>> the market can live with an environment where growth is strong. >> what makes me question the degree of restrictiveness is the strong activity data we see. >> that focused on that dynamic and that will continue >> to be the case. > if there isn't more of that language this is a market a bit more volatile. >> seeing the data cool in the way the market wants it to. >> this is bloomberg surveillance with jonathan ferro and annmarie hordern. jonathan: live from new york

city this morning good morning for audience worldwide. this is bloomberg surveillance headed towards three weeks of gains in the s&p 500 before we get to the weekend already looking forward to next week. look at the lineup absolutely stacked, full of economic data. wednesday cpi retail sales thursday jobless claims you got some retail earnings in the mix we will hear from home depot and walmart by the end of next week we should have a decent read on the american consumer? >> it feels like every piece of data is choose your own adventure. you decide what comes in and what you think about this economy. it's been contradictions, ism goes into contraction. earnings overall is great and gdp now tracker for percent. make sense of that. jonathan: you all remember last tuesday fed might have to talk about raising interest rates in the wednesday meeting and then all of a sudden the cooler

payrolls read whipsawed narrative from one side to the other. more fed speak later. fed speak just repeat the same line again and again. you'll hear from bowman, logan, kashkari and master. we are restrictive it might take more time to just bring inflation down, more time seems to be the frame -- the phrase. dani: we are pleased with literally any other fed speaker and that's always gotten. we don't know what they will do anymore because they don't know what they will do anymore so we get the same reframe. >> a lot of people have been talking about this over the last couple of weeks just the idea we don't have to be afraid of strong data they won't hike but if we get strong data they will ease. how well we set up for that given the move down we've seen in yields across the curve. dani: the animal spirits have

been unleashed so this market is set up as if we are in the cutting cycle. if we get anything contradictory what happens to this market where you see these people flood to the bond market because spreads are so thin. you have these companies announcing and acting like cuts are not only on their way but they are here. >> morgan stanley looking ahead to cpi, the dissent begins. we will see much more on that in the beginning -- in the program. positive by 0.4% there's a lift in this equity market. yields just about unchanged on the session but down big time over the last week on the 10 year. in the fx market 10777. larry adam of raymond james. john lever of eurasia group responding to threats from president biden and the white house expected to pose new tariffs on ev's out of china. in about 10 minutes time.

u.s. stocks looking to erase april losses. the s&p 500 less than 1% from all-time highs. larry adam with this to say we believe equity momentum is likely to continue in the long run because we are in the early stages. versus the average of 5.5. larry joins us for more. it stands out every time we talked. we have to bring it up again when you believe are the early stages of the bull market at a time when calling it late cycle. >> i think we are early because the fed is going to cut rates before the end of this year i think they will take outside assurance cuts which will elongate but we are in and that will set up the bull market to last in the years to come. jonathan: 5200 seems to be at the epicenter of your thinking. what is special about that level? >> that's our guiding light. we tend to turn cautious. if we get below that we tend to

get more optimistic and as we had that pullback the last couple of weeks that was a time that put more money to work into the equity market. going forward the risk reward ballast as we sit here right now some of the bad news is good news. at some point that bad news turns to bad news. i think the fed will cut rates and make sure we do elongate this recovery. dani: if we are at or above are you in that more cautious mode at this moment? larry: we've gotten a lot more cautious as the started to rally. selectivity becomes much more critical at this stage in the game. that's why we look at the favored sectors we still like technology. we like industrials and health care because those have the most sound earnings growth going forward in the best visibility. dani: the weird thing is after that pullback less than 1% the thing that got us there was

utilities. utilities are up 8% in the last month when the s&p is pretty much flat as a pancake that is a safety sector he would not think would lead you for the next leg of the bull market. so something going wrong then. larry: we looked over the last month it's been the defenses, utilities, consumer staples. what's lagged has been the more cyclical sectors. it's been consumer discretionary. that's a message from the market this economy is starting to slow. the fed should take note because they have the ability to do something very few feds have been able to do which is engineer the elusive soft landing everyone talks about. they need to take note of that. dani: what about the data next week? what will that change in your call for there to be cuts? what do you need to see to guarantee we will get those insurance cuts you think the fed will deliver. larry: we need to see the actual data reflect what's happening on

the surface of this economy. so when we see cpi next week hopefully we start to see those rental parts of cpi starting to decelerate because that's been the one linchpin that's kept us elevated. hopefully we see that move lower in the direction we are looking for that will start to get the fed the ability to put less focus on inflation and turn its sights on to this economy to make sure as i mentioned they can come -- they can cut. >> particular after the read the week got yesterday. companies are conserving on labor cost by selling hiring, cutting working hours. retentions of dropped to multiyear lows it goes on to say individuals are becoming more concerned about finding a new job at acquitting a lower rate. i'll be at risk here of a sharper week in the months to come? larry: let's keep in mind that that 175,000 jobs created that is slowing.

we still think you will see positive job growth for the remainder of this year but it is going to slow. i think we've gotten lulled into thinking you need to get above 2000 every month. that's really not normal for this economy. somewhere around 100, 1 25 would get us to a soft landing going forward but it's something to keep an ion. >> where you think earnings growth comes from? larry: if you look at what's happening in this earnings season it's the areas that tend to be more dedicated to business spending as opposed to consumer spending. this will be the best results in technology industrials and health care. those are areas i will see earnings growth. jonathan: just reinforcing everything you're saying. can we talk about consumer going into next week. we here on tuesday from home depot, walmart on thursday. then -- we were talking about that yesterday, pretty decent

for the read you get for mcdonald's and starbucks. there. >> the consumer is the biggest part of the economy. it's critical good to get the insights to what these companies are saying. one of the things we've been watching for we find restaurants previously and the consumer is starting to be challenged. it's one of the harbingers the areas consumer start to pull back on and when you look at restaurants specifically its which companies can convey the value-oriented menu. when it comes to these companies coming up to report are they providing the consumer with the low cost, of the value to have that come into their stores. that's a story we will watch. our consumer stepping down. looking at more value-oriented generic products as an example. those are some of the dynamics we will be looking for. jonathan: -- dani: i wonder how strong the trading down narrative is this time around

when you have someone like mcdonald's who is the most value of the value you can get when it comes to any food warning about the consumer. when you have amazon saying they think have consumers feeling the pinch. is the trading down tendency not as strong this time around? larry: i agree the consumer clearly is slowing but i do not think they are collapsing. you have to remember consumer wealth is an all-time record high when you look at the jobs being created that creates cash flow for consumers to spend. they are starting to prioritize what they are spending on in the areas we are spending. the ones that do offer the value to succeed in this market. >> the big tech players we will get nvidia earnings on may 22. hasn't been tech that led this rally.

does nvidia change that? >> i do think this ai trait is in its early stages and when you look at some of the big players. haven't really announced their strategy when it comes to ai that would be another catalyst for that theme going forward. one of the biggest things that i've taken away from earnings season is the profitability of these tech companies is fantastic. and what are they doing with those profits? they are investing in the future to make sure they can compete there -- complete their competitive edge. when it comes to shareholder value they are either initiating or increasing their dividends and they are doing buybacks and both of those also serve as tailwinds for the sector. jonathan: larry it was great to catch up. that was the only name we will be talking about may 22 shortly after 4:00 p.m.. want to go to what they had to say over the conference board.

confidence retreated further in april reaching its lowest level consumers became more concerned about future business conditions. job availability and income. that speaks to consumer franchises. dani: the weird thing about that is even if there is a consumer who is not very confident and more concerned about jobs the savings rate is somewhere around 3% of disposable income. if you are worried about the world, about the job presumably it would save money. that's not what we are seeing. then it comes to the contradictions we are seeing in the data and the anecdotes. >> getting you set up for a major week just around the corner. equity futures into the weekend posited by one third of 1%. with your bloomberg brief here sonali basak. sonali: the u.k. bounced back to post the strongest quarter of growth since late 2021. gdp jumped in the first quarter higher than it was expected and

the data marked the end of the mildest u.k. recession in almost 70 years. it could complicate the bank of england's rate cut path with potentially stronger growth feeding inflationary pressures. bloomberg news is reporting ubs is considering introducing a reward system for investment bankers who refer clients to the wealth management business. some would likely be in line for payouts when they attract new money through the lender's private banking unit. it would be a first for the swiss lender echoing incentives that credit suisse had offered to its dealmakers. apple has issued a rare apology for touting its latest ipad in a certain add. it shows musical instruments and other creative tools being crushed drawing criticism on social media for what many are calling a depiction of the destruction of humanity. the apple vice president of marketing communications telling at age we missed the mark with this video and we are sorry. apple says it won't air the ad on tv as planned. that your bloomberg brief. >> we've all got stuff to stay

about that -- say about this. if you're apologizing i think you're apologizing for the product. because that product is basically what the ad is. dani: people take stuff too seriously. apple wasn't going around taking a sledgehammer to guitars. jonathan: i watched it before i saw the headlines. i was like i can see it but really? a lot of people seem to headlines and not watch the ad. >> you have that bias of what other people are saying. >> if you can afford a 110 billion dollar buyback you can direct some of that money to outspend and avoid some of these mistakes if you believe they are mistakes. equities positive by one third of 1%. netanyahu vowing to fight alone. >> i've known joe biden for many years. we often had agreements but we've had our disagreements. if israel has to stand alone we

will stand alone. >> we will catch up with anne-marie down in washington. live from new york city this morning good morning. ♪

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jonathan: live from new york city welcome to the program taking you into the weekend alongside dani burger. primos taken a long weekend. equity futures on the s&p 500 positive by one third of 1%. yields about unchanged on the 10 year. under surveillance this morning netanyahu failing to fight alone. >> we often had agreements but we've had our disagreements we been able to overcome that. i hope we can overcome that now. we will do what we have to do. if israel has to stand alone we

will stand alone. >> the israeli prime minister bennett human that you move vowing to continue the war in gaza with or without u.s. support and president biden getting pushback on capitol hill. senator mitch mcconnell saying biden cannot have it both ways. he cannot claim to support his ironclad while denying them the weapons they need to defend themselves. anne-marie is joined by john lever of eurasia group. annmarie: he also was a former top policy advisor for senator mitch mcconnell. i want to first talk about the division not just of the foreign policy hawks. you saw mcconnell and biden site -- stand side-by-side when it came to russia and the middle east. the growing division we see with benjamin netanyahu and this administration how big is that gap now? >> i don't think they love each other all that much. there's personality differences and big policy differences.

even before october 7 you had a lot of the american supporters of israel who were not big benjamin netanyahu fans. now over the last few months of this bloody offensive into gaza israel has become a very big political problem for president biden. and it is starting to impact policy just in the last week we seen the biden administration really shift quickly they say they will keep sending weapons, they are just starting to do with the far left is wont to them to do for a while which is condition aid going into israel. >> we heard from senator mcconnell, lindsey graham also was quite feisty when it comes to how this administration is conducting itself with israel. the editorial board talked about how it was the democrats for months pushing the republicans to sign up for more aid and now they are the ones that don't want to send the weapons so we have that divide between israel

and this administration. what's the divide like between some of these republican foreign policy hawks in the biden administration. >> the republicans clearly benefit from criticizing biden at every opportunity they can. they clearly want to align is much as possible with israel and the pro-israel party. you've got senators like jon tester from montana in a race he's probably going to lose saying he does not support the biden administration's doing and declaring his ongoing support for israel against the wishes of the biden administration. so that divide is a big one. it's not just across party lines. >> this as they try to walk this fine line because of the pushback from the progressive left and also the protests on the ground and the fact that they are concerned about this densely populated area in rafah men what these types of bombs would do potentially to civilian casualties. when you play that all out what does this mean in terms of their

offramp because there's no hostage negotiation. how do they have an offramp from this crisis? >> the only offramp of the israelis have been clear about this is they need to succeed in gaza and achieve their military ends and root out hamas. that's not to be easy in the operation in rafah won't be for that. there could probably have to be fighting an insurgency in gaza for the foreseeable future and it still looks like there's no plan in place for how to govern the area once the military has withdrawn which means israel will be involved in this conflict for a long time potentially years to come and that means the americans will have to make this choice about how much aid they are willing to supply and what weapons they want to give to fight this war. annmarie: given this will go on for months and potentially years what is this mean for the administration in terms of policy heading into the

election. how much tougher will they get in terms of rhetoric and action from israel. >> just today we heard about this report they could be released criticizing the israelis for human rights violations in gaza. that itself would be a big rhetorical step up which on top of the threat to withhold weapons suggests there is an accelerating split between the white house and netanyahu which the israelis are signaling is not a problem for them. they will fight this offensive but it is a problem for joe biden who has this massive split in the democratic party and has been acting somewhat indecisively on the issue saying he supports israel all the way to the end and then now pivoting a little bit to say there's limits to our levels of support. that's a huge political vulnerability and he will be on his back foot for the remainder of the six months of the presidential campaign he will fight. >> some of these big donors in the democratic party saying to the administration you say you are ironclad but we feel like

there's been a shift in terms of policy on israel. we also have a bloomberg scoop overnight that this administration is planning on finally coming out with what they've been posting for months higher tariffs on chinese ev's. what else can we see them pull levers before the election. >> i think this ev story is a pretty big one if we look at two of the big battleground states its michigan and wisconsin which are traditional hubs of the auto industry heavily unionized auto workforces there and donald trump has been pretty explicit that on the attack joe biden's electric vehicle subsidies are hurting these autoworkers. so biden by putting this investigation gets his chance to say i'm also i don't like all this chinese competition and i'll make sure the electric vehicles are in the united states. your student loan forgiveness is a huge theme in the administration into the campaign. this will be of vulnerable one

for them. >> do you think it's the economics that the europeans are also complaining about these cheap chinese products being dumped in their markets or do you think it's politics, of the trump campaign is almost forcing their hand. >> gina called these -- they said the idea is they have so much information they are gathering about everyday americans in these cars that the u.s. does not want that type of information getting in the hands of the chinese communist party. there's an element of politics and policy here and right now the chinese ev share in the united states is basically nonexistent and i would be shocked if either administration allowed that share to grow it all. >> why do they need higher tariffs? it's already 27.5%. >> it's not the ev's themselves that are problems for the u.s. it's the component. one of the geopolitical concerns as the u.s. is trying to push

green energy transition is china ends up dominating the green energy supply chain whether it's batteries, critical minerals, whatever the components are the u.s. right now is deeply subsidizing through this very aggressive industrial policy. the goal is to make sure this is not only the industrial policy it's a reinvestment in america and they want that to stay here and they don't want any of that going to china. annmarie: thank you so much for your time this morning. former policy advisor to mitch mcconnell. these stories are going to continue until the election when it comes to the ev's potentially we will finally get those details next week. jonathan: we expected this didn't wait. we need to talk more about it. if you caught the tail end of that conversation exclusive reporting josh wingrove, jennifer jacobs according to people familiar with the matter president biden's administration poised to unveil a sweeping decision on china tariffs as soon as next week.

we've been waiting for this one for weeks if not months now. >> it does two things. one is the rhetoric of who is stronger in china and also it's something the united auto workers have been complaining about so this goes to biden's union two. >> we will catch up with dan ives for the commercial break. we will talk about tesla ev's out of china. we will have a conversation about apple. and the commercial wasn't really that bad. we will get the official review from dan ives himself. equity futures positive by one third of 1% and yields just about unchanged going into the weekend. from new york, this is bloomberg. ♪

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>> heading towards three weeks of gains on the s&p 500. the nasdaq positive on the russell up by one half of 1% if you take the sector breakdown i'm so pleased you brought this up. utilities what is it about? dani: i've heard people say it's an ai play. up nearly 8% this month. jonathan: all roads seem to lead to the same theme. getting to the bond market yields lower once again for a second week on the 10 year. we are down not even a basis point this morning but check out the two-year let me through some

levels. the two-year last friday closing at 48160 and now 48129 we've been pretty negative on the front end. we got pretty much no going into a heavy data slide next week. >> we've also seen bond auctions, through 125 billion this week. tenure a little bit weaker but the most part at what point does not hurt the front end but to the longer end. at what point do you need to return in order to actually buy those bonds. >> it's all at the long end. talk about foreign exchange how much movement we've seen in dollar-yen had its biggest week against the dollar going all the way back to i think december of 2022 we had a 3% you move in the yen's favor. we also broke through 160 which is bonkers. we had another 1.7 4% movement against the japanese yen.

danny as you've said repeatedly it doesn't matter what japanese authorities say this week the yen is moving against them. >> we didn't have any u.s. data that would strengthen the dollar. this should be when japanese officials coming out and saying we look at changing monetary policy if they're one way moves but again it's a credibility issue. the traders are not buying it until they see the white of the eyes of a hike from the boj. and the currency pair under surveillance the top stories, the israeli prime minister vowing to continue the war in gaza with or without u.s. support. netanyahu saying if we have to stand alone, we stand alone. the comments after president biden threaten to withhold u.s. weapons if israel continues with a ground invasion into roth. another investigation into boeing. the sec is looking to be scrutinizing statements the company made about practices before the door panel blowout in

early january. if they found the executives made false or misleading statements it could lead to fines. we are down by 2/10 of 1%. every week there seems to be another negative story about this company. dani: now we have the sec looking into boeing and we still don't know who will replace david calhoun. we do not have a new ceo who will come in. that should be job number one if you want to alleviate concerns of investors or even regulators. surely this is what you could do and we are still not there. jonathan: let's turn to the story president biden said to impose new tariffs and strategic sectors including china ev's. bloomberg reporting the measures, after a review of tariffs imposed by the trump administration. people familiar with the matter saying a decision could come as early as next week. we've been waiting for this,

you've been waiting for this we thought maybe we would come in later this summer could we hear from them this week? annmarie: potentially. what we are reporting overnight in this bloomberg scoot -- bloomberg scoop is it could come as soon as tuesday this would go into the strategic areas the administration has talked about when it comes to this competition with china and the concerns also national security and it's the ev sector but around this time last month we spoke to katherine tai u.s. trade representative who said they were coming soon. the issue has been the fact the trade rep has been going over these tariffs from the trump administration that were enacted in 2018 since 2020. we heard from john lieber who feels like the administration has been on the back foot. we do know it's potentially coming next week. they've gone to great lengths to signpost it but we are still waiting to hear what exactly these details are. 80 is hard to buy a china ev in

the united states. they do not sell here and the tariff right now is north of 27%. >> is the symbolism enough to convince voters biden is the choice if you are a china hawk. annmarie: that's on the political side and john feels like part of that is the trump administration pushed biden into this. one thing is for certain when we get the details of this and you see the direction of travel of this administration whether it's export controls or more tariffs on china goods coming into the united states most notably ev's and some of the components that go into them. it is clear to china and the rest of the world but whether or not we get trump or biden in the white house next year you will get a very similar policy direction when it comes from what washington is doing in their concerns for beijing. we have heard from beijing and that's one of the quotes, instead of correcting its wrong practices u.s. continues to politicize economic and trade

issues to increase tariffs is to add insult to injury. that's the response from beijing. jonathan: we will catch up in the next hour. the reporter behind the story joining us in about one hour and 10 minutes time with us around the table as dan ives. good morning to you. if the barriers go up and the wall gets a little bit higher for chinese players do they do the same thing to u.s. players. >> it's the last thing you need from a tesla perspective and i think this is something you'll be waiting for because the reality is given the prices of the chinese ev's and what i've seen firsthand it would be very tough from a competition perspective. retaliatory could have been this gate -- game of thrones continues. jonathan: i think a lot of people often consider chinese product to be cheap imitations of maybe u.s. innovation. are you seeing that out of china? how good is the product? dan: byd is special.

i think from a competition perspective tesla has seen that in china. i still view it as many winners there. when you look that comes to the u.s. it's a major competitive issue when it comes to detroit. the 313 area has bet so much on ev's, you are really protecting that as well for tesla domestically. >> byd gave an interview we will be the biggest ev carmaker in europe. no one else will be able to hold a candle to us. is your up next? is that the risk for the chinese ev sector? >> dan: europe is front and center. that will be the battleground. for a lot of the german automakers and beijing has their sites there. i think what we are seeing is even though ev's is moderately

global and of course that's been a blackeye for the industry it's still the massive transformation probably the biggest one since 1950 and that really, europe will be the next battleground. >> it hit tesla really hard in their saving grace was they went to china and that mosque went with xi jinping and he got these measures that seem to indicate autopilot can exist in china so if that's taken away what happens to tesla, what happens to share prices in our confidence in them? dan: we see the same thing with cook. china is the hearts and lungs of the tesla growth story. when i look at fsd autonomous and the first step to what could be ultimately a golden vision now from an autonomous perspective but china is the hearts and lungs of the growth story and that's well known it's been a headwind but we do believe in you'll see this the next coming quarter. >> it's funny you would allude to elon musk being somewhat of a

diplomat because other people in america would not share that perspective whatsoever. how much distance can he put between the view of his government and his personal views in the face of chinese authorities. >> it's a balancing act but how many ceos could fly over to beijing and 10 hours later, back. and i think it just speaks to that power despite the controversy, china. him and cook have been able to navigate china better than any two ceos and that's why for apple and tesla china is a key growth engine. it's not changing anytime soon. jonathan: let's talk about the power of the ipad and apple. let's get this commercial up as we have this conversation. what happened with this around the ipad? dan: and obviously an apology is rare but if you look at what they are doing here, apple is doing what apple does. jonathan: what are they apologizing for? dan: it's essentially showing

traditional music, traditional things that we've seen from the 80's and 90's are consolidating that into the ipad so it may be viewed as a shot across the bow. apple is doing what apple does and i think they definitely had some controversy from this but it is unusual for them to have to. jonathan: are they apologizing for the product basically? haven't you just describe the product. dan: that is the product. jonathan: what are they apologizing for? dani: also isn't this completely contradictory to the thing about apple, we don't give the consumer what they want we tell them what way want. what are they doing apologizing. >> given the scrutiny they are getting from d.c. and everywhere else that they need to sort of walk the line but this goes into what will be potentially the biggest event in a decade going

in next month where they will unveil ai, not just to their customers but to the world. dani: what do they need to show to get us excited besides a smiley face toy being exploded. i've had the same ipad since 2012. nothing motivates me to get one. >> it's about the chip. they have the most powerful chips in the world and their -- what they're able to do is these upgrade cycles this is going to create an upgrade cycle but it's happening across the whole base. this iphone 16 combined with this hardware, they essentially have an ai driven super cycle that's now going to take place over the next few years and that's why betting against cook and cupertino into an ai upgrade cycle i personally believe is a bad bet. >> you've been talking about this for quite a while.

we've had this conversation for a few years. what is different about this year and is the ipad may be a case study for what we could see from the iphone later on in september. dan: the big thing is going to be ai to developers to the app store. on the services side they will monetize from a services perspective but then you will have ai built into iphone 16 and what will ultimately be the 17. we have that upgrade cycle but 270 million haven't upgraded in four plus years. that install base has continued to increase and even though it's been disappointing we can see that just ultimately gives music to the ears of those going into the iphone 16 because of the technology and what i view. jonathan: if you aggressively upgrade the functionality of this phone i will consider changing it but for the last few years there's been no reason for

me to do that. this developers conference what will be here specifically without using the letters ai. what these apps are going to look like that could be on this phone, september. >> the most important thing is this is the start of an ai app store and what that basically means is developers will build generative ai apps, where are they going to build it? they will build it within apple's ecosystem. they will be able to monetize and from a technology perspective you will see what they will unveil is going to be historical moment for cupertino and cook and that's why betting against apple here and i believe the risk reward is potentially gold -- golden buying opportunity. jonathan: good to see you. dan ives. thank you. what a week for new york sports. it's fantastic.

dan: 1994 all over again. betting against apple is like betting against the rangers. i think this is the year. >> did you make it to the grand prix over the weekend. i did not make it to the grand prix but i watched. >> you could have come straight from miami. dan: i'm following his lead on f1. i wasn't in f1 fan. now i'm in. >> good to see you. here's your bloomberg brief with sonali basak. >> tsmc sales jumping in april the world's largest contract reporting sales of 7.3 billion dollars last month on the back of sustained demand for ai aided by a recovery in consumer electronics. it follows the 34% sales increase in market, shares of the stock rising to an all-time high in april.

target will not sell lgbtq themed merchandise and some of its stores during pride month after a backlash dented revenue last year. the retailer plans to offer the full assortment online and according to people familiar with the matter. target faced threats from some customers over its pride merchandise. campus protesters at harvard university say they will stay in their tents and continue an encampment at harvard yard. the school newspaper reporting the harvard occupied palestine group has rejected a proposal from the interim university president to leave the yard and avoid punishment up to and including suspension. the group posting that garber has rejected their offer that would move harvard forward on transparency and ethical investment grade that's your bloomberg brief. jonathan: i knew where this conversation would go. lobster rolls. $280. was it for one lobster roll in miami and the grand prix.

you get to. dan: they have to have some real good lobster rolls. you combine that with some rose. >> good to see you once again. thank you sir. a busy week of data on deck. >> you are seeing that impact of higher rates begin to filter through. i think we just need to see more data particularly in the cpi print to get a better sense >>. >>cpi data next wednesday from new york city this is bloomberg. ♪

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under surveillance a busy week of data on deck. >> one of the things that gives the fed a bit of confidence that they are applying the break in the right way is you are seeing that impact of higher rates finally filter through. we are still in the early innings, last week had suffered and some for the bears. i think we need to see more data particularly the cpi print next week to get a better sense. >> here's the latest traders looking ahead to a busy lineup of data next week. retail sales in the latest cpi print on deck writing this. it's reasonable to wonder whether or not the fed is at all considering a scenario whereby inflation fails to improve or worse continues to rise in a meaningful and persistent manner. lindsay joins us now for more. what are you looking for from cpi? lindsay: we see stubbornly high levels of inflation. price pressure in terms of the

consumer still moving around 3.5, 3.6%. consumer prices moving about the 2% threshold. the fed and investors alike are looking for meaningful reprieve in inflation but unfortunately they are going to have to continue to wait for sometime longer. >> goods prices and services prices and how different those trends can be over the last few months. it's where we see the vast majority of pressure with labor costs the largest component on the service side continuing to elevate this persistent and rising trend. goods inflation still remains the most beneficial component of the inflationary story. with international risks i think still to the upside, goods disinflation or outright deflation may begin to soften that contribution to the improvement we've seen. if you think about it the vast

majority of the games we've seen in the inflation picture have come from variables outside of the fed's purview. economies coming back online trade lines reopening so should we see some of that improvement reverse course i think we could exacerbate some of this elevated inflationary pressures we've been seeing since the start of the year. >> one of the arguments of cpi coming in softer is that rental inflation will be coming down. that finally the lag we've so long been calling to going to catch up and that's can i help cpi. does that argument miss something? lindsey: the timing might be off. we've been talking about this for the better part of the past two years which has failed to materialize. as we see housing demand outpace housing supply. expect the shelter costs to still remain quite robust for the foreseeable future as we expect the fed to keep raising

of these elevated levels. there have been some pockets of reprieve in terms of rental prices but we've also seen a lot of those repricing's existing leases coming back online at 30, 40, 50% in some of these more concentrated areas so i'm not yet convinced we are seeing broader based reprieve or broader based lessening of pressure in terms of cell shelter at least not -- at least not yet. >> is powell considering the scenario where inflation doesn't moderate but instead gets worse. he does not sound like a chair that's considering it. all the fed speakers are still talking about cuts even though they don't know when it will be. it should fed speakers and jay powell will be reintroducing the idea of two-way risk. >> when you look at the takeaways from last week's fomc meeting i think there were two. the chairman conceded it's likely to take much longer for

the committee to gain confidence that inflation is back on this disinflationary trend. even with that realization the chairman was very clear the committee's next move is likely still a rate cut and not a rate hike. so even though the committee is committed to remaining on the sidelines for an extended. beyond earlier expectations they are still very much focused on eventual policy easing. i do think as inflation remains of these elevated levels or even pushes slightly higher, i think that still justifies the fed's position in a steady state. but what happens if inflation continues to reverse course. at what point is the fed not just willing to delay rate cuts but actually talk about re-engaging in rate hikes and i think that's the riskiest scenario for the economy and that comes with persistent and elevated inflation. i think maybe six or more months

of this upward trend is going to force the fed into a corner and forced them to reengage or at least consider re-engaging in rate hikes. again to your point right now the fed is entirely focused on eventual easing which they said will be delayed relative to the earlier timeline but that eventual easing is on the near term or in their expectations for the near to medium term. >> what's your base case now with those in mind? >> inflation remains stubbornly elevated well above the fed's 2% target through the end of the year. keeping the fed potentially on hold through the entirety of 2024. the fed has a very clear dual mandate. full employment and stable prices. the fed is clearly able to check the box on full employment so the focuses is entirely on stable prices. they have been very clear 2% remains the target and has always been the target and they are willing to remain on the

sidelines indefinitely until they get back to 2%. that timeline on the sidelines now appears to be extended well beyond expectations. >> could you tell us how much there is downside risk to the labor market given some of the data we've seen recently. >> it appears the labor market is remaining surprisingly resilient. in terms of the latest state of the headline number was somewhat disappointing relative to those outsized gains we had seen at the start of the year but still the latest report at 75 even that as a six-month low is still nominally a robust level of job creation on a monthly basis and even that minimal uptick to 3.9%. still marks the longest stretch below 4% joblessness since the 1960's so we are far from talking about a loose labor market. labor conditions may not be

quite as tight as they were but we are still talking about a very resilient still relatively tight labor market in the u.s.. >> lindsay going into that data next week. cpi and retail sales on the same day amazing how many people have joined the camp over at apollo. not just lindsay also stephen at socgen saying we expect the fed to keep policy on hold for the remainder of the year. there should take many more months for the fed to get sufficient competence inflation can return back to 2%. we get more on that story in a moment but catching up with jim alongside anastasia amoroso, csis in washington with anne-marie. josh on the latest story out of d.c. the prospect of tariffs on china cvs. equity futures on the s&p 500 positive by one third of 1%. the second hour of bloomberg surveillance up next.

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>> not looking for a shock and all on inflation but we think the gradual incremental increase is a risk. >> inflation remains public enemy number one and what we need the fed to become more hawkish is if we saw that we acceleration and inflation. >> we know it's a bumpy ride for inflation. we will need further evidence in the data as we see the fed reacting to the slower growth

trajectory and moderation inflation pressures by some toleration. >> it is, to require more pain and a bigger hit to demand. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> the second hour of bloomberg surveillance begins right now. good morning. good morning for our audience worldwide this is bloomberg surveillance your equity market on the s&p 500 positive on the week for a third consecutive weekend positive on the session. equity futures up by one third of 1%. jim bianco on the 10 year yield could test 5% we will speak to anastasia amoroso with calls for three weeks of gains and normative csis as benjamin netanyahu strikes a defiant tone. we begin with our top story. treasury yields holding steady with a slew of fed speak. moving to neutral on bonds in

writing i expect a 10 year move top 550 to produce extreme sentiment and set up a decent bond rally. jim is with us around the table for the next 60 minutes or so. you had phrase of the last 12 months the disinflation is transitory, could you tell us what was behind that call and where we are now. >> things can be true at the same time. you do have this transitory part of inflation with the supply chains normalizing. and then cpi at 9%. then it came down. once we got that transitory inflation what we were finding is we are probably stuck in a 3% inflation world so we are not going back to where we were pre-pandemic. we are in a higher nominal growth world. a higher inflation world but it's a 3% inflation world which means elevated interest rates but nothing like zimbabwe or anything. >> let's talk of the elevated

level of rates we should be use to. what should it be like? >> what we are looking at with the yield right now is probably pretty close to on the 10 year yield something normal. this is about normal risk, anything if the economy was to show more signs of inflation or strength you could see us push back into the five handle. >> you've got a piece this morning the headline is the total return strategy and bonds is far from dead. what prompted this particular one. >> bill gross said the total return strategy is dead and i took issue with it to say a certain style of return strategy is dead. in the bond market, they really develop the idea of total return. you buy bonds to get a couponing yield and price appreciation.

for the last 40 years total return strategy has been driven by lower interest rates and higher prices. that era probably ended in 2020 but it doesn't mean bonds as an investable class worked cool -- tool return is gone. a 5% yield. you can start off every year saying i can get a 5% yield and if you manage around that properly you can do a little bit better than that. a little bit worse if you don't but there is strategies in the bond market that can be profitable. dani: it's not even total return forecast have declared over. there are a lot of strategies that if you're right if they are settling at a higher level perhaps seeming like they don't work. m&a is a great example of private equity waiting in the wings for there to be cuts, for rates to go back to where they are. total return works, what doesn't. >> any strategy reliance on lower interest rates. a lot of the m&a strategies that were the foundation of those

strategies was near zero interest rates. those are going to be very difficult you'll have to look at interest cost relative to the business you by and the cash flows it throws off. that's good to make the hurdle rates for a lot of these purchases or acquisitions a lot more difficult. i don't think we will be going back to those microscopic low rates we saw from 2008 to 2020 that was a unique error that even got us to negative interest rates in europe and japan, there probably isn't good to be repeated anytime soon. >> what about the deals that have already been done, what happens to them if rates don't go back down. >> they struggle because the companies won't be able to throw off enough of the cash flow to actually meet those debt service costs and it's good to be a difficult periods for them. >> what's the timeline for you around that. the phrase on the program is to survive until 25 when do see that pressure build. >> sooner rather than later.

when you look at the economy i like to say that every time there is a financial crisis or recession and we've had both in 2020 the economy changes and this one did change. it does not mean worse, it means different. you've seen lower personal savings rates, higher levels of spending, it seems like people for lack of a better term they have ptsd after the lockdown and then we had revenge travel and that never stopped. we still have people spending, we have the government spending. 6% deficit to gdp and that will push this economy forward and continue to keep it running hot. that is good. it will keep the unemployment first 27 months probably down at those levels. but the price of that will be elevated inflation. >> the credit stress you mentioned. just a couple of beats. how incensed will that be.

getting some regional bank starting to fail. thinking it's the end of the cycle a hard landing. we've moved on from that. how will these pockets of stress b. >> inc. -- the regional banks as a good example of that, they really struggled in the face of higher interest rates with the case of silicon valley but also the realization that came in last year that offers real estate is not going to bounce back as much as everybody thought. and that's why the regional banks and a lot of the smaller banks got hit. it was to the extent that if you look at their stock prices and you look at the stress that that sector went under it never really translated to the general economy or gdp or retail sales or anything so you've seen these pockets, through as we've tried to adjust and support higher interest rates. >> you don't see any of those pockets necessarily filtering through to the broader economy if there is that stress at this point. >> there is an economist to used

to work with the fed who had a famous line that expansions don't die of old age they are usually murdered and we don't have. the murder weapon historically has been a spike in oil prices from geopolitical events. or suffocating interest rates and i don't think 5% is anywhere near that. we don't have that and short of that i think the general economy will continue to do ok if not better than ok. i'm always on the lookout like everybody else is about that murder weapon. i thought maybe a year ago it might've been the banks but it turned out not to be. >> when you mentioned you of the big spenders out there you have the government and everyday consumers. the government doesn't seem like it's going to stop regardless of the white house. you mentioned that low savings rate. they are still spending. is this the forever now? is that ptsd just enduring from time on out here. >> this spending i hear a lot of

people talking about the consumer is going to slow. they will ebb and flow but what the consumer will do is keep spending this cycle. we get that murder we have that recession and then attitudes change again. maybe they change the savings rate goes to zero may be a ghost a 5% but for this whole cycle i think that's knocking to change. jonathan: this conversation is getting dark quickly. let's talk more about benchmark to extremes. you auto corrected yourself when you talked about inflation you said it's not zimbabwe and when the word stagflation comes up people often say it's not the 1970's. we heard that from chairman powell. do you think stagflation is as much as it was to the chairman last week. jim: a lot of these terms everybody goes to the extreme. if you say there will be inflation they think hyperinflation. they are not ready to think about the idea of it being

somewhat elevated. if the definition of stagflation is elevated inflation in an era of slower growth that's very possible but if you want a definition of five or six percent with contracting growth that's an extreme definition i don't think we need to go to just yet. jonathan: just going through some of the consumer facing companies they are facing difficulties. others not at all. then we get the economic data over the last week and it's pretty easy to construct may be a decent story of how bad things are even though you might make the argument they are not at all. i shared this quote earlier on the program. companies are conserving on labor costs by slowing hiring. cutting working hours, multiyear lows. individuals are becoming more concerned about finding a new job and are quitting lower rates. have you got a counterpoint to any of that.

>> the only counterpoint i would give after pointing at lower rates. the quit rate is higher than anything we saw before 2020. a lot of these numbers we are looking at are saying they've slowed from that red-hot pace we had in the middle of 23 when we have almost 5% gdp but if you compared it to a e3 2020 era these numbers i wouldn't say are completely different but are in a different level than we saw before. this economy is at a different pace so the economy is ebbing. and it was flowing big last year. but i don't think this is going to lead to anything more than a downturn within an economy that grows at least. >> let's get the policy call so toss this, socgen no cuts this year. lindsay on basically no cuts this year. where are you? >> i'm at the same point basically no cuts.

i do believe the fed is political. that they've noticed the schedule and that june, july and september they will move if the data warns it meaning that there needs to be a shock in much weaker data and otherwise we are looking at november december and only if the data does weaken enough because paul set out -- palace of any confidence that i don't have it. >> you've got to drop that in a non-mover. we will sit on this for a while longer. they are politically biased or politically sensitive. there is a difference. >> the economist gave a great term saying they are not partisan but they are political. they don't sit around the fomc table figuring out which candidate they want elected. they do not consider that. political they've noticed the calendar, the winds in washington. they've noticed where the reputation is and so that's what

i mean by political they've noticed the july 31 meeting is right in the middle of the republican and democrat convention to give you one example. >> you will stick with us through the next 45 minutes or so. equity futures right now on the s&p positive on one third of 1%. let's get you an update on stories elsewhere. jim: -- sonali: plans to sell off the paramount lot. that's according to people with the matter. which already owns a tv production facility is said to be only interested for its ip's like the godfather trilogy, top gun films. sony also plans to sell paramount's tv stations and streaming service. there is a new investigation into the door panel blowout on boeing 737 max 9 plains in early january. the sec is scrutinizing the claims made about its safety

practices and after the incident on the alaska airlines flight. the investigation is focused on whether comments by the company or its executives misled investors in violation of the regulator rules. the sec reviews do not always lead to enforcement actions but can lead to fines for companies and officials. bill ackman was criticized for his attacks on diversity and inclusion policies in a closed door panel discussion in los angeles. acumen has previously labeled dei initiatives as inherently racist and illegal. one speaker said it reflected a core understanding of the civil rights movement. he said he has written thousands of worried about his nuanced views on this important topic. he asked people to read them fully to understand his perspective. jonathan: up next on the program, bad news still good news? >> as we sit here right now some

of the bad news is good news at some point that turns to bad news. i think the fed will cut rates and make sure we do elongate this recovery. jonathan: equity futures positive by one third of 1% on -- good morning. ♪

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jonathan: live from new york city welcome to the program. annmarie in washington. dani burger alongside me. equity futures on the s&p 500 positive by one third of 1%. yields high by a single basis point as yields retreat for a second consecutive week, they climb just a little bit on the session. it is bad news? >> as we had that pullback the

last couple of weeks it was a time to put money and work into the equity market but i think going forward as we sit here right now some of the bad news is good news at some point in time that bad news turns to bad news. i think the fed will cut rates and make sure we do elongate this recovery. jonathan: the s&p 500 climbing as economic data supports the case for rate cuts. anastasia writing we find more positives than negatives for the environment right now. adding to equities exposure. could we start by talking about the set up going into next week with some big data points on deck including retail sales. can you walk us through that? anastasia: i want to comment on this bad news conversation into next week. i don't think we have much in

terms of bad news. we had slightly weaker gdp report but if you look under the hood we have a very strong core demand in the economy. when you look at the real-time consumer data it's improving from earlier in the year and if you look at the manufacturing surveys may be they disappoint on a one month basis but i still look at the inventory levels and think they are low enough to start to jumpstart a restocking cycle. this set up into next week i think this set is fairly strong from the growth perspective. in terms of inflation we were waiting for the last mile of inflation guess what it is here. it is upon us. we've managed to go from 5.8% cpi a year ago to now hopefully 3.8% or below this year so that's almost two percentage points of improvement and if you look at the core pce metric it's 2.8% so that's a to handle so i think we are in that last mile

and that's a positive development. dani: you sound like someone who would be very comfortable in this equity market right now. to keep buying. >> the risk reward was better when we were closer to 5000 and that's why we should be adding to allocations if you are underweight relative to strategic ones. if i look ahead and at the current multiple which can be sustained as long as economic environment is sustained and if i imply that to $270 in s&p 500 earnings for next year. that gets me to an implied price target of 5400 on the s&p i think that's the base case scenario. i do think stocks are worth being in and staying for and may be the upside to 5400 is not all that great but that's for the s&p. i think you can find pockets of opportunity in the market that should be able to outperform. jim: i want to ask about the

bond market. starting with the 10 year yield about 3.9% we got as high as 4.7% around 4.5 right now. is that uptrend going to continue or do you think we are finding high yield for the year. anastasia: i think for now we have sufficiently priced in the new reality. which is growth that is remaining pretty robust which is inflation expectations have picked up and the central bank policy which apparently may not have much in terms of rate cuts this year. that moved to 4.7 sufficiently reflected that. we look at the implied fair value on the 10 year based on some of the models out there relative to where the 10-year is today it is trading above some of those fair value models so i think that is what gives me more optimism on the equity markets is the 10 year can pause around

these current levels then that is less drag on valuations for equities. jim: do you think the fed will move and what that change your outlook if it were to move? anastasia: i think the fed will likely move once, maybe twice this year and obviously it has to be later in the year. the fed i think realizes they solve what they could solve which is slowing down demand in the interest rate sensitive parts of the economy. what they cannot solve is the supply of labor and the supply of housing. when you look at inflation today what's really making it sticky is the fact wages are still rising and the fact there's a shortage of workers. i'm in miami this week and apparently the unemployment rate in miami's 1.9% so talk about a lot of demand and lack of labor. the fed cannot really solve that. the fed cannot also solve the shortage of housing and the

under building we had in the economy of housing over the last 10 years. they can slow the demand and they have done that. they quit -- they cannot quickly turn on the supply spigot. having this realization is the reason why the fed will likely cut interest rates because they've done a lot in certain parts of the economy and certain pockets are feeling the strain which is commercial real estate especially in office and that's relating to the regional banks as well so i do think if inflation continues to be somewhere in the two to 3% range through the year they should cut rates. coming up on >> -- jonathan: you called a pullback in april a better entry point based on the last few weeks could you tell us how independent your market call is from your fed call. anastasia: it is fairly independent. when we wrote the outlook for this year we expect rate cuts but at the same time we say what

if the fed doesn't cut interest rates and the conclusion was it would still be in equity market worth staying in and the reason we said that was because the growth resilience they were expecting. there is this notion of the u.s. exceptionalism of the u.s. economic sectionalism and it is so true because this economy is not all that interest rate sensitive and in fact when you look at the consumer what we pay in terms of mortgage has not actually reset higher because only 5% of mortgages are a floating rate and yet the amount of income that we earn by parking the cash in the money market account is quite significant it's a significant pickup so this is why we thought we thought the consumer could handle 5% interest rates as they have supporting the economy and that's why even if the fed does not cut rates. the economic backdrop should support equity valuations and

equity earnings of course. jonathan: so far it has prayed great to catch up. on the backdrop for the federal reserve in this market as well. it's been a confusing one for a lot of people. help us explain this equity market has been ok. >> we were under the impression we would go to a soft landing with some whispers about a recession. and that we were solidly on our way on that last mile to 2%. then over the past four months the data has surprised to the upside and it dashed the recession call than the soft landing call and as far as the last mile for inflation it's been pushed out and i think that that's what really happened. there was an expectation when were going to see if you go back to the bloomberg consensus data we would see something like a 1% gdp growth year and now we are two and a half. that's a big difference.

jonathan: jim will be sticking with us. benjamin netanyahu striking a defiant tone following president biden's pause on weapons shipments. the latest from the former senior u.s. intelligence official norman roule in washington dc. equities are positive on the morning. we are up on the week. heading towards three weeks of gains on the s&p 500. yields are higher by almost a basis point on the 10 year. and in the fx market the euro doing not much at all. rounding out approaching all over again. positive 0.8%. ♪

jonathan: welcome to the program. stocks doing ok. update their present on the s&p 500. the russell up by .4%. on the s&p, as you've heard, headed toward three weeks of gains, longest winning streak going back to february. the 10 year and down again this week, upon the session by a single basis point. the 2-year poised to close where it closed last friday, anchored at the front and without much

economic data with the exception of that higher-than-expected jobless claims print. foreign exchange and the challenge posed in the exchange market. 155.72 on the yen. dani burger, all over the place in the last two weeks. dani: it's remarkable, you have the mof saying they will intervene in this thing. then you have them saying they may change monetary policy and we are at 155. jonathan: that is the key, do you have to hike to get the market to believe? right now they think he is paying lip service. will he actually move interest rates higher? dani: the boj is a part of the government, has had conversations. we talk about is the fed political? the boj has to be political because they are part of a political arm so they could

easily hike under the influence of the government. jonathan: under surveillance this morning, a slew of that is speak -- fed speak. traders looking for hints on the path forward on next week's cpi print together with retail sales, bpi, and jobless claims. what can be said that hasn't been said and later from officials? jim: nothing. the problem they are facing right now is the june 12 meeting, probability is 8% the fed will move. the market thinks we are on hold. there is nothing they can say. we have to wait for data to see if it surprises in either direction that would get them to move up in their current stance. jonathan: either direction. what little data would it take to reintroduce a summary rate cut, much more to reintroduce the conversation about hikes,

after powell tried to bury them last week in the news conference? jim: we went from asking if he was going to hike rates to a summer cut because we had a missing payrolls -- missing payrolls. if cpi were to miss or beat, it could change the narrative in the next couple weeks. right now we are in that weight mode. when fed officials come out now, the next meeting, june 12, is baked into the cake. we know there is more data after that. jonathan: you will hear from some retailers, walmart. tsmc posted a 60% jump on sales on the backup seemingly never-ending demand for semiconductors. it follows a 34% sales increase in march, helping the stock to an all-time high last month. this sets us up for nvidia, the last big one to report. dani: remember arm yesterday?

they are giving a worse forecast, which means the ai demand will peter out. morgan stanley had $300 billion as the capex for a i spend by 2030. the runway for nvidia looks incident at this point. jonathan: peter cheer over the weekend talked about how 10% one of the new 1% for tech names after earnings. what do you make of these moves? jim: extraordinary. especially because when you see from the market perspective, they report after the close, and then you get most of the move after the close. my mother was asking about that. how does something move after it closes? that is what will happen with nvidia. traders can start their day at 4:00 eastern at that point. jonathan: that is all that we will be doing that day.

our next story, israeli prime minister benjamin netanyahu vowing to press on in gaza with or without u.s. support. the u.s. pausing at arms shipment to israel over concerns about a possible ground invasion to rafah. prime minister netanyahu telling media that if we have to stand alone, we will stand alone. annmarie hordern is in d.c. speaking with norman roule. annmarie: we are lucky to be joined by norman roule, former u.s. intelligence official, also at csis. you have joined us a lot over the course of this conflict in the past couple months. where are we now that the blood it administrated -- but i did administration is putting some weapon sales on hold, the head of the cia left the middle east. where are we on this conflict and where is it going? norman: good morning to be without is the number one question policy answer should be

asking themselves and we don't have a clear answer forward. the israelis are moving forward to rafah, in many ways, doing exactly what the administration sought. they have closed in the corridors for smugglers, opened up some humanitarian area, small unit operation support in a surgical matter by air and artillery fire. that said, it looks as if hamas continues to survive. they were no closer to a hostage release, no closer to an end to the conflict. annmarie: when it comes to the rhetoric from this administration, on the one hand, we herby want to see the eradication of hamas. at the same time, they say how israel goes about it matters. the state department said they put proposals on the table of how israel should go about it. but now the administration is saying, joe biden himself, doesn't want to see any invasion of rafah. can you explain where they are

on what would be acceptable in terms of how israel could go into rafah and get to their target of ending hamas? norman: what would be acceptable is a lot of luck through the israelis, being able to identify the hamas leadership, hostages, and through a surgical raid, eradicate those individuals. that is just not going to happen. this is not inconsistent with past abuse of the administration on conflicts where offensive activity from ukraine to yemen is not something this administration puts forward routinely. annmarie: they've been putting pressure on israel to sign onto the cease-fire agreements. report that there were only minor changes to what israel was first willing to do, what ended up on the table that hamas agreed to. did you view it as minor changes? norman: certainly not. hamas is saying first israel must withdraw completely from gaza. at some point, israel must allow

individuals to return north without any exceptions, which means hamas can return north. hamas is saying it which is a large number of palestinian prisoners release for every hostage, and those prisoners cannot be individuals selected by israel but hamas. so you could have the worst palestinians under detention returning to gaza to conduct operations against israel. last, the number of hostages hamas is willing to release consistently drops. they are no longer willing to say which are alive and dead. we are in a situation where it is likely, after weeks, they will reveal that more hostages are dead. annmarie: that is devastating. when you have the administration withholding some of these weapons, not only is it political, but in rafah, it is a very dense population. 1.4 million palestinians.

these kinds of weapons, how deadly could they be if israel were to use them? norman: you have two problems. first, you have an adversary that purposely hides behind civilians. annmarie: why hasn't the administration said that more? we have known a lot of that since 2011, where hamas sets up control centers, in hospitals, schools. the same way that jake sullivan came out talking about what putin was doing to ukraine, why haven't we talked more about how hamas conducts the war? norman: admiral kirby has described them as murderous, but this is the same modus operandi that the houthis use. do you allow hamas to win or attack an adversary that hides behind civilians? if you are going to attack, you need precision intelligence, exquisite weapons.

often the u.s. provides kits that has bombs that can hit them with the most precise capacity possible. the israelis have more than enough ordinance to continue on the current pace but over time this could be a problem. annmarie: where does this leave u.s. support for israel? norman: the administration continues to provide support for the iron dome, political support when appropriate, but for a variety of reasons, to include domestic purposes, it is holding a tougher line on the work against rafah. but we are stuck. the adversary is hiding behind a million civilians. unless the adversary is eradicated, they have promised a murderous assault on israel, repeating the seventh. annmarie: the day after, a peace agreement, what does that look like? potentially a new palestinian authority. how do you get to point b?

norman: there is no such thing as the day after. they are in the months after where you will have a right wing government in israel that has to be dealt with, ineffective palestinian government, and hamas get a vote. they will do their best to upset any peace deal. unless hamas feels it has capacity to survive, that probably kills the prospect of a two state solution, simply because no israel he could tolerate hamas on their border, committed to resuming attacks. annmarie: where does this live israel with the rest of the region, most notably the kingdom? norman: where it is at this point. the saudi's, iraqis and others say there must be a two state solution, and there must be an american-led coalition to achieve this. as difficult as this might be with the mahmoud abbas

government, bibi netanyahu government, it is likely impossible if you have hamas running gaza. annmarie: so normalization not this year? norman: it will be a challenge. we have effective diplomats on all sides including saudi arabia and the emirates and elsewhere who will do their darndest. i tried to be an optimist on these things but it will be difficult. annmarie: norman roule, thank you for your time, former u.s. intelligence officer, friend of the show. really trying to understand the context and difficulties of what is happening on the ground right now in gaza. jonathan: he is one of the very best. thank you, norman. futures on the s&p positive. here's an update on the stories elsewhere with your bloomberg brief. sonali: hsbc and standard chartered are among major u.k. firms pressing prime minister rishi sunak to tone down proposed restrictions on doing

business with china. sources say the banks are lobbing ministers not to include china in the strictest risk categories a new national security legislation. they argue this would impede business and trigger negative publicity. apple has issued a rare apology touting its latest ipad. the commercial shows musical instruments and other creative tools being crushed, drawn criticism on social media for what many are calling a depiction of the destruction of humanity. the apple vice president of marketing telling ad age, we miss the mark and we are sorry. apples has inlet air that that on television as planned. finally, formula e is now in its 10th season, and in an interview with the ceo, they say they are always open to bringing in new competitors. >> i could see a team like lotus, saic.

we actually have two chinese teams here. >> what about a tesla team? >> tesla is unlikely, and i'll tell you why. all the teams race under a common battery. i'm not sure that testing would be so keen to run and i'm battery that is not their own. sonali: the ceo said he would love for tesla and elon musk to call but says it is not on the top of the list. jonathan: thank you. much more in about 30 minutes time. can we pause for a second? why are they apologizing for the second time on the show? who believes watching that they are scared about the destruction of humanity? dani: who is taking this thing so literally? this is apple's whole thing, we are inventing the future. we will tell you what you want but we will apologize for it. jonathan: who are they apologizing to?

jim: i didn't understand it either. i kept thinking, you are not going to run the ad. now there are going to be 100 million views on youtube. jonathan: sitting at home, still using vhs? offended via technological progress? stock is higher by 0.2%. president biden cracking down on chinese ev's. >> the chinese doubled down on what we call their nonmarket practices, predatory pricing practice, worldwide, that has driven out producers and other economies, leaving the chinese economy cornering the market in production. jonathan: that conversation around the corner. we will catch up with josh wingrove on the latest effort from the white house to clampdown on chinese ev's. this is bloomberg. ♪

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jonathan: stocks on the s&p 500 positive by a third of 1%. 100 minutes away from the opening bell. counting you down here on "bloomberg surveillance." yields higher by a single basis point. under surveillance this morning, president biden cracking down on chinese ev's. >> the chinese doubled down on what we call their nonmarket practices, a kind of predatory pricing practice, worldwide, that has driven out producers and other economies, leaving the chinese economy have cornered the market in production. right now, we are still 85% reliant on chinese production and supply in solar panels. we've also seen it in batteries. we are seeing it now in ev's. jonathan: president biden set to unveil new tariffs on china next week targeting key sectors including ev's, batteries, and

solar panels. josh wingrove joins us now for more. fantastic story, enjoyed their media. what are you and the team learning about what we may hear next week? josh: right now we are just trying to figure out the scope of this. this has been going on for some time. since 2022 they been doing this review. the question was how high with a ratchet it up, when they offset it with the client and other less critical sectors to try to make it a wash? doesn't look like that will be the case. certain key sectors will see tariffs rise either from existing levels, or from zero, depending on what they are, including electric vehicles, solar cells, batteries. we don't know the levels that they will go to. on the flipside, other tariffs are pretty much maintained.

no offsetting declines of some of those original trump tariffs. biden is looking to go tougher on china while also stopping short of what trump wanted, 60% on all chinese goods. that would stoke inflation, they will steer clear of that. instead of looking at these key sectors. auto also has a pretty strong election overlay. biden is trying to win an election that runs through michigan in a handful of other states. jonathan: let's get into that a little bit more. explain to me, chinese ev's don't have a big market in america right now, so what are they addressing? josh: they think a way of could be coming if they don't do anything. the same on aluminum and steel. he teased this in pittsburgh a couple weeks ago, talking about possibly raising tariffs.

tiny volumes that we see from china coming into the u.s. but they are expected to rise. they are worried about china trying to export or dump its way out of sluggish growth, some of the woes it is seeing right now. there are broader concerns with ev's and connected vehicles as well with data security, what information the u.s. is comfortable handing chinese companies. we see this in all sorts of sectors related to china. tiktok being top of mind. on steel and aluminum, ev's, this is a case of heading off with the u.s. expects could be a seismic shift, as opposed to addressing the market today. dani: the irony is not lost on most people that both europe and china have lobbied similar accusations against the u.s. china even if i'll do the subsidies you require for your ev's are discriminatory.

knowing china's stance, how are they likely to respond? josh: that is the multibillion-dollar question right now. some of our colleagues are saying they are not sure necessarily they will be a response immediately. china wouldn't want to trigger a tip for during an election year. it seems some sort of response would be necessary. we have seen the chinese government criticizing the americans for taking this reported step. i am sure they are waiting to see the fine print as we all are. the question is how far this will go. trump had a bit of a back-and-forth, tariffs on american agriculture that hit his base. right now, it is not clear what will happen. if it did happen, what goods would be targeted. would they try to target biden's political backyard, trump's, bot

h? jonathan: josh wingrove, always great reporting. the president and the administration poised to unveil a sweeping decision on chinese tariffs as soon as next week. jim bianco is with us. final thoughts, the election, is it too early to think about these things? jim: i think it is too early. we are still so wrapped up in personalities right now with these elections. all of these other issues, brain worms, everything else. when are we going to get to talk to policy, talking about contrasting what my administration means versus their administration? all we are left with are these generic, republicans do this, democrats do that. i feel like that is in the market anyway. dani: there is the argument, not

necessarily trade on volatility but trade around the election. let's say that trump doesn't accept the results, you should be prepared for volatility. jim: probably sell but that is in october, november story. actually could be november, december. but i don't think you'll see that kind of volatility come in until at least the conventions at the earliest. jonathan: many elections used to be differences in degrees, not kind. does it make it difficult to look ahead to 2025? you construct a view on 2025 in the american economy, in american markets, without a decent understanding of what policy will look like from the white house? jim: it is impossible to understand. certain things get said all the time. the biden administration talked about a 44% capital gains tax, but we forgot, none of that

happens until congress passes a law and the president signs it. he is not a monarch. then we have to remember, it is not just the president, it's also congress and what they want to do as well. jonathan: they have tried to do that. sinema prevented that already. jim: it shows you how difficult it is to get these proposals through, like trump wanting to put himself on the federal reserve board. jonathan: what did you make of that story? i have heard from so many people talking about that. they have yet to hear anyone from camp trump sing it on the record. jim: i understand his feeling. he has already said that he would fire powell if he became president, has already got that committee headed by arthur laffer that is looking at who would potentially be the next chairman. arthur laffer decided it is arthur laffer. exactly.

jonathan: [laughter] jim: i know the expectation is there will be big changes should trump come back, but as far as him putting himself on the federal reserve board, you have to rewrite the federal reserve act to do it. you don't just get to say i'm on the board now. jonathan: jim, you would be great on the board. jim beyonca of beyonca research, thank you. taking you to were there we weekend. we are catching up with oliver chen of td cowen. we will hear from walmart, home depot. and we will talk luxury with him as well. neil dutta on the latest economic data in america. the latest on cpi and retail sales. mandeep singh on some of the earnings from big tech. s&p futures positive by one third of 1%. ♪

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>> the market can live with an environment where growth is strong and may be that that only cuts a couple of times. >> what makes me question the

degree of restrictiveness is the activity of data that we continue to see. >> i think that will continue to be the case. >> if there is not more of that dovish pause language. >> we are still in the early innings of seeing the data cool in the way the market wants it to. >> this is bloomberg surveillance with jonathan ferro, lisa, and annmarie hordern. jonathan: good morning. equity market positive by one third of percent on the s&p 500. let's get you into the weekend, and then a sneak peek of next week. next 24 hours, need to look ahead to university of michigan sentiment numbers later this morning, a ton of that speak. here is your fed lineup for today. next week, ppi on tuesday, wednesday, cpi, retail sales,

thursday, jobless claims. then we will hear from some retailers, dani. home depot and walmart. dani: what keeps me up at night is if we get strong retail sales and then walmart will come out and say the consumer is concerned, they feel the pricing pinch, and then we get to the end of next week, and we say i'm still confused. jonathan: what do you think would be the most toxic mix of data? dani: at any point it is all toxic. we don't know where we are in the world. cpi is too high, maybe hikes need to come back into the conversation. if it is too low, stagflation, is that what it is? jonathan: narrative table tennis. that is what he said last year. that is when it still feels like from week to week, sometime day-to-day. equity futures positive by one third of 1% on the s&p 500. yields are higher by two basis

points on the 10-year. in the fx market, the euro going nowhere. 1.0780. coming up, dan suzuki, oliver chen, and then neil dutta weighing in on the labor market ahead of cpi next week. we begin with the big issue, stuck seeing a boost from earnings optimism. dan suzuki saying looking past the near term volatility, the market has strong support from earnings. until you see signs that earnings growth is starting to peek, the base case should be for markets to trend higher. dan, why haven't we seen that peak already, what would you say to that? dan: because underlying growth is still strong. we still have to remember that basically a year ago we were in a recession. things have been on the uptrend since then. nothing in the economic data

suggests that is speaking anytime soon. that is a strong support for markets going forward. jonathan: one thing you said about the cycle, it is too early to position for the end of the cycle. what do you mean by that? dan: we are basically 15 years or so into this incredibly strong bull market, some ups and downs in the meantime, but really the same leadership and story. we are late in the cycle, and this bull market, late in the economic cycle that have been one of the longer economic expansions outside the pandemic. you want to position for that late in the economic cycle period, which simply means the economy is tighter. the stronger growth comes in, the more inflationary that will be. you want to incorporate that into your positioning. to what we were talking about earlier, i don't think we are seeing the signs of the end of cycle, that growth is rolling over. you are seeing some signs of

stress but there are also signs of resilience. net worth more household is basically at an all-time high. dani: one argument you could make that the market is getting ready for the end of cycle, what is the current leadership, utilities, the safety sector, something that does outperform when a slowdown is on the way. dan: that is to be expected. we went through a little bit of a pullback. during that period, you had some defenses that were beaten down. that was the safety as volatility was picking up. at the same time, when you look at the leadership since the market peaked a few months ago, that leadership has been in the companies that have inflationary pricing power or just out right inflationary beneficiaries. whether that is some of the commodities, commodity producers, commodity producing countries, those have been the more resilient parts of the market. dani: one part that has been

red-hot is oig. the issuance is off the charts. $53 billion sold through wednesday. that is the most since 2021. we are well on track to get a record of issuance from these markets. it is almost like a market is trading like we have lower rates at this point. can that kind of action in this market continue? dan: i think it can. ultimately what that tells you is there is a ton of liquidity out there. i don't see that rolling over imminently. it also tells you that corporate profits are very strong. i don't see any signs that those corporate profits are peeking out. that dynamic can continue. the question is for ig investors, are you getting competency for the amount of risk? are you would argue that you are not. the spreads are basically at the tightest of the cycle. if you want to be positive on liquidity and corporate profits,

there are tons of areas that have plenty more upside on that same story. jonathan: you like energy, materials, industrials as well. we have talked about it briefly, positioning for inflationary growth. can you get into that when economists are coming onto the program talking about non-inflationary growth? where does the difference come from? dan: if you look at the level of inflation, it has come down from the extreme peaks that we saw a little over a year ago. people are saying that will continue. i think if you just look at the data, clearly that will not continue. it's been more of a normalization. the dictator of whether inflation goes higher or lower will be growth. in the meantime, i think growth will still be resilient. i don't see that it is peeking out. i see this as a positive for nominal growth. you want to own the company that

benefit from nominal growth, which is not everybody. some of them will feel the bite of inflation on their topline and bottom-line. jonathan: that might be consumer discretionary. is that where your focus is, where there could be margin pressure in the quarters to come? dan: that would be one area. if you listen to the companies over the past earnings season, there is feeling, a lack of pricing power, lack of ability to pass those higher prices onto the consumer. the customer base, the lower income consumer is getting more stretched, struggling a little dog more -- little bit more. consumer discretionary historically tends to not do well later in economic cycle when inflation is higher, and if the fed comes back into play or will not be cutting rates, is going to be hurt by that being priced into the market. dani: how does that translate

into more widespread weakness in the equity market? we could go as far as the economy, if the consumer has been the engine of growth and you are starting to see signs of weakness, slowdown. dan: there is basically a huge bifurcation within the consumer. the bottom 20% of lower income consumers is struggling. that is where you are seeing all of the evidence, the data pointing to that stress, distress within that segment of the consumer. it is picking up. when you look at the other 80%, which makes up the bulk of consumer spending, those consumers are actually doing pretty well. if you look at all the measures of leverage and interest coverage, financial obligations, their net worth, all those things are still pretty healthy. i think we have a runway for some time before that starts to rollover. dani: a lot of folks have talked

about that, jane fraser talking about the k-shaped recovery. the thing that still confuses me, if that engine is growth is still there, why aren't the cyclical small caps doing better? dan: i think they haven't been doing better simply because their earnings have lagged. if you look at their relative earnings or absolute earnings, they have come in weaker and disappointed. the inflection point we are seeing, that is likely changing, they are likely bottoming as we speak. as you look over the next few quarters, you will see an extreme amount of earnings acceleration. i think that is why it's an opportunity. earnings have been terrible, they have been beaten down, but now you are seeing where they may become the leadership in terms of earnings growth, but no one cares. that is the big opportunity for those stocks. dani: getting back to your idea of positioning for a late cycle. what do defaults look like? how do you position around the

idea that there might be more as you hit the long-awaited maturity walls? dan: at least in the near term, what we are seeing based on the stronger economic data, defaults could come down from here. clearly, at some point, you will see those defaults pick up. when you look at the cycle, there tends to be a bit of a lag. heads up that we will go into a bigger default cycle. you will see that when growth starts to slow. i think you are seeing a normalization within the services side of the economy, being acceleration pending for the manufacturing side of the economy. net-net, that will be a pretty strong growth environment. you shouldn't see in that environment, with where liquidity where it is, a huge spike in defaults. we will see that but not anytime soon. jonathan: good to hear from you

as always, dan suzuki, looking ahead to next week. we will keep doing that for you on this program, looking ahead to cpi and retail sales. not to be contrarian, cpi is top of the pile, but retailers next week, home depot, walmart, important to get some clarity on what is happening with the consumer, at a time when some are saying staples over discretionary. at a time when you have heard from mcdonald's, the consumer is becoming more discriminating. starbucks feeling the impact of a more cautious consumer. what is going on with home depot, walmart, macy's, target, lowe's? dani: walmart will be the most interesting. dan talked about the bottom echelon of the consumer struggling. someone like walmart should be benefiting from that. mcdonald's should be benefiting from that because folks are trading down. that is not what you are seeing.

they are saying consumers are not coming anymore and they are not volume. jonathan: more on that story next week. here is your bloomberg green with sonali basak. sonali: shares of novavax rising after the vaccine maker announces a $1.4 billion deal with french drugmaker sanofi. they agreed to pay $5 million upfront and pay another $700 million as they hit the relevant milestones. the deal positions novavax to commercialize its covid vaccine in combination with the synovial fluid vaccine starting next year. target will not sell lgbt q -themed merchandise during pride month after it dented revenue last year. the retailer plans to offer the full assortment online. target faced threats from some customers last year over its pride merchandise in the month of june.

some in the u.k. are getting asked to tip guests 10% or more on their bills. it is causing confusion for a lot of customers. the pandemic has played a role in changing, giving restaurants a chance to ask customers for a little extra through the qr code. jonathan: i feel like i should say something. it is believed the salary of someone who might work in this industry might be higher in the u.k. than someone in the united states, and for that reason, tipping culture has never been a massive thing. keep the change used to be a thing you would say. whenever it might be. dani: i don't understand what the confusion might be. do you want to tip? no. jonathan: i tip, just for the record. i know there is a reputation, a brit arrived.

dani: when i was a waiter, i would pass over them. i want my tips. jonathan: up next on the program, morning calls, looking ahead to big box earnings with oliver chen. futures on the s&p positive by one third of 1%. from new york, this is bloomberg. ♪ this is our future, ma. godaddy airo. creates a logo, website, even social posts... in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo

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expecting the company to return to growth, calling them a quality company trading at attractive valuations. barclays raising its price target on victoria's secret, maintaining an underweight rating. the retailer reaffirming -- that stock is up big. being box earnings taking off next week. home depot on tuesday followed by walmart on thursday. oliver chen from td joins us now. we can get into that and then we can get to luxury, which you love. home depot and walmart, what are you looking for next week? oliver: we are excited about walmart. more cautious on target. walmart is a need to retailer, 60% grocery, very helpful in terms of traffic. they are also managing well through this tough time where

the consumer is looking for value, very sensitive to price. in addition, walmart as a technology company. don't forget about digital advertising and the marketplace model. walmart is also getting a higher income customer. you can buy an apple macintosh on the website as well as fragrances from burberry. the whole flywheel is working. jonathan: let's talk about pricing power. we have heard from various executives over the past few months that may they are losing some, starting to see some disinflation in some places. what do you expect to hear next week? oliver: that is definitely happening. we have a consumer who is not necessarily loyal and doesn't want to overpay for national brands. what consumers are doing is what we call customized moderation, value hacking. trading down to private label when they need to and then

trading on selectively. that will continue to be a big issue. the bottom line, walmart wants everyday low prices. they want suppliers to offer low prices, too, so the consumer has more money to spend on nonfood and discretionary items. that is still a work in progress. what is good about the consumer is there is low unemployment and there is still spending power, given $670 building on the sidelines -- billion on the sidelines. what is bad is there is a bifurcated consumer. inflation is getting less bad, however, consumer confidence and what the consumer feels is still fairly volatile. mixed signals here about pricing is a hot topic. everybody wants low prices. dani: do you expect with some of those headwinds you are talking about, that at some point maybe not the upper echelons we will continue to spend, maybe not

just the lowest and consumer that starts to get more price conscious? oliver: everybody is getting somewhat price conscious. we see this do-it-yourself consumer. consumers are looking for newness. also what we see in our studies, there is so much receptivity to private labels such as kirkland at costco and others. that trend should continue. what we see at the higher end is the wealth effect, some confidence, some pockets of strength in the u.s. in particular. china is something we are watching, very volatile as well. jonathan: can we talk about luxury? i promise that we would. there are some brands that are struggling. more specifically about gucci. who is getting it right, who is getting it wrong? oliver: we are most excited about louis vuitton, as well as dior. they also own sephora which is

global. we downgraded the stock, gucci. they are at work in progress payment they have to reset the brand. some of the issues are specific to the brand which needs to return to classic and timelessness. it also needs to be more elevated. this process has been quite painful in the numbers have been quite sharp. what is happening in luxury goods is a share shift as well. big players like louis vuitton offer a full range of all kinds of luxury, hard luxury, and that is working well in the execution. i do love gucci personally but it is going to be a lot of change. part of that will be losing some customers. jonathan: who customers are they trying to attract? when we talk about the high-end, we are talking about the high-end luxury player, not the upper income consumer. i don't believe the last few years with gucci it's been about

the upper income consumer, it's been across-the-board. get access to an aspirational name. trying to work out who the target audience will be for that brand. oliver: it is a bit of a reset, and you are right. what happened with the gucci brand, which had massive growth, really broadened the aperture of what luxury means. it was a rethinking technology, gender, very exciting, but on the other this aspirational customer, has been more under pressure. that is something the industry is facing. gucci has a new designer, as well. in rethinking the brand, luxury is always about elevation and timelessness, taking you back to classic items. harkening back to a lot of the heritage of gucci. somewhat specific to them but they are definitely losing share to others like hermes, louis

vuitton, who also have an anchor on timelessness. dani: with all of the attention on the aspirational buyer, it is remarkable that the beauty brands continue to do well. you could say that people will trade down, go to a drugstore and get their makeup there. why is that story so enduring? is it just teenagers on tiktok looking at influencers, then going to buy something? oliver: 10-year-olds as well with skincare regimes. 111. beauty is it is an essential good. it also gets blurred with health and wellness. a lot of abundant cosmetic, hair care, skincare. we also like ulta, which is like home depot for women in terms of that routine. there is a ton of innovation in terms of social media that fuels new processes for cosmetics. skincare is self-care.

it has been a very resilient industry. a lot of the habits that were picked up in the pandemic really stuck in beauty. beauty is a profitable business globally. jonathan: home depot for women? you are going to get us in trouble. do you want to elaborate on that more? oliver: the whole experience is really comprehensive in terms of mass, prestige, you find things that you didn't know you needed, but you also talk about replenishment, investing in your body and skin. that is a principle that men and women love but women can be very loyal to certain categories like haircare and skincare. on the cosmetics front, there is a lot of newness and innovation. we are excited about ulta, especially the valuation here. we were at a beauty summit talking about intelligence means beauty. very vibrant industry. jonathan: looking to catch up with you soon.

amh rights in, i have so many questions, home depot for women. dani: home depot is also for women, not just for men? i went in the other day. they were like, our policies have changed, please come in. jonathan: you know who has never been to a home depot? tk. dani: home depot, for men, women, but not t.k. jonathan: neil looking ahead to retail sales and cp. i. from new york, this is bloomberg. ♪

jonathan: this whole week has felt like a long drumbeat to next week. almost to the weekend. cpi and retail sales coming on wednesday. retail earnings in the mix, and a ton of fed speak as well. one hour away from the opening bell. positive by one third of 1% on the s&p 500. the russell up by one third and some change. new levels compared to where we were a week or so ago after we got that eci print hotter. two-year back to boy 3%, all the

way back to 4.8318. climbing higher by three on the 10-year, 4.4826. taking a look at the euro against the dollar, unchanged at 1.0779. central banks starting to make some moves, talking about cutting rates, maybe doing so as soon as june. the bank of england and the ecb. you wonder how far they can go. the federal reserve doesn't dictate whether they go or not, but whether they go to another 100 basis points at the ecb if that that isn't going anywhere, that's a different question. dani: in the minds of andrew bailey, there is no law that says we cannot cut before the fed. interesting to look at this market. you have the fomc desperate to cut, ecb committed to cutting in june, the boe, boc wants to go.

this market had to sign and we are in the cutting cycle, let's go. jonathan: will the federal reserve join them? maybe if we get week data. andrew hallman horst has been on top of this, maybe in the possibility of sharpness in the economy. a range of labor market data has us expecting a sharp weakening in job growth over the coming months. the rise in jobless claims may be noise associated with school holidays but may be the start of a trend toward weaker labor markets. here are your top stories under surveillance this morning. netanyahu vowing to stand alone, striking a defiant tone, saying he will continue the war in gaza with or without u.s. support. it comes after president biden threatened withholding weapons if they continued ground invasion into rafah. president biden looking to crackdown on china yet again. the white house is yet to impose

new tariffs aimed at strategic sectors including china's ev's. the move coming after a review of section 301 tariffs first imposed by the trump administration. a decision could come next week. more fed speak. this is atlanta president rossdale bostic telling reuters he believes the u.s. economy is slowing. if that is still on track to cut even if the declines come slowly. investors looking ahead to ppi and cpi next week. joining us now is neil dutta. i was looking forward to this. reading your note, the labor market rebalancing has been achieved. can you walk us through how we have done that? neil: job openings have come down. job openings are a measure of excess labor demand. with very little upward movement in the unemployment rate. the rate has gone up but it does

look like, for the time being, that the fed was able to successfully trim excess labor demand without driving up unemployment all that much. i think what's important now, john, yes, the eci didn't pop in the first quarter but the underlying drivers of that data, average hourly earnings for nonsupervisory workers. we saw in april that is cooling. over the last three months, average hourly earnings for nonsupervisory workers are barely up 3% over the annual rate. even if you assume -- let's say 1.5% productivity, you are talking about wage growth that is broadly consistent with the fed is underlying inflation objective, which is why unit cost is cooling. so where is the inflation coming

from? if you ask someone, why did inflation perk up in the first quarter? they cannot point to a fundamental reason for that. is it because expectations are perking backup? because the labor markets are reheating? no. the dollar is pushing up the prices for imported consumer goods? no. the dollar has been stronger all year. financial services inflation picked up, healthcare services, motor vehicle insurance. it's important for people to go to first principles here. this is why i think the case for weaker inflation is still quite strong. jonathan: two things to unpack, the view on the labor market. this is the line from citi. they say evidence is building that the labor market is poised for a sharp weakening. you the word "cooling." explain the difference between a

welcome cooling in the market and an unwelcome deterioration. neil: when you want to do is look for discontinuities in the data. when you have a 200,000 job number and then a 50, you should be worried. i don't see much evidence and that be made you mentioned jobless claims. even if you assume that number is legit, which it is not, because it was mostly driven by new york, the breakeven level is still around 260,000 if you look at the separations and hires data from jolts. you can back out what initial claims are. you are still talking about continued job growth in the range of 175 to 200,000. if you see that, slowing wage growth to 3.5%, that would be cooling. if you see significantly worse than that, then you would be worried. but jobs are something that come

out of growth. jobs don't necessarily go into growth. if the economy is growing, employment will follow. we know the economy is growing, if you look at underlying domestic demand, 3% in the first half of the year. that doesn't leave me that concerned about discontinuities in the labor market. dani: to that point, earnings have backed up everything you said. huge capex coming from companies. what could drive a cooling? neil: in the labor market? turnover is coming down. that is what it is. there has been a pickup in labor supply, less turnover in the job market. i think those things basically tell you, combine for a moderation. we are basically hitting equilibrium now in the labor market. that is the bigger story. at the same time, the economy is not getting away from the fed.

yes, you mentioned capex, could be a growth of driver this year, but other areas may cool. residential investment. that was a strong area in q1 given the backup in rates, unlikely that to news over the next couple quarters. you should see some rebalancing in consumer spending. a lot of the upward movement in consumption -- retail sales next week -- a lot of that is driven by the decline in the savings rate. hard to see that lasting. i would expect to see a better balance going forward. i don't think growth is getting away from us but it is not something that i am letting my hair on fire for. you are talking about 2.5% growth, study job growth, ongoing disinflation trend given the improving stock conditions. dani: the word that you are using, normalize, more balanced, getting back to averages. is that a good enough reason for

the fed to cut? neil: absolutely. they believe they control inflation. if inflation cools more quickly than they think over the next several months, they should be cutting. they wouldn't want to tolerate higher real rates. you have to recalibrate policy to stay even. jonathan: should versus will. what do you think they will do? neil: i think they will cut. at the end of the year, we will still be talking about how much the economy is growing and how many times the fed has been cutting. i think the case for cuts is still quite strong. i put it to you this way. they go at least once, two is a good baseline, and i think there is an option for three, if we are right about how quickly inflation slows over the next two quarters. jonathan: basically when we are hearing from fed officials as well. i am wrestling with the supply side story in the labor market.

tons have been said about the amount of immigration coming across the southern border, allowing us to have the strong payrolls growth without the corresponding pickup in wages. based on communication we have had in the last week, border counts have dropped quite a bit. how can we anticipate the data in the months to come? neil: i think the immigration story is kind of a rationale that people are working back to. why have the labor market cooled off a bit? there was this big pickup in labor. i'm not sure that is the case. unit labor costs have moderated because people are getting more productive in the job they are in. we have seen a pickup of labor productivity. i think that is a more important driver. do your point, i'm not entirely convinced this is like a big, secular increase in immigration.

it could be a one-off dynamics related to the opening of the visa approval process following the pandemic. a lot of people on the sidelines, then they got their visa is as things reopened. that may will slow down. it is something closer to equilibrium. but i think people are getting more productive in their roles. that is what is important. you are not seeing quits go up as much. that means people are staying in their jobs longer. if they are staying in their jobs longer, presumably they will get more productive in those roles. dani: people use the immigration piece to say that we are in for an inflation spike next year if we get trump in the white house because you get more curtailed flow of immigrants. given this idea of what we see as normalization, from some of the visa process is opening up,

is that not as relevant of a fear? neil: worrying about inflation, with respect to the election, who knows what the outcome will be? but i do think it is fair to say that if trump were to win, then there is a higher likelihood that you have a unified government. whenever you have a new, unified government coming out of the election, they will always do something. it is not like they get into office and say, we are going to raise the retirement age and cut spending. they will want to do something that makes people feel good. i think they will probably lead with something like that, tax cuts, spending. that will be inflationary. to the extent there is a restrictive immigration policy that comes about, it will add to that even more. jonathan: enjoyed this. i know you have thoughts on

gucci. we will do that another time. thank you. equity futures on the s&p positive by a quarter of 1%. your bloomberg green with sonali basak. sonali: the u.s. army corps of engineers says it has a plan for the continued cleanup of the francis scott key bridge. workers will place a small explosives to clear parts of the span stranded on the container ship. the demolition can begin this week so that the content can be moved. the dali struck the bridge in the early hours of march 26, slowing down traffic and the port of baltimore ever since. ford is shaking up its c-suite of executives. sherry house is set to become the cfo this year. current cfo john lawler will become the vice chair and focus on the company's expansion plans. pershing square founder bill ackman was criticized for his

attacks on diversity and inclusion policies. in a closed-door discussion at the milken conference in los angeles. he previously labeled dei initiatives as inherently racist and illegal. at least one speaker said his comments reflected a poor understanding of the civil rights movement. in a statement issued afterward, ackman says he has written thousands of words on the topic and asked people to read them fully to fully understand his perspective. jonathan: thank you. enjoy your weekend. i feel like i need to say on the record, neil dutta did have thoughts on gucci, just didn't have time to share them. it is amazing that economists can look at the same data and have two very different views. neil talking about a welcome cooling, deterioration over at citi. they are saying watching for weakness.

dani: also you have others talking about. ellen zentner at morgan stanley saying we are going to get three this year. jonathan: without a doubt, opposing views. great ideas exchange. next on the program, ai fueling demand for chips. >> we are very confident about these growth numbers. we see people investing faster and faster into new hardware, which is good for us. jonathan: we will catch up with mandeep singh to get you down to the opening bell. cash open is 45 minutes away. on the s&p 500, we are up by 0.25%. warm then rain, more clouds. maybe some heat over the weekend at some point. this is bloomberg. ♪

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jonathan: here are your scores going into the opening bell. s&p 500 positive by a quarter of 1%. foreign exchange, not much happening. the euro a little bit weaker. 1.0769. light on economic data all week. jobless claims, the wrong kind of upside surprise. you will get the university of michigan sentiment numbers, so look out for them this morning. under surveillance, ai fueling demand for chips. >> why are we so optimistic about the future? one is the business model. we have incredible visibility in terms of, a, when the products are designed, when they will ship, with the volume looks like. we are very confident about the growth numbers.

we see people investing faster and faster into new hardware, which is a good thing for us. jonathan: chip stocks writing strong to mentor him as demand continues to rise across the industry. tsmc reporting sales jumped 60%. that follows a 34% increase in march, pushing shares near all-time highs. mandeep singh a bloomberg intelligence joins us now. difficult to get a clean read on this, and that applies to a lot of things including semis. you hear one thing, you hear something else from somebody else. what is the clear read on what is happening at the moment? mandeep: the monthly numbers seem to be accelerating. to my mind, tsmc is the best proxy for chip demand across different sectors. clearly they have told us ai would be about low teens of their revenue, which is a pull forward from there earlier forecast, but this suggests the

auto and smartphone chip demand, which was weak until now, seemed to be bottoming out. otherwise they would not report this kind of a bump. apple guiding that the next quarter they would see growth, indicates there will be a faster upgrade. now we are seeing that in the tsmc monthly numbers. dani: i will try my hardest not to talk about the ipad ad again as much as i want to. how much of this is ipad demand? dav ives thinks there will be a new upgrade cycle. is tsmc telling us that that will happen? mandeep: very hard to pinpoint exactly how much would flow into an ipad upgrade. when i think about tsmc's revenue split, smartphone chips where the largest portion of their revenue. now with the pace that ai

accelerators are growing, they are taking away spend from non-ai spend. there is that substitution going on. in this case, iphone versus ipad, i was told that my money on iphone upgrade being faster than ipad, but time will tell. if they come up with a lot of new applications, maybe it drives a faster ipad upgrade cycle. dani: we know who apple's capex benefits, not just tsmc. talking about capital expenditures, who will that money benefit of the ai players? mandeep: interesting that you mentioned apple's capex. we are getting hints that they are actually thinking about coming up with their own chips for data centers. so far, the apple chips were more geared toward their own devices, iphones, ipads.

now we are talking about apple actually applying their own chips in their data centers. that could be viewed for somebody like tsmc given how much business they get from apple on the consumer handset side. if apple is another capex player, which they did indicate on their earnings call. they suggested they would use more of the capacity from the cloud providers. but if they are designing their own chips for data centers, tsmc stand to benefit the most in this case. dani: who stands to lose? mandeep: what we have seen is the substitution. clearly, ai accelerators spend has taken away the capex from the cpu, other types of hardware spend. the fact that intel is at a $125 million market cap, tsmc at 750

shows it is already reflected in the numbers, market sentiment. the cpu portion is the one getting affected the most. i think you are seeing more bespoke accelerators. jonathan: dani gave a nod to it, let's do it. when was the last time you heard apple apologize for anything? i am still not sure what they are apologizing for. when was the last time this happened at that company? mandeep: it is hard to see apple putting any kind of step wrong in terms of how they do their pr. they have always been privacy-focused from a pr perspective, i think they do a great job. clearly, there are things that they try to fix when it comes to their reputation. i think they have the cleanest

reputation when it comes to all of the large tech companies. jonathan: that is what is odd about it. this company talks about shaping the future. this is the very essence of what these technological firms are. they have destroyed industries and they are proud of it for a long time. if they are apologizing, aren't they apologizing for the product? what position is this company in now, have they lost a step, lost confidence? mandeep: clearly on the ai side, they have been behind. no doubt they are playing catch-up year. but when it comes to ads and specific things, these sorts of things happen from time to time. again, i look at apple's history, they have done a good job being on the consumer side when it comes to a lot of things, especially on the privacy side of it. this to me is just a small thing. on the whole, they have done a good job in terms of their

reputation. jonathan: appreciate the input, mandeep singh. bizarre story after that product launch. sneak peek of next week. we will deal with the data and then the guests. retail sales, cpi, ppi, jobless claims. then you have a ton of fed's, retail in the mix from walmart, home depot. what can we look forward to next week? the big one is cpi. what stands out to you? dani: has to be retail, individual companies. we get a real-time update about how people are feeling about prices. it often is it matching with the macro data. if we get that mismatch again, i don't know what the market does with that. somebody what she was a narrative of economic weakening, someone will choose a narrative of strength. jonathan: coming into this week, what would we move on more? weaker data or stronger data?

this believe that the fed would cut on weak. do the same rules apply going into next week given the repricing we have seen in bonds already? dani: likely. it feels like a market that is in no man's land. this will be the ends of earning -- and their earnings, and then we will get these nuggets of data. that gives us these opportunities were volatility because we have nothing strong to anchor on. fed speak? they say the same thing over and over again. jonathan: there is a sneak peek of the guest lineup. cameron dawson, john riding, and then lynn martin. torsten's lock said he is looking for no cuts in 2024. looking forward to that conversation next week. dani, appreciate it. enjoy your weekend, for all of you at home. we should have bramo and the team, amh, hopefully the band is

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manus: a very good morning. pump up the volume when it comes to to sense he -- tm and c. we will count you down to the open right now. good morning. ♪ futures rise. stocks close in on another record. the white house prefers to