alix: reacting to fed chair jay powell's speech on friday and how hawkish the fed impacts will be onarkets. the hawks definitely landed. now what? kate moore, blackrock head of strategy for global allocation. it's an open ended question. we know the hawks are here, they made it clear. now what happens? kate: it's a good question. we will be watching market movement this week. a really important feature of friday's price action was that there was not a tremendous amount of volume. it is not like you had a lot of acting investors all of a sudden say, well, even if i was hoping the fed would give it a more dovish tone, this changes my entire thesis. not only was volume light on friday, but we saw significant amount of the volume from almost 40% in etf's rather than single stocks. that was the highest level since june. i think your question was where do we go from here. in addition to watching policy and the additional speakers and the data points that come out on the macroeconomy, inflation, labor market, overall sentiment, the two things that matter for me, number one, direction of pro

if we believe the fed will keep tightening.ou have to be cautious on high-yield, waiting for better opportunities. not a blowout but certainly a wider spread. it is interesting spreads widen as yields went up spreads fell when yields came down and today they are not really seeming to do much of anything. i'm not sure if it is picking a much of a signal. immediate investment grade, there is reasonable yield to be had for the risk and in that environment, that is a sweet spot for a lot of individual investors. jonathan: what about over the last month? kathy jones, gargi chaudhuri, and gershon distenfeld will be sticking with us. just ahead, a host of economic data including another big inflation print in america. that conversation is next. ♪ jonathan: live from new york, i am jonathan ferro and this is "bloomberg real yield." it is time for the week ahead. fed officials speaking throughout the week and you will hear from the likes of evan kashkari daily and plenty of economic data on the calendar. u.s. ebi and initial jobless cla

jonathan: let's look at the first fed psychos. -- let look at the last three fed cycles. six months in 2018, 2019. what is in store? luke: the problem with markets today is the are looking too far ahead into 2023. they are somehow not pricing in declining earnings substantially and also higher corporate defaults. before you go through the ultimate cut cycle, which could be six to 12 months after they finish hiking, you are going to have to go through some potentially substantial earnings declines and corporate default rates above 4% or 5%. there will be another round of risk for the potential for economic recession, as well as more tightening that will be much more aggressive with the balance sheet than we have seen so far. a lot of the talk of the pivot is so premature. you have to let this cycle play out. it is playing out rapidly with a much steeper trajectory than we have seen in the past. to answer the question you asked meghan earlier, the risk of heart landing is going up but that should not be viewed as good news. that should be used as news to become more defensi

that is what the fed is watching. weaker payroll report is agreeing with weaker wages, and ultimately weaker inflation can allow the fed to slowdown. but not with inflation running aside is -- high as it is right now. i think that cpr report is probably the linchpin for the 75 or 50, and we did not get much from chair powell. i think they are trying to move us out of the base of hikes to that endpoint and how long we stay there. lisa: priya misra, we are in jackson hole talking about the fed, talking about the united states. we need to pivot to europe. because that is really where the incredible action is, at least in markets today, as people start to think about a 75 point basis point hike by the ecb. do you foresee this as a real possibility and something that could sustain the moves we have seen that are quite dramatic in the german bond market, in the upon -- the italian bond market, and the euro? priya: we are still looking for 50. when you are starting out you could make the same case for the fed. they have gone

the market doesn't fear the fed. should you fear the fed? alix: i didn't think we were that clever but sure, we can go with it. we are finally accepting the fed is going to do what it says or is this just positioning and you will deal with issues headed to jackson hole? guy: a combination of factors coming together. people have hated this rally. let's turn the question smarter. mike mckee joins us. the one and only vincent as well with us. any sign the market is beginning to fear the fed? michael: it is a combination. some of the talk from the ecb and the fed was piling on. i am in the opposite camp. i am not afraid of an institution that cannot get a forecast right. of an institution that has been wrong for the past 25 years. [laughter] when i was trading, they said goldman sachs was selling. thank you. i don't think you can look at this fed with credibility from the transient on. yesterday, looking for 75, in the neighborhood of 325 for the upper band of the target. you're not giving monetary policy an opportunity to work the market, which

coming up, the fed in focus. take a look at the fed speak we are going to be getting.aking earlier on in the week, we get consumer confidence, those numbers out in europe and the u.s. tuesday. we get another read on european inflation wednesday and of course ism and initial jobless claims thursday. finally, the big data point of the week, another u.s. payrolls report and that comes friday. kelsey berro, matthew hornbach, jim bianco still with me. matt, how important is another data point that is the u.s. payrolls? matthew: it is very important. i think it is probably the make or break between 75 and 50 personally. obviously the cpi report is also important, but the reality is the underlying strength of the economy shows up in the payrolls numbers and if the payrolls number and strong again, what that is telling the fed is they've got to really worry about underlying inflationary pressures through the filler curve framework and that is something i think will resonate with them and could very well make the difference between 50 and 75 in the market i as well. taylor: are

ann-marie: there is no fed put -- there is an michael: there is no fed put here. that has become obvious. all the governors saying you misinterpreted the press conference. you bring up a great point. you see most likely rhetoric around inflation job is not done. we have much further to go. you are seeing the doves saying market, we will hike for a while and aggressively. we don't care what the equity market does. in fact, the frost in crypto and areas of a credit market and equity market, we hope those things come down. so doing, we are going to tighten financial conditions. the market will help us. whether it is credit, equities, the world hasn't woken up to that yet. it is not thata typical. bear and market rallies happen all the time. people like tighter spreads and hire equity prices. that is ok. that is normal. it is probably not going to end well for a lot of people entering into the trade today. lisa: love it. if people want to go for it, go for it. have a nice time. you are sticking with us. up next, a slowdown in inflation triggering high yields. this is

the fed is not driving this ship.what is happening, we are already into a brand-new easing cycle right now. lisa: jim. jim: bond yields from 30 years have started to ease. the dollar has rolled over. junk spreads have gone from over six to under five, they have started to ease. real money growth is at -3.2%, you cannot go much lower. i think it is going to start to improve because inflation comes down. fiscal growth has started to go back to easing. do you want to miss an easing cycle? lisa: i hear you. i also hear federal reserve officials like kashkari saying we are nowhere near done. kailey: we have so much tightening left to do. inflation is very far from our target, even if it is moderating cleared -- moderating. as you talk about these things changing, financial conditions easing in the fed not being in control, does that not mean they are going to be or aggressive to get that control back? jim: i think it is interesting how much attention we devote to the fed. the fed has been behind the curve the whole time. i

that is not what the fed will want to see. does the fed need to push back on a comfortable market? it does not feel like there is fear out there at the moment. the market is looking at much better economic data coming towards us. how is the fed managing going to manage the message? we have seen a little bit of that. will they have to do it a little bit more aggressively? >> i would expect them to push back against the idea that they will pivot at all. it is a question now of whether they do 50 or 75 again. we will get another report before they have to make up their minds, but they will stay the course. it makes it easier for them to stay the course because it looks like things are working and that the unemployment rate is not going up. the fed will be expressing their desire for the markets not to get too far ahead of them when it comes to pricing in good news. it might have a slap across the face effect on the markets and it is a question of, do they get to lose? they are undoing what they did during the jobs report, so it is not a major issue but expect them to do that. >> i fee

fed is expected to continue to hike. -- the real emergence comes in 2023 when the fed is expected to continue to hike. jonathan: from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." if you wanted a quiet end to the week, you didn't get it. down one full percentage point. tom: i broke out between jacket. i just saw the first leaves in central park beginning to change. this is the beginning of autumn and you saw it yesterday with the collapse of the currency market. it continues this morning. the emerging market, the united kingdom is a litmus paper for the stress in the european system. jonathan: autumn started on august 19. he said the leaves are changing in central park. this is from barclays, stocks may face a reality check next week. the fairman -- chairman how set for next friday. tom: i use the dow jones industrial average for this and the average is the dow, even with three days of stress, sits between a solid moving average and two standard deviations up. we

the fed is clearly on a tightening pattern.nflation is still a .25%, still very high. -- 8.25%, still very high and we still have a tight labor market. the fed has got to keep going and then start slowing into the coming year. dani: sonja, translate that into her the dollar goes from here. you talked about the broken relationship between rate hikes and dollar strength, why his that and exhausted? sonja: what tends to happen is the dollar benefits from rate hikes speculation when it is being priced in. once rate hikes start, on in the past we have found that the dollar not only doesn't gain anymore. it might actually lose ground, because at that point other central banks follow through, the fed has tended to be first in line. we are looking for they've euro-dollar to have a slow crawl higher. the ecb is hiking, it is a more cumbersome process but it is happening. we are looking for the u.s. to go into recession. there is some downside potential here. but before people talk about the downward trend, it will be a slow process beca

is the fed ignoring the market or is the market ignoring the fed?atherine: the fed is ignoring the market. they were clear friday saying they would raise rates to contain inflation. they were so far behind the curve, they would lose credibility if they don't move forward and raise rates. the thing we have to worry about is energy prices, food, rent, inflation is sticky. we are not going to see immediate gratification of the draw in pricing because the fed is raising rates. this will be sticking around for a lot longer. the big question moving forward is how do investors operate in this environment? anna: on that, i was listening to tom keene earlier. he was saying the u.s. economy will this inflate -- dis-inflate quickly. he acknowledged that clients do not want to believe it. catherine: energy prices, there is still a huge supply shortage of oil. we are coming into the winter months. that will create more demand for natural gas, etc. china is coming out of lockdown. we continue to see more excess demand for commodities. food is tied to energy becau

the fed end up doing? because if it flip-flops, that's actually worse for stocks than if it's committed and getting the inflation genie back in the bottle i think the uncertainty around the fed is much higher than what's subjected by the discussion. >> we're going to have a fed meeting decision in a few weeks. i don't know what is priced into the market or what the expectations are or not, but that's going to largely guide where stocks go this month >> can i just take a big step back, if you'd allow me to, scott. i think one of the things -- i've listened to the other three members of the committee i agree with what a lot of they say. i think it goes back to inflation expectations main street is not reading the fed's statement. main street doesn't care how many times powell has pivoted. and it doesn't care why he's pivoted and that it's based on data what main street is reacting to, look at those consumer confidence numbers that recently came out main street feels like inflation is coming down that prices

alix: talking about the fed, the cleveland fed president doesn't expect them to cut anytime soon.ish today. >> my current view is it's necessary to move the fed funds rate up above 4% by early next year and hold it there. i do not anticipate the fed cutting the rate next year. alix: what would that wind of meaning for the economy. talking about a growth recession. ubs is warning the credit market is underpricing that fed hawkish miss and a risk of recession. joining us as the head of credit strategy at ubs. what is the credit market pricing in? what should they be pricing in? >> the market we think is pricing in about a 20% to 25 risk of recession early next year. if you look at mild versus severe recession, pricing at about 30% risk of a mild recession. a 20% risk of a severe recession. global macro economics basically has three signals into the recession framework and the overall aggregate is about 60%. we would argue credit market is well shy of procession risks. -- recession risks. that's basically keying on a lot of the goods data, of the yield curve model we think we run is

. >> i think the fed was very late to this. i would argue that today we should be 100 basis points higher. >> it is clear that that is not done. >> this is bloomberg surveillance with tom keene, jonathan ferro, lisa abramowicz. tom: good morning, everyone. tom keene, jonathan ferro, lisa abramowicz. it is jobs day in america. important report in 29 minutes. wages, wages, wages. that is what matters this morning. jonathan: today is payrolls, next week is cpi. that should set us up for the meeting in september. you will get another payrolls and cpi report that, too. tom: no forward guidance into this report. that data is there at 8:30 and the fed will have to adjust. curve inversion of 37 basis points. jonathan: the fed has pushed back in a way that we thought they would. yields have responded on the front end by 17 basis on the two-year. equity markets kept on rounding. we have ripped off that market low. close to 20% higher from june 16 on the nasdaq. tom: it does for to into the fixed income space. frankly, that has been as dy

always talk about is the fed because a lot of the time all that matters is the fed.ong for the days that is not the case and we could talk about data and good news is good news and bad news is bad news, because to everyone else bad news is just bad news. lisa: certainly on main street. jonathan: these conversations just sound alien-like, because of the involvement of central banks in markets over the last 15 years. tom: i talked to -- i thought the richmond-man city game was remarkable. jonathan: you are going to keep this up? tom: just don't give me the fictional stuff. jonathan: you think it is real? i'm sure you do. tom: he reminds me of you. jonathan: that is really rude. this is bloomberg. ♪ ritika: keeping up-to-date with news from around the world. china is lashing out at the u.s. for house speaker nancy pelosi's trip to taiwan. today beijing announced it is imposing sanctions on pelosi and her family. china is also halting meetings with american military leaders in cooperation with the u.s. on drugs, climate, and a number of other issues. u.s. health official

these are things that could happen and part of the fed's communication. i think that the statement josh made is good it sends a chill to employers and sends chills to anyone looking and reading and wanting a job to make people think twice about switching. look what happened with housing already. house something in a pretty big downt downturn it's not going to start rising because someone thinks there's a fed pivot. we're already in a down word spiral for housing that's what you need to cool inflation >> tom, lwe'll leave it there see you soon, tom lee of fundstrat joining us today >>> tech is taking a beating today. coming up the one mega cap tech stock you should stay away from even on the dips, a big call from one major tech investor we reveal who that is and why he thinks it and debate it in our call of the day. we're back on "the half" after this ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay..

>> the fed did have a credibility problem. they still do have one, deirdre, but i think the last couple of months, the last couple of meetings they're building that back, and, you know, clearly we have very, very high inflation that's going to take some time to come down the fed's more than willing, as they've stated many, many times, to give up growth to get there we know that the unemployment rate's going to go up. we're looking for about 5.3% on the unemployment rate by the end of next year you know, the fed may not -- you know, they'll -- they won't say they want the unemployment rate to go up but they'll hem and ha around it with other verbiage. the fed has to attack demand they can't do anything about the supply chain disruption, they can't do anything about russia invading ukraine the only thing they can do is try to dampen demand. >> scott, call out session lows in the major indices down off 500 points, just over 1.5% the nasdaq down 2.3%, the s&p right about there in the middle at 1.8 but should we pay so much attenti

and also, the fed having to ease. the market is wrong to expect a central bank to expect a long-term when. we are seeing a stock tip in the world economy that even as inflation retreats from peak, we still have issues with supply chain disruptions. imagine things happening in china right now. the war in ukraine continuing. maybe the fed will carry out that dovish pivot. let's bring in our guests. let me start with what we are seeing in the markets. there seems to be a lot of positioning right now to what is going to happen at jackson hole than what we can expect. >> we have seen this rally start to cool off. the market has shifted from earnings being better than expected to looking ahead to this jackson hole meeting and traders are positioned for a more hawkish fed. bloomberg news had more out today about the hedge fund space. the question now is as that expectation for pal to come out and say they are going to raise interest rates, has that already been priced into the equity market or are the next few days going to

dani: fed hedge.omc saw the need to eventually slow rate hikes, but noted risk of tightening too far or inflation can become entrenched. goldman sachs and nomura cut their gdp forecasts, warning of a power crunch in covid lockdowns. the combination spells risk off. asia stocks and u.s. futures lower. treasuries and the dollar climb. you are back in dubai after a fantastic interview with the new opec secretary general. oil encapsulates all the risks we are seeing in this market, including those warnings from china. dani: the oil market had battered away those warnings. oil is up zero point 2% on wti and brent. that leans into what the secretary general had to say to me yesterday in terms of china coming back. there is more jet fuel and demand. it is reflected in the cross asset allocation this morning. the people who deliver oil to china believe in the narrative. crude. the magic words from the fed minutes, which were weeks ago is that they could trim back at some point, but the other key line is that

in fact, here is the fed line. fed can't fix fiscal driven inflation. jackson hole paper.that paper. he joins me now. he is a professor the economics at johns hopkins university. frances co, i got to tell you, here with the audience part of this paper i think is amazing. quote, approximately half the recent increase of inflation has fiscal roots poses some specific challenges for policymakers today. not only fiscal inflation tends to be highly persistent but also requires a different policy response also. as a result a vicious circle of rising nominal interest rates, rising inflation, economic stagnation and increasing debt would arise. the paper argues that this pathological monetary situation tightening would actually spur higher inflation and would spark pernicious fiscal stagflation. that is very ominous. yet it feels like the path we're on, right? >> yeah. first of all thanks for having me and like you're saying that analysis we find part of the inflation we see today is the result of robust fiscal interventions we had during the covid pandemic and arguably this was t

fed in september.oming through that will help to give us a stronger signal on the further trajectory of interest rates, inflation, also the path of growth, labor market, as well. when make it past the summer, we could see more volatility as we begin to understand exactly the trajectory of the economy. from there we could see spreads widening depending on the data. tom: marilyn watson, thank you so much. that is terrific insight, that we have to get "passed this summer." we have to remind ourselves, it has not turned around yet. these are vectors moving upward, and they continue to move upward. lisa: peak inflation it is just math, but no one is projecting for inflation to increase from 9.1%? but what if you don't get any decline at all? we have not seen it. that is looming large over a very illiquid and uncertain summer. tom: futures up 10. dow futures up 62. kailey leinz, look at inflation, looking at the political imperative. it will be interesting to see, as we are mystified where we are, the white

the fed is a lumberjack. it has two tolls, an axe and a chainsaw the axe are the rate hikes the chainsaw is whatever they'll do with their portfolio. they'll try to shave $2 trillion off of a bond portfolio. you think valuation will sposht y support your stock or earnings not falling yet? that's not going to help you it's sentiment declining, it's technicals worsening and a liquidity picture -- it's not even september yet i've been talking about this, we have not seen the effect of a $95 billion cap on bonds maturing and not being replaced. we don't even know what that does to the liquidity picture. i think the bulls have been restinging their laurels, especially during this summer rally on the earnings have not fallen yet it doesn't matter. >> it's not the only thing they're talking about. they're talking about the fact that tell us what we don't know. the market knows what's coming from the fed haven't we priced something in >> the market prices in new information every day. that gets priced in. that's why

all of the stimulus the fed and the fiscal authorities put in, the fed needs to do more work. i think the stock market will embrace it and we will get double digit returns over the next two years. lisa: you talked about how to treat the legislation passed over the weekend by senate democrats. how much does that change the landscape when it comes to companies buying back their shares and issues that go beyond monetary aspects? david: in policy terms is little -- it is a letter grade d or f. i am buying these companies because i think they are good allocators of capital with the cash flow they generate. take two names to criticize the share repurchase tax. marriott and wyndham are growing their rooms, that means they are hiring people to build those rooms, they are growing the dividend, and they are buying back shares. they are deciding how to allocate that capital best in the interest of the shareholder and to begin to tax share repurchases is misguided because you are hurting the investors like policeman, fireman, laborers that i manage money for. it is bad policy. kailey: cou

the fed wants below trend.t is why financial conditions are where they are. you have the fiscal drag. plenty of headwinds for sure. i don't think it's quite as bad as in china were euro. i think it will be balancing two things. one, they will lay out a case as they did in the minutes, slowing the pace of increases. i don't think he will be specific about the number, but he will be saying there is a risk of over tightening, and therefore, it makes sense to go more slowly, but at the same time, it will make clear the job is not done, inflation is too high. they are committed to bringing inflation back down. it will be a balancing act. >> there is a mix of themes. macy's, bloomingdale's do well in the have-nots are struggling. john taylor visiting with bloomberg, saying sustain the higher yield environment. are we getting the x-axis wrong? do we need to look to years, three years or five years of elevated inflation? >> one year from now, two years from now inflation will be lower. there are some drivers in commodi

for the last 25 years, you know, what does the fed do like a good neighbor, the fed is there if there's a downturn. so people have to realize that the fed's mission is to make sure that inflation doesn't get out of control and that's really devastating if it does look at countries like argentina. they're not going to say oh, gee, the fed should pivot, they have economic devastation because they have high inf inflation. >> sure. and i think for those who go no, those extreme cases are just scare-mongering, it's hard to understand why even 4% or 5% inflation might be so pernicious over time. why nominal gdp, so much higher than what we can actually handle is such a problem. i mean, how do you demonstrate that and the way that could affect the economy negatively? >> yeah, sure. you don't want to go just to the extremes but it reminds us that things can get out of control and i think it's really clear what happened in the late 1970s, early 1980s in the u.s. when the fed lost credibility, then they had to bring interest rates up so high to bring rates down because if the fed loses credibilit

the fed wyoming symposium is on its way.ates may need to move about 4%, we will hear from chair powell tomorrow. china chips and. evening risks to risk appetite. but how long will it last? will your from the bridgewater associates co. cio. and fuel concerns. we will speak with a morningstar analyst who has a full rated. from new york, i'm kailey leinz with guy johnson in london. alix steel is off. as the start of the monetary policy super bowl. jackson hole. guy: a great way to be pointing at. it seems to be built that way. sometimes it is academic, sometimes boring. kailey leinz had a great question today. will jackson hole get grizzly? i'm listening to what george has to say, a relatively dovish week, i think there is a big possibility that could be the case. she said get the 4%, potentially we stay there, we look at the labor markets., claims data today. kailey: and you have gdp speakers out today as well. it will be interesting. i'm so looking at everything they said, so will it change direction only for chair powell tom

city fed.ad to say. rates higher, get demand down. how much payment are they willing to tolerate? lisa: what we have seen, they have not come out that dramatically to say, we need to get inflation under control,. , regardless of the cost. that seemed to be where she was leaning. it is much more, price stability is the bedrock of any strong economy. that is a change in tone for her, i think that is going to be reflected. jonathan: can you reconcile how this market is priced the last couple of months, and the communication they are offering? how many times have you heard "pivot?" lisa: what i want to hear, does this reflect the lack of credibility that the federal reserve has with the market? the market saying, you are not understanding the weakness. we do not buy it. we know you are trying to signal to us. next year, we are going to see that weakness trickle through. we are on the road, we believe, to the transitory story. tom: i talked to president george last night, she said she is considering

we need to see what happens when the fed is done. the fed will be done at some point. the futures markets are already pricing in and stubbornly for the fed rate cuts. powell not willing to say that yet. he has to be hawkish we know this can't continue forever. we have to think about what happens next >> well, i mean, really the market seems to be starting to believe him. maybe dad is really not going to take us for ice cream this time. in the past, i know you are looking at what tends to happen after the fed is finished hiking in the past, they've cut you look at the data and probably everything that happened with stocks shows that reaction to cut. he is saying we are not cutting. we are keeping rates where they are. can you look at historical data in the same way? >> you really have to think about, again, the fed has very few tools in order to, you know, get accomplished what it wants to accomplish. they have jawboning. that's what you hear fed hawkish in its tone. they have the ability to raise rates and quantitative easing and tightening and the pace they do these t

and fed thanks weighs on china sentiment. it is -- and the fed sinks and ways on china sentiment. stocks at the moment down 0.8%. looking at volume this morning, just for good measure, lower than they were a month ago. dex features are flat and ftse 100 futures also flat. there is a lull. the idea that mark cudmore was talking about that the next catalyst is what we will hear from in jackson hole. until then, we are in a holding pattern, although markets are trying to contest the fed. ftse is just opening up. gold spot at 1761. not only the u.s. yield curve, but in the u.k.. we had a warning from denny branch water -- denny -- danny blanchflower who says that these will make this interesting. i want to show you the u.s. 10 year yield that would give us an indication of what investors will buy in the yield curve. european stocks down 0.8%. let's get over to our bloomberg mliv managing editor mark cudmore. mark, you are looking at -- this morning. mark: this chart was flagged to me at daybreak this morning and they got it from eric albert. it is an believable charge. it is the housi

louis fed president jim bullard.nks for joining us. >> happy to be here. >> tyler gives you a curtain raise, a man who speaks his mind and not afraid to talk about where things are going what's your take a couple of weeks ago you talked about a 4.4 peak funds rate. are you still in line with that idea >> i think i said 3.75 to 4. >> okay. >> -- is my target for this year, for the end of this year, and i like the front loading i like the idea that you get the rate increases in earlier rather than later we've got inflation right now. we've got a strong labor market right now. it seems like a good time to get to the right neighborhood for the funds rate we had a good debate in the noon hour of the idea of 50 and 75 and how much does it matter? what's the upside of that? i think the front loading idea is that first of all, you show you're serious about inflation fighting and you want to get up to the level that will put downward pressure on inflation and we're at 2.33 right now. that's not high enough to be serious about

annabelle: the fed pivot erased now, people thought we have reached peak fed hawkishness and you saw those expectations unwinding when you look at the move in the treasury yield. the 10 year moved more than a points today. one of the largest daily increases in the yields in the last five years. they have only two days during covid and one day before we heard of the 75 basis point rate hike. we see large moves in the market and traders are trying to figure out where the fed is going to go and how aggressive it is going to be and with each new bout of fed speak we are seeing, we are seeing these large movement in yields as the market is trying to figure out. heidi: let us get you over to bonnie. -- vonnie. >> the deep eoc has withdrawn -- dboc has withdrawn as a demand for loans leaves a lot of cash in the system. it has pushed the seven day repo rate to the lowest level in two years. hong kong's new chief executive has gotten the low's rating for a new leader. he has faced with tough covid research is a on the economy, 52% say his -- his predecessor had 52% approval rating. those who

fed chair that culminated as very hawkish. tonight they're going to go through all of that. hope all of you have a good weekend. i will see you on the other side. that does it for us. fast money begins now. >>> right now on fast, stocks hammered during a brutal friday selloff after the fed chair forcefully tells the market rates are headed higher and they are going to stay there until inflation is truly under control. should investors brace for a wave of selling in september? >>> plus, crashing the consumer, crushing the consumer. it could be both. will the feds hiking bonanza put the brakes on a two year shopping spree from everything from electronics to cars to yoga pants. later >>> the crew conundrum. a slowing conundrum should push energy prices lower, but right now, charts are telling a different story. we will go inside the numbers straight ahead. i am courtney in this evening for melissa lee. on the desk tonight, tim. help us make sense of it all, tim. yes, we heard from jerome powell. hawkish stance. we are going to ke

the fed expects -- the fed expects to back down in q3. think the front end of the curve is going to remain volatile. interestingly, we have seen the two year, and the fed preferred measure, the three-month spread, those were fairly wide, they came in dramatically flattening. those could invert as well, pointing to recession risks. that's precisely what's going to keep the short and volatility in place -- -- end volatility in place. >> i've got to get your views on the u.s.-china politics peace. we have already seen some trade actions and bands taking place. are you concerned -- bans taking place. are you concerned this further contributes to some of the price pressures and supply chain pressures we are already seeing? >> absolutely, haidi, i think you hit the nail on the head. we think, as a collective, the geopolitical pressures are going to give rise to stagflation type pressures on the overall picture. because of all the friction involved in demand and the necessity of excess capacity being built around and the cost associated. the str

i will look at the fed futures while he is speaking. next year to potentially a rate hike in the first quarter, no cuts until later next year, the year after that. is moving very quickly. charles: is that bullish mike coming back through? >> look i don't think we'll retest these lows. i think we have some stuff to work through. charles: right. >> if he is very hawk. >> we give up 5% of this rally back. we'll not touch it. we rallied enough. this is new bull market started. maybe you get a chance to get in cheaper than today, the worst is already in. charles: ann, deere posted numbers last friday. down 7% premarket. finished session higher, almost higher every day. today it is nvidia. posted numbers last night. stock were was looking sloppy in the after-market. it made reversal higher. what does that tell you? >> i think overreaction. i don't think people are reacting to macro news actually. i think people are over this idea watching exactly what the fed will do watching tea leaves. charles: these reversals are they buy signals, potentia

this year was about the fed and its credibility. the fed has obviously had a little bit of difficulty with messaging in recent on. the sense that there might be a pivot towards a looser, at least less-restrictive policy. what jay powell did today was to come out and reinforce the message that other members of the fomc have been giving him the last few weeks. first, he made the economic case for why inflation and fighting inflation needs to be front and center for fed policy. second, on behalf of the fed he took institutional ownership of the responsibility for getting inflation down. third and probably most important, what you and your colleagues have been talking about in terms of market reaction, he tried to get the strongest message of the reserve resolved to continue to fight inflation as the two of you had just said, even after headline readings have come down. kailey: he said they are going to get restrictive and stay there. what is restrictive? what is your guess of where the terminal rate will ultimately be? if he says they

of concerns about the fed.es. he said yes, they are down, but they are odds they are going to move higher. there are so many geopolitical factors. what do you see with oil prices? if it does move higher, does that hurt economies? does it make it harder for the fed to back off? audrey: energy prices, they will continue to pose upside risks. the moderation in oil prices is a function of demand. [indiscernible] and the fact we have major tensions elsewhere, whether it is russia-ukraine, and you see slightly lower oil prices in the short-term. but longer-term given the structural shift to de-c arbonization, we believe in the upside. kathleen: the dollar popping, that is important to many markets across the globe and many kinds of currencies. audrey: short-term, we expect the yen-dollar to continue the extension of the rally. it will depend on what jay powell has to say in jackson hole, but we see 1.0447, the current range at an elevated level for the time being. in the near term, i am probably biased to the upside.

that will not impress the fed.he fact that the core is where it is, and we are not sure where it is going because of other things, again, like shelter cost, that is why to feds came out today, the president of the minneapolis fed. people were saying this will reassure the fed and maybe they will soften. listen to what he said. >> the idea that we will start cutting rates through next year when inflation is very likely going to be well, well, well in excess of our target, i think that's not realistic. it will be a more likely scenario that we will raise rates to some point and then sit there until we get convinced that inflation is well on his way back to 2% before, i would think about easing on interest rates. >> charles evans, the president of the chicago fed, i am sure they did not call each other and say, what did i -- what should i say today? he said inflation is still unacceptably high and he sees rate hikes through the rest of this year and into 2023. that seems to be the consensus. it is interesting about th

fed rate cuts down the road i think what you heard from daly is a part of a process of fed officials trying to lean again that but what he'd like to see is go ahead the range up 3.25, 3.5 range, and maybe stay there no while. what did daly say? she per membersed by the market pricing in -- you can see how the futures is priced. everybody is telling until by january but then you see the market trying to price in the rate cuts next year. both evans and daly are leaning against that pricing right now. >> yeah. she said she doesn't know what data they're looking at, but not only what you would expect, but it will be kind of jerking the economy around in a negative way, hiking, then cutting, then -- you know >> to be fair i asked john williams about this a few weeks ago. he said there are times -- and eadvance etalked about this as well -- where the fed make tweaks it on the back side, but there is more than a tweak built into the market. i think, john, we have to talk about the full argument here of the fed. in part, they don't see the rate cuts, because they're not out there predicting

i don't think the fed will pause at all. i would be pretty scared if they did. >> you are comparing it to, the blue dress in the gold dress thing. two people say one thing and it was completely different. i feel like that is exactly what jerome powell was. so, you've been arguing that we need to see the recession and better off getting it done and getting it done quickly? >> yes. i think they are nowhere near done and i believe that inflation has peaked. however, inflation needs to come down so dramatically that i think the fed has no choice. absolutely no choice, given that they have said that inflation is the main priority. i think they are nowhere near pivoting. the reaction to the last hike, one would guess that every hike is a good thing but, i think that the byproduct of that, we have seen housing cool and i think we will see another several areas of the economy cool as well. i am not really buying this rally. i feel like there is more pain to come and we have not released. i am not really buying stuff appear. it has b

nearly three quarters of respondents said fed policy is the biggest risk to fed policy over the next months. .20% said banks. we had over 700 responses to these questions. let's look at what the majority are saying for the outlook for fixed income investors. three quarters say the yield for junk bonds were widened to treasuries at the same time the downside is fairly limited. the spread is going to hold well below those levels we saw during the march 2020 covid crash and financial crisis. as for where to put your money, bonds or stocks, the vast majority of respondents saying equities are the better bet. some urging extreme caution and that was reflected in the survey. some analysts saying the rate impact will be a lot more pronounced in high yields. let's get more on that with vonnie quinn. vonnie: san francisco fed president mary daly said a 50 basis point rate hike is not locked in. they stay data-dependent with the fight against inflation far from done. fridays job report has buoyed support for another 75 basis point rate hike. >> we are far from done yet. we will continue to bri

i'm scott walker the critical fed event under way now. we get the latest from jackson hole, debate what is really priced into stocks and what isn't. joining me for the hour today josh brown, steve wieis on set and my guests. we're positive across the board. nasdaq the big winner thus far trying to get to a 1% gain right now. 106.5. 12,537 yields on the ten-year watching those obviously with jackson hole going on got as high as almost 313 dropped down to 308 where we are currently. we try to game out what these next couple days are really going to mean to the markets how much hawkishness is priced in, do you think 75 is that priced in? i don't think so do you >> i think it is i think the market thinks we're going to have the 75 we're having a lot of confusion in the market. we opened, the market went up 2% higher than it's come back in. we could trade all around today because people are unclear 75 is what we expect we would also expect there to be some chatter from the fed, from the fed chair particularly about how they're seeing some sign

and the fed pivot goes out the window. lisa: i wish he was here today because he has been one of them -- different team, but how much of this is a global call versus a u.s. call? i was wondering how much is because of what is happening in europe and china, versus a global feeling of the necessary response. tom: we did have our colleague patrick on yesterday and he maintained a sense of optimism that earnings would be good. off of the alloway wiesenthal stream, i put in a tweet that is important. he believes in the stock market and has an immense respect for the building of stocks. if you look at the vix, imagine where it was in june. it was way out there, 34.02. you come into the glory of 19.5. we are midway today. jonathan: it's like you are having a conversation with yourself. one of those numbers, tom? tom: those are the vix numbers. those are how pros look at the numbers, they don't look at the dow, they follow vix. someone like tracy alloway is following the futures even more than the market. jonathan: we will get to

and where the fed is saying. is at a risky thing for he market? >> you will in the middle of the initial -- the initial fear is that what is the fed going to do and how they impact the economy? that was the first move lower. now we are in okay it's not as bad as the economy because it works with a live. our call for the fall, once we look through the summer rally which i think we are pretty close, you actually get the fear of what is happening. interest rates work with a lag. this is a pretty funny range. it takes three months to 18 months. tires the spread of what economists think. let's take the shortest, three months. we are discounting the first 25 basis point hikes. it looks more like the economy slowed down because of the fiscal cliff, the ending of extra unemployment benefits and other pandemic related fiscal stimulants. as we go to the end of the year, we will have to have the impact of those higher rates. again, the whole premise here -- where i screwed up in 2020 was after the initial surge, we did a go

sharp -- fed chair powell be? volumes are seen very much below average in all major industry groups. we did see that higher training particularly when it came to material communications as well as tech. the dow added just about 1% there. watching new york crude as well. we are sitting at about $93. much uncertainty continues to way for both supply and demand when it comes to energy. let's look at how all this is setting up for this final friday session of the week. cracks yes. but another sector and focus. that is chinese companies that are listed in the u.s. because we saw that big jump you can see at the bottom of the screen and the golden dragon index. up more than 6% now. we see the signs of progress between china and the u.s. to avert listings of more than 300 companies. we hear that accounting firms in china are telling firms that are listed in the u.s. to be prepared to bring their audit pages to hong kong for inspection by american authorities. you have to look over at the historical average. we are down m

>> so i will spend another second on the fed and then pivot to that because i think the fed is the central actor. i know jimmy thinks it is more about earnings. >> i need you to pivot to where i took you to. and then i have to go. >> i think the worst case scenario has been taken off the table. we were thinking you can get to 3400 on the s&p and overshoot 3200 but the risk of that has gone down meaningfully with how healthy the market has acted. i think there will be ebb and flow to this, and we pick pushing higher? the answer is yes but at some point valuation will act as a ceiling. you cannot have an environment where the fed is tightening, the economy is decelerating, earnings need to come in and you sit there and ignore this negative data and you keep buying stocks. >> tom is drinking a sixpack because he says today he is more confident of greater than 4800 how does he get there? we will ask him next. he is our headliner today. plus, a special tonight onhe t jobs report at 6:00 eastern time. halftime is back after this. wh ng o na? hi, i'm ladonna. i invest in invesco qqq, a fund that

i think jane made it clear that they will leave the fed there and hold the fed there.will wait until their mission is done. kathleen: a lot of the discussion about -- it is not that hard, it is simple to do quantitative easing. getting around is much more complicated potentially. how will that play out and will it be one of the elements of the fed says we are using this to tighten? >> the fed likes to keep monetary policy focused on interest rates and leave the balance sheet in the background. i think there has been little discussion of the balance sheet since they started the production earlier this year. they are likely to keep it that way unless there is a liquidity crisis, they will gradually come down. keep monetary policy primarily focused on interest rates. kathleen: thank you so much. it is always great to speak with you. more on my conversation with the bank of korea governor, he says higher interest rates could weaken the won further. decisions on future deals must be data driven. >> we are not targeting results or the interest rate gap. it is not our prime o

how clear was this message from the fed? >> i think it was a simple message that interest rates are still going to go up and even though they are flooding the economy, making the point they have no choice but to keep on this until inflation gets back to where they are comfortable. i did not mention the recession word but he was trying to manage expectations. it was not just chairman powell. the other central bank speakers especially the ecb made a similar point saying they have no option but to keep raising borrowing costs despite what that will mean for the economy. rishaad: the prospects of 75 basis points from the ecb. is that out of the question? >> it is not out of the question especially when you consider what is going on with european energy prices. a total crisis underway. it shows you the gravity of the situation that in this point in the crisis, central banks are still talk about raising rates at that magnitude which will have an impact. there are some outliers at jackson hole. in either case, he thinks inflation i

the fed is going to make a mistake. given that it has let inflation out for the first time in three decades, it is going to make a mistake by raising rates too much. and that inevitably is going to result at some point in recession. not imminently, but as the three-month curve flattens, that recession signal starts to emerge when we close to zero. i think engineering a soft landing braces a bit the beverage curve the relationship between unemployment. we get the job earnings data later today which gives us a new reading on job openings. there are almost two jobs per unemployed person. the debate going on right now is can the fed deflate the demand for labor in the economy without pushing up unemployment a lot because there's a lot of job openings and quite a raging debate going on between governor warner and larry summers, trading blows. tom: lisa, jump in here on this huge debate. lisa: basically saying that the soft landing paper had errors after they came out and tried to slap down the previous piece. basically a tit

i do not anticipate the fed cutting the fed funds rate target next year. >> high yields, remember when we spoke to esther george, president of the kansas city fed at their symposium last week, she made it clear that she thought above 4%, 4.5%, possibly, even higher. it depends on inflation how it works. but, it is on the table now. i think it is interesting to wonder what the markets will do after this. >> yes, you have to wonder if there is more repricing of expectations to come. the other thing is you are getting increasingly analyst saying investors are too preoccupied with the fed outlook. mike wilson, the chief u.s. equity strategist of morgan stanley is saying investors need to press for more pain. he says the u.s. index stock index, particularly, the s&p 500 has not hit bottom yet this year. he is talking up out not -- about not because the fed will be hawkish but because the equity market is too optimistic about the earnings outlook. he says earnings get cut -- if earnings get cut we will see the market bottom. they say that is probably between september and december. >> let's