♪ >> when we've had big movements in trade deals, it does create a lot of volatility, a lot of noise. >> we are expecting a tariff rate of around 14% by year end. >> i don't think these are going to be done that quickly. i do think the tariff uncertainty will continue. we are all looking at the black box right now, waiting as this information comes out. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning, good morning. for the audience worldwide come bloomberg surveillance starts right now. closing at q2, the s&p 500 sitting at all-time highs, looking to caps off a 10% advance even at the big,

beautiful bill hits some increased resistance in the senate and trade partners strike a deal before the july 9 deadline. >> that's the end of the trade deal. we were saying congratulations, we are allowing you to shop in the united states of america, you're going to pay a 25% tariff or 35% or 50% or 10%. jonathan:jonathan: a busy july is just around the corner. lisa: the question is are we overly pessimistic or are we too optimistic at a time when you were coming off record highs for u.s. equities, good for stocks, good for von to just take a test month going back to february. a certain point, are we baking in two much good news, or as i see steve next to me shaking his head, pessimism, or we overly pessimistic because things continue to grind higher, and we still have a lot of stock lagging behind? >> it's worth repeating again, a 10% rally on the s&p 500 in the

same quarter we have april 2, that is absolutely phenomenal. even with these deadlines, july 4, july 9, both july 4 and july 9. annmarie: maybe that is a reason they could slide. this is going to be a fight because not only does majority leader john thune have to get a handful of senators across the finish line, you have these different factions. those who want to see lest spending, those who want to see more health care benefits and those who are really concerned about what is going on with renewable. when you get a concession to one group you create whole host of problems in another but even if senator thune is able to do this to the next 12-16 hours, the house has to decide are they going to capitulate or are they going to have their own fight? jonathan: before we get to friday we need to deal with payrolls thursday.

113 at the median estimate, down from a previous read of 139. lisa: there's a lot of payrolls risk fake into the market, this according to a whole host of different analysts over the weekend. and i'm just wondering what is that risk at a time when people are expecting a low trend to not necessarily represent weakness, but just below churn of less immigration, less hiring and less firing? how do we understand this were shack test of numbers? -- rorshach test? of numbers lisa: that is the question, what is the come to jesus moment in market were suddenly start to say hold on a second, we can identify a trend to the weaker point and can you get the fed cutting rates without that type of clarity because if you can, then you are in the mike burleson camp. if you are not, there is a question about whether the fed is going to be too late. jonathan: up another 0.4% on the

s&p 500. coming up, stocks looking to add to record highs. the former senior white house traded visor kelly and shaw on the latest trade negotiations, and bank of america looking ahead to thursday's payrolls report. we begin the stocks looking to close out. we expect the grind higher inequities to continue as investors that overreacted to april continue to get pulled into the market. steve joins us now for more. it's good to see you. lisa mentioned mike wilson, this line this morning the rally has been more fundamentally driven man many appreciate. we you agree? >> i think that is the point you are making in the quote you just had up there is a tendency when you are caught short in market rallies to discount that rally. in look, at the beginning of every rally it is short covering or is it balanced or is tariffs

got delayed, not canceled. and in other things start to happen. the fed gets closer to cutting, even powell hinted that september is likely to happen. you start seeing things like the big beautiful bill start to move through the pipeline. every reconciliation bill fails at least twice before it passes, so nothing that has happened this week has me thrown off there. trade deals of some kind are likely to come, and underneath, earnings estimates have stabilized after falling in the immediate aftermath of april. so it started out as just a relief rally is starting to become something real and that is what sucks in those investors slowly and reluctantly. jonathan: is that despite or because of the data? >> one of the missing ingredients here is the fed movement. you're in a scenario where if data was too high in the fed has all the excuse that they need to remain on the sidelines, whereas the data is softening enough in a way that suggests the economy

is slowing, but not in a way that suggests some major problem. the same thing lisa mentioned with the payroll report. it is slower, but it is not showing massive layoffs. and i think that kind of slower data that pulls the fed in but isn't indicative of major economic problem is being seen by this market as a positive. lisa: this is the key point, mike wilson pointing to the idea of great rate cuts. not that any rate cut would be a bad thing. why are we morphing into that again when that was actually anathema to everybody believed just a month or two ago? >> not everybody. that's what we have been screaming. i've been on this show at least once or twice a month for the last several months and we've been wanting the fed to move in the direction of the lease preparing the market for cuts. but the reason why it is not because we see a big problem but because if the fed can move earlier and gradually, and you

have an economy that is slowing and it is the good kind of cut, preventing a problem from coming. if you wait too long you let those pressures build and you find yourself behind the curve in your any scenario where you got to cut much quicker because you have a problem. you are on the cusp here, and if they move in the next two meetings i think that is probably fine. jonathan: we've been talking extensively about how the s&p 500 is not the economy and increasingly weak since divergence increasingly being led by the big tech names and it really hasn't been led by everything else. you are starting to see small signs of broadening out, but how crucial is that the idea that this is a durable rally back and get the 7500 and the next 18 months? >> it has been narrow, but during the april selloff, the mag 7. to a two or three year cheap in terms of valuation. we've been in the camp of broadening out now for a couple years but during selloff really

was a large cap tech that took the big brand. what you seem since his look at small caps. small caps have participated. some of the value names have underperformed that is because their last earnings season was a little disappointing. so yes, it has been growth-led. i don't think this is just a story of growth, though. i don't know that you have to right now. i think this is a pretty healthy rotational rally. annmarie: you look at the tax and spending bill going through congress and you say it is going to be moderately stimulative, what part of the domestic economy? >> you have to take into account with tariffs, assuming something like 10% across the board. when you do, although some looked like a $2 trillion or three for the dollars increase from the debt comes something when you have tariff revenue that is basically debt-neutral. a little bit of a higher rate you can get to deficit reducing.

it is not a big, huge stimulus bill where you are blowing out the deficit. using some of that tariff revenue, i would probably half is borne by the u.s. taxpayer, half by a foreign taxpayer, where they delivering 4.5 trillion dollars of tax cut extensions plus a little bit extra. annmarie: does the american consumer feel it? there are getting a tax cut from washington to pay more for everyday goods because of an increase in tariffs from goods coming into the united states. is it basically just equal, do they cancel each other out? >> if you are just extending the 12 -- 2017 cuts i would say yes, but it cancels out. lower and middle income americans feel the brunt of these price hikes the most. rich people don't get paid in tips. rich people don't get paid in overtime. i've tried to reclassify my bonuses. the point i'm making is that no

tax on social security, those are the designed to help out low to middle income americans that feel those higher prices. in the past, that's always been equipment but this is plant and equipment which i think will allow companies who might be reticent and want to wait out the administration in terms of investing in the united states have such a good deal on plated equipment that they may do it now. lisa: he said he would talk with management. let's see how that goes. jonathan: the estimate in their surveys, 113. a whole bunch of reasons we might get a softer than expected. daniel one k. does the market have the capacity to observe a downside surprise on thursday morning? >> i think it does depending on how the fed reacts. whether or not that number is a little high or a little low, we know it is slow. you see it in wage inflation, in the claims data. it has slowed.

answer the question is, is that slowing going to be met with more dovish policy? it is just a slowing and it doesn't morph into something more significant. i expect it, but we will see. jonathan: any sign that coming from german pal? >> as much as he has been locked in, i think i saw the first set of cracks at the testimonial. this idea that he admitted that most of the committee sees cuts this year and he seemed to hit september would likely be in play unless we had a big inflation surprise. in a perfect world i think it probably should be july but if the september vs. july that is probably not the end of the world. jonathan: good to see you. if you months ago being constructed in bullish this month. that was dangerous stuff back then. sounds great now, but that was a tray for the brave back in early april. lisa: and the question is really can we continue forward with the same kind of a momentum, and

what steve is pointing to is all the people who are still saying are we to optimistic are the reason why this market will continue to go higher. jonathan: chairman powell will be speaking tomorrow alongside a whole bunch of central bankers, so look out for that. in the meantime, let's get you an update on stories elsewhere this morning. yahaira: senate majority leader john food isworking to pass donald trump's tax and spending bill by july 4, but is facing opposition from eight republican senators and must find a compromise between factions of his party. some are pushing for deeper spending cuts while others are seeking more funding for health benefit and renewable energy subsidies. meanwhile, canada is making a move to try to jumpstart trade talks with the u.s. that is withdrawing its digital services tax on technology companies such as meta platforms and alphabet. this comes after trump said on friday he was ending ultra talks

with canada in retaliation for the digital tax. an online retailers teemy and shien have seen growth plunge after steep tariffs and ending of a loophole. monthly less active users plunged more than 50% to about 40 million users march through june. it reports the companies have switched their focus to europe. jonathan: thank you. more in about 30 minutes. up next on the program, the tax bill hitting some resistance. >> i want to move onto the big beautiful bill. do you think you're going to get it in that timing? jonathan: if it is today's letter of five days later, they say that is a tremendous failure. whatever it is, as long as we have it is very important. jonathan: live from new york city this morning, good morning.

♪

♪ jonathan: 9:40 this morning eastern time, do not miss this conversation with scott bessent sitting down with bloomberg tv on taxes, on a trade come this market. in this market right now, equity features positive once again by 0.4%. up another 0.65. the tax bill hitting some resistance. >> i want to move onto the big beautiful bill. do you think you will get it in that time? >> i would like to say yes but the problem is if we are today's late or days late everybody says it is a tremendous failure. whatever it is, as long as we have it.

if we don't have it, the debt ceiling extension is very important. >> the deadline for president trump's big, beautiful bill could slide as legislation faces pushback from his own party. >> we owe it to the american people and i await to the people of north carolina to withhold my affirmative vote until it is demonstrated to me that we've done our homework. jonathan: tyler, good morning and welcome back to the program. just how strong is this pushback from the republican party over the weekend? >> well we know at least two republican two are likely no's, enacted be a problem for john food because he could really only afford to lose one more before he has to call in jd vance to cast a tiebreaker vote. one of them we just heard from, thom tillis from north carolina. he's raised concerns about changes to medicaid including lowering the medicaid provider tax. it is how quickly some of these

tax credits are going to be phased out. the second is senator rand paul of kentucky who wants to see deeper spending cuts and really won't vote for any legislation that let's the debt ceiling. that really illustrates the two factions here. yes, they agree on the core tenants of this bill, but they are completely separate ends when it comes to the spending cuts. there's about six other republicans that we are closely watching better on the dance and senate majority leader john food is going to have to really get them over the finish line if they want to pass this by july 4. to give you sort of the states we are working with, the senate is going to reconvene today at 9:00 a.m. is turn to kick off what is known as a voteorama for democrats are going to introduce amendments, try to force some politically fraught vote and dried out the process. that could take up to 12 hours to complete but when it is done the senate would vote on final passage. the senate could potentially look at passing this if they have the vote as early as tonight or tomorrow morning.

jonathan: terry haynes joins us now. in your opinion, is this real, authentic persistence were just a little bit of theater before the ultimate inevitable later this weekend? >> i'm in the theater category today, and i enjoy theater, but it is theater. political bodies always wrangle around for folks and this is a situation where there are 53 votes that absolutely matter and they are jockeying for the most they can get in a situation. but at the end of the day here, they come together and if anything, a weekend -- with senator tillis foreshadows that because you have a situation where there was so much pressure put on him. he's decided not to run for reelection. these guys all liked their seats and are going to want to stay.

annmarie: when it comes to competing factions in the senate, which group is it? >> fundamentally i think it is the harder-core vs. the software. obviously there's more of them, number one. number two, they are pushing as hard if they can to get the things done. they'll make whatever smaller accommodations they have to to get some things done, but don't look for the senate to automatically morph into kind of flipping over to the southside wholesale. annmarie: when it comes to how this process all comes together, what is going on, do you think we are setting up a president now where -- precedent now were any president can come in and set policy and extend that policy within the next 10 years? >> i think that's been going on for 60 years to reconciliation process frankly. let me also say whether or not it should be budget impact at

all, those are rules of the senate. there's always kerfuffle about the parliamentarian. what she's doing is faithfully executed her job as a staffer to interpret and finalize rules that the senate itself has put into place. so this is not a situation where the staff is hijacking some process. it is a terrible thing for an elected official to blame a staffer for that. back to your point, both parties have been gaming the system for 60 years and i expect that to continue, yes. lisa: you said initially that you think this is more theater than actual fissure and yet we

are all playing the numbers game of the weekend that the republican senators can only afford to lose three votes and currently there are four on the line. thom tillis who isn't running for reelection isn't necessarily constrained by potentially being primary. who caves on that front, why do you see this as still getting over the finish line? >> i think with senator murkowski, senator collins gets is a little more softening on medicaid provisions. at the end of the day what you're going to have is a situation where you have 52 on one side and rand paul on the other. >> so we spend a lot of time

wringing our hands talking about the increasing budget deficit in the united states and how this is going to cause some sort of bond vigilante moment you get real pushback in the bond market. the committee for responsible federal budget says that this current iteration of the one big beautiful bill is going to add $1.3 trillion to the deficit over the next decade. do you think this is -- or are they going to be real offset that we haven't accounted for? >> whoever is doing the interview with secretary bessent i hope will acknowledge that he was absolutely correct in how we got markets would react. he called that, a lot of people didn't. sanguine, i don't know.

the rules by which the cbo and outside groups concoct their views are artificial, and they exclude lots of things like the impact of tariffs and growth, frankly. i am on team steve on this one, i think. annmarie: when it comes to how this gets to the president's desk, does the freedom caucus just fold like they did in 2017? >> for three months now i've been advising markets that this thing was going to happen on or around july 4, and now here we are. i've also for probably a couple of months now been advising that the whole purpose here is the senate is going to jam the house and the senate bill will be a final bill. i still think that and frankly if you listen, that buzz is bubbling under right now.

how we've accommodated the house and how we can working together and all the rest, that is a signal that we are going to end up having to take whatever the senate does and the president is going to have to come in and put the hammer down on some people. jonathan: good morning sir. is it real persistent or theater, terry believes it is just theater. annmarie: but there could be real resistance with some members of the house. i understand there is some good mood music put out there making from the likes of congressman mike law, but then you go to chip roy, congressman chip roy of the house freedom caucus. you go to his twitter handle over the weekend, he does not like the senate version of the bill. jonathan: yields down for three consecutive weeks, down almost 10 basis points on the 10 year just last week.

lisa: people are shrugging off this idea that this is somehow going to spur bond vigilantes into action. get your fiscal budget in order. we are not seeing it happen. is it because they're made isn't as much foreign selling? a whole host of suggested that is the case. jonathan: up next, a former senior trump trade advisor kelly and shaw as canada looks to restart trade talks with the u.s. plus, dani burger with your morning movers. renewables and focus falling on the latest version of the trump spending bill. you're watching bloomberg tv. ♪

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jonathan: record highs on the s&p 500, through friday 82 day winning streak. closing out last week for the biggest weekly gain since mid-may. on the nasdaq up .7%. two year, 10 year, 30 year, nothing to worry about been fixed income. the 10 year down close to 10 basis points last week. another two this morning going into payrolls thursday a few days away. yields come back down and the pressure on the u.s. dollar is not going anywhere. in the fx market euro-dollar, euro stronger for an eighth consecutive session. at grind continues.

the longest daily run back to july 2023. let's get you some single names. morning clean energy stocks getting slammed. hve a quicker than expected phaseout for renewable tax credits for solar and wind projects. the expectation was that would've happened later. you are looking at names like nextera energy following 3%. -- following 3%. in the latest draft you saw a quicker rollback of ev credits. that is hitting tesla. shares down more than 1%. elon musk slamming that tax bill. jeffries upgrading disney this morning. shares are up 1.9% saying there is less of a slow down for their parks division.

cruises look strong and they have a big slate of entertainment over the next six months including his utopia -- including zootopia 2 and avatar 3. nothing is new anymore. jonathan: that is exactly how i felt. lisa: you actually have seen it because it is usually 2 or 3 or 4 or 5. jonathan: giving all of that a mess. president trump's tax bill heading for a marathon vote session. senator john thune looking to oppose holdouts. annmarie: he can only lose 2 -- he can only lose three. he has already lost two. he needs to get one of these senators over the finish line. this will come down to the group terry was talking about, the group that is looking to scale back how quickly they are

cutting medicaid cuts. politically this might be challenging for republicans when it comes to the midterms. pew research showing most americans are not down with the big beautiful bill. maybe in terms of tax cuts but they do not want to see things like medicaid or any sort of health care benefits taken away. lisa: this is the reason we will have a vote a rama which will be 12 hours more. the rabbit hole i went down which is why vote a rama. as recently as 1992 they started calling it a vote a rama and in 1996 it was codified by republican whip trent lott. it sounds like a bad term out of a 1988 sitcom. jonathan: can i recommend you spend that time just sleeping? extra time in bed. lisa: i was thinking how did we end up saying this with a serious face voter rama every time it comes up?

jonathan: that is just one of the deadlines, july 4 on taxes, trade very much in focus with candidate making a concession to the u.s. in a bid to restart trade talks, dropping the digital services tax. prime minister mark carney and president trump are grinning to sign a new deal by july 21. annmarie: we learned there is going to be an extension when it comes to canada and their trait discussions. when i speak to trade negotiations on the other side of the case, if there are serious conversations with the trump administration they are being told we will give you that extension. two, when it comes to digital services tax, how much did this help mark carney? this is something from the justin trudeau world and a lot of businesses have been going up saying please do not put this into play and may president trump helped him here? lisa: i think mark carney has to be given a little bit of credit. he has brought the temperature down.

even when you had the leaders of the world come to canada he did not have them come out with a joint communique. let's not focus on that, let's talk about real stuff and not raise the temperature on a specific number of words. he has played this in a way that has made canada more accessible for people who might want to vacation there. jonathan: the weaker currency, all that stuff. deadlines? july 21, july 9, one is the deadline for all of these countries? annmarie: i don't think there is one. the president constantly says in two weeks. i feel like i have been hearing every two weeks since april 2. it depends. for each country it is specific. jonathan: let's get to the story in new york city. president trump threatening to withhold federal funding from nyc if the mayoral front leonard does not behave himself financially. the comments, as mamdani says he

does not believe the world should have billionaires. lisa: this is the federal government versus local municipalities. what i find interesting is there is a split in maga world about people who find this up orange and people who are not so much in that camp. tucker carlson saying zorhan mamdani was the only person to say he wanted to focus on new york city. if you look at some of the rhetoric it starts to look very similar on either side when you go far enough to the fringes. annmarie: i saw that clip with marjorie taylor greene who is the only one who said i have no reason to travel anywhere but stay in new york. we have seen the president do this before. he did it with governor newsom. i will withhold funds. if zohran mamdani becomes the mayor of new york that will be, tense relationship between washington and the financial capital of the world. jonathan: and could be

complicated for that democratic party going into the midterms and tried to secure what their future looks like in the next presidential general. annmarie: a lot of democrats that are more moderate and centrist have come out strong against zohran mamdani and of some of them have said i am not ready to give my backing to this individual. jonathan: that is the latest on new york city. let's get back to trade. global trade partners looking to strike a deal before president trump's self-imposed deadline of july 9. the former senior trade advisor at writing "i'm expected to see most tariffs land between 10% to 25%." kelly and joins us for more. what leads you to that conclusion? kelly ann: thank you so much for having me. i think july 9 is feeling less like a deadline and more like a mindset in terms of how i see these relationships rollout. 10% is the safe zone where the

president has kept us for 90 days and 25% is a high tariff. i expect after all these negotiations the countries who get the best deals like the u.k. will end up with a 10% baseline tariff and for everybody else 25% is probably the upper range. plus we have these sectoral tariffs and we are getting indications from administration officials signaling that to the private sector as well. annmarie: i like that. it is a mindset. in this negotiate of mindsets, what is the pecking order of who gets a deal first? kelly ann: we are likely to see a mix of countries and clearly administration has been targeting our biggest trading partners, those with whom we have the largest trade deficit as the prime targets for the presidents trade policy because of you get that right everything else can flow through. i expect to see a mix. i expect to see large trading partners. i am putting the european union

in that bucket. the president has talked about india. we could see asian countries. other european countries like switzerland. brazil and argentina and countries like israel. the president will assign a tariff rate everyone else and give them the opportunity didn't come back and renegotiate if they want something lower. i think we will see all of the above. annmarie: it feels like you will be negotiating for his entire term. is that how you take it? kelly ann: if it is anything like trump 1.0 then yes. this is a perpetual negotiation. i think what we will see is over the next couple of days from july 4 to july 9 we will see a series of deals announced in these will be agreements in principle over core obligations. then the details of those deals will need to be further negotiated. secretary bessent has talked about labor day as a potential target day for finishing up

those negotiations. we will see more stability in the market from there but this is continually a moving target and i think countries who want a better deal six months or two years from now will have the opportunity. lisa: we are talking about july 9 soft deadline for concepts and then for more details we are talking about labor day. what do companies do with all of this? are they paying the tariffs at any given time? how do they follow rules that have not yet been codified? kelly ann: those are great questions. i think we will start to see the lay of the land july 9. we will see a greater lay of the land this summer or fall. that is where i really think the private sector will have more certainty as to what some of these tariff rates are likely going to be for the long haul. i do not think we will ever get that certainty because we also have these sectoral tariffs the administration is continuing to rollout. we have heard they have six or

seven more investigations in the hopper of different projects or sectors so we will see this evolving. i think we will get more certainty through the summer. lisa: there has been a theory we will see some of the trade negotiations and the trade deals we have been discussing trickle into the economic data and to trickle into earnings as soon as the next few weeks. you think that is feasible given the fact companies do not have certainty or not willing to make big moves on the supply chain level or a pricing level before they have that clarity? kelly ann: the other thing that is in play is the one big beautiful tax bill. the administration would say it is not just our tariff policy or our trade policy but you have to look at our tax policy, deregulation, energy diversity, all of these things to get the full picture as you take steps to invest in the united states and set up supply chains. some of these sectoral tariffs will be stickier. companies in steel, aluminum,

automotive, i think they will see more certainty sooner. i think for everyone else if you can bake in an estimate of a 10% to 25% tariff depending on where you are importing from, that is a good estimation of where things will land that is what i'm telling my clients. annmarie: we've not talked about china. what is the next steps when it comes to this relationship between beijing and washington following the geneva and london talks? kelly ann: things are going very slowly. right now we are working on implementing that original geneva deal through the london framework. all eyes are focused on some of these export controls. on the chinese side rare-earth and rare earth magnets. on the u.s. side some of the countermeasures taken. the president mentioned the chokehold the u.s. has is on china's aircraft and aerospace industry and they need us for that the same way we need them for rare earth magnets. we need to see a de-escalation with these two sectors in the

next few weeks. at that point, that august 12 deadline was supposed to be the date where we saw a broader set of economic commitments being negotiated between united states and china. i think the focus of august 12 will be relatively narrow on implementation and may seeing phase i rollout. this is going to be a difficult relationship and we will see this play out over the next year or two, not the next couple of weeks. jonathan: a few more years of this. cannot wait. kelly and shaw, former senior trump trade advisor. lisa: how do you price entail risk that every day seems catastrophic and everyday does not materialize? you just ignore it. that is the only way to stay sane. jonathan: this is the biggest wrinkle communicating policy of the federal reserve. chair of the federal reserve says who will pay the tariffs? what he should be asking is what are the tariffs. lisa: that is the reason he said he had to wait until july 9 to

understand the levels. does he get those levels july 9? if it is an ongoing negotiation we end up in a situation where we do not have any sense of it and we are just throwing spit balls at the wall? kelly ann: kelly ann shaw was at the table when it came to negotiating the china data. i take her word for it. jonathan: did you do spitballs as a kid? lisa: kind of disgusting. did you ever do it? jonathan: i am sure i did. i've not thought about that for about 30 years. we can talk about that another time. futures -- what were you doing last week? social media stocks. equity futures positive on the s&p. a lot on trade, taxes, and policies. in our bloomberg brief, we have more. yahaira: one of hong kong's last remaining pro-democracy parties has officially disbanded.

the leader of the league of social democrats cited immense political pressure for the decision. it is the latest opposition party to cease operating after beijing imposed a national security law on hong kong in 2020. here in the u.s. north carolina senator thom tillis will not seek reelection. this after he voted against advancing trump's tax and spending bill. trump responded on social media, calling thom tillis a talker and a complainer and said he was speaking with several candidates to launch a republican primary bid. meta is ramping up hiring for its ai super intelligence group. the company signed on four notable ai researchers from openai. meta ceo mark zuckerberg made headlines for beginning to personally recruit ai researchers and engineers after being frustrated by his company shortcomings in the space. those $100 million packages are working. that is your bloomberg brief. jonathan: if you cannot by the

companies, take out the stuff. lisa: that is what he seems to be going. this is the way people are spreading political messages. jonathan: an aggressive push for mark zuckerberg. taking that somewhere else. coming up next, a thursday payrolls report. >> what if we are transitioning to a point where the labor markets are becoming a source of disinflationary pressure? the reason that could be is because the stock of unemployed people could grow. jonathan: coming up next, aditya bhave. his number for thursday morning in the 90's. that conversation is coming up next. ♪

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jonathan: all-time highs into monday. the rally continues. this quarter has been an absolute blur. where has it all gone? equity futures up .4% as we close out q2. a thursday payrolls report. >> what if we are transitioning to a point where the labor markets are becoming a source of disinflationary pressure? the reason that could be is because the stock of unemployed people continues to grow. the markets are looking for a smoking gun. to me that could be a negative barrel print at some point over the next few months. when that happens i think the markets will pricing more rate cuts. jonathan: a shortened but busy week of economic data hit including adp, jolts come in the june jobs report. aditya bhave writing the following, we expect nonfarm

payrolls to come in at 95,000, lower than consensus expectation of 120,000. he joins us with more. you are looking for 95 but no rate cuts for 2025. 95,000 compass that about 95 or 95 and get used to it? aditya: the first thing i do is focus on the unemployment rate. i think that is more important than nonfarm payrolls. with the unemployment rate we think it will land around 4.3%. in may it was 4.24 so that is fine. on payrolls we think it is a combination of idiosyncratic stuff around the timing of memorial day and how that affects leisure and hospitality hiring in may and june. but also structural issues. continuing claims were quite elevated for june. jonathan: combined those data points. don't they paint a picture of deterioration in the labor market? aditya: softening, yes.

out like deterioration we worry about work when the unemployed rate goes above 4.5%. lisa: we saw your call for the fed of no rate cuts. how can you possibly have a deteriorating labor backdrop, not necessarily weak, and a fed that remains on the sidelines without inflation pressure? aditya: the last part is what i would question. i think there is some inflation pressure. we have been stuck at 2.7% for the last year on core pce inflation. in may 2024 the core pce was 2.67% coming-out is 2.68%. the excuse last may was housing inflation would come down and that would bring the core back to 2%. that's happened. we have gone down on housing but everything else has picked up including goods. we are not making progress on inflation even before you see

the tariff impact. lisa: what are you seeing that mary daly and jerome powell and some of the others are not when they are signaling septembers the time they will cut rates and it is fully price to markets. what are you seeing that you think will surprise them into holding? aditya: september is live in the sense that it is an option. they are concerned about how the labor market will evolve over the next few months. if the labor data are super weaker for the next few months if we get 4.5% on the unemployment rate is completely reasonable for them to cut in september. the problem is if we don't we are looking at potential 3% core pce with a relatively healthy labor market and then it gets a lot harder to cut and when you get into the fall you're are talking about fiscal stimulus, getting past tariff uncertainty, the economy could pick back up. annmarie: how important is it for the fed to understand not just to his eating the tariffs but the tariff rates? we might not get that by september for these countries.

aditya: presumably we will have more clarity after july 9 but things could still go back and forth. jonathan: how are you drawing a conclusion about who will shoulder the tariffs? we have had two types of guests on the programs. i've read from goldman sachs that will be the u.s. consumer. we have heard from other companies that thinks it will be the exporter. it will come from the national players. you seen anything in the data that convinces you one way or the other? aditya: i would start with the idea that back in 2017 and 2018 affects eight most of the shock. the remember the dusted -- fx ate most of the shock. that has not happened this time around so someone has to pay it. it will be a mix. if you look at in port prices they suggest the u.s. importer and the consumer will have to bear a significant burden of the tariffs. jonathan: does the consumer in a

position to bear the ultimate cost of the tariff? are they in a position to go back to their employer and ask for a wage increase? we are from economist every economist. the tightness in the labor market is not there. they will not be able to back this up so you should not worry about inflation getting out of control. why doesn't that convince you? aditya: because the saving rate has increased significantly. the trough in 2022% -- the trough been 2022 -- now it is 4.5%. that means we have room to absorb a 2.5% inflation stock. nobody is talking the about the impact of consumer spending. we are talking about inflation rising by a few tenths. in theory that could bet and by the savings rate. jonathan: this is why the debate continues this summer. lisa: people say the savings late -- the savings rate and you have to look at the fact that a lot of people are under leveraged.

i wondered whether it ends up being company specific. nike was able to pass on more prices. general mills, turns out lucky charms is not as popular as it was when i was a kid. it is company by company, who has the pricing power to carry it through? jonathan: not a tariff story, the serial story. annmarie: that is a maha story. lisa: i don't know what it is. my kids do not like it. jonathan: they say they will take out the artificial dyes. lisa: i cannot imagine what skittles look like. annmarie: you can use beat e xtract. jonathan: piercing that change. thanks for stopping by. we will not ask you about that. the second hours just around the corner. you are watching bloomberg tv. ♪

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>> i think there is a structural decline in the u.s. because there are genuine questions about the reliability of institutions. >> the base case is a slowdown in growth, below potential, but still positive. >> there is an over optimism rate cuts are coming imminently. >> the next six months to nine months i did not think rates will be traumatically lower. >> we were thinking rates would quiet for the summer but now i am not so sure. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: what a rally through q2. the final trading day of the

second quarter and so far in q2 we are higher 10% on the s&p 500. your scores look like this. equity futures up .4%, building on a two win streak on the benchmark stateside. your week ahead shaping up as follows. the big one on thursday. payrolls thursday before the july 4 holiday. before we get to all of that come on tuesday we hear from chairman powell at the form for the universal -- for the european central bank and he is not looking to cut rates anytime soon. lisa: he is the difference between the bulls and the bears. many say if the fed cuts rates for the right reason that the market is not falling off a cliff you end up with a rally more significant than what we have seen. if they stay put like we just heard from kailey: -- from aditya bhave some people think some of the froth comes off the top. jonathan: before he sets policy

has to figure out what trade policy is elsewhere. july 9 for trade. the self-imposed deadlines might slide. annmarie: they might slide and the president himself has said it might be a few days late when it comes to the big beautiful bill. when it comes to the trade deal we have seen canada has a new deadline, july 21. it depends what country you're coming from when it comes to trade negotiations. senate majority leader john thune is bringing everyone back at 9:00, everyone can have an amendment to the vote a rama and this could be hours in a making. he is doing all of the dirty work. he has a number of senators he needs to shore up dealing with three factions. the fiscal hawks, those who want to see medicaid and health care benefits and those who say you're going too far on the renewables. if they are able to get this over the finish line in the senate, does the house just capitulate and accept this? jonathan: the pressure is coming

from within the republican party. it is not coming from the bond market. lisa pointed that out. 10 year bond yields around 4.25. this is three weeks of lower bond yields. annmarie: you are seeing -- lisa: you are seeing yields down to places we've not seen since february after the biggest rally in bonds a couple of months. the people stopped caring? have people looked at the dynamics in seen inflation coming in even with risk premium or is it just a great degree of complacency at a time you have the committee for responsible federal budget coming out saying it will increase the deficit to $3.9 trillion over the next 10 years. i'm not sure what to make of this except maybe supply is not what is driving bonds. jonathan: it is fair to say treasury secretary scott bessent might be happy with this outcome. he will join us at 9:40 eastern. look out for that conversation.

a conversation with treasury secretary scott bessent. coming up this hour we will catch up with stuart kaiser of citi, angelo zito with no video -- with nvidia approaching a market cap. we begin with stocks higher after the s&p 500 posted its first record high since february. stuart kaiser writing "valuation position sentiment and risk are similar to january as investors grow comfortable with no risk." stuart joins us for more. compare now to back then. are things better now? stuart: better. [laughter] that is a loaded question. the risks are known and once the market knows risks they can do with it but the risks to the economy are worse they were in january in some degree. they had wines for the economy are worse and market expectation of those risk is probably better than it was. lisa: you think right now the

market is fairly pricing some of the risks from a weakening economy and potentially treat deals that increased tariffs between 10% and 25%? stuart: you would hope the market is factoring that level of tariffs into the math. before you just said good news is good news and if rates are lower for the right reason markets will rally. i think the market is fairly discounting what they think a baseline for the budget is in a baseline for tariffs. are they fully discounting the unemployment rate at 4.4% on thursday which is what our economists think? probably not. annmarie: there was a lot of uncertainty in january. you've seen that same level of uncertainty right now. a lot of unknowns on the table? stuart: if you go back to january you are way ahead of april. back in january it was trump has not been inaugurated yet and we have deepseek and things of that nature.

i think the uncertainties are pretty similar to where they were in january. nowhere near where they were in march and april. it had -- it has been a long year. we have had a client say what happened in q2? annmarie: that to january like a full circle. in january we were all expecting a 10% baseline tariff and then higher on china. isn't that where we will end up after we almost went through this process of getting it out of his system as trump would say when it comes to liberation day? stuart: that is exactly right. you are pricing a base case on tariffs and things like that. the market expected the tax cuts to get extended for a year. what is different is you spend three months beating up the economy. the question is is the economy resilient enough to recover through that or are you in the same place in january except you will bludgeon the economy into submission to some degree? jonathan: is the bad data still ahead of us?

go to think about things super technically. going into something like payrolls on thursday are you comfortable being long into that? stuart: closer to the downside for thursday. i think it'll be a low-volume trading day. our economists are at 85,000 payrolls with a 4.5% unemployment rate. if that number prints we are lower from an equity perspective. i would not want to be carrying a lot of risk into that and trump has a history of messing up people's weekends. two things going on. we are comfortable long u.s. equity risks. we do it through a high-quality lens. tactically i would be cautious around the payrolls print the next couple of weeks. lisa: how scary is it to be bearish right now? how scary is it to come out with something that is not just ride the melt up? that is the biggest risk. this idea that bears have gotten blown up time and again.

people look at the headlines and said that is bad, turns out it is not so bad. how has that scared people away from tactically turning negative? stuart: that is a good question. if you are short in early april you got destroyed on the way up. consistently speaking the tail risks have been trimmed off and the worst cases have been walked out and if you been short that stuff has worked against you. for a short or bare to be happy these days they have to be betting on u.s. economic data weakening or significant re-escalation in the china-u.s. trade war situation. you need trump to say they are not negotiating in good faith. we are going back to 100%. you need something to that degree to turn tariffs from a buy the dip opportunity into i need to sell? lisa: what we need to see on the economic data front that would cause the bulls to get more bullish, for there to be a prodding out in the rally a lot of people have been waiting for to say now we are seeing

something that is sustainable? stuart: you get a couple of rate cuts, not because the economy is slowing but because inflation is coming off in the economy is moving along in this late cycle fashion than you're doing $1 trillion of buybacks and you have systematic buying and you have foreign investors re-engaging in the u.s. there is a story and it is just what you described. the economy holds in and we get support of rate cuts behind that with trump promising more next year. then the market can rally pretty well into that environment. it is the economy at this point. jonathan: can you clarify your bullish posture with more detail. is it something more nuanced? stuart: it is quality across the board so it is not just tech. we liked semiconductors as a ketchup trade. it is an area that has underperformed in the analog space. not just nvidia and broadcom, but the other folks. it is quality across the board.

mag 7 falls into that category. we like large-cap growth. we backed off on that a little bit when rate started to dislocate to the upside. we are in a higher quality rate insensitive stop right now. jonathan: there was another consensus sector in the banks. it was the banks. everyone coming into 2025 was saying we love the banks. where are the banks now? stuart: we would have fallen into that category ourselves. we have seen demand for regionals in the last couple of weeks. that is folks who like the banking sector and think the economy will pick up and are looking for a laggard as we get into all-time highs. you have earnings coming up, you have the slr, you will get potentially later this week into next week and remind people that financials are the second-biggest buyback sector in the market.

you have a flows dynamic and regulatory dynamic and growth holding in, you get a steepening yield curve, you can talk yourself into this being an environment that is good for banks. within banks what do you own? are you hiding in the large caps or are you willing to go down the cap spectrum and play more of a small cap ketchup theme. at this point we would still be comfortable in the larger cap higher-quality but it would be dishonest to say clients are not trying to engage in the smaller cap stocks right now. lisa: i was looking at a series of statistics 10 curtis of bloomberg puts out on a daily basis and he was talking about how the volume of ipo's trading this year is the greatest going back to 2021. are we going to see ongoing momentum in that space a lot of people of written off as being a lot more subdued than initially thought at the outset of 2025? stuart: i certainly hope so. i think the m&a cycle was a huge part of the thesis into this

year. you've and administration more open-minded about m&a and things of that nature. i would put m&a and what i call institutional risk sentiment theme. most retail investors are not trying to identify m&a targets. this is more of institutional trade. our target has been a rocketship to the upside. i think institutional risk sentiment has improved so much people are willing to put money to work. i am sure you will hear in two weeks that the pipeline looks great. we want that trade to work because that is an institutional positive risk sentiment, markets moving higher theme. will we see it? i don't know. we have had successful ipos but we need to stack those on top of each other. jonathan: the c-suite has been whipsawed over the last several months. we came in and we had confidence

like the world economic forum in switzerland. april it was sit on your hands and wait. lisa: we should do a basket for the anti-davos sentiment and have people traded in january and see how well it does every year. pretty much, american exceptionalism, europe needs to get off its can, let's go. jonathan: confidence of american bankers is right up here start 2025 and i guess all-time highs in the equity market might justify that to some extent. equities at all-time highs this monday morning. stuart kaiser will be sticking with us. futures up .4% on the s&p. with an update on stories elsewhere, let's crossover for more. yahaira: senate majority leader john thune is rushing to meet president trump's july 4 deadline to passive as of tax and spending bill. he is facing opposition from eight republican senators and must find a compromise. some are pushing for deeper

spending cuts while others want more funding for health benefits and renewable energy subsidies. zohran mamdani says billionaires should not exist in an interview. he said it is so much money in a moment of such inequality. president trump threaten to pull federal funding from new york city if soren mamdani becomes mayor and according to him, "does not do the right thing." president trump says he found a buyer for the u.s. operations of tiktok but will not provide details for two weeks. trump says it is a group of very wealthy people but the deal will meet china's approval. trump says he expects president xi jinping to agree to it. jonathan: this company is just in this rolling 90 day extension. talk about purgatory. lisa: is it going to be killed, is it going to die? two weeks. weight two weeks. annmarie: perennial extension.

you have to have china on board if you're going to sell this and that is the problem. i don't think having the buyers to buy this is the issue. jonathan: up next, the struggle to strike a trade deal. >> what i want to do and what i will do sometime prior to july 9 as we will send a letter to all of these countries, we will send a letter and say shop in the united states and you will pay a 25% tariffs and that is the end of the trade deal. jonathan: thank you for your attention to this matter. lisa: [laughter] signed president of united states of america. jonathan: tyler kendall will break down the situation going into july 4 and july 9 deadline for taxes and trade. good morning. ♪

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jonathan: looking to close out the quarter with equities all-time highs come up another .4% on the s&p 500. the biggest quarterly gain for the s&p 500 going back more than a year. for the fx market, a different story. euro-dollar has had 8% move over the quarter. the worst quarter for the dollar against the euro back to december 2022. lisa: i am old enough to remember when people would point to this and say this is the end of american exceptionalism. the new trend is this is the beginning of affects hedging desks across united states because this is all the investors from overseas saying the dollar might be a risk and we better get on that. jonathan: apollo saying look to the earnings from financials later in the quarter. lisa: that is what we saw with a number of studies over the weekend, particular from morgan stanley that looked at some of

the data that came out last week and said you're not actually seeing outright selling of anything, you are seeing that buying of u.s. stocks and u.s. bonds. jonathan: euro-dollar 1.1725. it is the struggle to strike a trade deal. >> what i want to do and what i will do prior to the ninth is we will send a letter to all of these countries and say -- this is 200 countries -- we will send the letter and say we would consider it a great honor and this is what you'll have to do to shop in the united states. we are like the united states. you will pay 25% tariff and we wish you a lot of luck and that is the trade deal. jonathan: trade partners lining up to strike a deal before president trump july 9 tariff deadline. the white house seeing agreements with as many as a dozen countries are expected by next tuesday. joining us to discuss is bloomberg's tyler kendall. not all countries will be treated the same so who is at the front of the line next week?

tyler: a person familiar tells bloomberg news the u.s. is nearing some sort of agreement. we would expect these to be frameworks, not fully fleshed out deals with a few different economies. that includes taiwan and indonesia. they also say pacts are possible with vietnam and south korea for july 9. that is not surprising since we know this administration has long prioritized those economies that are geographically close to china. we'll have to see how this does come into effect as the administration has said we could expect a handful of deals before july 9 but president trump has long toyed with this idea of setting an effective tariff rate in letter sent to our trading partners and perhaps july 9 could serve as the deadline for him to actually do so. it was interesting to hear the former trump trade official say earlier on this program that she is expecting perpetual negotiations under this administration and i will point out it has been fascinating to

see how sector specific tariffs have made their way into the conversations in such a meaningful way considering our original understanding was that these levees and under section 232 on the grounds of national security concerns were not going to be up for negotiation. you had president trump over the weekend threatening to keep auto tariffs on japan at 25% amid a roadblock in those talks, giving us insight into how this administration is playing with a lot of different factors as they try to work toward some sort of progress on trade deals. jonathan: tyler kendall down in washington, d.c. stuart kaiser still with us. we're hearing some people say the outcome of july 4 and that deadline might impact july 9. you see it that way? stuart: i feel like those are independent of each other. what you get on july 4 may reference tariff revenues. i feel like you are negotiating -- july 4 is within the gop negotiation. this other negotiation with other countries i think they are

separate. expectations are pretty high for both. markets are assuming a budget deal will get passed with a high likelihood that they are assuming the tax cuts will be extended. on the tariffs they are assuming you have the vast majority of these deadlines common agreement reached or ruled out because of good faith negotiations and you get one or two countries use it as an example to prove trump is still serious about that. both of those outcomes are positive for equity markets. annmarie: expectations are positive it gets done but are they high enough it gets done july 4 or july 9? stuart: july 4 may get pushed a bit but it will not get pushed until august. this is something where they will have a framework on the deal and moving chairs around on the titanic. lisa: when you talk about deals do you mean every single country but china? stuart: a lot of people assumed it would be negotiating with our trading allies first and everybody negotiates with china as a block, he has thrown that upside down.

you might argue that undercuts the leverage of countries like india in their negotiations with the u.s. initially the assumption was allies first and then china but it is little hard to figure it out because that order has been thrown up in the air. annmarie: tyler brought up a good point. these will have a better and solid legal footing. are you concerned what that could mean from an equity perspective? stuart: depending on what sectors you are targeting. semiconductor tariffs will be an issue. things in the health care sector could be a big issue. yes, but. these get rumored and the markets move. we are definitely concerned about it, not because they are more legally defensible. i don't think any investors have any idea what the legal grounds for a lot of the stuff are anyway. a good part about the sectoral tariffs is it is easier to trade

because you can trade the sector directly. these broad-based tariffs is basically just a -- it is not as nuanced and specific as to targeting. i would prefer to have the trade sectoral tariffs than broader. lisa: we understanding in the market that tariff cannot be passed along? stuart: potentially but the dollar is weaker so those earnings will repatriate at a higher rate. i don't think we really know what will happen with margins on a go forward basis. nike's call last week sounded like they were going to eat margin a little bit or maybe they were going to try to pass on cost. it was hard to determine based on their forecasts which way they would go. a lot of these companies do not know themselves because they do not know what the tariff will be on vietnam vis-a-vis taiwan vis-a-vis korea. your supply chain is in flux for a lot of these companies. i don't think there is a clear understanding of what the impact will be on margins which is why

2k learning should be so important. these companies were given a pass in 1q. jonathan: if you're long on stocks what is the best outcome for july 9? extend and pretend or 10% and move on? stuart: if the moveon was for sure than you would want the 10% and move on. you could get 10% and move on except we will come back in a couple weeks. that would be the bigger risk. what markets are girded up for his 70% to 80% of these countries a framework is in place and negotiations are progressing. these other two, those are the bad apples. in that sense a more likely outcome is if you could tell us for sure 10% across-the-board, 30% to 40% on china and we are done, that is the best outcome. i think it is the less likely. jonathan: it is a small detail

buried in the headlines. if you go back to april 2 the market thought was 10% and done and we started to rally and then the table got held up in the rose garden. all of these massive numbers in the market went south. lisa: the initial journal -- the initial story in the wall street journal was everything 10% is fine. annmarie: handing out the handouts, this is not 10%. let's tweet that right now. jonathan: up next, angela zito on nvidia, dani burger on hp. ♪

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jonathan: the moves through q2 phenomenal. equities positive by 0.5% on the s&p. 10% higher on the quarter, off the lows by 23.89%. all the low of april 8. nasdaq 100, off the lows on the quarter, more than 30%. nasdaq 100 positive by 0.65. let's get some morning moves and cross over to dani burger. dani: hbe had been pursuing this takeover of juniper networks. it had faced a lawsuit from the doj. they have settled that lawsuit, clearing the way for the takeover to happen.

those shares for hp up 10.5. also some breaking news in the last hour, modernity seeing one of its trials for its mrna flu vaccine, meaning it can offer a combo vaccine with the flu and covid. in general, they would also so more covid vaccines, so shares up 5.4%. outperformance from the banks, wells fargo, goldman, bank of america. no surprise, they passed those stress tests. that helped to pave the way for more dividends, buybacks. jonathan: thank you. more on the banks and about 45 minutes time. senate majority leader john thune is rushing to meet president trump's deadline to pass the tax and spending bill.

he will have to appease eight holdouts. annmarie: jd vance will have to come in for his support. he can only lose one more and he is dealing with different groups of factions. this is a problem in the house, now it's a problem in the senate. say you decide to be more friendly when it comes to the renewable caucus, or those that care about medicaid benefits. what about those fiscal hawks who say we are spending too much? even if the senate says we can do it, the house has to deal with it. take a look at chip roy over the weekend, and you can see the freedom caucus is not happy with what is going on in the upper chamber. lisa: is it a fissure in the republican party? each person wants to get something. you talk about eight members of the senate. half of them want more cuts to medicaid, half of them want fewer cuts.

everyone wants some sort of reconciliation to their personal need. you just have to wonder what i markets are fully appreciating what will end up being in here, what kind of offsets will be there. this will be the debate once the market gets its hands on it. jonathan: he is not running again and he may burn the place down on the whole way out. annmarie: now that he has been freed up saying i'm not running again, this could just be the beginning for him. potentially what trump did is kind of broke up the senate in this way and opened up a seat very early on for the democrats to really start looking at when it comes to north carolina. jonathan: another unhappy person, elon musk, ex first the body slamming the senate version of the bill, saying that cuts to clean energy credits are destructive, killing millions of jobs. lisa: his company is one of the

beneficiaries of these tax credits, points to another fissure in the republican party. thom tillis wants to see some of these green energy tax subsidies put in simply because they have bolstered some of the red states in terms of manufacturing and production. annmarie: elon musk is the only one. a bunch of unions coming out, one construction union saying this is the equivalent of terminating 1000 keystone xl projects. others say taxing energy production is never good policy. electricity demand is set to be an enormous growth and this tax will increase prices that should be removed. i'm confused about how the administration is saying we are going to go after this excise tax, at the same time, trump is talking about the insatiable energy that will be needed for ai demand.

how do you claim that you are for both? jonathan: on monetary policy, even more pushback particularly from the president. he says he has three names in mind for his fed chair pick. he was asked about kevin warsh. he said i don't know that it will be him, but he wouldn't be doing what powell is doing. lisa: he is the person that everyone points to as saying, really? he is not really dovish, why would you want him in it? a potential candidate who could act as a shadow fed chair. scott bessent said two seats come up next year. ostensibly in january, president trump could somebody in one of the seats who could then serve as fed chair when jay powell would end his term in may, which means it can be the october or september time frame. jonathan: the shadow chair might

be on the inside. fun and games and lots of dissent. annmarie: jay powell will not be chairman but he may stay on the board and he just may want to lurk. jonathan: we will hear from the treasury secretary later this morning. he has basically acknowledged that he could keep his governor seat. lisa: ends in 2028. he has not confirmed whether he wants to do that. he says he is clearly focus on what is in front of him. jonathan: secretary bessent, 9:40 eastern time. chip stocks up nearly 30% in the second quarter, led by broadcom, arm. nvidia surpassing microsoft on its way to a $4 trillion rocket cap. joining us now is mandeep singh. deepseek, everything is blowing up. what changed?

>> there are new use cases that have emerged. coding assistance is an example of a market that was not there especially to the extent that companies like google are now launching their own coding assistant. that market could be $50 billion plus. that is all driven by generative ai. people talk about search getting disrupted. there are other pockets within software getting disrupted by generative ai. that is why that reasoning aspect of what generative ai is doing, running any sort of browser session, code, that is what is driving the computer right now. lisa: it comes at a time when we are talking about a new record highs for the s&p with the likes of nvidia and microsoft. wondering from your perspective whether this was not known, if this is a new development enough

to generate the same kind of cash flow that would justify this kind of reevaluation. mandeep: what people underestimated is there is roi in terms of the computer being spent. right now you are starting to see that roi. competition with the likes of nvidia by the hyperscalers. there chip efforts have taken back in terms of their ability to make a chip that is comparable to nvidia. that is why nvidia and broadcom are getting bid up. hyperscaler chip efforts are not materializing the way that everyone expected. jonathan: 67% off of the lows from early april. lisa: you cannot bet against this trend. it is so hard for people to be bearish to say it is a bubble but it is not, because they just came out with this new thing. there will be winners and losers from the ai trend, but you

cannot write off the winners just yet. jonathan: angelo zino joins us now. why do you leave q2 with more confidence with this name and not less? angelo: thanks for having me. a lot of it has to do with what mandeep said. a lot of these companies and their capex spending plans. over the last couple of months, we have gotten some great data points in terms of these reasoning models starting to gain momentum. alphabet talked about how much more compute we are using with these more advanced reasoning models. a year ago, multi-tokens process was 9.7 trillion, so that is up 50 fold a year later. we are getting a lot more compute being leveraged here. that is driving significant demand not just from these

hyperscalers, but we are seeing real signs that the spending is really broadening out. not only from these big four, but oracle just had an unbelievable earnings season. essentially projecting a doubling in terms of their bookings over the next year. we are seeing some real momentum here on the compute side of things, and that will continue to drive demand for nvidia, as well as other ai chip names. lisa: have we moved on from deepseek? is that not a story or is that working out there to potentially threaten some of this spend? angelo: in many respects come in deepseek has almost become a stimulant for a lot of these ai semi names. it is creating a lot more of these smaller language models,

essentially leveraging off of these larger models. you are finding more use cases and applications for these smaller language models. in many respects, driving more demand out there, use cases for these ai agents, more compute demand. in some way, we are seeing higher demand in a post deepseek environment. whether or not it has come and gone, not going to get these efficiencies, that is yet to be seen. i just think the demand is so strong because of these greater inference use cases, we will look past this moment years down the road. annmarie: what happens when we get to sectoral terrace looking at semiconductors --tariffs looking at semiconductors? angelo: that is the question if there is a bare case, that is what it is. the more the stocks go up, the greater the pullback.

we expect to see some sort of permanent tax. right now in our view, 25% tariff once this gets enacted. we will see when this happens, to what extent it happens, but there are two pockets of the hardware supply chain we are looking closely at. the first is the ai server environment. every percentage increase in tariffs leads to a .6% increase in terms of the cost of a server. the other aspect is what the impact will be for the apple supply chain, what apple does on that side of things. whether or not they pressure some of their suppliers. that will have an impact as well. the street is almost dismissing the 232 semiconductor investigation. remains to be seen how this plays out. a lot of these companies are generating essentially zeroing out revenue in china which could

come back for some of these companies. there will be a lot of moving parts, but to your point, there is a risk out there tied to the tariffs. lisa: is there a new reality when it comes to the magnificent 7 that looks less cohesive than two years ago, where some of the names don't seem like they are on this freight train upward in the same way? thinking of consumer and tariff-exposed companies like apple and tesla? angelo: great question. right now, the street is trying to figure it out. i think apple is maybe being left behind. partly at their own fault. they have essentially fallen behind on the ai side of things. they promised the street something a year ago with siri integration. we do think that they will be able to figure this out. apple will be more of a 2026 story, but if this ends up

taking longer than some investors anticipate, like us, this is a company that could potentially be left behind for a while. tesla, i don't personally cover, but i think the street is trying to sniff this stuff out. right now it looks like the easy stores are nvidia, microsoft, and meta among about seven. -- mag 7. jonathan: you will see all of these vicious snapback's on the charts of many tech names. you don't see that with apple. lisa: a secular decline in terms of the refresh cycle for the iphone but also questions about ai adoption, whether they are going quickly enough. jonathan: the stock is down 20% year to date for apple. down 19.7 to be precise.

let's get an update on stories elsewhere this morning. with your bloomberg brief, here's yahaira anand. yahaira: the senate is poised to approve a precision that provision preventing some states from regulating ai for the next five years. republicans say that states would be barred from regulating ai if they want access to $500 million in new federal funding for a broadband program. starting today, costco's executive members can now shop earlier than others. they will start opening at 9:00 for its top-tier shoppers. all other members, clubs will be open at 10:00, 9:30 on saturdays. the new schedule rivals one of sam's club. and the f1 movie talk to the box office over the weekend, taking in $65 million in u.s. and canadian theaters.

the movie comes over $200 million to make, seen as a test for apple to release movies in theaters before they appear on the streaming service. jonathan: thank you. eh. i have some thoughts. lisa: you don't like it. jonathan: i think it is good for the sport. just parts of the element annoyed me, and it was the audio. whenever they were racing, they use the outer that you would hear at the racetrack, hearing the commentary over the speaker. instead of hearing it over your natural tv audio. it really bugged me. lisa: can i make a recommendation? instead of movies, tv streaming series. they are really good. you are allowed to go to the movies, but streaming series are the new movies in my opinion. jonathan: "stick" is a great

one. you do that and then we will swap. next on the program, the president's tax bill facing pushback. >> can you identify anything that you can actually cut out that you could have ron johnson and other senators upset about the price feel better about it? >> let's see, we are cutting $1.7 trillion. we can grow our country so much more than that. jonathan: that conversation coming up next with kurt ryman. you are watching bloomberg tv. ♪

jonathan: equity futures positive, up after a two-day winning streak. record highs on the s&p for the first time going back to february. up another 0.7 on the nasdaq.

rustle up by .55. under surveillance this morning, the president's tax bill facing some pushback. >> if we are to days or five days late, everyone says tremendous value. as long as we have it. >> can you identify anything that you can cut out that you can have ron johnson and other senators upset about the price feel better about it? >> we are cutting $1.7 trillion. we can grow our country so much more than that. jonathan: a new estimate from the congressional budget office saying the senate's bill would add nearly three point $3 trillion to u.s. deficits over the decade. joining us to discuss his kurt reiman of ubs. pushback from republican senators and journalists. very little pushback from the bond market. kurt: pushback has been the story all throughout when we

think about this second administration for president trump all the way back to november, one of the things that we pointed out that you can be assured of it is under united government, which is what we have, you will see higher deficits over the next several years. that has come through. but the pushback has also been pretty consistent at every stage, whether it was getting the bill through the house or the senate, which we are waiting for that. we are going to hear this constant pushback, but yet, the bill is likely to advance, because it does a few things. it gets the debt limit solved for a couple of years, and it at least keeps the tax rates where they are for most americans. that is an important piece but it does a couple of other things. it takes the deficits and makes them sustained at a high level

for a fairly long period of time. even the tariff income is not coming necessarily to the rescue. lisa: sorry to cut in, but my is in the bond market pushing back in the form of higher yields? kurt: this could have been, something that we should think about. over the past couple of months, the bond market has been doing well, we have been living through these periodic episodes where the 10-year moves up to close to 5%. we have been concerned about that. 4.75 on the 10 year, this is about as good as it gets. lisa: so you think this is the floor, yields will go higher from here? kurt: if growth slows, as we expect from the tariffs, yields could move a little bit lower. but our view is it will be how your first. -- hire first. our view is over the course of

the year we get that rate cuts. that should be beneficial. that other concerns about tariffs leading to higher inflation or deficit concerns, maybe even geopolitical risks if oil prices would move higher. all of these factors are keeping us from moving out the yield curve, taking on additional interest rate risk. why do we have to? if you can get 90% of the 10-year yield in a 5-year, that should be sufficient. hug the intermediate part of the curve. around 4%, that is a good result. annmarie: if we are at a floor with the 10-year, what is the ceiling? kurt: i would be looking for a range of 4.25, 4.75 over this year. annmarie: 5%? kurt: i would not rule it out. the bond market will be taking cues from a lot of different forces over the next several months.

it is this back end that we are seeing rates now compressed that does look susceptible. again, we are keeping in the belly of the curve, and that is providing decent value. jonathan: this sounds like a period that we saw last year, where the fed could be reducing interest rates on mortgage rates go up. could we see a repeat? kurt: that is what we have to be careful of. i don't think there will be any fed chair that will get a free pass on policy. you think about pushback, senators, members of the house have against the bill. the president will keep the pressure on the fed chair no matter what. coming into the back end of the year, he will start to get some of the policies he is hoping for but in the form of a quarter-point cut and gradually. over the next year, we may see another full percentage point

lower. but the fed has to be careful. the administration also has to be careful that when you move rates lower, you have to be cognizant of the possibility that long and rates go higher, mortgage rates go higher. these are also concerns of the administration. you will have secretary bessent on later. this is a great question to ask him. jonathan: i appreciate the promo and your appearance. this was a nightmare from last year. lisa: this could be the cautionary tale or why the fed doesn't want to cut rates to aggressively this year. jonathan: next on the program, eric freedman of u.s. bank, david george. catching up with a former kansas city fed president esther george , michael kushma of morgan stanley. the third hour of bloomberg surveillance is just around the corner.

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>> when we have had big movements in trade deals, it creates a lot of volatility, creates a lot of noise. >> we expect an average tariff rate around 15% by year-end. >> i don't think these tariff

deals will be done that quickly. the uncertainty will continue. >> we are all waiting as the information comes out. >> this is "bloomberg surveillance." when jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: equity futures positive once again by 0.4% off the back of a two-day winning streak on the s&p 500, another all-time closing high last week. up 10% on q2 for the s&p 500. if you looked at that, nothing to worry about. if you looked at this, there might be something to worry about. euro-dollar on an eight-day run, 1.1725. eight-day run of dollar weakness, 8% on the single currency. that is a lot of dollar weakness. lisa: we have been asking where are the bond vigilantes?

potentially $4 trillion to the deficit from the big, beautiful bill. maybe the vigilantes have moved from the bond market to the currency market and there are selling the dollar, and that is how you will see an expression of concern for the fiscal outlook of the united states. whether this is outright something or hedging, people will be discussing, but this is the big change over the past three months. jonathan: the tension going into next week as we think about july, we have payrolls thursday, self-imposed deadline for taxes, and then another deadline for tariffs and trade. annmarie: the operative phrase is self-imposed, which means they could slip, and it wouldn't be the biggest deal for the republican party. the senate will be starting this voterama. this could go on for hours. even if senator majority leader

john thune is able to get the ducks in a row, he can only lose three votes right now. he has pretty much already lost two. then the house has to deal with this. cbo scoring says the measure would spend $3.2 trillion to the deficit. if you look at the freedom caucus twitter handle over the weekend, they are not prepared to vote for this bill. lisa: we have talked about this. the word voterama was fashioned as early as 1990 two, developed into 1996, where it was codified by a republican senator. i am going to propose voterpalooza. i think that is a more modern take. jonathan: you should write a letter to the senate majority leader. that is the value and so far this morning. anything else, nothing for you.

coming up, eric freedman, david george after downgrading jp morgan to a celebrating. and the former kansas city fed president esther george saying it is too soon for a rate cut. the s&p 500 posting its first record high since february. eric freedman writing, in this environment, we want to be either overweight or neutral risk. the time for being cautious is behind us. welcome to the program. how confident are you that bad data isn't still in front of us? eric: we think there is a back and forth on the data front. the employment front, your team has done a great job covering it. in our estimation, in the shaky is part of the current set up. businesses writ large are still

cautious in terms of making exploratory decisions. most of the decisions that we see are more maintenance in nature. what may go wrong in this environment is a weakening labor picture, certainly we could have trade talks to the wrong way, but in general we think momentum is still positive. we would be on the side of being neutral or down on risk assets. jonathan: the median estimate, 1.13 at the moment. the previous number was 1.39. you keep on saying overweight or neutral. how have you seen this recent bout of strength over the past few months? eric: we have been using it as an opportunity to get back to a much more neutral positioning. if anything, momentum continues. if clients are normally a 60% equity investor, if they want to add another 10%, we just hedge it.

one of the things we are paying attention to, and you did a nice job covering it with currencies, is looking for correlations. what are stocks and bonds doing together? the reality is that they have been moving in the same direction, which were us is not a good thing. we think the most prudent thing for investors is to have that glass half-full viewpoint but use outright hedges as opposed to being more reliant on traditional asset allocation to do its thing. using some opportunities to feed the ducks, technical phrase in the industry, certainly bank some gains. we think the time to be overly cautious is certainly a response to deterioration in the labor market or if trade talks to the wrong way, which we don't think they will. lisa: so you are renting pessimism, holding onto optimism? eric: it is sort of a

rent-controlled world, if you will. this is an interesting time of transition on a policy front, you hear a lot about the fed. what we think this will boil down to is what companies do with budgets. one of the things we are using as a gauge heading into earnings season is just how confident and thorough is forward guidance. that is something that has been a real lack in terms of the analysis that we do, how skittish companies are about being definitive with their plan. with the passage of the bill -- we will see if that july 4 deadline sticks let's call it late july, that will give opportunities for company to think about employment plans. we think the bias is still for reinvestment in companies, share buybacks will continue, but that gives us optimism for the path ahead. lisa: do you see certain stocks that are better to be

pessimistic on than others? the major theme has been nvidia and microsoft skyrocketing everyone else upward and the actual leadership has been somewhat narrow. we are seeing it brought it out. where are you most pessimistic, on the big tech names, valuations, or the deterioration that you expect to come to the fore with respect to the labor market or other indicators? eric: it has been a very nuanced move in leadership in equities. the part that we would be most concerned about are those retailers focusing on the middle income consumers. that is the vulnerable set. if we see companies continuing to delay employment, wage growth, which you covered this morning. but then if we see credit we can at the margins -- there doesn't need to be a credit shock -- but

we are seeing to liquid sees pickup not just in auto loans. that has been the case for some time. but the midpoint in credit, real estate continues to show some weakness as well. where we would be concern is those retailers focused on the middle income retailers. we like discount retailers, some of the more luxury brands on valuation. that middle income consumer may be a bit vulnerable here. annmarie: you rate the consumer as five out of 10. how do you get to that reading, do you think in the future it will move up? do we have a chance to see the consumer drop? eric: we look at the consumers, score them on a scale of 20. right now they have gone from an eight down to about a five presently. we think some stability but an

upturn for lower income consumers as well as for higher income consumers. what we don't have enough data on yet, in terms of having a strong view is what happens to the middle income consumer. that will be a function of what happens with house prices. the quality of the employment gains, that is an area that is yet to be determined. but a lot to do while we wait for more clarity. we think there is likely more stability within upturn, really a function of the capex cycle returning. we think betting against that is not what you want to be doing with client money. annmarie: i know you are glass half-full in terms of client portfolios, but you are sounding glass half empty when it comes to the consumer. eric: in general, the industry doesn't do a great job of bifurcating out the sub cohorts.

we are positive on high income consumers. lower income consumers have withstood a lot of body blows as of late. we are glass half-full with middle income consumers but we are still concerned about how that may swing in the event there is a delay in that capex cycle or if there is a delay in tariff reconciliation. lots of things to do while we wait, but still think in general the upturn is therefore the consumer but large. there is just a lot of variation as a cohort. jonathan: it's been too long. let's do it again soon. you said it so many times this quarter, the market is not the economy. lisa: ultimately, you see a number of companies benefiting from technological changes that are really underscoring how much that is the case. it sounds like he is a quarter glass will when it comes to the

lower income cohort, three quarters full when it comes to the higher income, feeding the ducks in the middle. jonathan: he thinks the time for being cautious is behind us, reinforced by what we see in the markets, but ultimately weary that the worst of the data may be in front of us. citi looking for some terrible numbers on thursday. stuart kaiser making the point that he is not comfortable being long into. lisa: this is why derivative traders will have an interesting time. nobody wants to be wholesale committed to any particular trade. they want to do it in a renting type of way rather than selling or buying wholesale. they just don't know and will probably muddle through. we were probably in the same place in three months time. jonathan: just embody the pessimism? lisa: embody the pessimism but

buy the optimism because you have to live. jonathan: s&p positive 5.4%. with an update on stories elsewhere, here's yahaira anand. yahaira: john thune is rushing to meet president's july 4 deadline to pass this massive tax and spending bill, but he is facing opposition from eight republican senators, and must find a compromise. some are pushing for deeper spending cuts while others want more funding for health benefits and renewable energy subsidies. canada is making a move to jumpstart trade talks with the u.s. it is withdrawing at digital services tax on technology companies. this comes after president trump said on friday that he was ending all trade talks with canada in retaliation for the digital tax. in sports, the yankees took two of three from the athletics over the weekend, winning on sunday

12-5. they now hold a game and a half lead in the division over tampa bay. the yankees are looking ahead to a subway series starting friday with the mets, who have won just three of their last 16 games. sorry, lisa. annmarie: i was at the game. i didn't write the script. i said that we should put the yankees game in there. those hormones were amazing. 44th multi-home run game. he is now sitting third in this achievement behind babe ruth and mickey mantle. pretty incredible. jonathan: are they mets? lisa: the season is young, things could happen. we can recover. i am going to buy cookies for everybody. jonathan: that was pretty brutal. annmarie: every time i travel, i

do bring the team back goods from wherever i am. jonathan: next on the program, morning calls. david george after downgrading jp morgan on valuation concerns. that stock is almost up percent. from new york, this is bloomberg. ♪

jonathan: the opening bell, one hour, 13 minutes away. equity futures up .4%. up by .6% on the nasdaq 100. let's get some morning calls.

steeple upgrading oracle to a buy. that stock is up by more than 2%. your third and final call from jeffries, upgrading disney to a buy. that stock is up by more than 1% in the premarket. optimism for big banks, driving jp morgan to fresh highs last week, but not everyone is buying into the rally. david george jon gruden the company to an underperform rating. we simply think expectations are superhigh. david joins us now. this isn't something that you see too often from the street or from you personally. why the downgrade? david: good morning. very simple. it's important for viewers and

you all to understand and appreciate the fact that in addition to following companies we also follow stocks. as you were saying in your last segment, the market is not the economy. stocks are not always companies. from our perspective, the risk around some of the big bank names has gotten elevated given the big moves. jp morgan, we are urging clients to sell stock, given record valuations, trading at three times tangible book value. they typically treat at 10 times earnings, forget about pre-provision earnings. we are simply of the view that returns in the stock from here are not going to be as good as the past. the risk in stocks in general but particularly the big banks are a little higher today than they were in april when they were about 20, 20 5% lower. lisa: is your thesis simply a

valuation thing, that the sector will not be the growth engine with all the regulation and what have you coming from washington? david: i don't think banks are a growth sector, and that's ok. we think about banks is a risk reward sector. this is a group that will grow pre-provision earnings at around 6% to 8% per year. you'll get some capital management in the form of dividends and buybacks. that will be a pretty respectable return in a high single digit, low double-digit area. given this is a low growth sector, this is the price that you pay. returns, we think, are highly correlated to the price that you pay. buying the stock here doesn't make a lot of sense to us given what you are paying for it here. lisa: there is this thesis out there that banks have not been a

growth sector for the past 20 years, in particular on the heels of dodd-frank, as business went to private managers. there is a thought that some of deregulation and changes will allow the biggest banks to compete more aggressively with private asset managers and potentially take more risk, also get bigger returns to make them a growth sector once again. do you think there is any validity in that type of thesis? david: there is a lot of positives around deregulation. for the last seven or eight years, we as investors and analysts are always expecting regulators to find reasons why big banks need more capital. today, we think we have crossed the rubicon of being at a level where banks have adequate capital levels. we think that positions the sector to be in a position to return more capital to shareholders in the for my

buybacks and dividends. what you will see is adding a little bit more leverage to be able to accommodate trading. we would expect trading assets to bulk up a little bit. that is a function of not adding risk, per se, but being in a position to accommodate clients more freely. as it relates to private credit, that is not something we would expect, for credit risk to meaningfully change. this is more a function of capital, a more friendly the regulatory environment is also conducive to bank m&a. we think that is going to happen, which is why we are constructed on the super regional banks. annmarie: when it comes to something we saw last week, the slr, isn't that impact won't be for the bigger banks, not the

smaller regional banks? david: it is. going back to my initial comments, it is priced for that. jp morgan is at three times tangible book, several regional banks trading half of that price. that slr reform we think has been largely played out. a lot of buying on the rumor, and we are a seller on the news. jonathan: i appreciate the news. the rare downgrade for the likes of jp morgan. in terms of her earnings, -- in terms of her earnings, jp morgan just around the corner. almost $800 billion market cap over a jp morgan right now. lisa: his point is it is a great company, lots of potential tailwinds but the valuation has gotten extreme. this probably will not be the growth engine as it was in the

heydays of the 1980's. the banking boom that you saw with a lot of these banks. it really raises the question, where are the borrowers going to be for some of these earnings? whether some have too much baked into these, too little baked into the smaller banks, in terms of leverage requirements. jonathan: stuart kaiser was talking about that. do we know what the policies are going to be in two weeks, a day? lisa: we will not know what the policy will be, but they will know what the pipeline looks like. we did here at recent readings, they are not expecting the same m&a activity as we saw last year. expecting derivatives trading to increase. that will be a key indicator. they cannot punch completely. annmarie: they may be talking

about what the outlook uncertainty is in washington, at a time when the administration is trying to announce deals. july night, nobody thinks that we are going to get these deals in place, so we will have a little wiggle room to punt. jonathan: remember being on trillion dollar walk for tech names? doesn't feel like long ago. we are almost there for single bank names. barclays is something like 50 billion sterling. jp morgan, close to 800. lisa: really smart that you are talking about tech companies, now we are talking about nvidia. at what point to the biggest banks have an advantage technologically to capitalize on how much efficiency they can generate, trading advice, etc.? you have to look at that change to juice valuations. if they could do the same amount of work with fewer employees,

how much would that return on investment be? jonathan: brian moynihan got us onto that a few weeks ago. lisa: there is a feeling that it will not lead to layoffs right now, but not leading to hiring. we are seeing that with graduates. jonathan: next on their program, former kansas city fed president esther george saying it is too soon for a rate cut. and a deal in the home-improvement space. this is bloomberg. ♪

jonathan: wrapping up the first half of 2025, 1 day away. q2 felt like a year, never mind a quarter. the nasdaq 100 up by 0.6. with your morning movers come here is dani burger. dani: one of the subsidiaries of home depot will be buying gms, a distributor of various building products. it's a play for home depot to tap into that professional contractor network. the deal values gms at a 13% premium of. you can see the pop in shares, up about 11%. elsewhere to the downside, a lot of the clean energy names really

getting hit in today's trade. nexterra down 5.8% after the latest version of the big, beautiful bill at a quicker phase out. it also included a quicker phase out in september ev credits, for purchasers. that is hurting tesla shares. elon musk also taking to x to slam the one big, beautiful bill. jonathan: pushback coming from elon musk, republican senators. and we has repeated, it is not coming from the bond market over the last month. lisa: not seen yields rise in tandem with the deficit increasing, as some were arguing earlier this year. there is however that constant weakening in the dollar.

at some point, people will look at the bond vigilantes turning into fx vigilantes. jonathan: 4.25 on the 10-year. payrolls on thursday, before the long weekend stateside. mike mckee has more for us. mike: it is going to be a busy week, the first week of the month always is but this week it is more crowded because we have the holiday at the end of the week. first we got monday, tuesday, wednesday, which has some major indicators. ism manufacturing index tomorrow, adp jobs on wednesday. all of that will drive some market volatility. thursday is the big day. june jobs, jobless claims, ism services, durable goods. there will be a lot to talk about. the question with jobs, are we

slowing down? is that going to press some sort of move in the bond market with rates falling, if people are worried about the economy slowing down? we don't get a lot of fed speak to talk about this. today we have raphael bostic and austan goolsbee. tomorrow will be interesting, the european central bank version of jackson hole. they have a single panel including jay powell, christine lagarde, andrew bailey. whether they will talk about their individual banks and plans is not clear, but there is that risk. thursday, raphael bostic is back. he is the only one speaking after the jobs report. he will probably have more to say. the interesting thing about all of this, we could see in a normal month that this kind of data would drive trading for a while.

but unfortunately for the markets, the president's reciprocal tariffs come back next week, so there could be a short half-life or all of this. jonathan: we have taxes on july 4, self-imposed, then july 9, the trade story. lisa: it depends in what the number is. annmarie: you do it on the beach. jonathan: working from home, from the beach. lisa: portugal looks beautiful. i love the difference between europeans and the u.s. in europe, it is this lovely cultivated experience. in the u.s., very rugged out west. jonathan: i think you are going this summer? lisa: i am very curious to see the wildlife and the discussions. jonathan: former kansas city fed

president esther george expecting the that to stay on hold. although inflation is not accelerating, it remains sticky, appropriately ties the fed's hands on further rate adjustments. i apologize for lisa. i love the for him. i love seeing you over there. lisa: i am not going to apologize. i love it. i love the experience, i love the land. i'm a big proponent of staying longer so i can go and tour around. jonathan: let's start with that quote, an important one. do you believe the labor market is strong enough to see what happens with inflation? esther: we are going to find out with this week's report how the labor market is faring. we have seen the labor market first come into better balance, if you will, the number of job openings has come down.

we hear it anecdotally that businesses are hanging onto people. we will see if they are shedding people, what the labor force looks like itself with all the policy changes that have been going on. there is a lot to watch for in this particular report that could begin to give us a sense of how the labor market is doing. lisa: just to build on the jackson hole symposium, this year, talking about the changing nature of the labor market. pairing that with a number that we get on thursday, the believe that will be lower than what people have become accustomed to but that is still healthy. how do we gauge a market that is so influx from the policy perspective and technological perspective? esther: it is especially hard because we have come off a period that is, i will call it, unusual. to have an unemployment rate

around 3.5%, try to diagnose the characteristics of what is shaping that labor market is essential to how the fed calibrates. you think about both sides of our calculation here. we have seen the bottom line number around who is in the workforce. we have seen the hiring numbers. trying to assess that in a time of great uncertainty is one of the fed's biggest challenges. lisa: a big debate in wall street, is this market, albeit not strong, but weakening, whether it is still healthy enough, whether it is shown real cracks like neil data has pointed out -- dutta has pointed out. people on the unemployment rolls for longer.

do you think there should be more emphasis placed in one of these places than the other? esther: we know the dynamics and our economy today are pushing in both directions. we have seen an economy beginning to slow, being hit by policy changes that businesses are trying to digest here. i think you have to not lock into a particular narrative but be watching how those dynamics are unfolding. remember, today, the economy is still in forward motion. it is still operating in a way that we see growth. obviously, that can change with any particular data point or news announcement that we see. but i think the fundamentals here suggest we should not read too much into any particular narrative at this stage. jonathan: if april 2 had not happened, given the downsides of we have had from core cpi over

the last four months, the uplift we have seen in continuing claims, which is slightly concerning, would you have voted for a rate cut based on that alone? esther: i don't think so, and here is why. i view price stability as a prerequisite for sustained growth, healthy labor market in the long run, which is what the fed's mandate really is, look into the long run. when you see fiscal policy on the path that it has been on, it would be by itself, reason to be cautious right now in an environment where the fed has not yet hit its inflation target. i don't want to take anything away from the fact that we have made progress, but i would also want to be careful in that risk management scenario, that you are not putting too much promise yet on a state of inflation that

has yet to be achieved. annmarie: speaking of risk management, if we get an announcement from the president of who the next fed chair will be, who his pick is, will that blur the lines of the fed's independence, who is really leading the institution? esther: i don't think so, as long as the current fed chair is in his seat. he has been clear, and he has every incentive to be focused on policies that achieve the fed's mandate. does it complicate communication, create noise? of course it could. but any fed chair will understand their obligation to meeting their congressionally assigned mandate is really the priority. you are really doing that on behalf of the american public. you are not just serving one part of the government. jonathan: always appreciate your

take on things. a clinic as always. the former kansas city fed president on what the fed should and shouldn't be doing right now. mission is not complete. lisa: your question was on. take away the tariff debate, do you end up at the safe place about a rate cut? we are not necessarily at that full 2% target, and that is the ultimate mandate of the federal reserve. jonathan: by the time you get to september, we all acknowledge it is important, but by the time you get to september, they might be doing with the president wants anyway. lisa: when people pound the table and say the fed needs to be cutting and are you asking, is september early enough? they are saying they are probably going to cut in september. annmarie: we could have back-to-back truth social posts where the fed chair cuts and

then the president is praising him. does he stay on and lurk? jonathan: it depends who the pick is and how early they announced the pick. weibel will asked the questions anyway. 9:40 eastern time, will be sitting down with the treasury secretary scott bessent. sonali basak will be conducting the interview in about one hour from now. equity futures on the s&p positive by .3%. with your bloomberg brief, here's yahaira anand. yahaira: nintendo has pulled its product from the amazon site following a disagreement on all the authorized sales. nintendo made the move after noticing that third-party merchants were offering games for sale in the u.s. at prices that undercut its advertised rates. meta is ramping up hiring for

its ai super intelligence group. the company signed on four notable researchers from openai. mark zuckerberg may headlines this month for beginning to personally recruit researchers and engineers after being frustrated by his company's shortcomings in the space. elon musk is slamming the senate's latest version of president trump's tax cut bill. in a post, he said cuts to ev and other clean energy credits are "incredibly destructive" and the billable destroy millions of jobs. the bill would bring a quicker end to the 7500 dollar consumer tax credit for ev's. jonathan: thank you. next on the program, setting you up for the week ahead. a shortened trading week but a busy one. we will get the thoughts of michael kushma. this is bloomberg. ♪

jonathan: the opening bell, 43 minutes away. equity futures positive by .3%. what a run it's been and what a run this week will be as well. this week is absolutely stacked. today at 2:30 eastern time, president trump exciting executive orders. tomorrow, jolts and ism manufacturing. fed chair jay powell and christine lagarde both speaking at the ecb form in portugal. moore did on wednesday with the adp employment report. more data on thursday with the trade balance, jobless claims. friday come a long weekend begins but you probably have one

eye on the news. markets might be close but president's self-imposed deadline to pass his tax and spending bill kicks in. michael kushma of morgan stanley believes we are currently in a sweet spot for markets. we have the unemployment report, budget negotiations, tariff deadlines all coming up in the next two weeks. good morning. it hasn't felt like a sweet spot for markets. if you see the stock market at record highs, it may feel good, but if you are in it come the last three months have been brutal. michael: sweet spot for all the worries that we had a couple of weeks ago, all the negative things that could happen to have at least dissipated for the time being. we have this calendar coming up the next couple of weeks through july that are quite potentially volatile. the digital services tax, yesterday, positive news at the margin. reducing the intensity of worry.

jonathan: i remember when the election happened, whether the bond market would push back. what would be the biggest constraint on this particular bill in washington? here we are and this bond market is not pushing back at all, why? michael: the confidence that rates will be cut. deterioration in the labor market will continue. the idea of fed policy being a balance between employment and inflation, as employment drifts weaker relative to inflation -- inflation has been good the last couple of months. that is why they cut rates last september. is that going to deteriorate? it unemployment deteriorates, the fed will react to that. lisa: it seems as if the bond market and stock market are getting excited about different things. the stock market getting excited about ai, allowing companies to keep innovating, possible

regulatory pullback. the bond market is excited about the fed cutting enough but not enough to fall off a cliff. michael: rate cuts and a still growing economy. the economy is forecast to deteriorate 1% and then back to growth next year. lisa: why are we not talking about the fed cutting rates at a time when the economy is still moving forward with a budget that is still getting more deficit driven? the dollar being sold, institutional investors overseas, questions about how much they will be the incremental buyer of treasuries. why are we no longer talking about that dynamic at the long end? michael: we think there will be a steepening bios for that reason. 10-year, we had a serious glut in savings. now we have an explosion of safe

assets. that will put demand to be substandard relative to the supply of longer-term government bonds, whether it is european or u.s.. pressure will continue. so why is the fed cutting 100 basis points when fiscal policy is where it is, inflation is still problematic? annmarie: is this dollar trend here to stay? michael: i think it is. the underpinnings of the strong the dollar are eroding, not changing. just going to narrow a bit, given valuations where the dollar is, it is likely to fall. fiscal policy will be more expansionary outside the u.s. annmarie: the bond vigilantes absent right now. maybe they are taking it out when it comes to unwinding it in

the dollar. dollar dumpers, is that what it is? michael: potentially the world is overweight dollar assets. the dollar has acted as a good hedge for those assets. when the s&p went down, the dollar went up. as that changes, there is more dollar hedging going on. maybe not selling dollar assets, but look at where equities are, but maybe we should be hedging our u.s. assets. jonathan: where are you comfortable taking duration right now? the whole world is on the menu. michael: shorter, intermediate maturities. this huge rally we have had, really big rally in 2-year notes with fed funds rates at still 4.5. same thing with 10-year treasuries.

potentially ok if we deliver 100 basis points of rate cuts. lisa: if we deliver that at a time when the economy is still strong, what happens to the yield curve? this ultimately goes to the question, is there a lesson from what we saw last year from the fed's 100 basis point cut and what that could mean for this one? michael: last time we had rate cuts last year, the minute they finished, 10-year went up in yield. i'm not sure that fed rate cuts help mortgage rates. jonathan: what is the president going to say when that happens? precisely what happened last year. lisa: does he blame the fed chair? keep them in there so that he can blame him? essentially monetize the debt, which is the worst case scenario for the dollar. do you just say that rates are too high, cut more? it is really unclear how you message this when it is a simple message of get rates lower,

facing up with a complicated economic reality of what you are talking about. annmarie: the latter. it is not enough, cut more. jonathan: so that means a new fed chair in 2025. what does that mean to you? michael: it means that monetary policy is going to be more uncertain next year. i am not sure that a fed chair of the candidates that are being bandied about are that wildly different from what we have today. it's a board of governors, committee. if you get kevin warsh, one of these other gentlemen, women being proposed, will not radically change monetary policy. jonathan: what if it was the nec director kevin hassett, somebody in the administration right now working closely with the president, when the president has said clearly what he wants from monetary policy, and then

select somebody from within the team? michael: it will be a little unprecedented. jonathan: do we sell the dollar, sold bonds? i want to know what the market would do before hand. michael: it would be worried. jonathan: the vote would be to sell fx. that is why we say the market will get a vote on this before the senate. lisa: the market is saying keep going. if you look at the bond market, you are not seeing any sign a real worry given the fact that we had the best rally going back to february. not the same message coming from the dollar. jonathan: not the same music for kevin hassett, who thinks that he may do a great job at the federal reserve. but the perception of the market, where there we would just sell bonds and sell the dollar in the face of that decision. lisa: if you are worried about institutional credibility, and you put the person in charge of orchestrating the trump agenda

in charge of the federal reserve, that independence gets challenged in a very obvious and public way. jonathan: michael kushma of morgan stanley. as we said throughout this morning, it is a shortened trading week but there is a lot to get through with payrolls on thursday, self-imposed tax deadline on friday. next week, we have july 9. the week after that, jp morgan. i don't think anything could be busier than q2, and i think we are all looking forward to leaving the second quarter behind. coming up later this morning, look out for the interview with the treasury secretary scott bessent. tomorrow, julie and emmanuelle, cameron dawson of new age wealth. we will see you in the second have. -- half. ♪

matt: this market continues to break records. katie: bloomberg open interest starts right now. matt: coming up, a record run. progress on trade. on capitol hill, trump's big, beautiful tax bill years the finish line but major hurdles remain. we will discuss it all with scott bessent. the treasury secretary joins open interest later this hour. katie: we start with goldman