the valuation cements spacex's status as the most valuable private startup in the world. the yankees may have lost the one soto sweepstakes -- juan sot o sweepstakes but made an upgrade to their pitching rotation. max fried agreed to the largest deal for a left-handed pitcher in history. he's coming off a stellar stretch with atlanta, holding the league's lowest e.r.a. in the last five seasons. lisa: every team wants to pay that much money for a pitcher, they can do that. annmarie: welcome max but i'm still sore over juan. lisa: the state of u.s. retail. >> low and consumers are fickle because they are the most economically distressed.

at the high end we see a lot of fickleness. lisa: is that what we saw at macy's? that's coming up next. this is "bloomberg surveillance ." ♪ ♪

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lisa: 41 minutes until the key cpi report. just getting this. opec is cutting its oil demand growth forecast this year for a fifth straight month, the deepest reduction to its outlook for the year so far. annmarie, this emphasizes why you are not seeing more of a response in crude to some of the geopolitical concerns elsewhere. annmarie: the fundamentals have been weak and soft for the oil market. they are seeing the softness in demand in china. opec has not been able to put barrels back on the market and

this is why. lisa: more on that coming up. eyesacy's shares. the state of u.s. retail. >> at the low end consumers are incredibly fickle. they are the most economically distressed. at the high end we see a lot of fickleness. those consumers, while still flush with cash, they have so much choice. you see that in some of the u.s. numbers. that is absolutely an issue every business that is trying to attract higher and customers has to face. lisa: macy's shares taking a hit in premarket trading. third quarter earnings below estimates with the retailer cutting the profit outlook after an employee intentionally hit over $150 million and delivery costs. macy's found material weakness in the internal controls. joining us now is dana telsey. what went wrong with macy's? was it just an errant employee?

dana: you had a pressured consumer during this time. you did see some improvement like at the bloomingdale's division where the comps turned positive. it is a challenging landscape. the weakness in macy's, yes, the delivery expense was the gross margin. the merchandise margin was down 70 basis points. they go forward outlook and adjustment to guidance for the year came from the gross margins side. when you look at the initiatives put in place, like the first 50 locations, they see accelerating positive comps given the service added. one other thing is they announced an increase to the number of store closers for macy's this year going to around 66 from the previous expected 55. lisa: macy's shares are down so far this year and it raises the question when they put out a warning that they have found material breaches and their internal controls. how endemic is this to just

management style overall? dana: you have had different ceos over the time period, 10 years with three different ceos. i knew team has taken over now. a large company but controls matter. it showed in this with what happened in terms of how the controls need to be strengthened. anxious to hear what happened and how it will be addressed going forward. many companies need to assess that so you don't have this breaches and conduct with enhanced audits. dani: is there an idea other companies are not up to snuff? this is an industrywide problem? dana: this was macy's alone. we have not heard any companies are doing this. we have over the years when you had covid companies increase and excel are the audits that they do of delivery expenses and what is happening with all the

omni-channel initiatives. annmarie: how much is macy's lifted by bloomingdale's and blue mercury? dana: they are. they are being lifted in many ways. not just the sales part but also on the merchandising part. to better understand what product trends can be gleaned into the core macy's business too. when you think about living deals and blue mercury and the size of macy's, over $20 billion in sales, it is macy's that is the bulk of the revenue. those are much smaller entities compared to what you are generating for macy's. annmarie: i love your thoughts on holiday shopping spending. out of europe we got the owner of zara reporting slower sales growth at the start of the holiday season. dana: they are up 9% from november 1 through december 9. when you look at the prior read it was up 11%. the stock is down because of the

deceleration in sales. we have heard through our checks that they have seen around the world, whether canada, europe, north america, a slower sales rate. that impact when you're looking at a trend retailer, it is not just a macy's issue. it is what is happening with how the consumer is spending on discretionary goods, newness and innovation drive that spent. macy's talked about the strength of fragrances they had, contemporary advanced apparel. it has to be new to drive demand. dani: macy's has activist investors. they are recommending put real estate in a separate company. is there risk they are veering towards financial engineering and not actually fixing the offering and culture? dana: one thing you see, look at abercrombie & fitch. look at companies like coach

with the coach brand of what they have done to reinvigorate. it can be done. it takes time. the financial engineering of what you split off real estate or do anything else, investment in stores is critical to present an experience that matches the goods you have. if you going to split off the real estate, you still have a to pay rent. you need sales increases to deliver on those numbers. lisa: macy's shares are down, 10% full dana telsey thank you for being with us this morning -- down 10%. some expo nations about what actually happened. to me that is a key question at a time where do we understand shipping costs and how one person can cause a $100 million gap. dani: we learned about this a while ago and i still don't understand it. people want to know how much is

macy's just using this as an excuse. this idea that changes can be made. you can fix your offering. you can get there. some companies just say things will go by. maybe consumers will come back. you need to change things and maybe can't keep relying on old excuses. lisa: why we are hearing about property sales and other initiatives. coming up, the key hour with cpi coming up. jay bryson of wells fargo and david kelly of jp morgan. stocks grinding around trying to find a direction ahead of the key inflation rate of the u.s., the last before the fed meeting. this is bloomberg. ♪

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>> it ultimately comes down to whether or not we see in unexpectedly higher cpi number. >> if inflation starts to reverse that could cause i posit the december meeting. >> if we got a stronger reading

they might say they would be at the point where we slow the pace of cuts. >> we think that there will be upside surprise. >> we have a risk of moving higher. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: welcome back, already minutes until we find out how willing consumers are to accept higher prices with stocks trying to turn around two days of losses ahead of the key cpi print in 30 minutes. this is a moment that a lot of people are trying to figure out. are we looking at an economy with more inflationary pressure than previously realized, or maybe they are just feeling tired with how far and long this rally has gone. dani: there is and that is may be why we have seen some of the pauses but we are seeing more fear that inflation is not dead. today might confirm that. deutsche bank out with a note

saying that u.s. data is pointing to a significantly more inflationary direction. he points to housing as forward indicators, immigration flows have already slowed and even if we get a cut from the fed this month it will be a long pause. annmarie: deutsche bank was saying it might be more than .3%. if that is the case that would actually be the highest monthly number in seven months. what does this mean when everyone is talking about next year's policies that could be inflationary? just a reminder is that a lot of economists told us that they would have the flight down to 2% in the last mile will be the hardest. lisa: that is why the bank of dirt -- bank of america derivative said that the market's underpricing cpi risk. macy explains why it saw some light on $100 billion removed off of its top line from an

errant employee which raises the question about how much we are seeing consumers pushback in real time about how much they are willing to spend and buy at a time when otherwise things are reaching equilibrium? dani: it is a -- it is a weird thing to look at a macy's and consumers discretionary company is. and on the other hand have a conversation about airline saying that everyone will be traveling to europe and spending this money and going on cruises. it is not a consumer who has stopped spending. but they are stopping a spending if you do not have a strategy to capture them. they do not have the money they once did. annmarie: people are hungry for services and experiences while goods inflation has not come down. lisa: we are seeing the market trying to claw out gains after two straight day of losses. the s&p futures bouncing around .10%. you can see the outperformance

on the nasdaq. dollar strength across the board. 1.05 on the euro-dollar cross. yields are creeping higher. it will be the fourth straight day of yields taking higher ahead of the key option -- auction. crude prices are off of their earlier highs as we got the opec news. we have deutsche bank with the stocks looking to bounce back from two days of losing. deborah cunningham on federated hermes and why investors can keep cash on the sidelines and david kelley on why there is a lot evidence of mounting inflation pressures. stocks are steady. we are looking ahead to next year like all of us. the 2020 five year end s&p 500 target is 7000. from a demand supply perspective positioning is near the top of its band with little room to rise. we see robust equity inflows

boosted by strong risk appetite although we are factoring in slowing. he joins us now. thank you for being with us. my favorite part of everybody's outlooks is explaining why people are not more bullish because you come out with a bullish outlook and say it will not be that quick so just pump the brakes. binky: i hate to use a very overused word right now which is constructive. but we have been constructed for two years and the fundamental reason is really about the business cycle and that is what equities are about. and i would say the cycle looks pretty good. there is a whole set of things that one can think about that really have not kicked in yet. i mean we have had destocking that everyone knows about. we cannot remain in that world permanently, so at some point that goes restocking.

if you look at capex and earning outside of tech are starting to turn up so we should start to get capex. there is the biggest question i would say, which is the funk in manufacturing globally, and the same is true basically in the u.s.. and what you are talking about before then, the services. bigger picture i would say the pandemic and the pandemic rotations are still very much with us. what i would add is that first of course everybody knows about that we have a massive rotation into goods and then over time we have the rotation into services. what i would point out is that ces relative to good spending looks to have overshot. we might be at that cusp of a rotation back into goods. and that will go a long way towards sort of normalizing things. goods of course are more

important for equities they had earnings because it has been disproportionately represented. lisa: it raises a question about the vulnerability to data surprise at a time where people have a hard time getting their head around which rotation we are in and how affected it is. how vulnerable do you see the market if we do see an upside surprise of cpi in 25 minutes? binky: i think it will lead to modest pullback, perhaps. depending on the details. what i would say is sure, we will have bumps, but i would say that the broader disinflation trend remains in place, especially if you think about it fundamentally. the inflation did not come, but basically for the traditional drivers and the traditional drivers for me are the unemployment rate and the u.s. dollar. the pandemic related boost to

inflation was worth basically about four percentage points. that has obviously come down a lot but it is still 40 basis points and that is a force for continued disinflation. most people did not believe that 4% would go away. and then down to 40. i am sticking with the dish inflationary forces. -- disinflationary forces. we will have a lot of bumps. the residuals and all of that is well known. i think it is going to be bumpy. but i think the broader trend remains very much in place. dani: one of the other things we have seen a lot are the 2025 outlooks that forecast the equity market continuing to gain his how you talk about valuations and how those are justified. ubs says that it is justified to be above the long-term average because of technology. blackrock says the business cycle does not exist anymore because of the ai excitement and what that means.

what do you make of that piece of the picture? binky: on valuations the first point i will emphasize is that it is not coming from here or there, but everywhere. the market is expensive and there is no getting around that fact. we are basically trading at 24 times trailing on the history -- when the historic average is 15.3 times. but you know, it is a big topic. but i would say there is also plenty of fundamental reasons for why valuations have gone up. i would point out that valuations actually went up, so we spoke about the 15 times. look at a chart for multiple for the last hundred years. it is going to be at average which means you get sometimes above and below. but since the late 80's, early 90's, we have barely gone below 15 times. so, that move up happened earlier.

the question is to understand why it went up. it is not something that happened this year. and so, obviously valuations went higher this year. what i would say is number one, we live in a 2% inflation world rather than 3% which is a little bit better than multiples which gives you a point or more. they keep thing that has changed is payout ratios. historically they ran between 50 and 60%. late last cycle we were running for several years closer to 80%, a 45% increase in payout ratios. if you remember present value mass, -- math that tells you the fair value multiple should go up 45%. that is probably too much. there are fundamental reasons and there are several others. annmarie: one of the things that

has helped his benign corporate credit spreads. you can issue large buybacks and keep our. how much are you looking to that market and seeing any potential widening that might disrupt these good trends? binky: the leveraging to do the buybacks, that is a myth. most of the buybacks come from the most unleveraged companies and the most leveraged companies do not do any buybacks. and then obviously there is a case here and there and generally, lowered buybacks produce negative not positive reactions. that is not really an issue the way we think about buybacks, simply that companies get earnings and they convert it to cash flow and you payout the dividends and do what you want to do and what is left over is returned in the form of buybacks. so we have buybacks next year going up in line with earnings, about 11%. annmarie: i would love to get

your thoughts about policy. you think the sequencing will be similar to trump 1.0. binky: it is a working assumption as i would put it. annmarie: why do you think you will wait so long when arguably he is already negotiating tariffs right now with china, mexico, and canada? binky: when you think about basically a set of policies and as i said before the way we think about it and it is easy to talk around. there are various positives and negatives. if there are both positives and negatives you have to think about it in terms of offsets. we have had very decent economic growth for a couple of years now and you start with the negatives and you will lower it. if you start with the positives you are raising it. and when you do the negatives it is taking off of that which leaves you where you are give or take one slight direction or

another. to me it seems sort of key to do the positives first. i mean, in a good context, perhaps that is to broad-based sorts of statements. the taxes if that is not the focus you end up a sickly and what could be a sizable tax increase so that has to be the focus and that should be the focus. to preserve or raise the growth before you start to think of the negatives. lisa: wonderful to speak with you as always. this morning ahead of that cpi prints that comes in about 17 minutes. let us get you an update on stories elsewhere. here is your bloomberg brief. yahira: the suspect in the murder of the unitedhealth group ceo is being held without bail after fighting extradition to new york. authorities have gathered evidence against him including

surveillance video autopsy results and written admissions. they are seeking his return to face second-degree murder and weapons charges. he is due back in court on december 23 unless he is extradited sooner. senator bernie sanders told political -- politico his term starting in january will likely be his last. he has been in congress since 19 monday one serving eight terms in the house before winning a senate seat. sanders was a top contender for the democratic residential nomination in 2016 and 2020 but was a runner-up both times. after trump's victory the senator called out the democratic party for abandoning the working class. several items from tom brady's career were auctioned off at souther be's new york including rare watches and sports memorabilia including the george -- the jersey he wore when he broke the all-time passing record. the top items where his watches with the rolex daytona selling

for over $1.1 million. the total value topped estimates coming in at $9 million. lisa: thank you. up next the morning calls plus deborah cunningham as we caught you -- count you down to the cpi report. this is bloomberg surveillance. ♪

lisa: 13 minutes until the cpi report and that will be the last major release ahead of the meeting next weekend. you are seeing markets trying to eke out gains. the s&p futures appoint 10%. 10-year yields up two basis points. a question about how much it really sets the tone when we get cpi for the auction of 10 year notes. time for the morning calls. first up morgan stanley resuming coverage of jet blue with an

equal weight rating expecting it to remain resilient. deutsche bank raising the price target on southwest to $35 saying that stock valuations main attractive. jp morgan raising the project -- the price target on netflix to $1012 citing healthy organic growth in all of the households with children who are purchasing certain shows repeatedly and watching them when they should be doing homework. cpi do in a few minutes. the data could predict the fed final rate decision of the year. deborah cunningham of federated hermes saying that if policymakers slow the pace of easing due to worries about inflation, money markets will likely see yield stabilize at elevated levels. deborah joins us now and i really enjoy your notes and your point because it really kind of challenges this idea of money on the sidelines. does that stay on the sidelines

in the money market accounts if there is a higher neutral great for the federal reserve -- neutral rate for the federal reserve. deborah: the expectation had been and we will see after the dot plot comes out next week. it had been 2.9% from the fomc. we have it a little bit higher at 32 3.25. we are raising that to 50 basis points higher. that is based on what we think continues to be a pretty strong employment picture and inflation environment that continues to be a little bit maybe disconcerting. it has stabilized and it is no longer coming down. and the expectation of policies for a new administration standpoint that perhaps take those inflationary numbers upward again when you look at immigration and tax law changes

and tariffs and regulatory changes. all of those have the potential to become more inflationary in 2025. i think the fomc will be cautious and rightly so. lisa: this is the reason why you have seen people pile into money markets and it is a risk-free yield. what you have seen is almost $2 trillion into money market funds from the lows of this year alone for nearly $7 trillion. how much of this do you expect to just stay given what you expect from the federal reserve? deborah: our expectation is 90%. maybe there is 10% that sideline cash if they are enticed by the equity market or some other asset allocation. quite honestly if yields have three or four handles for a

portion of 2025. there is no reason with it being a very low risk product that it does not have appeals. it is not just one sector. the retail trade into money market funds drove the bus in 2023 and the beginning of 2024. institutional has kicked in in the second half of 2024. we think both of those sectors will continue to be strong from an asset standpoint. dani: in the summer there was a concentration that the reinvestment risk is coming. and if you are not further along the curve you will be missing out as yields drop. we had a 50 basis point from the fed and since then 10-year yields have moved higher by 54

basis points. what is the impact on investor psychology if those concerns of reinvestment risk played out the opposite as many assumed that they would? deborah: i think what you end up seeing is the extension trade being something talked about on a regular basis but not necessarily undertaken. within the products and within our own products and short-term bond products, those portfolios have extended but still within the range of the short end of the yield curve. and what we have not seen is investors actually moving a lot of their cash from the short money market end of the curve into the micro to ultrashort products. those cash flows have turned positive but not in a major way that would indicate a trend change. i think you still see the

contemplation continue in 2025 without a whole lot of real movement out of the money funds side. dani: bank of america had a note out that i knew but did not think about until they laid it out that every part of the u.s. treasury curve beyond cash equivalents is still in a drawdown from the pot -- prior highs. beyond cash equivalents what place do treasuries have in a portfolio right now? deborah: they are the most liquid and the safest security in the world. even in a client environment even if it is not much in a decline as it had been initially anticipated six months ago, or three months ago for that matter, the portfolios that have a lag like a money fun of 40 to 60 days are going to keep a higher yield for a longer period of time.

you are looking at institutions to choose between treasuries, rex securities, treasuries and money funds, -- direct's securities, treasuries and money funds will be part of that lag. there are places from a treasury perspective and lots of treasuries that could be used for a collateral standpoint with regards to repo which is a big item for use in money funds. if you are comparing them to money funds with rates higher longer, you are going to want to stay in a product that lags those changes and that is a money fund. lisa: thank you so much for being with us. six minutes to go until we get the cpi print. here is how we are stacking up in terms of expectations. the expectation of the survey, 0.3% in terms of month over

month cpi gains. we can expect a 2.7% cpi year-over-year up from 2.6% in the prior month. if you are looking at the core, 3.3% in line with what we saw the last reading around emory. it raises the issue of how high is the bar versus one way or another for the market to wake up? annmarie: this is the last data point so when it comes to the labor market people say we are ok even though everyone was talking about that the bias was the labor market and people are worried about inflation. and i go back to what the fed was talking about. it seems like they want to cut but they are waiting for totality. dani: it seems like a bond market that adjusted, is it offsides or will they surprise or are we more vulnerable. the bond market flattened into

this positioning right sized. unless it is a huge surprise is a bigger rex -- risk when we get the spc or division. lisa: we might kick the can down the road down the week. dave -- jay bryson and dave kelly breaking down the key cpi print. i'm curious to see what the market does as important as the number itself. this is bloomberg surveillance. where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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lisa: 25 seconds until the cpi report in the market is shaping up as follows. gains in the s&p 500 more than a 10th of a percent and nasdaq up one third -- .3%. people are parsing through where the leadership will come from. yields inflecting higher for a fourth straight day as people look at potential upside surprises to that inflation rate. right now with the data michael mckee. what do you see? michael: we see what we expected and we should keep the fed on track. a .3% rise pushes the headline number to 2.7% and 8.3 percent rise in the core pushes it to no

change in the prior months. we are looking at status quo with inflation. the only issue is that status quo enough for the fed to go ahead with a rate cut. it does not seem like there is anything in here that immediately suggests that the fed would have any problem with that. i have checked three digits to see if it is a strong .3 or a week .3. but i am sure that we are probably getting less market reaction then maybe you anticipated. lisa: indeed. stay close as you parse through the details and i am very curious to see. in the markets there is nothing to see. a little bit of a down take in two year yields and they pop in the futures with a potential upside surprises taken off of the table. interesting to note the outperformance of the russell performance up even .7%. dani: how long could that last? small caps are rallying with

this idea of a cut in december. with this move to .3% that is the strongest figure we have had in seven months even if we are getting the cut in december. is some of that joy tampered out as we say the numbers are as expected but this is not the all clear down to 2%? lisa: it seems like the all clear for the rally to continue as they say completely in line as expected. we will get those details in a moment with michael mckee. joining us now is jay bryson. your initial reaction to a hugely surprising print of laying on what everyone was expecting? jay: this is a damask web, -- damp squib, nothing to see. i think the fomc will cut by 25 basis points and it will be interesting going forward because we are not at 2%. if you take this number you are

still running at 3.25% which is well above where the fomc wants to see. tomorrow we will have ppi and that will true up the pce number which is the more important number for the fed. there is nothing here that would say that the fed does not cut rates next week. lisa: this comes after the unemployment rate ticked up a little bit in the prior nfp that we got. i just wonder what data will become incredibly important going forward or essentially if the fed will really open up a blank check to do whatever it wants because of the policy uncertainty on the table? michael: the two big numbers will continue to be the labor market report and the cpi/pce. and then we will look at the totality. we will get spending the day before the fomc meets and that is still an important number. it is not an a list but i think

those will be the real leaky numbers as we move forward. dani: thank you for using this phrase damp squib. what do you expect now that we are missing a tiny piece of the puzzle but we have labor figures and cpi? when it comes to protecting forward for 2025, what are we likely to hear. does this ml -- fomc want to give themselves more optionality to pause at the moment? jay: i do not expect chair powell to be specific about policy assumptions. i think what will be interesting is the dot plot for 2025. you will see a lot of dispersing depending on what policy assumptions different members are making. if you are the presidents of a fed somewhere and you think there will be a lot of tariffs next year you will probably have a higher. than otherwise. we do not know what those assumptions are and i will

assume during the meeting there will be a robust discussion but we will not actually know until five years ago before the transcripts come out. dani: what is your basecase? it feels with this inflation data basically the fed has given the green light to cut next week. what about 2025? jay: we are assuming and we have break -- baked into our forecast it is not the whole 10% across the board tariffs and 60% on china. we said we think it will come in the second half of the year. the base case is that in the second half of next year you see a big slowdown in the u.s. economy because of the tariffs draining purchasing power. and then inflation coming up. we have the fed stopping in the summer of next year with the rate cuts. annmarie: that means the terminal rate is? jay: 3.524. lisa: it will be interesting to see if they revise their

statement. wonderful to see you in person. michael mckee has been going through the details of the cpi report, what do you see? michael: let us start with the overall cpi because things are love -- everybody is looking at the three digit number. and in november, 3.31 three up from .244 the month before. that tells you that we have a little extra strength on the three digit number. in terms of where we saw the gains it was in used cars, a second straight month up to percent. the owners equivalent rent of .2%. that is half of what we saw and that is the lowest in quite some time. i have not got historical for you yet but it suggests that maybe we are making progress. rent or shelter up 3%. a little progress on the side of

inflation in housing, which is going to be good news. and the one thing i want to point out is the incoming president, donald trump suggested that he was elected because of the price of eggs. people do not like the price of eggs going up and they went up a lot, 8.2% after a 6.4% decline. so he can get to work on that. lisa: thank you so much on the price of eggs, joining us now is david kelly from jp morgan. basically, in line with expectations and i imagine you will talk about how this is exactly as expected. the disinflationary trend intact, what is your take? david: it is interesting. we have rich american inflation and poor world deflation. where do we see inflation in

november, another .4 and airline fares and .5 on airline rates and 610 -- .6 for airline prices. the stuff that the rich buy is going up. when you look at the energy in recent months has come down a lot. and as michael is pointing out and two things that are holding inflation up, shelter costs and auto insurance were mild. what that tells me is that barring some shock the cpi numbers will trend down. the next few months will show some height numbers and then blow to percent for year-over-year cpi but that is really because of a lot of ordinary goods and services by ordinary people seeing deflation pressure even as the play activities of the rich get more expensive. lisa: we are seeing two year yields getting a leg lower as people look at this in terms of

inflation coming in. how do you dismiss this idea that some of the drivers of inflation thinking of airplane costs in cars and other sectors, are likely starting to see another revival of inflation how do you discount the anecdotes at the cycle that has been so confusing? david: i do not think that is likely to happen barring policy change. what i focus on is labor costs. and we see no evidence that american workers are getting the kind of wage increases that would generate inflation from below. i do not think that will happen. when the federal reserve looks at it they will have to look with one eye on what is going on in the economy and what might be coming in terms of policy going forward. i do expect that the dot plot will be a little bit more cautious than september.

they will try and take some rate cuts off of the table and i even expect that they will cut in december. right now the inflation story is benign and cooling slowly but still cooling. the question is what will be due to that when we attack this with policy changes? annmarie: of course the fed is not political but how do they avoid a potential political firestorm if they take cuts off the table for 2025 in the first year of trump's second term as president? that seems like something that would absolutely invoke a troops social post. -- truth social post. david: i think they should try to sneak it in right now rather than disappoint by not cutting when people expect them to next year. so i think we will see a bit of that. i think that they will not assume, speculate or guess the impact of all of the potential

immigration tariff policies or fiscal stimulus of 2026. they will not assume that. the individual bank presidents will take a rate cut or two off the table and put it in the summary of economic projections. and the danger of a pollutant -- a big political firestorm over a dot plot when americans don't pay that much attention i do not think that is a danger and it is better to set up expectations. and to set that up now so they do not have to defend not cutting when they were expected to. dani: in the meantime there has been a surge of optimism. there are ones from ceos and the business roundtable saying that they plan to spend more on cap acts. small business optimism is off the charts. at what point does that go from soft to hard data? is there a potential for that to

act as an inflationary force? david: i do not think so. people are happy to have the election behind us. i think there is optimism on deregulation and a fair amount of concern about how far we are going to push things in terms of tariffs and deportations. so i think there is a little bit of caution still out there. and i do not think there is the amount of spending going into the economy in 2025 will cause more inflation, particularly because we have a stronger dollar that will reduce import prices and weak level oil prices and a kind of mediocre global economy. i do not see wages generating internal inflation but right now i think we are on a good track, steady growth and a little bit above trend with inflation gradually easing. this is a really good economy for financial markets.

the question is can we sustain it in 2025. annmarie: constrictor immigration flows could be a cause for higher wages and wage inflation? david: if we do mass deportations of people currently working legal or not, if they are currently working and we deport them the problem is the nativeborn population in the united states of working age is declining. if we slam the door on both legal and illegal immigration then we have a problem. i do not think that is what will happen. i think we will see some deportation but american business is very anxious that we continue to have skilled workers coming to the united states in helping our economy grow. i think that will be sustained. lisa: david kelly, thank you for your insight. while we have been focusing on cpi we got this headline. albertsons is terminating its merger pack with kroger after

losing its court case. also suing kroger for gumming up the works and ignoring regulator concerns. and basically seeking billions of dollars in damages in addition to the immediate $600 million fee. annmarie: the saga continues. this is the fact that the deal, the judge is saying cannot go through. a nice parting gift. albertson's is saying that kroger refused to offer an adequate divestiture package. dani: i think that is interesting because that is the exact point that many analysts raised saying this is a problem because kroger said they would sell off some of their stores to wholesale. people at the time said this is a grocery chain that does not have the strategy to make itself a competitor with a new kroger and albertson. not only that but they did not divest the stores with overlaps. they did some picking and choosing saying we did not like this story. this is something that a lot of

people raised saying maybe if they had done this and done a better structure they could've gotten this true. i am not quite sure if this is certain or not. it had been a concern and albertson is grabbing on. lisa: there is a feeling that some of the companies that got involved with the m&a that got stymied are not going to try again so quickly. that some of the animosity and institutional trauma when it comes to the scars and the cost is not really work that. annmarie: a lot of executives say i might want to see others go after it first and see what the ftc that we are dealing with. how much have lawyers made with this ftc on all of these deals collapsing? lisa: they are missing out on those deals that did not just happen. let us update you on stories elsewhere. here is your bloomberg brief. yahaira: grocery chain albertson's has filed a lawsuit

against kroger for breaching its merger agreement. albertson's claimed that kroger did not offer an adequate divestiture package and ignored regulator concerns. this comes after albertson said they would terminate the agreement. yesterday a flutter -- a federal judge blocked the deal. exxon mobil will raise its capital spending as it adds a 60 billion dollar purchase of pioneer to its oil production plants. the growth plan is in contrast to the peers like chevron which are reducing spending and prioritizing profit overproduction. exxon expects to pump five point million dollars a barrel per day by 2030. the most in the modern history despite forecasts of a crude gluttony year. general motors shares rising up 1.8% after the company says it plans to shut down the robotaxi program citing high developing costs and reputational risks.

gm had invested $9 billion and at one point it bought been -- bought waymo for navigation in the cities. lisa: thank you. up next setting you up for the day ahead as well as a discussion on old technologies and some new ones. ♪

investment opportunities are everywhere you turn. but at t. rowe price, we're letting curiosity light the way. asking smart questions about opportunities like advances in healthcare. and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

lisa: so, it was the biggest moment until it wasn't and then it was exactly online. and it will be forgotten. counting down to the opening bell, here is the trading diary. adobe earnings plus a 39 billion

dollar option of 10-year note's tomorrow and and ecb rate does a cash decision as well as a usb pi and another round of jobless claims. on monday, s&p global pmi's. wednesday is the main event, the fed rate decision and the statement of academic projections. coming up tonight on television, peer-to-peer compensations with david rubenstein, he sat down with carla hayden, a librarian of congress and it is really interesting to see you book end the old technology of reading and books and some of the new technologies in some of your recent conversations. i want to start with how you framed this conversation and what the librarian had to say. david r.: the librarian of congress was appointed by the president of the united states. she was appointed by president obama and confirmed by the senate. she is actually unusual in that

she is a librarian. thereof have been 14 librarians of congress and she is the first librarian, the first woman and first african-american. she has served 22 years of the cheese -- chief librarian of baltimore and another year -- few years in chicago. she is making it available and open not to just scholars but to every citizen who wants to use the facilities. she is transforming the place but digitizing all of the holdings. they have 175 million different pieces of books or written material. and she has digitizing all of these to the extent it is possible so everyone can edit -- can get access. dani: speaking of transformations you spoke with the co-ceo of eli lilly who told you about the idea that the treatments could be used to treat addictions. how transformative are some of

these things going to be in ways that have already reshape society and it comes to issues like diabetes and obesity? david r.: for those who are not familiar, the world has been transformed by the anti-obesity drugs which initially started out to help you with other diseases, for example diabetes. now they are used much more for anti-obesity. in the case of eli lilly the stock has gone up under the ceo by about 1000% since he has been the ceo with the market cap up 800%. it is a staggering success story in the most valuable pharmaceutical company in the world. the foundation is probably the largest foundation in the united states by far. it is incredible what this one drug has done for the health of people but also for the stock. annmarie: and washington, d.c. what are you hearing from

policymakers and business leaders when it comes to mergers and acquisitions. we heard from the new head of the ftc andrew ferguson, very different potentially from lina khan who is very aggressive at challenging m&a. are we going to see a groundswell of more merger activity? david r.: hope springs eternal in the business community because i think many people were not happy with the ftc chair, whether the world would change dramatically we do not know. there is some concern about companies becoming too big even within the trump constituency. on the over -- on the whole, they are looking forward to a new regime in washington. lisa: david rubinstein who is always busy considering that he owns the orioles and interviews these top leaders and is the founder of carlisle. thank you for being with us. we always appreciate your time. you can watch his interview tonight at 9:00 p.m.

do not miss this in about an hour and a half we have 10:30 a.m. this morning bloomberg television has a sit down with janet yellen, do not miss this as she talks about her tenure and what she sees going forward. i have to say i expected the cpi report to change some of the assumptions and it did not. it came in in line and that does not change opinions. it raises the specter and i am curious your take on this. what do you think the fed will do when they talk about the lack of clarity into 2025? dani: this cpi figure made it easy for next week but not 2025. what we have heard from the fed is just giving themselves a lot of optionality saying that inflation is progressing how we want and we will have to see how restrictive we are. you are seeing a lot of language

that gives them the ability to pause. it will be interesting to see what the dot plots look like if you have some committee members preparing for a world where tariffs and tax cuts mean they cannot continue to cut. annmarie: the green line set for the december meeting but for 2025 you might see a fed on pause, or if you do see tax cuts and tariffs become inflationary you go back to what we heard from the peterson institute for a month that 2025 you could see a hike? lisa: right now you see a 97.7 percent chance being priced in that there will be a cut next week. what comes after is anyone's gas. coming up tomorrow anastasia amoroso of capital. dana peterson of the conference board and scott kroner of citigroup. this was bloomberg surveillance. ♪

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matt: futures rising after inflation came in exactly as predicted in every single category. 30 minutes until the start of the cash trade. katie: sonali basak is on assignment and bloomberg open interest starts right now. matt: we expected it and it happened, core inflation rising again in the forts -- in the fourth straight mud -- month. the fed will cut rates at the next meeting, i'm not sure how that would make them want to cut rates. janet yellen sits down with david gura as she