>> this is not really going to start hurting until the middle of the year. >> tariffs will be a net negative across the board. >> this cannot be a surprise. the reality of the surprises more painful. >> as things stand now we are headed to a recession and this is clear this is a tax on businesses and households. >> if the u.s. is going to be in awaiting economic environment it will most likely tracked the rest of the world with it. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: let's get you to the weekend. live from new york city, good morning. bloomberg surveillance starts

right now. coming into friday following major market moves. equity markets extending losses, adding to the biggest one-day drop since the pandemic. thanks plunging, big tech taking a beating, and retailers decimated. president trump's tariffs upending stocks worldwide as we head into the payrolls report. can the labor market hold up in the face of unprecedented policy volatility and is chair powell in a position to step in? the fed chair speaking later this morning confronting upside risk to inflation and downside risk to growth. lisa: that will be the main event as much as nonfarm payrolls is usually the start date of for a week. this will not tell us what will come if jay powell takes the helm at 11:25 and repeats transitory this market will feel a lot better. right now he is facing off with one-year inflation swaps with united states at the highest level since 2022 as wall street

firms downgrade their expectations for growth and he has to send a message. michael: the s&p -- jonathan: the s&p 500, the bear cases becoming the base case. lori calvasina, new year end price target, 5550, down from 6200. "our old bear case has become our new base case." lisa: across the board you see this drumbeat of downgrades to the outlook. not only lori calvasina. ubs coming out and reducing the december 2020 55 forecast. -- the december 2025 forecast. the most interesting aspect about all of these downgrades is most of them are still expecting gains. they have not fully capitulated to this idea we could see a truly bear market continue. is it predicated on the idea of a fed put or predicated on a policy shift in washington?

jonathan: a big step back. we have had a 5% move on the index and the lastly four hours and we go through all the research, the overwhelming consensus is this will not happen. what will happen if it does? april for this over the weekend. reciprocal tariffs a week away. how long will they wait before they realize this is something they have to internalize? john: and what does that -- lisa: and what does that look like in terms of downside risk? are we just pricing and uncertainty around the tariffs where the actuality of a tariff rate on scene for 100 years. hard to see that is the case but what point will they believe it given that may be president trump dropped 18 leaf, phenomenal deals he would accept, we can reading. jonathan: high-yield yesterday finally started to break. a big widening in spreads. the bond market rallied. the bond market rallied. i would be very afraid if i wake

up one morning and we are all scared about policy in america come the dollar is weaker come in treasuries are selling off, not being bought. that is the little silver lining i can find in the price action. lisa: it is not as if the rest of the world is pulling back. if you look at the inflows for the past week, guess you did best? u.s. government bonds, which suggests they do have a haven property or there is this feeling that even at the rest of the world is really ticked off at the united states they are not going to boycott u.s. treasuries. at what point is this the reason why the trump put does not come into play for a while? he talked about how he wanted yields lower, he got them across the curve. jay powell has to confirm that or push against it. jonathan: jonathan: yields down for seven consecutive session. your two year, 3.60, you 10 3.94. coming up, johnston office on the latest selloff -- jan stall

fuss -- we begin this hour with stocks following following the worst day since 2020 leading to more revisions of class wall street and another downgrade from rbcs lori calvasina. joining us is john stolfus the price target of 7100. is that going to change? john: it is under review and has been under review for a while. the reality is until we got these rather surprising and on present levels of tariffs we got yesterday and the markets reaction we are going to have to take a look and sharpen our pencils. i do not think we will be as drastic as some people have been at this point. where we are is something like a

29% to 30% upside to a 71 target off the top of my head. jonathan: are you assuming the president blinks? is that the ultimate assumption? john: i think he does and i think already you have in the senate there is a bipartisan move to see how they can somehow check the president's capability on tariffs without congressional approval. that looks like a possibility. the other thing is the overreaction on a thing like this is not a typical. immediately everybody figures this is the way it is going to be. yesterday looked like he is going to hold onto these tariffs and it will be the end of the world. the key driver for him in many ways is when he looks at trade, that is his focus. the level of the playing field,

which is not exactly fair at this point. he figures if we are the biggest buyers in town and the rest of the world, particularly in china but elsewhere around the world, is suffering from overcapacity in manufacturing, which has been built over the last 40 years, not only in china but throughout the markets and developed markets, usually with a destination of those products for the u.s., there is a chance that others will come to the table. we have been of the opinion it will be cooler heads that will prevail. thus far they have not shown up at the dinner table. lisa: what would it take free believe these tariffs are real? john: if we saw these tariffs stick for any kind of a period that would last several months, two or three months. then you could figure this is it. in terms of are they real, i

think they most certainly are in terms of the way they are defined. though there is always the exceptions to the rules. it looks like latin america is almost being giving a free hall pass. there are some things that are interesting when you look at this too think this is probably the first administration that has dealt with this in years in terms of addressing trade, u.s. versus its partners and what is fair in terms of tariffs. it is like the old song, it is the way you do the things you do. the way you do the things you do have to do with creating volatility that might not have been necessary. lisa: i want to pick up on that. the way you do the things you do goes to execution risk and the idea that implied uncertainty for a prolonged time has a tax itself on equity valuations. how do you count that in a 7100 target? john: that is why the target is

under review. at this point -- when we put that target in you have to remember it was practically a different world. the markets were rejoicing on the outcome of the election. it was december 7 or december 9 when we put it in. the 7100 target implied 17% upside. i think right now it'll will be over 30% from where we closed. the other thing is it is where we are today is likely not where we will be tomorrow. and that already the pressure is coming in, not only stateside but from around the world as to what does this mean. are you really serious, all of that questioning. all of that brings us closer to some kind of moment when genuine negotiations start. this was the first big shot across the bow.

it was throwing down the gauntlet. we were very much surprised it was as dramatic. we thought a little bit overdone. jonathan: there someday variables, one of which is how others will respond. a big headline just crossing the terminal. china announces an extra 34% tariff on u.s. goods. that is the breaking news. i think the date for this announcement is important. next week on april 9 cervical tariffs taken in china is going with ape -- the reciprocal tariffs kick in and china is going with april 10. lisa: extra 34% tariff on u.s. goods. how are we coming up with these numbers? who will get hurt most? initially it was the united states that will be the epicenter. the stoxx 600 taking on this. it raises the question on how much the rest of the world will get caught up in a tit-for-tat

that mayor mount -- in a tit-for-tat that may or may not get resolved. jonathan: it is almost impossible to understand all the different variables, how others will respond, whether you can negotiate this, how long they will stay on, what companies will do, whether the consumer price is there. consumer sentiment has greater, the soft data is ugly. the ism services do not get a look in. the employment component entered contraction or territory. i think that is really important going into this morning's payrolls report. do you believe the hard data can hold up in the face of cratering sentiment? john: the cratering sentiment and the response to the levels where the market is now, if you consider the market is 12% off of its peak right now on a year-to-date basis, it is a little over 8% if i am correct.

i cannot access my bloomberg for some reason this morning. i had earlier but it just disappeared. i cannot check that number right away. what i would have to say is i think a lot of this has been overdone. the bears have had a horrible two year period that just vanished. they have a great catalyst called uncertainty. when we look at this from a historical perspective, we've been through the great financial crisis, covid, doesn't all this negative projection sound similar? it is in parallel because it is on a very different thing, but usually it is times like these where some of the best money is made. it is not necessarily from shortselling, it is from catching babies that get tossed out with the bathwater. if you consider the intermediate to longer trends. within technology, the worsted area and what it can do for all

11 sectors including itself and communication services in terms of creating greater efficiencies to navigate that up as you know i've been around this business for 42 years. my first rodeo was october 19, 1987, when the dow fell 23% in a day. that is very different than from the beginning of this year to now, the s&p 500 off 8% from its peak. it's max drawdown at this point is 12%. we think -- we have to put the drama in perspective and recognize that this is a workout period. when these things happen you generally find cooler heads will prevail. i cannot help but think of march

or april of 2020 when people were predicting -- jonathan: in march and april of 2020 policymakers panicked and did big things. you know the cliche, you can stop panicking when policymakers start to. john: the wonderful thing is that was a recession that was so short the arbiter of when recessions start did not even call it a recession. the decline was over the course of a month. it was a significant decline, it was a bear market decline. then it just popped back because enough liquidity was provided that helped us through that. in this case it is a question of bringing down the rhetoric and raising the quality of negotiation. a few weeks ago we said we were surprised the european markets were doing as well as they were

because we look at it and we think it is a question of the biggest buyers is the u.s. and it is a tough one to replace. you can say we will go to emerging markets and replace it but the problem is the emerging markets do not have the same buying power, the same middle-class. china cannot by anybody in terms of ferrari and can out by anybody in terms of birkin bags and louis vuitton bags. when it comes to the basic commoditized stuff, whether it is pen and pencil sets hillary was furnished with, the u.s. is the one who can write the check -- or what this hotel room is furnished with, the u.s. is the one who can write the check. jonathan: i want to get back to this breaking news, the latest from china announcing 34% tariffs on u.s. goods that will hit next week, the day after their cervical tariffs from

america are said to kick in. can we turn to the european equity markets. the dax down more than 3%. italy we are down close to 6% on the ftse mip. lisa: they will get caught up in this as much or more than the united states and that is the shift between yesterday and today. yesterday the pain was concentrated in u.s. assets. today the focus is when it true that when the u.s. sneezes the rest of the world catches a cold? the chinese ministry said this a typical act of unilateral bullying, urging washington to immediately remove the tariffs and resolve any disputes through ferrand equal dialogue with its trade partners. how much is them trying to get an upper hand ahead of april 9? jonathan: the overwhelming consensus right now waking up on a friday morning on wall street is this still does not happen. this takes long weeks and long months to internalize. maybe then it is too late. lisa: if you look at the talking

points the administration put out to its people yesterday, they included there was no room for negotiation. they are not coming out saying let's get a deal done. they are saying this is been structurally unfair for a long time and we need to change it. jonathan: equity futures at session lows. on the s&p down another 1.6%. here is an update on stories elsewhere. china announcing 34% additional tariffs on the united states said to take effect april 10. president donald trump saying he is open to tariff cuts in return for phenomenal offers, adding his plan gives the u.s. great power to negotiate in their more tariffs on the way, including on pharma and on ships. republicans debating raising the top tax rate to 40% for those earning $1 million or more according to people familiar with the matter officials are beginning to draft a package with the hopes of passing it within the coming months. that is your bloomberg brief. up next, the president open to

offers. >> that is the beauty of what we do. >> are you up into deals with these countries? >> it depends. if somebody said we will give you something phenomenal. jonathan: up next, robert casey of cigna global advisors. good morning. ♪

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jonathan: session lows on the s&p, down 1.7% on the s&p 500. on the nasdaq down another 1.8%. the president open to offers. >> it was a sick nation and we

went through an operation on liberation day and it will be a booming country. that is the beauty of what we do. we put ourselves in the driver seat. >> are you open to deals with these countries? >> it depends. if somebody says they want to give you something so phenomenal. jonathan: president trump same tariffs give the u.s. power to negotiate. the president reiterating his willingness to offer tariff relief for china. bloomberg's wendy benjaminson's is for more. china has an offer, it is a 34% tariff. this tit-for-tat, how much worse will it get? wendy: if that is any indication of how is going to go, we know france and germany are considering retaliation. japan is holding its fire. the clip of donald trump on the plane saying he was open negotiations, this is classic donald trump.

he throws these extreme proposals and policies and then uses that as leverage to get what he wants another things like how are tariffs related to the sale of tiktok which was legislation passed in the biden administration? he is conflating all of these things to manipulate other countries to do what he wants. jonathan: are they going to come to the table? we spoke to the commerce secretary yesterday and i said may be do not think you think you have. the chinese are not coming to the table. where is the call between president xi and trump? that is not in the cards. lisa: this is why you are seeing europe do badly on the heels of this. how do they come to the table with something phenomenal at a time when they have a lot of disagreement with their union members. and with china, they have more leverage when they are trying to make their economy more domestic. there is huge execution risk. at the same time a lot of people are trying to say there is

something structurally unfair and maybe this goes resolve it. jonathan: robert casey joins us around the table. what an earth did you tell clients yesterday? rob: we told clients this was bigger than we expected and that everybody expected. we also told clients we think 10% sticks on april 5. they could is unlikely -- as commerce secretary howard lutnick and others keep telling us. we think instead, negotiated, may be shied away from. lisa: john and anne-marie were trying to get to this with howard lutnick yesterday. where the formula came from. he did not give a full response. a lot of people keep wondering what is this formula we are working with? rob: in terms of the driver seat you have to look at jamieson greer and howard lutnick. it is clear to me that scott

bessent is potentially a deer in the headlights at this moment. he said for weeks if not months this would not be as bad as wednesday was. over the course of the campaign he seemed to be the calm presence. he was dishing for the job at that point. at this point it is jamieson greer and howard lutnick and we have to remind ourselves that the person making these decisions is president trump. it is not a wizard of oz behind the curtain. i think on wednesday donald trump woke up it was presented with options and this is the menu item he chose. lisa: there is a question of how open he is to doing deals. unclear how many phenomenal offers are coming out. 34% tariffs by china, baby that is a phenomenal offer in a different way. how much of the people you talk to counting on some sort of deal? rob: i think it is a latent consensus we get some sort

negotiations. jonathan: why do believe that? where does that come from? is it the mutually assured destruction that the economy craters? where does the faith come from? rob: over president trump's second term he has made 20 serious tariff threats and only laid on four of those, twice on china come on steel and aluminum, and on autos. everything else he rolls back. he continues to rollback threats against canada and mexico. one could say that is because they are following through on promises. honestly it is because the markets -- when they hear about tariffs on our biggest trading partners. markets do not puke when we got the first 10% on china. those have state. i think there's a push and pull as to what president trump wants to do and feels able to do. jonathan: markets are certainly

puking now and that is the ultimate position we need to stress test. where does that faith come from and will extend up to the pressure of the next few weeks? lisa: does president trumpcare if the markets are puking if the bond market is not? that is a test at a time people are saying let's try this out. it loses about a quarter of the value of most of your major retailers in the united states. yesterday trump said he would potentially add additional tariffs. jonathan: robert casey, good to see you. the bond market, we are down 15 basis points at the front end of the curve. up next, dan ives of wedbush. this is bloomberg. ♪

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jonathan: we are not going quietly into the weekend. equity futures down 2.6% on the s&p. down 3% on the nasdaq following the biggest one-day drop since june 2020 and no bounce. let's get you some movers. apple down 9% yesterday. this morning down 4.6%. this came from rosenblatt: "it is hard to imagine trump blowing up an american icon, that suggests something is likely to give." that is the belief on wall street come that something will give. nike down double digits. the april 7 tariff seam purpose built to hobble the apparel industry.

people believe this is so bad it will not happen. jp morgan, the worst day since the pandemic. outside of the regional bank prices this is the worst day since the pandemic for jp morgan, down 5.7%. they deliver earnings next week. lisa: how do they give guidance? i don't see how they can. it is across the board. you saw this with lululemon, nike, abercrombie & fitch, but you also sought with norwegian cruise. with respect to carvana, with respect to kkr, with respect to evercore and jp morgan, this is coming and a time when every industry will get hit come at a time people do not believe this could go through. it raises the question how much is uncertainty and how much is an actual believe these tariffs are real? jonathan: we've talked about upside risk to inflation and

downside risk to growth. yesterday crude cratered and the bond market -- check out the bond market now. yields down double digits across the curve, down 16 or 17 basis points the two year to 3.5165. on 10, 3.8879. we are three hours away from the payroll report and we have hardly talked about it. donald trump saying he is open to cutting tariffs in return for phenomenal offers, trump adding that more tariffs are on the way on pharma and chips. china has more to say because on their side more tariffs are on the way. lisa: 34% that would going to place april 10, the day after there is this deadline for the u.s. tariffs to go on. does this leave room for negotiation? there are 11 companies china is targeting from the united states they are calling on in this offer at the same time they are potentially going to have certain controls on certain precious metals.

they have leveraged and that is the message they are trying to send. jonathan: we said this repeatedly that the strategic anchor for equity market bulls is the complete policy mix. there is the tax package. republicans weighing the creation of a new tax bracket for millionaires. sources telling us deliberations have included a new top rate around 40%. lisa: this would be in excess of what was the case under president obama and would rise from 36%. what this highlights is the difficulty in trying to get a tax package through a republican house and senate that is concerned about the fiscal deficit, that is concerned about some sort of retrenchment of the overhang of debt. howdy do that at a time you potentially need to expand the balance sheet in other capacities? this would be the first time in decades that republicans propose a tax hike. michael: they need to -- jonathan: they need to change

the conversation and that is a very different conversation. president donald trump saying the united states is close to reaching a tiptop deal and also read rating he would be willing to offer turf relief in exchange for china's help -- in exchange for china's help approving a tiktok sale. lisa: put this to april 9, 54% rates on china and then the retaliatory tariffs coming into place by china the next day. when you take a look at the details it is also highly complicated, talking about what bytedance gets to keep, how much the algorithm gets outsourced and managed by other people in the consortium of investors that are going to be involved. jonathan: who are they negotiating with? who are they talking to. you have a deal today, great, going into the weekend we will celebrate it, maybe we can have another rose garden meeting. they have negotiations, who have

they signed off with on this? there is no sign they are coming to the table. lisa: we have no sense of what the leverage is. we have heard from china that they're not willing and we have heard them come back about the panama canal and push back against the sale we saw with blackrock saying you did not tell us before doing this. it is unclear how willing china is to play by the rules set out by the united states. jonathan: equities are lower, down 2.3% on the s&p 500 following yesterday's losses. big tech felt the brunt of the selloff with $1.4 trillion in market cap wiped out from the nasdaq 100. dan ives writing "the economic pain that will be brought by these tariffs are hard to describe and can essentially take the u.s. tech industry back a decade in the process while china steams ahead." dan joins us for more. you are an analyst what you do? dan: 25 years covering tech and markets is the most absurd 48

hours i've ever seen. my view is that this is an economic armageddon if these tariffs come through. from a tech perspective which is one of the biggest assets we have in the country, it would take us back potentially a decade and steamrolled china ahead and that is why our point right here -- even if you get a deal in a month, you are already looking at five to 10% earnings cuts across the board in tech to start. that is the worry as a tech investor. jonathan: apple, american icon and for that reason nobody believes this will happen. they reported a month. how do they offer any guidance at all? dan: we don't believe apple or any other tech company gives guidance because you're essentially blindfolded playing darts giving guidance and it comes down to if you wanted to

implode apple and figure out the formula to take them back years it is this tariff. it comes down to 54% from tariff. it would take three years and $20 billion to take even 10% of the supply chain to the u.s.. if you want $3500 iphones we should build them in new jersey, we should build them in texas. if you want $1000 iphones you build them in china and that is the issue in terms of the near-term pain would be 5, 7, eight, it would change apple as a company. lisa: which is a reason people do not believe this is going to come through. how much damage do you think is being done through the uncertainty? dan: you are burning the house down but then you still have a toaster oven when the bagel is ready. the damage that is being done, i have talked to so many tech executives over the last 48 hours. they don't know.

the worry is the uncertainty. what does this mean? through all the conversations we have had over the years, ai revolution -- fourth industrial revolution -- where we are in tech, overall markets. this is imploding it, self-inflicted. that is the before blend thing for investors in terms of where we sit and what -- that is the befuddling thing for investors. lisa: yesterday the mag seven lost more than $1 trillion, the first time that has ever happened in one day. as a perennial bull in the u.s. tech sector do you think there is more downside ahead simply because this uncertainty is not going to go away? dan: this uncertainty in itself has already taken numbers down. it becomes a self-fulfilling prophecy. in terms of the long-term mag seven come our view of tech continues to be bullish over the long-term. right now, we are sitting on the

precipice of an economic armageddon. it does not matter what you say and the beltway in front of microphones. talk to executives and see what is happening. i think that right now is what tech stocks are reflecting. investors are not republican or democrat. they are speaking through what stocks are telling you and this is in the midst of we are in the midst of a massive economic armageddon if this continues. jonathan: apple you have outperform, tesla outperform, microsoft outperform. gm come outperform. when we revise these calls? dan: if the tariffs stick and they continue for the weeks and months ahead, then we have to change our outlook. jonathan: can you help me understand that a little bit more. april 5, baseline tariffs 10% chicken. next week the additional tariffs kick in. how long do you wait? dan: this is what i've been

telling investors. two -- q2 is a disaster. q3 -- you have to look at the next three to six months, i would not call them a wash but basically the street will look through what the numbers look like, run rate if these tariffs get to some sort of baseline. q4 2026. you basically go back to the playbook we have used in covid and as early as march, june and terms of the covid playbook, looking out and normalizing and assuming this gets negotiated. if these tariffs stay, all bets are off. it changes the paradigm. lisa: do you expect to see the outperformance anytime in the near future or are you saying at this point you are not getting that kind of capitulation? if you have faith over the next 10 years you make it a good entry point but otherwise not

worth getting in? dan: in the near term a lot of it is based on what we see with negotiations, if they happen, what happens with china. tiktok is one of the first chips on the table. the reality is the growth story in terms of where we see tech over the next 9, 12, 18, 24. that does not change. the reality is if this continues , once the snowball starts going downhill you cannot stop it. lisa: elon musk, i want to talk you about tesla and what we have seen over the past few weeks. we have heard from president trump yesterday that he would like elon musk to stay on with the doge effort for a prolonged time but he will be going back to his company in a few months. does that help insulate tesla or is tesla uniquely vulnerable because of elon musk's relationship with this

administration? dan: every day elon musk stays in the government is another day there is more brand destruction for tesla. that is the reality. tesla has become a political symbol. elon musk has no choice. he has to take a step back to ceo of tesla. look at the q1 delivery numbers. if you look at brand issues, that crisis continues. i think the long-term view and the long-term brand of tesla changes and that continues to be how we view it. it is a fork in the road, it is a moment of truth for elon musk. he needs to make the right decision as a fiduciary and ceo of tesla. jonathan: another cut to estimates this quarter. jp morgan on tesla. first quarter sales were below their estimates and confirmed the unprecedented brand damage they had feared. lisa: we saw anecdotes about

european sales. anecdotes about canada. this is coming at a time he is expected to go back but it is unclear if reviver brand at a time of increasing composition from -- unclear if it can revive the brand. jonathan: i saw you smiling as lisa and i were talking about a potential deal. who are they negotiating with? dan: themselves? my view is it is a chip on the table. bytedance keeps the algorithm. there is some sort of combination. i view it as part of a broader negotiation. if i'm negotiating with myself in my room, what does that do? it comes down to what does beijing say. jonathan: good to see you. equities down across the board, extending losses at very close to session lows, down 2.5% on the s&p 500. about 40 minutes ago we had a headline out of china that they announced a next or 34% tariffs

on u.s. goods. those tariffs are said to kick in a day after the reciprocal tariffs from the u.s. kick on april 9. that is how the stage is set into next week with what many think will be around of negotiations. will we see it take place? lisa: that will we see what scott bessent was saying, just take a deep breath, don't retaliate, just let it happen, absorb it, take it in. they have taken it in and we have gotten some response and it is a little bit less passive. jonathan: i have tremendous respect for the treasury secretary. i got the sense when he spoke to annmarie hordern this week that he was not in the room for these conversations and a lot of other people got that sense from watching that exchange. i imagine that unnerved people because they thought they were the safe hands in this administration. when you get the impression the safe hands are not part of the conversation that will rattle nerves. lisa: the reason why people got that impression is because when amory asked him about max --

when annmarie hordern asked him about mexico and canada and why they were not included he did not know. when she asked how much room there was for negotiation he did not know. that was up to president trump. it felt like he was not making those decisions. jonathan: equities down 2.5%. let's get in update of stories elsewhere. vice president jd vance downplaying the global route in stocks, describing yesterday's massive selloff as one bad day in the stock market and promising a booming market ahead. jp morgan's top economists raising recession odds to 60% after the trump administration announced its once a century tariffs. calling the tariffs the largest tax hike on u.s. households and businesses since 1968. the title of his report yesterday, "bloodbath." intel and tsmc have reached an agreement to operate intel's chipmaking facilities. the trump administration

reportedly initiated the talks between the giants an effort to revitalize the company. that is your bloomberg brief. up next, uncertainty. >> uncertainty is the killer of everything. this uncertainty will weigh on the consumer sentiment. we have seen it this year. jonathan: payrolls just around the corner. reaction and a preview from sarah house from wells fargo. from new york, this is bloomberg. ♪

jonathan: yesterday the biggest one-day drop since the pandemic. we are lower again. on the nasdaq we are down 2.75.

on the russell we are negative another 4%. under surveillance, the weight of uncertainty. >> uncertainty is the killer of everything. if you a corporate or a board room, uncertainty stops you from making investment decisions, stops you from making hiring decisions. this uncertainty will weigh on consumer sentiment. jonathan: retailers taking a massive hit as president donald trump tariffs agenda puts increasing pressure on the u.s. consumer. sarah house of wells fargo writing "march will mark the second month in which additional tariffs on chinese goods were in effect, making it an early tell on how quickly higher import duties good feedthrough to consumer prices." we've got talked about the payrolls report at all come have not spent a minute on it. how relevant is that report at 8:30? sarah: it is certainly rest relevant -- it is certainly less relevant than it usually is but

i still think it is important level setting where we are into these additional headwinds for the economy. also a glimpse of what some of the damage from some of the doge efforts are taking on the labor market in addition to some of the trade and tariff policy headwinds we have been focused so much on over the past week or so. lisa: heading into that yesterday and i want to pick out this point, we did get ism services and it highlighted the labor component of that index was the weakest going back to december 2023. are there signs that it will not show up in this report but that this truly will be the last good payrolls report and there is this sort of deterioration behind it? sarah: i think that is certainly the risk of what we are looking at today. there are still some helpful factors for today's print. expecting a rebound in leisure and hospitality hiring after that was down the past couple of months as the spring weather normalized versus a chilly

winter. a couple strikes and a level of the payrolls by 15,000. when we look ahead at some of the pmi data, not just the ism services we saw yesterday but the regional fit surveys are saying the same thing. we see job postings come down. there is lot of indications that businesses appetite to hire has withered over the past month or so and as we move forward as soon as april you could be seeing comfortably below 100,000 in jobs prints, may be with negative prints. this is going to potentially be the last decent jobs report we could see for a while. lisa: there has been this theory that a lot of employers have not been laying people off, they've been reluctant to do so and are pulling other levers to do so because of their experience during the pandemic. do you think that dynamic is in play, supporting this labor market? sarah: that is true to an extent but the issue is we have seen the hiring rate come down so

much there is less and less scope to manage headcount through things like attrition than what we are looking at a year or two ago. now with the additional growth slowed down in the works that will put pressure on the headcount numbers and in some ways leaves layoffs as the only remaining option. businesses might be even more reluctant to let workers go than they have in prior cycles knowing how hard-fought that was. when push comes to shove and they're looking at their costs, sometimes that is the only option. we are getting closer to that risk of layoffs as we do not have as much cushion as we did a year or two ago when those low layoffs have helped keep those net hiring numbers in good shape. jonathan: somewhere this morning there is a laptop open with a draft of chairman powell speech on it and i wonder how much it needs to be edited after last 24 hours? what does the fed chair say when we hear from him at 11:25? sarah: it will be interesting

when you've seen a lot of the fed speak in recent weeks has pushed back against some of the transitory nature of the terror of shock, underscoring that is the -- of the tariff shock, underscoring that that is what happens in textbooks but it can take time to see implementation. we know transitory could end up being a lot longer than what it initially applies. he may be walking that back and showing more concern about inflation or does he think the risks are still balanced, perfectly depending on what we see out of today's jobs numbers and if that does show some further loss of momentum like we expect. jonathan: sarah house of wells fargo on the latest. let's unpack those points. on the payrolls report, it could be the last good one. for that reason people might look through strength. chairman powell, that means he will be the main event today. lisa: 100%. people are not looking at getting confirmation that is forward-looking from this particular payrolls report.

it is getting a sense of where we are coming from. jay powell has to push back against market pricing which is now pricing it 100% chance of four or more tribes from the remainder of this year -- four or more cuts for the remainder of this year -- he has to push back against that or enforce that the time you also see climbing inflation expectations. why is he speaking? that is my ultimate question. if he has nothing to say why is he giving a speech? jonathan: they are in a bind. he is looking at policy and washington, d.c. that could change a week later and he is looking at hard data that is on a pre-well in the face of cratering sentiment. as far as they are concerned they will not act until they see it in the hard data which means they will not act until maybe it is too late. lisa: that is what a lot of people have been arguing. we heard from bob michele of jp morgan who expects the fed to move.

that is what a lot of people are expecting. the reason i ask why is he speaking because there's a political overlay. there is an administration that would like him to respond to potential weakness in the economy. if you put yourself out there saying i will not cot that you make yourself the poster child of it. if you say the market is correct and we will respond to weakness and look through inflation, you raise the prospect of continuing some of the strength that could prolong inflation. it is damned if they do and if they don't. jonathan: bonds are lower at the front end of the curve by 17 basis points. yields down for seven consecutive session. up next, priya misra, michael's eyes asked, and the former boston fed president eric rosengrant. from new york city, the second hour of bloomberg surveillance is up next. ♪

>> globalization is not going to be like we've seen it in the past. >> every company is going to absorb these impacts differently, and you will not see it immediately. >> the u.s. market is a big market. it is kind of hard to get out of it. >> if china starts to make friends with our allies around a shared dislike of trump, this is a bigger concern. >> we will see some of these back off. i don't think that administration would like to crash the economy.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of "surveillance" starts now. 90 minutes away from payroll. good morning. lower by 2.7% on the s&p 500. the nasdaq down by 2.9%. the russell down by four full percentage points. surely focus on the upside of inflation or the downside to growth? the two year is lower by three basis points, and a 10 year down to 3.90 as we anticipate the payroll later, estimate, one hundred 40 k. sarah house from wells fargo with us a couple of minutes ago. after that, chairman powell going into the weekend, who blinks first? we will hear from him later 11:25 eastern. lisa: does he lean into the weakness?

or will they have some kind of pop and near-term inflation. let's see if he doubles down on transitory and looks at the effects of tariffs. ultimately, what can he say at a time when we are not getting hard data, where policy is uncertain, and they have a lot to lose on both sides. jonathan: it is research note after research note. it is really bad. bruce is not the kind of guy who writes a headline and says bloodbath. if you read the note, it is still not in their forecast, and i saw that repeatedly yesterday. a lot of people do not think, even if the tariffs go on again on the fifth, the ninth, and if china responds on the 10th, people don't think they will stick. how long before we have to internalize the potential that maybe they will? that is what is interesting about the price action from

yesterday. you could have a full percentage point move, but that is not breaking in the tariffs. it is just a risk. lisa: i was talking to a couple of money managers yesterday, and it struck me that a lot of people on wall street have become conditioned to see volatility as an opportunity, conditioned to look at what you could buy during the chaos, and that is still the position a lot of people are in after years of equities. and there is this feeling that this, too, will work out because it always has been before, and that is why people are looking at the off ramps. there is the trump and fed off ramps, and the tail risks are getting fatter. in a survey of economists by bloomberg, recession onset increased by 92% but the odds of trade agreements have increased by almost 60%. both sides coming to the floor with faith. jonathan: when you see huge shifts like this that could lead

to regime change, it could take years to internalize how powerful that change might be and what things might look like. and this happened to a lot of people on the south side. they can sit here and say that tariffs might not be on it two to four months time, i may be the stock is down in that time, but that helps nobody. lisa: at the same time, how do you hope anybody if you can't give guidance? that's part of the issue. there is a deer in headlights field for everybody because there isn't a sense of what formula you can use. how do even get a sense of what the uncertainty tax is versus the implementation of some tariffs? and then you can come out with hemlines at what point you gotta pricing tariffs and that uncertainty itself. jonathan: crude down another 6%, brent wti down 6.8.

the focus for this market is on growth and not inflation. lisa: which is the ultimate question, how much do you see a uniform downgrading a growth expectation around the world? we did see that from wall street across the board. at the same time, there's upside shift and inflation. opec-plus increasing production and houses a tliv to president trump and how does this say to those overproducing, game on, let's go? jonathan: i'm not sure if this was by design, but no doubt, summed up well. obliteration day. it continues for a second session. trump's tariffs have roiled markets for a second straight day. the former boston fed president try to boost bets for federal rate cuts. we begin with stocks falling for a second straight day.

jp morgan saying the risk of a recession is 50%, and the market is not priced for a 50% recession. where is the policy put? not at these levels. there's no sense of panic in the white house or the fed. priya misra joins us. do you see any sign of panicking right now? priya: i don't. i do see hope that this is the start of negotiation and this is not going to stick. maybe it is right, and there is uncertainty. that is what the fed is grappling with. as that hope evacuate's, their uncertainty has to build before you get that deal. the other big hope is fiscal. there is a hope we will get fiscal stimulus and everything will be fine. the politics are not there yet.

do we actually get the tax cuts? where is that additional stimulus customer i do not want to sound alarmist, but we have had a massive shift, and i think when you came into the year, there was the ideological and pragmatic sides. we haven't releasing that pragmatic side. and to cooler heads prevail if we go into a recession? the hard data has been strong. you need those negative payrolls for the fed put to come in. jonathan: the hard data, payrolls at 8:30 eastern. we started the year and i looked around the table and said i hope we don't squander confidence. it is skyhigh and i would like to see that translate into investment. the country was gearing up for a boom, you can see that confidence as of this morning has been squandered and is gone. sentiment is down here.

the hard data is still up there. unemployment at 4.1% doesn't speak to her confidence is at for the c-suite for consumers around the country right now. how much longer can that spread stay that wide? that has to be the trillion dollar question. priya: it is. i'm sure that is something the markets in the fed are grappling with. unless that number is weak. as much as i have never cared less about payroll report than today because we had a shift in trade policy, but if the number is weak, and i would say that is anything less 102,000, i think the market will say maybe we would like that strong as we have an uncertainty in trade shock. remember, that also happens in the background. you get fiscal contraction and if economy is not fundamentally strong, i would like and how it

hasn't been strong for a while. layoffs have been low. if there's tax on the consumer and corporate sector, at what point do companies say i've already cut tyree in, i have to start laying off? -- cut hiring, i have to start laying off? it is compressed towards the hard data and i don't think it will take that long. if we don't get the negotiations or the status of the table, it is not really clear what the basis of negotiation is. everything is on the table, so that takes a while. i think the economy will respond quickly. lisa: why is he speaking today? fed chair powell told us they don't have all the tools or answers in the rna dark room with blindfolds like the rest of us. why is he trying to message anything? priya: the fed would like to be

transparent, so i think he would like to explain the reaction function. that's what he can do, that he's not facing anything on the model, so i think people push back a little on inflation that if the fed has a duly mandated, they will look at the unemployment rate and all he can do is be a little bit of a therapist, but i love your point that therapists already do that. they did not see the impact on the economy. and so the hope, another hope trade, the fed is going to lower rates, and he will have some interest sensitive sectors but with unemployment rates rising, it takes a while for that to work. i think you like to calm the market down and look at the totality of data, but uncertainty is so high that we will not do anything. lisa: what's fascinating is there is a discussion and markets that may be traders are pricing in too many fed cuts by the end of the year and

ultimately they will not be able to get ahead of any weakness because of this dual mandate that will not show up in the data. you have an interesting take on that that maybe they will have to wait longer but they will have to cut substantially more. how much more? how much does this give you confidence in the u.s. debt market? priya: it gives me a lot of confidence that interest rates are not pricing in recession. where does the fed take rates in a recession? we can debate when they cut, but we have seen how the fed is not shy. they hiked and 75 in terms -- interims. it takes a few months for hard data to show up. they are not going to start cutting in may, thinking the hard data will worsen. the later they start, the more they have to cut. i look at the endpoint. rather than when they start to cut, i look at that endpoint. the market is still pricing in

today a little below 3%. if we are in a recession, the fed is going to 2, 1, 0. maybe that is high because that is a negative real rate but the rates market is pricing in a chance of a recession, 20%, 25%, not 50, 60. jonathan: big difference this time, no one's going to blame them for this situation. it's not there mess. lisa: except a person of the white house because all of a sudden then it becomes a political motivation of how you message this and where you shift the blame. ultimately, it is not under their control. people might blame them but this is not focused on the credit markets and not something they can fix preemptively. jonathan: i hear a lot of people on the conservative side defending the actions this week and sympathy that you should deliver reciprocity given what took place in china the past decades. we all have sympathy with the

economic argument of what has happened throughout globalization the past decades. what is consensus is how the policy has been executed and deployed. the methodology used to come up with these numbers. it makes it difficult to take it seriously, and that isn't a good position for any authority to be lisa: in. it makes it difficult for anyone to know the off ramps. people say the more specificity the better because then you understand with the notes of negotiation were, and if you don't have off ramps, how do you price and uncertainty and how do you understand how long this could go on? jonathan: priya misra of j.p. morgan asset management. two year bond yields down by close to 19 basis points. just broke 3.50. let's get you an update elsewhere. here's your bloomberg brief. president yoon was removed from office after marshall declaration, stripping him of powers and setting and motion

the presidential election to take place next 60 days. elsewhere, steven witkoff meeting with his russian counterpart to discuss a cease-fire in ukraine. the u.s. now waiting for the report back to president putin before moving forward with next steps. finally, president trump saying the u.s. is close to unveiling a plan that would spare tiktok from a ban. bytedance stakes are falling below 20%. that is your bloomberg brief. next, preparing to negotiate. >> that is the beauty of what we do. >> are you open to deals with these countries who have been calling you? >> if someone says we will give you something that is so phenomenal. jonathan: from new york city this morning, good morning. ♪

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jonathan: here is your friday morning price action, down 2.9 on the s&p 500. on the russell, down by more than four. preparing to negotiate, under surveillance this morning. >> just went for an operation on liberation, and it is going to be a booming country. that is the beauty of what we do. we put ourselves in the driver seat. >> but are open -- but are you open for deals? >> it depends. if someone says we will give you something so phenomenal. jonathan: president trump suggesting dealmaking is on the table, believing economic turbulence will settle now and

the tariff operation is complete. let's go through the timeline of what the next week will look like down in washington, d.c. >> i think we will see a parade of foreign diplomats or leaders literally doing exactly what donald trump would like him to -- them to do which is to begging for relief. from the tariffs. you will see american ceos doing the same thing, trying to take advantage of that comment made on the plane last night s8 if you offer me something phenomenal, that is great. that did not work, we saw with china, where he said he might get china tariff relief if they do it he would like with the tiktok deal, but then this morning they slapped 34% tariffs on u.s. goods, so china may be an outlier, but i think there will be a lot of people asking donald trump for relief, which is what he wanted in the first place. lisa: we have reflecting --

conflicting reporting, how open is the white house to negotiation? he said if we get something phenomenal. how phenomenal is phenomenal given that they were not open to negotiation before april 2? wendy: exactly. that is the uncertainty that donald trump really drives on, this controlled chaos or not so controlled chaos of throwing a bone out there and saying if you give me something phenomenal, and then you have to figure out what that is. but you remember when the tsmc was at the white house and he offered $100 billion, and trump said how about $200 billion, and the guy was like, sure. but then trump stared at him and was like, 200 billion, and he came back with more. so people will negotiate to the best they can, and trump may or may not be willing to exceed to

their wishes, but only one person knows and that is donald trump. jonathan: wendy, appreciate the update. michael's jesus -- michael zezus 's with us around the table. what are your position on things. michael: there is probably plenty of room for negotiation but we don't know the parameters. we expect lower tariffs, potentially more military spending in some of these situations, but really we are in the discovery process of what the conditions are. unfortunately, and i don't think this will clarify anything, the conditions we are looking at our for countries, so we should not go into this from my perspective thinking that the negotiations will go quickly or that they will come about quickly. we do need to price and most of the negative consequences of these choices. lisa: what is the significance of the formula that the trump,

station used to come up with tariff rates on each country? michael: i only know what they told us, which is effectively it is supposed to be a representation of the trade deficit and the theoretical world where if tariffs are equalized, there will be no deficit. that said, i don't know if the information we are supposed to take from that is that there end goal is to get rates down to zero or if it is just that they apply the methodology and they are willing to talk about it. we are in that discovery process the next week. either way, it doesn't seem we will get relief quickly. lisa: speaking with an investment manager yesterday, i said what is your methodology of taking all the data we are getting and they said, i run, i run a lot, i run frequently. what are they telling your clients? michael: what we said coming into the year's we did think higher tariffs would be a fixture of u.s. policy posture,

thought it was going to be mostly a line from china and the rest of the world would be a lighter touch. the china tariffs have been faster than we thought. we thought we would get to 60%, and the rest of the world would sort of the product by product, so the new thing we have to bake in here is the rest of the world tariffs are higher, there's a 10% minimum and there are higher levels. that means there is a weaker growth outlook than we would have anticipated, i know we have to pricing weaker growth, higher recession probability, and i think most of the markets are not priced for that reality yet. some becomes prominence. jonathan: is this about getting rates down, on deals down before they become entertained with a massive tax plan? michael: i took a look at this as a sequencing of what was available to them politically

and legislatively going into this because you could make a theory that, hey, why don't we just do tax cuts first and create space to operate and incur pain around tariffs with the grand remaking. lisa: that is what people hope for. michael: practically speaking, the ability to extend tax cuts was likely to be the offer early. you had to work through the reconciliation process, slowing the majority. so you work with things that are for control, which are tariffs because that is open to you, and the legislative stuff was always going to take longer. i don't know if there is a lot of rhyme and reason other than the administration is doing what they can with the tools available and this just happens to be the sequence of the government. jonathan: the challenge is to put records to one side and think about where we will be. in 12 months time, when you have your hands are on the policy platform, what is the mix going to look like? michael: there are two ways to

look at it, are you better off 12 months from now then you would have been if choices had not been made? the answer is not necessarily relevant in this sense where the real question is can we price in the negative effects of making these policy attempts? once you have done that, ken the policy choices ease that better? if we fully priced and higher recession probabilities and then some of these negotiations on workout and then maybe we get a bigger tax cut than we anticipate, because it will mostly be an extension, those things can be positives on top of pricing with outcomes, but we have to go through the pricing and outcomes first. lisa: yesterday there were historic comments along catastrophic rhetoric, the loss of u.s. exceptionalism. did you take comfort in the fact that treasuries rallied? even though people were talking

about boycotting u.s. goods or boycotting the u.s. dollar, you did seek yields go lower as a haven trade. michael: it is an incredibly large liquid market, and it makes sense in times of uncertainty were growth expectations are weaker, you would be buying more treasuries. that was never in question. i know there are hypothetical longer concerns but that is why we had a preference for fixed income over equities coming into the year and then throughout all of this, we think that is still a way to be his agent right now. jonathan: that's the silver lining for me. i would be worried if we woke up and you had all those people running around, saying we will see an exodus of money from the u.s.. people are going to dump dollar-denominated assets. they are jumping equities because that is associated with growth. i don't think it's a sign here that there will be dumping assets because of the volatility because that would show up in policies, too, and that is conservative.

and that is the price action of the past 24 hours or so. lisa: at least the u.s. is not acting as an emerging market in that respect. jonathan: solid dollar weakness accompanied with a bond selloff would get my attention in a more negative way and it would get the federal reserve's, as well. lisa: the u.s. is still the dominant market which goes to the idea of how do you get perspective at a time of a lot of superlatives? jonathan: let's hope we never see that. michael zuzus of morgan's -- zeza of morgan stanley. sdwn to the open time. we are four minutes away. ♪ to help you see untapped possibilities and relentlessly work with you to make them real.

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jonathan: the biggest one-day dropjonathan: since the pandemic and equity futures negative and down across the board. down three point 7% on the s&p 500, the nasdaq down four percentage points. wrestled down by 5.3. next week we get a report, earnings on wednesday, down another four point 5%, down 10% yesterday, 30% down here today and to bank of america cutting price targets across evocative names, looking for super conservative guidance the next few weeks. lisa: which is something we already heard a taste of united shares lower significantly as

people look forward to the idea of low consumer confidence translating into less travel, and canadians are not traveling to the u.s., so that takes a hit, too. jonathan: at our age, restoration hardware, down 40% in the blink of an eye yesterday. we have heard this story. they see the stock, and it is, not good. lisa: it's a quote -- it is a four letter word that begins with s and ends with t. he said that is their moment and this is ultimately what they are dealing with, with softer consumer demand and they are affected by the tariffs. you saw this with every single company that was intentionally exposed, seem pretty significant drops. jonathan: these are companies that insulated themselves from china risk. we saw that with other companies, as well, and now they are in a position where they cannot hide in the and a tougher position because some of the places they operate is so much

greater here in the united states that they would be better off staying where they are taking the tariff it moving production here in moving and taking the wage hit. the challenge for so many retailers at the moment. lisa: which is why there is paralysis. how do you get out ahead of this if you don't know where the off ramps are, where your potential leverage will come from? it's interesting to see that investors are differentiating between those who have exposure and those that don't, and you are seeing that dollar tree, dollar general, that total discrepancy. there are interesting patterns. jonathan: tech is having a tough time of it. tesla down again this morning and the premarket, negative by close to seven percentage points, having a difficult year already. i will be back when we talk to the bulls, and they talk about the effect from the trump administration. stories change so much the past few months. lisa: i the hello effect -- halo

effect -- now the halo effect has a place, and elon musk is associated with this brand. at what point cody resurrect that? at what point will this name because of the magnificent seven downdraft it has been 24% since the peak late last year? jonathan: check this out, two year, 10-year, 20 year. bond yields were down two, and then we saw the prospect of china retaliating at 34% and we just created, dumber 20 basis points, down 15 on tens. payrolls, 60 minutes away. the estimate is .140. if you are stronger, you will say we are the last strong one, and then you have chairman powell coming at 11:25. lisa: if it is strong, it will be even more of a problem but fed chair powell cannot even indicate he is recognizing softness in the data. right now i'm looking at credit risk surging the most since june

of 2020 and the metrics are flying out to levels we haven't seen since the pandemic. yet, we have heard from chair powell before that he looks more at the hard data than the soft data, so what to do with this? and how does he spin this forward in a way you could be the offramp where he does it create and frankly he doesn't have the tools to address. jonathan: we are hearing from senator rubio, and markets are adjusting to u.s. tariffs. president donald trump is open to negotiations for cutting back tariffs. he considered lowering tariff rates to offer something phenomenal lisa: in return. lisa:do you have any sense of what the parameters of phenomenal are? we could have a discussion about how to create a more fair trade situation, and i think a lot of people would entertain and agree with the premise of the discussion, but there's a question about how the tariff rates came out and where the details were for people to offer

something phenomenal. we don't even have a sense of whether that has to do with tiktok, whether that is with cars, wine, cheese, and that is difficult for people to understand. jonathan: anne-marie went to go see the president with the press, and he talked about the golden lisa. he did not look under at all by the way the equity market reacted to the tariffs announced to the day before. lisa: he said it was expected, pretty much in line. typically when there's nervousness, there's a response and right now does not seem like this is something the administration will push back on. jonathan: people think chairman powell will respond. in the aftermath of what we saw the past 24 hours, rockets are pricing 100 basis points worth of cuts and by year-end, the expectation that tariffs lift inflation by slow growth and that inflation will not last long. that is the bet and it is implied by the forecast for the federal reserve only a few weeks

ago. lisa: we will view this as transitory and cut weakness. priya misra from jp morgan had a fascinating take. they will not be preemptive, they will not necessarily cut so soon, but when they cut, it will be cutting more than expecting because this is a fed not shy about responding to recession should they essentially start to see it in the data. that is basically what they will deal with. jonathan: commodities getting hammered, crude down the eight percentage points. wti 61, threatening to break into the 50's. brent crude down by more than 7%. the eu preparing penalties against elon musk for battling disinformation. regulators are weighing a fine of over $1 billion. lisa: this has been in the works for a while, the idea of the eu going after u.s. technology companies but also a question of

retaliating against specific companies with u.s. companies as retaliations to emphasize that china points because the retaliation is what is driving markets lower. there is a question about how much china and europe will go after specific companies in the u.s., china mentioning 11 companies in the u.s. that are unreliabl. -- unreliable. jonathan: we have to drop a distinction between the shock to the cycle and system. it is a shock to the cycle. you see equities and bonds and commodities, as well. the shock to the system will take longer to internalize, much longer. that is the weeks, months, years story. that is difficult to price. that involves shifting away potentially from dollar-denominated assets and that speaks to the weakness was on the dollar yesterday. i would like to go back to the same point, we are seeing treasuries being dumped, and that is one thing that would

really scare me, to wake up and see that. the fact that we are rallying as hard as we are, the treasury market speaks to the idea at the moment at least that it is a bigger shock to the cycle than it is to the system because the tariffs are not even on yet and may not be on for very long. lisa: you cannot move the global system is quickly. this is a global system that has plagued the dollars, the treasury, that is the most deepest liquid market that offers swap lines to the rest of the world. people can have big, catastrophic ideas, but can you implement them and a time when economies and markets cannot move as quickly as proclamations or bills or tariffs can be put on or off? jonathan: it's hard to price the latter. we are sending a shock to the cycle, equity futures, three percentage points on the s&p 500. payrolls in just one hour. we are calling for an increase of 140,000 jobs.

calling for 185 k saying risk to our forecast very much to the downside. we are joined by aditya bhave for more. is this the last good one, the question a lot of people are asking. aditya: that is a great question. one of the reasons why we have strengths and the jobs report is we expect hospitality hiring that was soft in january and february, but it was strong going into the end-of-the-year, so we think that january and february was probably weather-related, you would like to get something back in march. the other thing we see in the claims data is you are not releasing seen slow down, so claims are still low, that is true for federal claims and the number that gets more widely discussed. you're still in the two 20's. jonathan: chairman powell at 11:25, what does he say about this? aditya: the question we would like to hear answered is how will the fed respond to inflation risks question mark

you mentioned earlier that the orchids are looking for aggressive frontloaded cuts, but i'm in the other camp, where if the fed has to go, it is going to be backloaded and they might have to go fast because the issue with stagflation is it is almost like your two kids running in opposite directions and you have to choose which to chase, so initially inflation is above target and i do think they have to maintain credibility on inflation, as long as it goes up, especially if tariffs aren't limited and we are heading towards 4%. then they have to focus on that. they have to wait until inflation leaks out and may it starts rolling over and then they can focus. lisa: why do you think fed chair jay powell said transitory? do think you will try to put that back in the bottle today? aditya: the context of that statement was interesting. if i remember correctly, he said there is a chance it could be transitory or something like that.

but i do think the fed is a little bit scarred by its previous experience from three years ago where it insisted that the supply shop was transitory but it was not. lisa: there's also the feeling that there is a fed could or some sort of policy cut from washington, d.c., and it used to be that someone would talk about markets selling off in freefall over the past couple of days. we don't get the sense that anyone is, is fed chair jay powell going to be concerned from the sentiment, given that so many households are leveraged to the stock market by sentiment and retirement, as well? aditya: michael specht is stagflation. it is easier to respond to financial conditions. when the driver of weaker financial conditions is a supply shop, go back to 2022, the fed was hiking because they had to

respond to the inflation shocks. it is something similar to right now, where one consumer sentiment has been a terrible indicator of consumer spending, so we need to keep that in mind, i do need to keep in mind that balance sheets, there is still plenty of room there to accommodate some sort of inflation shock. folks could lose jobs, and that it will be harder. powell has to say the hard data are holding up, and if anything, the hard data on inflation are not behaving as well as the fed would like. jonathan: are you seeing signs based on speeches you have read and heard that they are conditioned by 21-22 and that means they went longer than some people believed they needed to? aditya: we are getting the same message from the fed, wait and see, let's see how the tariffs play out, how much the impact inflation and economic activity, and let's not jump to

conclusions, so as long as the labor report is fine, it is on to the next inflation threat, and i'm not sure they will be swayed just by financial conditions. jonathan: the market is down another 5, 10, 15. welcome to the program, equity sewer by 3.4% on the s&p, crude down a percentage points, bond yields lower by 18 and the payrolls report 48 minutes away or so. if you are just waking up, earlier this morning, a headline from china announcing an extra 34 percent tariffs on u.s. goods that kicks in april 10. on april 5, the baseline 10% tariff kicks in, april 9, the reciprocal tariffs kick in on the u.s. side and china is saying we will have this ready for you april 10, a 34% tariff on u.s. goods. you would imagine it sets the stage for negotiations between now and then without any sign at the moment that those negotiations are taking place

later between the u.s. or china at a high level. lisa: we don't have a sense of what the offramp sorry. the reason this is catalyzing declines across the boards throughout global markets is once you start a tit-for-tat, it's hard to get that back under control, especially if you don't have an understanding of how to alleviate some of the pressures. it is interesting that yesterday we talked about how a lot of the pain was concentrated and focused on the u.s. is taking the biggest hit. today it is a global shock and we see this globally with markets falling. you are seeing credit spreads widen the fastest place going back to 2020 at the peak of the pandemic, and there is a question of how exactly people even begin to reprice something that could be so sustained and that has levels of uncertainty that we have not seen before. jonathan: we have seen a lot of estimates, from socgen, barclays, goldman twice.

obviously twice, now they have done it again. the price target to 55-50 from 6200, saying that the old bear case is now the base case. they have cut from 6400 to 5800, but as indicated, a belief that by the end of the year, the stock market will be higher than it was from here because the epicenter is a belief that these tariffs were announced early this week will not go on, and if they do, they will not stay on very long. lisa: which is that was interesting and a survey of economists, that 92% think the chance of recession has increased, but 58% think there is a great likelihood that we are going to get some sort of trade deals that result in lower tariffs by the end of the year. i will say, you are starting to see potentially signs of this and the hard data coming out. yesterday i thought it was interesting, and maybe i'm making too much of this and they

welcome comments, but claims came in at the highest level going back to 2021 what some people interpret this as is companies don't have the conviction to higher, and it leaves the question of how do you move forward with an economy where companies don't have that conviction? that is a big concern. jonathan: you are seeing that with continuing claims. you are seeing activity contracting, employment component negative, as well, and it doesn't make for good reason going into the payrolls report later this morning. good to see you. aditya bhave of bank of america. we are lower by 3.6%. next, betting big on the fed. >> as things stand now, we are headed to recession. a lot can happen, but if these policies stick for the next quarter or so, then you have to start pricing in the fed, brings down rates to 2.25, 2.50. jonathan: we will get insights

from the former boston fed president, eric rosengren. this is bloomberg. ♪

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jonathan: equity futures negative by 3.4% under s&p. payrolls around the corner. mastec number 3.7. small caps down by close to five percentage points as china announces an extra 34% tariffs on u.s. goods. the car this is showing up in equities over in europe. the dax in germany, down by 4.7%. check out italy, the ftse down by seven percentage points.

sector to sector across the index, thanks are down 9% on europe this morning. it is down hard there, as well. most 9% on brent. this is a real shock to the global economy and the cycle. the prospect of growth rolling over aggressively and repricing the growth story crude down by eight percentage points to 64 and wti threatening to break into the 50's. lisa: you are seeing copper down 5%. and you see this elsewhere, as well. what you just highlighted was a global week story, and that i think is the key one. in the u.s. experiences the brunt of the shock and today we are talking about a global down growth. jonathan: under surveillance, betting big on the fed. >> as things stand now, we are headed to recession. the fed already told us a few weeks ago that, yes, it isn't

pleasant to have this cost push inflation, but they will look through the. they are more concerned about the downside. a lot can happen, but if these policies stick next quarter or so, then you need to start pricing in the fed. it brings down rates to 2.25 to 2.50. jonathan: the view from the former boston fed president eric rosengren, the fed may be slow to react, given uncertainty around the trade policy, and the likely significant impact on reported inflation over the next six months. welcome to the program. lucky for us to lean on your experience. how is placed or well-placed is that fed on cutting rates? eric: i think it is a challenging environment for the fed. first of all, while the tariffs i've come on and are significant in the retaliation been announced now, we have china today, but they certainly will be retaliating, as well. the question is, how long will

these tariffs be in place? demonstration has been pretty unclear as to the purpose of the tariffs. if the purpose is to raise taxes and bring manufacturing here, the tariffs need to be permanent. if the purpose is a negotiating tool, then it will be temporary. so the fed, first of all, has to be concerned that the shock that has occurred could be offset quickly and if tariffs sorry serious estate, the most efficient way to address the problem is for the tariffs to be taken off. in the event the tariffs are kept on and look more permanent, then you have an environment where the unemployment rate is going to go up and the inflation rate is going to go up. the inflation rate probably will start showing the next couple of months. the effective tariffs. it is a tax and will go through

relatively quickly. there are some goods that are already being priced and there are reflections of tariff changes. the unemployment rate is likely to be more slow-moving. so, given the uncertainty about what the policy actually is, and given the fact that the first impulse is likely to be on the inflation site, i think the fed will be reluctant and move very quickly. if it looks like we are actually going to go into a global recession, where the unemployment rate of the u.s. goes up quite significantly, that is a situation that the fed has to react to, but, hopefully, there are other off ramps including changes in fiscal policy regarding tariffs that will avoid that. i think the last thing the fed would like to do is perpetuate a view that inflation is going to be tolerated over 3%. i think it is quite likely that we are going to see a half percent increase in core pc --

core cpe over the course of the are putting this over 3% and concerts us at 3%. that is not inflation rate consistent with the fed's target. and it will make the fed reluctant to move quickly to address the concerns that are incurring and financial markets and are likely to be occurring in unemployment rate over time. lisa: i'm wondering if you think the fed is destined to cut much more on the backend? eric: if the unemployment rate shows it going up, it will cut dramatically in the end. and i think they will move slowly, gradually and reluctantly, and when they move, they will have to move quickly to bring interest rates down. unfortunately, it is unlikely to

immediate offset the nature of the problem, which is about tariffs. one thing people are not talking about is developing countries are likely to be experiencing a financial crisis. many of the poorest countries in the world are getting the highest tariffs with the united states. and that could exacerbate the international composition of what is going on. jonathan: that is the last and we would like to see. appreciate you jumping on. thank you, the former boston fed president, eric rosengren. breaking down the federal reserve position. we will hear from german powell and morning at 11:25 eastern. forget that, a payrolls report, 8:30, 34 minutes away. stephanie roth of wolf research, jeff rosenberg of blackrock, and how medullary and of queens college cambridge. the third hour of "bloomberg surveillance" is next. ♪

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>> this isn't really going to start hurting until the middle of the year. >> tariffs will be a net negative across the board. >> the reality of the surprise is more painful for everyone to

digest. as things stand now, we are headed to recession and it is very clear that this is a tax on businesses and households. >> if the u.s. is going to be in a weaning environment, it can drive the rest of the world with it. jonathan: 90 minutes away from the opening bell. 30 minutes from the payrolls report. live from new york city, the third hour of bloomberg surveillance starts now. equity features on the s&p 500, the good news, off of the lows. down 2.8% and a 3% on the nasdaq and on the russell down for. in europe, down hard, the dax is down for in and italy down 6.5% is china pledges to retaliate with an extra 34% tariff on u.s. goods which would kick in a day after the u.s. puts additional tariffs on them on april 9.

in the bond market, double digit moves across the curve, down 11 basis points. the move almost 28 basis points lower than the last hour. so we are down 11 on the u.s. 10 year to 3.92. and crude is down by seven percentage points per wti down by eight. 61.60. the market very concerned about growth come in for me not as concerned about inflation. going into the payrolls reports with estimates in 1.4 zero, how meaningless is it when so many people on the program are saying this could be the last good one if the tariffs go on and stay on. this is going to talk about it. chairman powell will get the final word. what on earth does the federal reserve chairman say about the position of this global economy? lisa: everyone agrees he is in a

tenuous position. maybe if the payrolls is negative enough he could talk about downside risk to growth and how they can address that would at a time when we still have not gotten inflation to 2%, they are facing a dual mandate of both inflation and employment. a sticky employment market that really does hold up at least in the near term puts them in a bind. a key question right now, what is the off ramp for this concern we have in the markets, that the trade war could get out of control in right now people are having a hard time finding it. jonathan: when chairman powell looks at the forecast and a lot of people say they are implying a one-off hit by the time to get back to 26 inch 27 and then back to target and they can reduce interest rates and it is good news. the reflects on the sentiment survey data implies he wouldn't put much weight on it and said the hard data is still holding up.

a lot of people still think that is hard data is going to stand up. can he put a speech together and say unemployment is 4.1% and there is nothing to see here. i don't think he can do that. lisa: i think he wants to say he is looking at a labor market coming from a stable place but as autonomous -- economists have pointed out, it is a stagnant market where you have macro economic paralysis, that was jim salter's comment yesterday from apollo. how many companies have the conviction to massively higher people. not healthy market for the federal reserve when there is so much anxiety. at the same time inflationary concerns picking up. when your measure of inflation reaching the highest level going back to 2022. jonathan: we are hoping for the negotiations. april 5 we expect to see the tariff of 10% kick in and then on april 9 the additional.

we are talking about 20% tariffs on the eu and 24 on japan and 34 on china. china basically saying this morning, if you do that some of the day after we will go 34. how much negotiation can be completed in the next week is a big question with us down three percentage points on the s&p 500 at the moment. we will catch up with nadia lovell and stephanie roth on why she is lowering her outlook and mohamed e-erian looking to the payroll reports. she writes, we are looking at slower economic growth and extended market volatility and reducing the year-end target to 5800 from 6400. she joins us now for more. good to see you. nadia: good morning. jonathan: it has been volatile. what has changed? nadia: the tariffs have come in

from our worst case scenario we were looking to be in the low teens effective tariff rate that that are close to 25% and we think they could go even higher. remember retaliation is happening and the president has to still said there are investigations that need to happen and still potentially more tariffs. the reality is, we are in a situation where we will see it lower growth and we have to tick down the estimates to reflect that here we were looking for the trend line at 2% growth and it is probably lower than that and could get down to 0% growth. jonathan: do you consider this a regime change or negotiations to take it to a better place. nadia: we hope it is negotiations. but we are all debating on what the off ramp looks like and we know that the tariffs were calculated in a peculiar way in

terms of as a percentage of the trade deficit. some of the nations, particularly asian nations that have made the cost of living higher for us, what can't they offer and is it about investment in the u.s. for big tsmc that upped and softened earlier this year investments and last week raising capital rates in openai. so it is trying to figure out what can that countries offer the president and companies have already promised concessions and yet you have time on hit with 32%, japan hit with 24%. it remains to be seen, maybe the offramp is the american consumer. lisa: are we getting close to a buying point? i say this because you didn't downgrade the expectation to the target of 58 hundred and said we think the s&p 500 levels of 5000

to 50 to 50 could be an attractive entry point. we are getting close today in futures. how you have conviction to buy given everything you just said? nadia: it is hard to have conviction to buy. you might remember we came in for of the tariff on 5100 on the s&p and it looks like we will be testing that could have to be a level where you start to look. but right now the focus is focusing on income equity structural products because we think that could give me some downside protection and yet upside participation. all of this could change with one headline for the better for the worse. so you have to have some protection and it is different -- difficult to call the bottom. lisa: can it? can it just be put back in the bottle and to meet when you take a look at the excel off morning, how much is stemming from the tariffs and how much is stemming from the idea that this is going

to potentially get out of control with a tip for cap type of trade war -- tit-for-tat type of trade war. nadia: we heard it could include like a tiktok and something you might be willing to ease back on the tariff concerns in china. that is one headline that could change it in terms of the president steps back and starts negotiations. we know the market is a forward-looking instrument. so if there is any inkling of that, there could beat negotiations that could meaningfully bring this down and you will start to see the market recover from that. if we are in a stalemate, this is a huge impact to earnings and potentially recessionary if they remain in place over the next three to six months, talking about double-digit downside to earnings and a recession that you can see the market get to 4500. jonathan: what is the guide for earnings? what do they come out and say?

nadia: the internal conversation as we think this is a kitchen sink quarter in terms of forward guidance and potential for guidance to totally be pulled. some of the companies have literally said they have thrown out the playbook as of wednesday. it will be interesting to see. but the reality is who can speak with conviction when there is so much uncertainty. lisa: the start of the year come in davos for the world economic forum. the bank executives running around talking about how great things are, how powerful the story is in america. and to give them credit, there was good reason for that story could you had an administration coming into power that many people thought was going to be progrowth and deregulation and tax cuts and sentiment was skyhigh. now we are sitting here saying they are going to come out of the first quarter earnings and pull guidance. that is how much things have changed in three months.

nadia: that is how much things have changed in two days, right? most people thought the 10% potential effective tariff and we are in the situation where things could change it day by day and that is partly why you might remember we were quite bullish on the financials. one of the best performing sectors since last summer, we took that down to neutral because the risk of downside if we end up in a recession. that will offset some of the potential positive that we could get in the second half of the year r&d regulation and potential for capital returns. lisa: i am smiling because everybody is saying this will be a kitchen sink and i am expecting everyone to reveal fraud because no one will care. if you have some malfeasance, now is the time to report it because everyone will be distracted. in a more serious note, does the jobs report matter in this app

-- backdrop? nadia: if it is weak yes because that means the recession has probably started. if it is strong, who cares because the reality is wednesday's announcement was a seismic shock to the market and has yet to see the aftershock in the economy, the corporate confidence. where we end up on that scale will depend on the president and the administration and how much damage and gambling they are willing to do with the u.s. economy. jonathan: there is never a good time to reveal an affair with your secretary, is it? lisa: i think right now, if you really wanted to go there. [laughter] if they are going to kitchen sink its let's see what they can come up with. jonathan: one writes in with the latest note, why does anyone think this is over soon? it's as if wall street stops panicking when policymakers begin to panic, that we should not hold our breath. president trump cannot back off. if he did, he would look weak

and there is no coming back politically from it. he says i'm increasingly of you that when they reclaim the tariff authority, maybe i'm too pessimistic. lisa: he might be too pessimistic or correct but right now the fact that there is the range of possibility gives you a sense of the reins of options. to his point, marco rubio, sectors state saying the markets will adjust and no one seems phased and it is hard to see how president trump backs down and says, ok, if you are going to put 34% tears on us, we will come to a negotiating table. that is not the tenor of these negotiations. lisa: is great -- jonathan: is great to see you. equities lower by three percentage points. up next, morning calls plus we will catch up with robert tipp as we count down to the payrolls report and as indicated earlier this morning, the payrolls report may well be the last good

one. from new york, this is bloomberg. ♪

jonathan: we have had price target cuts on the s&p 500 so far this morning from ubs, rbc. coming down at 5350 from 6400. some said there will be blood if the tariffs go on. alliteration date is what it has been called. equities keep falling on the s&p, down 2.7% in on the nasdaq down by 2.9. on the russell, down by close to four.

cutting a price target citing tariffs and competitive drink wear. lowering on wells fargo to 84. citi cutting and citing risk reward by a mexican chain. they have bigger problems i am sure good nordstrom down by 2.6 percent. lisa: a lot of retailers lost a quarter value or less yesterday in one day on the potential for supply chains. maybe the deals will be refreshing to discuss. jonathan: robert to writing come in the wake of the tariff announcement, investors will anxiously await hard economic data. central bankers will be struggling to evaluate the expected impact of tariffs on growth and inflation pay robert joins us now. welcome to the program. that payrolls report is 13 minutes away.

what is your approach to that data point? how relevant is it? robert: i agree that downside showing up in the numbers right now in things that occurred prior to april 2 will be very worrying. so far that has been limited it. there has been some hit to confidence. layouts for challenges surge and those were for government jobs. people are going to look through strong data like they did with adp and other data at this week would be very sensitive to the downside, as of the policy makers. jonathan: chairman's powell speaks later this morning. you expect a repeat on what you heard in the news conference a few weeks ago or is it time to offer something different? robert: i think that this could be a watershed event. i think that he signaled at that conference may be that there was a crack between him and other

policymakers on the committee there that since then we have heard patients preached from others. i think he signaled he would be willing to take risk on inflation if needed meet in order to curtail downside risks to the economy. i think this could be a moment analogous to kind of a mix of a 1987 or alan greenspan 1998 island of prosperity speech where he talks about things look really good but sometimes you need to act and confidence is important. he alluded to that in the last meeting. this could be an important time given that we have had things coming worse than expected this week. lisa: what is the risk that if the fed jay powell indicates that he is ready to proactively cut rates that long and yields

-- long end yields go up and that creates a live only for longer-term inflation expectations? robert: it is a reasonable question and expectation. the yield curve is really flat. in order to justify a 3.9 zero 10 year, you think they will cut 150 basis points and you hope it will be sustained. i don't think that is their concern. i think the concern is confidence and i think it is possible for him to preach the sound underpinnings of the economy that imports are not a major aspect of the economy and that this is something people will be able to get through but he needs to be sure and he it needs to instill confidence in the economy and in the markets in order to begin to throw a that and let people know that they are there and that they had a dual mandate and that they are

prepared to look through the inflation which he went so far as to say could be a transitory threat. lisa: what is the incentive to do that given the fact that this isn't a problem they are making and solving and that the credit creation doesn't offset some of the uncertainty you are seeing get injected? robert: yeah, i wasn't there but this reminds me of 1929 because in the middle of that huge decline of the stock market halfway down, that is when smoot-hawley was brought to the fore. central bankers are still looking back and regretting that there was not a more aggressive approach to heading of the great depression. alan greenspan in 1998 with the island of prosperity speech, a show was in a crisis, russia was defaulting in long-term capital

management was freezing up, threatening the entire community and we are seeing some liquidity concerns in this market. there are a lot of markets -- relationships in fixed income that keeps mortgage issuable and also i don't think he wants to look back at or 12 months from now whether it things go great or where that they go terrible, look back and say, we didn't do anything. i think he needs to show they were willing to act in the whole economics community is up in arms about the tears being a destructive way to address this, rightly or wrongly in the markets are very concerned. he needs to show he is willing to step in and take some risk to instill confidence that they will be there they need to support this economy. jonathan: you know that you have to manage risk and knowing can see into the future. i wonder how you have been managing risk around fixed income and high corporate in what we saw in yesterday's session. it is unusual.

we don't typically see moves of 50 basis points and spread widening and that is what we saw in yesterday's session. what are you in the team doing? robert: just go right to the point of panic, do you had a panic button. i knew this is a panic for cash in people in cash because this opens up the prospects of cash yields dropping aggressively. i think it creates a panic for equity investors because they are clearly contingent on expectations for earnings growth that may be threatened by the rapid policy changes that are out there. in fixed income, you will have some balance between yield and spreads. i think the treasury equation, the yield equation has become less attractive but the corporate market has a lot of sound underpinnings in terms of fundamentals. this is not 2008. this is not worldcom and ron

capitalized, high leveraged situations and a lot of high competition spread out competitors and industries. there has been a lot of consolidation and battening down the hatches through covid and the war and the hikes in interest rates. there are a lot of credits that are well to take this. i think if you are seeing yields go up in a manner that offsets or more than offsets the decline in at treasuries, this is a great spot for fixed income. do i think people need to be alert that this could go further and we could have a recession, the possibility israel. yes, they're having growth dropped from 2.542 1.0 is not a nightmare for fixed income. after the initial panic phase passes, think back to 2021. we are in the midst of an environment where nobody knew what was going to happen. there were huge flows into fixed

income and i was very supportive of the credit markets and there are a lot of credits that made it through covid. i think this is something that may be very manageable for a lot and give an opportunity and for bonds, we are at a strategic by point as a whole in general. lisa: when was the last time you were this overweight corporate credit? robert: i can't remember the last time we were this low in our exposure to corporate credit. so spreads have been tight. we have been guardedly optimistic on the outlook for corporate credit. i think you will have positive returns and that is the case from where we are now. i don't think this is something where we come into it and say, we have way too much economic risk and what are we going to do. i think it is an opportunity in the credit markets to find things that are underpriced and do very well over the next one

through five years. jonathan: good to catch up with you. thank you. as we head towards a payrolls report five minutes away, the survey is 140 thousand. equity futures down by two .9% on the s&p 500. stocks getting hammered. crude is a lower end down hard as the market focuses on the downside risk to growth in the upside risk of inflation. in the bond market, as we approach the jobs report, the 10 year yield is down by 14 basis points. the two-year is down 17. we will catch up with stephanie roth and jeffrey rosenberg and mohamed el-erian this is bloomberg. ♪

♪ i know sometimes we get into it

and it's just hard on both of us. but, you know, try to understand me more and i'll try to do the same. but you have excuses cause you're old. it's okay.

jonathan: payrolls report 20 seconds away. equity futures down across the board on the s&p down by 2.7. on the nasdaq, down by 2.9. russell is down by 3.7. check out the bond market going into this report. yields lower across the board, down 15 on twos, 10 year, 14, a drop below 4%. a break earlier below 350 on the two is good with the jobs report come here is michael mckee. michael: 228,000 after a revised lower at 117,000 the month before.

you would say that offsets a lot but given the situation, this will have some repercussions for the fed. unemployment rises to 4.2% from 4.1% and we see average hourly earnings up as forecasted .3% but year-over-year, the forecast was for four and that is what we saw in february. so there has to be some base effect in there. average weekly hours rise to 34 as forecasted the 10th of a percent higher than they were in february. a change in private payrolls is 209,000 come up from 140 the month before. the revisions total, i mentioned it, the total of -48,000. you can cross reference that to what we got today but it is still a very strong report. and finally, the average, 7.9%

drops a little bit here and this certainly creates a bit of a conundrum if you are thinking about the fed and it tells you it might be harder to cut rates than people anticipate. jonathan: thank you. if i showed you a chart of the s&p or just the two year yield right now you would have no idea that jobs report just came out. equities lower on the session by two point 7% on the s&p. the bond year -- the bond, the two-year is down by 13 or 14 basis points. lower on tens by 13%. there is a take on wall street at this jobs report will be a good one and might be the last good one. lisa: which is why they expect the fed to speak. we just spoke with robert tip of this is a fed that wants to be seen as doing something ahead of weakness. this is not weakness we are

seeing. are we had a place where good news is a bad news or whether this ties the hands of the federal reserve just based on the fact that it is a massive upside surprise with wage growth still there and underemployment rate and a labor force participation rate that went up, not down. it makes it difficult for them to respond to weakness that might come. jonathan: that takes us to 11:25 when we hear from chairman powell. this is the data he has good hard data isn't that. the soft it is terrible, prospects for the future not great with a hard deed is still ok -- hard data is still ok. what does he say? michael: that we have to see the totality of the data and how all of this is playing into the economy good i suppose it is true as some analysts have said to you this morning that if trump suddenly looks at the markets and says i will take the terrace off, then all of the danger goes away. for right now, they don't have a meeting until may 7 and there

isn't much for the fed to do except sit and watch. a couple of notes in terms of the jobs, 3600 federal jobs lost sight of postal service. so really nothing, half of what we saw in february. the biggest number at this time is in retail sales, up almost 24 thousand, including 20,000 at grocery stores. that reflects the end of the grocery store strike in colorado that had 20,000 workers off of the payroll. it is not an actual increase in workers, so maybe we can take that out of the headlines number and it looks a little bit more realistic but would still put you above 200,000. jonathan: we have the jobs report, if you look at equities, recovering only slightly, laura

by 2.4%. in the bond market, yields down -- lower by 2.4%. the bond market, yields down. around 11:30 eastern time when you hear from chairman powell who has to confront the very real rest of upside risk to inflation in downside risk to growth. stephanie roth is with us for more. jonathan: the last good one? stephanie: for sure and then it will plummet lower. lisa: you have to wonder how much people can take this and giving any sense of where we are coming from, does this report indicate we are coming from a position of great strength that will take a long time to weaken? stephanie: i don't think it matters. the tariffs are so big and there will be damaging to the consumer. and businesses have no idea how to invest in this environment. i would look at this as a shock to the economy as opposed to something more domestically driven in case -- those things

tend to take a while to work their way through. the fact that it is strong today doesn't matter with everything else going on. lisa: does it signal how much room the fed has to act versus not really doing anything simply because the hard data, the totality of data is showing that strength? stephanie: i think either way they are in a position where they can't act unless the data were crumbling already which hasn't been the case. they will have to wait until the data actually start to crack before they react. they are in a tough position. it will be interesting to see how he spends it today. he wanted to use the word transitory last time and i don't anticipate he will use that again. the base case is he will probably talk about how they are ready to act. financial conditions have tightened a lot since we last heard from him at least from an equity perspective. it will have to wait until they see a notable rise in the unemployment rate until they can ease because inflation is going

to tick up notably higher. jonathan: coming from chairman powell or from the president could pretend that xi called again. lisa: this is become accustomed to having a circuit breaker and it has come in the form of chairman powell. this is not the fed's problem to fix or problem they can fix. how can they get ahead of this when they are facing what essentially looks like a stagflationary shock. jonathan: joining us is jeffrey rosenberg . how relevant is this number to you and the team this morning? jeffrey: it is not particularly relevant. it is one of the very unique situations where the data looking backwards is probably the least impactful to the forward-looking outlook. you said it a few minutes ago when you talk about the market

reaction, a big upside surprise. we came into this backward looking. the economy is in good shape. labor markets were in good shape. none of that matters to financial markets. they are incredible discounting machines and they are discounting the future's and that is really about the tariff story. jonathan: sentiment is already rock-bottom and hard data based is still holding up here how much longer can it hold up? jeffrey: there is a split in the hard and soft data. the hard data is more about looking forward and the hard data is going to be about people taking actions and i think you will start to see that show up in the hard data and most importantly for the economy is much as the focus is on manufacturing, this is a service and consumption based economy and the most important for consumption is real wages. when you take something away from today's report that is

important, it is the wage picture and it has been pretty good and holding up. it is a little bit of a concern in terms of support it has had for inflation and the likelihood that we get back down to 2%. we are more likely to stall out at 3%. but you throw in an entirely different wrench into the mix when it comes to the near term inflation story which is of course the tariffs and the impact that has in terms of growth away from the confidence shock is this is a wage killer but in terms of short-term impact on inflation. that will be the way in which we see the hard data react. i think most importantly, the follow-through in terms of the survey data is going to be on the business side and investment. it is an certainty is bad for investment. i think you will see that in the data. on the consumption side to at

the second to the one-two punch is the real wage impact from what hopefully is a transitory impact on inflation as powell make repeat or not later today. in the interim, it doesn't feel transitory just what people are feeling in terms of their wages and that is a drag in of hard data into consumption. that is all kind of forward-looking so not yet there and that data is more reflective of where we were. jonathan: i want to bring in mohamed el-erian. mohamed: i agree generally that this is not as relevant as it normally is as an employment report. i do focus on the .3% monthly earnings growth. when people rush to predict lots of fed cuts, they forget the

difference between what is necessary and necessary and sufficient. pronounced weakness in the economy is necessary for the sorts of cuts being priced in but they are not sufficient. the fed needs some sort of cover on inflation and most forecasts of inflation as jeff said are now going to 3% 3.5% at the pce core level. this is quite a move. the .3 monthly earnings growth we saw in today's report is not consistent with the cover on inflation. this is a report that suggests to the fed, wait and see in my hope is that chairman powell later this morning will do two things. he will walk back the notion that the tariffs impact on inflation will be transitory in let's eliminate that word from his vocabulary and the second

thing i hope you walks attack is the ease with with heat -- with which he dismissed the soft data. so as it's been said, expect the hard data to weaken in the months ahead. lisa: are we dismissing the strength of this chart report at our own peril? the fact that corporate america has thrived despite what the government has done and there is robustness and people who are employed and able to absorb a greater amount of price increases that might get passed along to them? mohamed: this remind you the structure of the economy is fine. this is important because while there is general agreement on a very bumpy few months, the significant disagreement on where this will lead to. there are those who think that the pain is with the game that is coming forward. it is just a matter of time and the structure of the economy is strong enough to take us to this

very bumpy journey. in the others that worry that the structure of the economy is not as strong as we think it is. this number you shoot some confidence that the economy is fine if we can just avoid repeated self-inflicted wounds. jonathan: moments ago, a big upside surprise in the payrolls report, 228, the estimate 140. you look at the charts in the immediate aftermath in this market hardly blinked. yields are down 15 basis points at the front end of the curve and the equity market, futures lower by 2.8%. stephanie talked about the word transitory. does that get canned today? stephanie: i would imagine he will visit again. will have to be more cautious about this. it is also important to think about transitory does it mean the same for every person, which

is the problem appeared in the extent of the chairs are so big that it might take a long time for this inflation shock to work its way through the economy. jonathan: it speaks to the same mistake we all remember it was waiting too long eared that is a problem with that word. waiting too long to do something about inflation. this time around, i wonder if they wait too long to do something about growth and downside risk because that is the major risks to the market. stephanie: they will have to wait and see. and they will be watching inflation expectations. in 2018, they said it is the main anchor to determine whether they can look through it or whether they have to act more harshly as a result. inflation expectations if they picked up, they will be in a tough situation and will have to wait until things get bad before they can act. and inflation expectations, long-term, are largely driven by the most recent expense with inflation. in 2018, we had no inflation in

this time it is very different. inflation expectations likely to pick up more given experience and that the tariffs are so large. lisa: i would love your thoughts on how the bond market response to a dovish mash or hawkish message from powell if you put the genie back in the bottle, does that to you more confidence to go into long-term bonds because they might have to cut rates a whole lot more? jeffrey: if you look at the last two days and what has transpired in the bond markets, yesterday you saw a big rally in rates but it was mostly led by the intermediate and short end. if you look at that portion for 30 year, it lagged. for a brief moment it barely budged. contrast that to today and what you are seeing is a very different picture from the bond market. probably the most striking is that you are seeing not only

longer-term inflation expectations fall but even the shorter term inflation measures. stephanie was talking about it and it will be challenging for the fed because it depends on how you are measuring inflation expectations. everyone has seen the michigan survey and the measures will likely be going higher in an environment where people are seeing higher prices due to tariffs. potentially that gets a little bit offset by what we are seeing in oil but the impact in terms of survey responses may be to higher inflation. but in the bond market, they are looking at the financial conditions tightening that is going on in seeing the implications for consumption. 70% of the economy driven by that side and that is quite negative and is starting to price in today, much more of a deflationary environment. you are seeing the back end of the curve fall in yours and breakevens fall and even seeing short end inflation measures

which have been the story about stagflation and when you measure it, it is short measures, inflation in the near term expected to go up and now some of that is starting to get willed over. it is possible the bond market may try to lead the fed to this message of transitory but basically cutting interest rates in real and nominal terms. jonathan: the market moves are not leading the president to changing his mind. he just posted saying that my policies will never change. if you're looking for something to blinked this morning, it is not the president at the moment. lisa: he says to the many investors coming in, my policies will never change. this is a great time to get rich and richer than ever before which raises the question of how much the bond market and the stock market matter to him at a time when there is real concern on wall street that isn't being inflected in the commentary. jonathan: crude is down by 7.5%

and wti is down by seven point 4%. clearly this is a shock to the cycle and repricing growth lower. how much of a shock to the system is it and how long does it take to internalize major at regime change is like the one we must see? mohamed: we are repricing growth outlook in a significant manner. interestingly, the beta for the rest of the world is catching up. it started out being a u.s. phenomenon and now it is spreading and people are realizing that if the u.s. growth rate falls by x, then it might fall by more than x outside of the u.s. it is a major revisiting of the growth outlook. how long, it depends on what other countries decide right now. the president's message will

encourage other countries to retaliate and there is a choice out there between retaliate, de-escalate or just wait and we all want ds causation -- to de-escalate but there has to be trust that will have to renegotiate every time and if you de-escalate now it will halt. that isn't there right now so i suspect he will see more countries move towards what china did which is a response that involves both tariffs and non-tariffs. and where that comes in for the bond market is not just talking about interest rate risk but credit risk in the bond market, credit risk has been until very recently unprotected but now we are starting to see it come under pressure and credit investors no longer have the shield of all in be because both

components are now in play it so the next thing to look in the bond market is going to be not just a government bonds but credit and in particular high yield because that is significantly vulnerable right now. lisa: we saw yesterday the biggest spread in those instruments. we caught up with you earlier and you said it is about a 50-50 chance that we either have some sort of reagan and thatcher reporting of the trade system where you go back to the 70's or carter on steroids. do you still think it is 50-50? mohamed: i do. my own was 50-50 but the market is 8020 and is absolutely convinced this is a reagan-thatcher moment. i think that has come down in the last couple of days and for good reason. i am still at a 50-50 it because there is the upside of

significant innovations intact that are there -- in tech that are there for productivity. the market is replacing -- repricing closer to 50-50. that -- jonathan: many people still don't believe the tariffs go on and they won't last long. with the two key dates come april for tomorrow, the baseline 10% tariff. april 9 is the 20 on the eu and 24 in japan and 34 in china. everyone thinks we can negotiate something and i think they are scared at the moment that we won't. but if you go through all of the research, the base case is this won't happen and i wonder where that faith comes from. lisa: was believe heading into the year that the fed was there and the trump was there appear to imagine an administration would allow an economy to tank

for a market to tank seems infeasible. if you put on top of that the question of where is the offramp for the tit-for-tat retaliation and how do we estimate the damage from that and it becomes a fools errand to try to model out and i think a lot of people are saying, we are just going to assume that is not going to happen. jonathan: where does that faith come in the market right now that it is so bad that it won't happen? jeffrey: as mohamed was pointing out, i think the faith is being challenged day by day and i think that is why you are seeing the market reactions. i think the only path forward is to observe with this administration and the policies that it chooses to implement our . it is impossible to forecast but the 80-20 to 50-50.

lisa: how do you model this? stephanie: we have done a fools errand approach and try to model from a global perspective good what happens if we apply tariffs and everyone retaliates and you get offsetting factors? the numbers are kind of comically bad. you are looking at a 2% to 3% headwind on gdp if it all plays out. we don't think it will play out to that extent good with think it will be severe which is why we took the growth estimate is down 2.5%. these policies are bad in his heart for the administration to walk away from it -- these policies are bad and it is hard for the administration to walk away from it. jonathan: i just want to give you the final word of what you will be looking for looking into the weekend as we reset going into next week? what is the number one thing? mohamed: number one is listen to the administration.

i think there was a belief that you might have to break things to remake the global order but remaking the global order is the objective and you have the very specific example of x where you had to break things and -- to remake it. and also listen to business. i have been on the phone nonstop with business leaders and they are not waiting. they see a hit on the cost side and they are worried about the amount of instruction on the revenue side and they are starting to make difficult decisions about the balance between profit margin compression, higher prices and cutting costs and these discussions are really active. business is not going to wait because they will try to rebuild resilience because whatever people disagree on, i think most of us agree on this being a very uncertain environment. jonathan: appreciate your time as always. mohamed el-erian there on the

last point of what companies will do in the last -- next few weeks and months. that is why so many on wall street think the last jobs report will be the last good one. when they start thinking about pulling a lever on costs, that is when the labor market feels it. lisa: what we saw yesterday, the employment going into contraction and some of the lowest levels we have seen on the index going back to late 2023 but also the most since 2020. it is a difficult scenario to try to model out at a time of the shock to two policy given that the economy was strong heading into it. jonathan: this was always going to be a long week. do you want to do a special program sunday? lisa: what are you doing? is this what you are doing? nobody is going to be resting.

everyone will be working and focused on what happens over the weekend because this is a seismic shift. i am game if you are game. jonathan: if you wrote a book on this week, but it gets a chapter? i think of the policy is enacted, this will be the book. this could be a major change for the global economy. lisa: the entire book could be what went into creating the model that president trump put out there. that gets five chapters on how it is modeled and the reaction in the market right now. it remains to be seen where the offramp actually is. jonathan: equities down 2.5%. we will catch up with the white house and get reaction to the jobs report and speak with the u.s. labor secretary. look out for that. on monday, the former senior trump trade advisor, liz ann sonders of charles schwab. try to enjoy your weekend. from new york city, this was a

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matt: the selloff 10 years. katie: sonali basak is on assignment and bloomberg open interest starts right now. matt: coming up, obliterate a day, part two. truck's tariff wrecking ball continues to hit every corner of the market. and a hot jobs report offers some relief to investors. fed chair jay powell takes the mic today. plus, china retaliates with a 34% tariff on the