♪ >> the fed is going to keep rates higher for longer and that puts more pressure on the economy. >> i do believe monetary conditions are not tight. >> yes, we are going to have higher interest rates, but to us that is not that bad a problem. >> the economy has demonstrated it can live with these interest rates. >> financial conditions have been tightening to some degree. overall the picture remains fairly positive. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: it is a monster week of earnings. live from new york city this morning, good morning. there are audience worldwide, this is bloomberg surveillance. six-day losing streak, can we break that?

positive by 0.5%. it is all about the calendar this week, all about the tech earnings. tuesday, tomorrow, tesla. wednesday, meta. thursday, google and microsoft. lisa: it's going to be interesting to see whether even a beat is a disappointment to market because so far that has been the tone. we've gotten the biggest selloff going back to late 2022. have we already priced out that potential disappointment set out for a positive upside surprise, or is this a pivot point at a time and a lot of uncertainty? jonathan: let's talk about tesla. downline 2.4% this morning. more than 40% year-to-date and we start this week with another round of price cuts. annmarie: a string of bad news is coming to tesla and some -- tomorrow they are supposed report first revenue decline in four years. a challenging earnings call for elon musk. not just the cuts.

across the board, china, europe and the u.s., but also the job cuts. the fact that they are trying to basically pin the future on this robotaxi that remains a ton of questions. lisa: i keep thinking to myself is this really a situation of a car company that is trying to mask itself as something else, and our people going to come to that realization? we're looking at a 40% plunge in operating profits. jonathan: tesla, we need to talk about the bond market as well. last week, when fed officials wondered out loud are we restricted enough? the conversation began to shift. lisa: frankly they were just following the market and it didn't disrupt the market as much as i would expect. the question of the weekend, does this federal reserve need

to completely change its communication strategy because right now, it ain't working at a think a lot of people would be with that. she calls it the u-turn. you can call it whatever you want. the big issue is they are losing credibility because their communication strategy is failing. jonathan: let's go to equities. equity futures look a little something like this. positive on the session coming off the back of it week of losses. the nasdaq 100 coming off the back of its worst day of the year. tech on friday absolutely hammered. nvidia down by 10%. lisa: and it was because super micro computer announced a turning date without further guidance. this is what we got set up for this week. first of all, we don't have fed speak, which i think is important. we do get tesla on tuesday, meta

on wednesday as well as microsoft and alphabet and a little intel on thursday. how much does that set the tone? when it comes to the data, that is all friday. how much does this confirm the reflationary narrative that we get, and in the absence of fed speak, we can options. a lot of people are focused on these options, record options. $70 billion of 5-year note on wednesday and 44 billion dollars on thursday at a time when yields are at the highest of the year. in either buyers going to come in? jonathan: a ton of supply later this week. mag seven earnings on deck. terry haynes of pangea policy as u.s. lawmakers tame amed tiktok and elsa lignos. u.s. stocks looking to bounce back from the worst week of the year. macro risk advisor saying this. i am a more diversified than i thought i was set absolutely no

one. dean, wonderful to catch up with you going into a critical week for earnings from the tech. let's just talk about the performance, the tech cohort about has dominated this market for so long. what are we learning about what has happened? >> the performance obviously has been unbelievable. what has been even more special in terms of owning this particular group of stocks has been the correlation properties of the stocks. they've been incredibly strong in terms of their performance but they've also been unusually and unsustainably low in terms of their correlation with each other. when we look at the volatility of the s&p we are looking at two things at once. one is the volatility of the stocks in the s&p and the second is the correlation to those stocks. you just mentioned nvidia went down 10%, basically nothing. friday, apple was just down 1%,

microsoft was down 1%. earlier this year, that 16% move, that was also really in isolation. the quote you read for me was the just this idea that i think what happens over time that investors tend to certainly price the risk. they price how much they own based on the realized volatility of that asset and as i said, the realized volatility of the s&p 500 has been unusually and unsustainably low because of this incredibly muted level of correlation across the three or four stocks. i think that really the fragility of the market, this idea that the stocks just move in isolation. there is no macro factor that is going to drive the performance of the stocks. i think that is a vulnerability for investors. jonathan: is that why you are still advocating for downside protection? >> the market is going through a transition right now.

the vix popped up to 18-20. it is a lot higher than it was but obviously we've seen it considerably higher than that as well. one of the conundrum that investors have right now is that the increase in the vix has not really been driven by the size of the moves in the s&p. the realized volatility is only 10 or 11 which is challenging for investors, a big spread. i think that is basically the market pricing in uncertainty. uncertainty on the monetary policy front. you guys review the fed potential changes in its language, we are obviously watching the short end of the curve taking the cuts out of the curve. and of course, the geopolitical risk is something that typically is more bark than bite, but we've got to pay attention to it. one of my favorite quotes, most

economists know the stock market. i would broaden that out to just the level of risk premium. you can really learn a ton by just analyzing implied volatility. these prices are just singing right now. gold has rallied substantially in the face of a stronger dollar. very atypical. even as goals rallying, these are things that are telling us about an underlying risk dynamic for the market is trying to understand things. it hasn't yet, it is still holding's economy up as a consumer. i do think that there is a lot to be said about this upcoming series of quarterly reports coming as well. you are not lisa: the only person who suggests that right now if you listen to the market signals they are telling you we are at some sort of inflation point. michael o'rourke at the same kind of idea. what do you think this says

about the relationship between bonds and stocks? is this a point where higher yields is bad news for the stock market and frankly, people are not digesting the good news is good news the same kind of way, meaning that any upside surprise either on earnings or economic data could be problematic? >> i think there is something to that. at some point, the rise of the 10 year and the taking out of these cuts from the short end of the curve intended is something that is going to test the stock market resiliency. remember, around this time last year the market actually priced in a number of cuts toward the end of 2023. those did materialize and the stock market did quite well. it is not for sure that the fed has got to stay the course in terms of keeping rates where they are, the u.s. economy has just proven completely visibly in.

one of the things i scratch my head every time that is not enough a part of the conversation around the essential inability of monetary policy could -- to contain the economy is the degree of deficit spending. we are spending 7% more than we take in with a 3.8% unemployment rate. it is pretty unsustainable and i think the issue for investors is when we look at government bonds as a stabilized portfolio, you've got a push and pull. you've got this incredible supply that is coming, testing investors ability to take it down. you got unsustainable deficits that i think are certainly getting a lot of attention, and then the bond market does want to rally based on geopolitical risk. i don't know that you are going to be able to count a lot on stock bond correlation as you have in the past. and of course because you can't, you've got to really focus a lot more on option strategies than

just using bonds as a diversifier. lisa: this week we do have these three problems, the economic data, the earnings which are the true test of the mag seven, and we do have those options. what are you looking at they can kindest -- kind of give us a sense of where we are going at this inflection point? >> prices going to tell us a lot. what you are trying to do is read with the market is telling you. if you get a bad option, and we see these in the past, and the s&p goes down a lot based on that auction, it is telling you about a market level of discomfort. of course the data itself has become critical again. core pc on friday, obviously everyone is going to be watching. those were big data releases for a time in 2022, not so much in 2023. and again i think we are supposed to watch these other

assets like oil and gold for indication of just market discomfort. what i would just say is 5% two-year note yields, it kind of harkens back, you're kind of paid to wait in a way that you weren't for a long time. i think you are supposed to really think about what you can earn on the short end of the yield curve at least for now eight it is a lot of uncertainty in the market. jonathan:jonathan: we've heard that a few times over the last week, that's for sure. grandma went through the auction slate this week. let's do it again. $30 billion bark after about $70 billion of five-year notes. there are some record auctions on some of those. this was a big feature of the conversation last week. america's deficit, the sustainability of u.s. exceptionalism, the disruption he could cause the rest of the world. and a lot of people lisa: didn't

have answers of what that disruption could be, suddenly the u.s. is going to lose the privilege to borrow and spend recklessly, as some would say. the key question to me is you don't know when you hit that threshold and what we heard this basically we are going to hit an inflection point when it comes to interest payments. we don't know where it is. we are just bumping up against that danger point. annmarie: most of them think it is going to be a market issue that forces washington to get their act together instead of washington saying look at what the imf put out, a rare warning about the united states, let's do something and be proactive. don't think so. it is going to be a mess in the market that trickles down to washington. jonathan: we are higher by three basis points or so. the yield at the moment, 4.65. here is your bloomberg brief. dani: the new york stock exchange is asking stakeholders about their thought on 24/7

trading. the survey asked respondents whether round-the-clock trading all week plus how they would staff the overnight session. regulators are also assessing an application form that happens by a startup that launched the first round-the-clock exchange. u.s. commerce secretary dena removed the says huawei's latest phone shows that china remains behind on chip technology. they downplayed the claim of a breakthrough and also said that the tech gap shows that the biden administration has been successful in imposing export controls on china. and a rare rolex with a split second chronograph sold for $3.5 million at an auction. it is a record price for the model. produced in 1942, is one of just 12 ever made and nine known to exist. the watch has a case damon are

of 1.73 inches making the largest rolex watches ever made. that is your brief. jonathan: financial conditions are still using. up next on the program, tiktok. >> the idea that we would give the communist party this much of a propaganda tool as well as the ability to scrape 170 million american personal data, it is a national security risk. jonathan: the conversation about that so-called national security risk ending up next. (traffic noises) (♪♪) the road to opportunity. is often the road overlooked. (♪♪)

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♪ jonathan: bouncing back to snap a six-day losing streak on the s&p 500. yields a little bit higher by three basis points. lisa said earlier, the good news, the federal reserve decision the following wednesday. just a week or so away. under surveillance this morning, the clock ticking on tiktok. >> the idea that we would give the communist party this much of a propaganda tool as well as the ability to scrape wanted 70 million americans personal data, it is a national security risk. the timeline is a complicate a transaction.

jonathan: the house approving legislation of the weekend requiring bytedance to divest from tiktok or the band. the bill attached to an a package for ukraine in israel. the senate is expected to vote on the measure in the coming days. terry haynes writing we are still of the view that the tiktok issue get stuck with by years end, but how matters in the senate where the debate has been outright ban vs. letting potus investigate and figure out specifics to take -- tiktok or any other similar website. for anyone else out there who is confused, what is and isn't going to pass in the senate? >> the aid package certainly passes. ukraine, israel, the indo pacific, an awful lot of sanctions and foreign policy matters that pass, which i view as a congressional rebuke divided, essentially to get more

energy and moving on foreign policy. beyond that, i don't think largely we know yet. there are two main approaches, the one of the ban, the other is let's give the president the direct authority to evaluate websites generally for problems similar to that of tiktok, national security problems. there has been a debate about that. my instinct is that the wave kind of washes over the people who want that more nuanced approach, and we get right into the full ban, but i don't think we are going to go for a couple of days which approach they're interested in taking. if that is the case, it complicates things because then the bill would have to go back to the house for final passage. annmarie: they extended the amount of time bytedance would have to sell or divest from six months to one year. does that help his chances in the senate?

>> i think it probably does. you played senator warren on the bumper and he's absolutely right. this is looked at as much more of a fairness and business case matter than anything else. nobody is trying to shut off tiktok tomorrow, and it is important for senators to be able to say that as they are voting. annmarie: you say you are still of the view that the tiktok issue gets dealt with by the end of the year. do you mean dealt with in congress or dealt with altogether? this looks like it has a tremendous amount of legal battles ahead. >> i mean in congress. the posture of the united states government and what they are going to do about it. the legal case, frankly, i will tell you is overblown. the short strokes are that the site somehow his first amendment rights and all the rest. this is very much uncharted territory legally in the united date generally, but what the

first amendment fundamentally focuses on either right of individuals to speak and nobody's right to speak on the internet is going to be negatively affected if they can't do it on one of one billion sites. lisa: if i were cynical i would suggest may be the one year timeframe pushes us past the election where this becomes an issue that has been dealt with where no one feels the consequences if they are younger and they use tiktok. is that part of the reason why things were extended to a year? >> i'm pleased you are not cynical, lisa. annmarie: lisa: i appreciate that lisa:. >> the short answer is yes. i do think that is a consideration. i also do think that the business case of the primary reason, so accusing the united states senders of politics is not a particularly controversial matter passed by november elections is politically important for them. lisa: just talking about the political environment, i spent a

lot of time thinking about mike johnson's transformation where he was with kant that didn't want to provide funding to ukraine, and he said that this article that i'm that is transformation, he prayed a lot, do we have a sense of what intelligence documents really guided some of the decision-making that could put his ship in jeopardy? >> specifically no, but there are sort of two things at work on speaker johnson. one is the pure national security case, the idea that he got briefed on and from all accounts, everything i've heard, really sought out in just the way he would want from a senior leader in the congress. trying to get the best case and the best view of what the national security problems were and what the consequences might be. the other thing which i think is

under-appreciated that speaker johnson is a committed christian, says so, professes so, and the idea that russians were torturing christians became a powerful motivator for him generally, and increasingly the evangelical community in the united states made that case. but as i say, underappreciated. jonathan: russian assets of becoming a much bigger focal point pulling forward and more specifically, russian assets being held in europe, in france, indulge in. how close do you think we are to an agreement with the europeans on how to move forward? >> i think >> we are very close. >>you've got remarkable consensus in the united states congress on this in a way that didn't exist two or three months ago, frankly.

the administration is pushing hard to try to get something on this and i think the europeans are similarly motivated. you are looking at the continued weaponization of this sort of thing in a way that hasn't existed in about 80 years, really. jonathan: thanks for hosting us last week, good to see you. following the imf world bank spring meetings last week. amh, a feeling that we were getting closer and closer until we get to that g7 leaders meeting in june. >> there's a lot of different ways to get that money to -- and a lot of europeans are concerned about the precedent that this would set even though they are being pushed by a lot of officials to come to an agreement. at the end of the day, the leaders will decide. jonathan: equity futures on the s&p 500, welcome to the program. positive here by 0.6%. the bond market, yields are

higher by three basis points. coming up on the program, tasnim from citi. a sprinkle of economic data concluding with the pce read at the back end of the week. this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

manus: -- jonathan: thousand back on the s&p 500. nasdaq coming off the worst day of the year. down 5% last week, worst week since november 2022. the rest are positive. a little bit of a bounce in the equity market. turning to the board -- turning to the bond market, two year yields climbing. up about three basis points. on the two-year come up by almost a single basis point and getting closer to 5%. lisa: on one hand, people i saying this is a good place to buy.

that is the battle that we will be looking at. do we get more people saying to year yield looks pretty good? or do you have more people saying, hold up. we do not understand what exactly is going on under this -- under the hood. jonathan: a quiet period for the federal reserve. i think we all understand that. what we do not understand is what is happening in the commodity market. wti is down. crude coming off of a weekly loss. when comparing the reaction of markets to the views of most security experts, i am reminded of the story of the frog in boiling water. lisa: we kept talking about that

again and again. maybe we did not get further escalation, but that is not to say that there will not be, at some point. other people saying that actually it came without them looking at it. annmarie: it sent a strong message. saying this was not a big deal because they do not want to retaliate. that is why this chapter is over and there is calm. when you think about geopolitical risk for the future , if we get that we surgeons. jonathan: 86 point 83 on brent crude. max seven earnings kicking off this week. we will also hear from meta and alphabet.

nvidia is always at the tail end. what a brutal start for tessa. lisa: they have not been able to perform as well as they want. the price cuts that we heard reported over the weekend which actually with a fourth or fifth consecutive price cut. how do they cut profit margins when they are looking more like a car company? jonathan: else, the house of representatives passing a package for israel. this and expected to take up measure. talk about losing count. how many villas have been put through in the senate? annmarie: there were at least

four bills, but it is coming through as a foreign aid package. if you look at the vote count on whether it is israel, taiwan or ukraine, you can see what parts they are more interested in. tiktok, this could be a make or break moment for tiktok. there is also a number of times that you have seen lawmakers trying to ban this company and it is becoming a moment where this could be enclosed chapter. jonathan: i think about 15 minutes ago, there is a one year window to address some of this. it can get tangled up in the court.

that is exactly what most people assume will happen. lisa: i wonder who is the person dealing with the u.s. government for tiktok. it raises a lot of questions in terms of, are they going to take a new strategy? annmarie: that signal, to me was really important. it means that he did not do his job correctly. at some point, something will have to happen. jonathan: could they have lobbied any harder? lisa: everybody wants to hate china. this administration argument to china is, it could be a lot worse, so work with us, as we rake you over the coals. jonathan: the fed's preferred gauge coming later this week. expecting core pce. the last two year yield hovering near 5% ahead of a fed decision

next week. following the impact of those and more. wonderful to catch up with you. a little bit about our travels. we just got back to new york from washington dc and we thought we were going to spend a week talking about the economy. i wonder from your perspective if you could speak to some of the trends that you have seen and worries of what are happening between china and the u.s.? >> thank you for having me. it is a real pleasure to be here. definitely, we are seeing a lot of activity with our clients as they tried to navigate the environment, which seems to be getting more and more intense on the macros around inflation, around interest rate, proving to

be higher for longer. clients are eagerly awaiting when the cuts will come. as you mentioned on the political side as well, a lot of things for our clients to navigate. lisa: we were speaking with the thick of america ceo and he said it is hard to get conviction to buy another company or merge with a lot of things are being rejected in the name of antitrust or whatever. are you seeing the same thing among your client? >> it is a very hard time on the deal front for companies to go about. we are seeing some deals closing but they have been opportunities and they have been able to go through the cycle. a lot of things in the way and

also with the high interest rates, capital to fund the acquisitions and another factor that is proving to be a sticking point for our clients. it is not cheap anymore to buy another company. you have to make sure that you are not going to overpay. evaluation will be there to see you through lisa:. many are talking about it as a pivot point. you focus on a host of different banks and companies that have individual challenges and a better view in terms of economic strength and inflation. are the signs that you are seeing consistent with this general feeling that we will get a no landing with inflation running hot for the foreseeable future? >> one of the things that are

interesting is the balance sheets really quite strong. for the vast majority of our clients, we have been supporting them as they think about diversifying. although the environment is tough, it is posing quite a lot of opportunities as well. they are thinking strongly about their supply chains and how to make them more resilient. making them secure as well. things like reassuring, things like diversifying the funding environment -- i think these are the opportunities that our clients are playing into. it is not all doom and gloom where our clients are concerned. annmarie: is that because of the market were policies and this urge by certain governments? >> i think it is a little bit of

both. on the supply chain side, i think they are trying to address things like logistics cost, ensuring that their goods actually get there and there are no delays, managing it from that and then there are incentives as well. last week i was in mexico, where i saw the phenomena with my own eyes. it was amazing how large companies announced either a new investment or an expansion of a factory like in mexico. the supply chain follows them there and a whole ecosystem gets built out. the big expansion of a plant in mexico. there are different impacts with that. annmarie: do you see chinese firms moving into mexico?

>> there are a couple chinese firms, but it is bigger than that. we have seen other asian companies moving there as well. what we are noticing with these is that there is a big move that is very abrupt -- very vibrant. jonathan: what it sounds like is that it is becoming complex. it is easier to be local and avoid expanding beyond their borders. >> absolutely not. companies want to make sure that they are strong in their domestic markets, but i think

that the vast majority of our clients and the reason they come is because they have global ambitions. as they think about how they will grow themselves and how they will succeed in the market, more and more, we're are looking at cross-border opportunities. that is where a bank like ours can really help them. jonathan: can we talk about how that is being funded? >> one of the things i will say is that clients are getting absolutely focus on their own fluidity. even midmarket clients that probably did not pay that much attention to their liquidity as

some of the large clients would traditionally be doing. they are paying a lot of attention to make sure that they are efficiently using all sorts of capital. the collections are really quick as well and the whole cycle is as tight and efficient as possible. we have a lot of solutions that can help with that. there is bank funding and the rise of credit as well. a lot of innovation happening on the finance side. lisa: has it moved to -- it might be more challenging, but you have to be innovative. it is just as available in terms of credit creation to go out and expand.

>> i think so. companies are not just getting stronger. geopolitics does not take the wind in the sales of these companies. they do use the most volatile environments to look for opportunities to expand not doing big, transformative kind of deals. a $10 million company -- adding particular expertise. that is something that we are hearing a lot from our clients. jonathan: we love to have you around the table with us. breaking down what is happening with some lending to multinational companies.

when you stay local? -- would you stay local? lisa: also what we are hearing is, as this a restrictive interest rate environment? i do not know. it is not sound like it based on the fact that companies can keep borrowing and transacted. jonathan: if you are just joining us, welcome to the program. here is your bloomberg brief. dani: chump return -- trump returns to court later today. classes will be virtual today after antisemitic statements on campus at columbia. columbia's president said they

would meet to discuss a way to in the crisis. tesla announced price cuts over the weekend. now the risk of yet another price war is growing. tesla has also slashed the prices of their software by a third. jonathan: up next, strong dollar here to stay. >> if even japan and korea are losing ground against the dollar, it is a wave. and only goes up from here. jonathan: live from new york, this is bloomberg. ♪

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than the business you're in. if you use data, that's the privacy business. manufacturing on demand? you're talking cloud business. got a few million hyper-connected customers? digital experience business. that was fast. that's where deloitte comes in. with the right combination of talent and technology to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. jonathan: bouncing back on the s&p 500. bond yields are a little bit higher.

the dollar is a touch stronger than the euro. strong dollar is here to stay. >> if even japan and korea are losing ground against the dollar, it is a wave. it is not sustainable long-term. it is a little hard to say please do something cooperatively. jonathan: investors are gearing up had of data this week over the pca -- pce deflating. most investors expect a trump victory would be positive.

here with us on the table this morning. let's talk about the strength of the u.s. dollar. are we beginning to have the 2025 debate around interest-rate and not just a 2024 debate? >> not quite yet. we might be looking at more of an impact on the economy. it will ultimately turn the dollar around but until you see signs that the economy is weakening, it is difficult to change the momentum. it has been premature so far. lisa: you have not changed your view on the dollar. how do you push against what we have seen? even fed officials are changing

their communication. >> it is higher than what we are today. it is more in terms of the range. as we get down there, i think there is good interest to lock in at lower levels. lisa: what is the trigger here? it seems that the data is coming out and what you end up seeing is this feeling that the u.s. may not be able to cut rates until september at the earliest. >> even though we have be priced the fed, back then i think we spoke in january on the back of

ab pricing by the fed. it is interesting that we have only been able to get down to a 106 handle. just 34 big figures lower. annmarie: most investors expect a trump victory would be positive. what would a joe biden second term median, in terms of the dollar? >> they expect it to be fiscally supportive. a lot less if you have a divided congress. it is a known quantity for many. a trump victory is interesting because there are split views.

it is definitely the view in europe. i found a lot more people willing to contemplate trump being dollar negative. one is the pressure he exerts on the fed to be more dovish. the other is the deficit story. many come back to the idea that it will turn into a big dollars story. annmarie: doesn't that match up with what we might see from the fed if they hold off on cuts this year? it will have to be a 2025 story. >> it depends on how much we get from fiscal support. you have to expect that at some point they will be cutting rates. but the timing is a big one. everyone was looking for cuts to come this year and here we are. it does seem more likely to come into 2025.

jonathan: what explains the european differentiation? what do you think explains that the >> a lot of that might be the fear on what tariffs mean for europe and for trade. in the u.k., we always think of a downward trajectory for the pound. jonathan: always. it is a permanent mindset. we said it is this my get worried about the u.s. deficit? 20 into the market as a reason to say, no worries at all. a decent chance that the story might change in the next few months? >> it is hard to imagine. in particular what the private sector is doing. much of it is financed domestically.

>> that said, he came out and said the stock is pricing higher. it was in reference to sovereign debt. debt servicing costs start to accelerate. doesn't that worry you? >> at some point, that will very much matter. but at the same time coming have to bear in mind that we have had this conversation some the time before. why does it not play out? you are in an environment where you can finance it at the right yield and at some point, they cut rates. lisa: meeting the bank of japan. theoretically. jonathan: thank you for being with us.

breaking down the dollars story. a lot of talk and conversation expected about supply this week. going through the numbers again. notes coming tomorrow after that 70 billion and five-year notes. a lot through the front end and into the belly of the curve. coming up on the second hour, we will catch up with j.p. morgan. we will speak with alex webb and catch up with mandeep singh with some big tech earnings on deck. we are positive by .5%. live from new york city, kicking off a brand-new trading week, this is the very. -- brand-new trading week. this is bloomberg. ♪ der coming in.. big orders! starting a business is never easy, but starting it eight months pregnant..

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>> we are more in the roaring 20's camp. >> we have slower growth, but growth overall. >> there is a lot of pressure on a handful of stocks. >> a think the most likely scenario is the roaring 20 20's. >> this is bloomberg surveillance. jonathan: last week was a weird week.

usually it is the other way around. lisa: how often is it a counter indicator? jonathan: good morning. get your trading week begins right now. let's go straight to the calendar again. microsoft and google on thursday. lisa: we have been hearing this time and time again. the biggest weekly loss at a time when maybe, just maybe the ai adoption is not happening as quickly and in as robust a manner. jonathan: we had a 10% move on nvidia. tessa is a focus first on many

at home. another round of price cuts going into the release tomorrow, after the bell. annmarie: i was looking at the note put out. he is basically saying if musk is flippant again on the call, darker days will be ahead for this company. lisa: is he going to come in in a suit? jonathan: it has been the moment of truth for a while. great guests alongside us. just about positive. the scores look like this beginning with the treasury yield higher by three to four basis points. lisa, you mentioned at the previous hour, fed speak. what did we learn last week from

fed officials? lisa: the fact that john williams came out and talked about the potential of hiking rates, if the data warranted it. it was a huge shift. there was so much focus on communication failures by the federal reserve. there needs to be some kind of scenario analysis as a way to better communicate the markets what they perceive jonathan: coming up, we will catch up with another round of price cuts. we began with our topsoil. nowhere to hide. writing this, we are hoping that is a further washout of markets. it would allow the opportunity

for money to come into the sidelines. good to see you and good to catch up. i we restrictive enough? -- are we restrictive enough? >> you are effectively setting a new record for fed policy if they hike rates again, they will have never cut rates. we know what that is. it was 12 months. i do not think any of us are calling for a rate hike in july. if they hike any time after july, then it is another new record for distance, from one rate hike to another. it seems implausible. we look at the summary of economic projections. the highest ever for neutral

policy. if you get to the extremes, it was 4.5%. over the last 12 years, no one on the fed has ever believed that rates had to be higher than 4.25. here we are and we put those things together. i cannot really believe that we are going to see anything approaching a rate hike. jonathan: is that still the case? >> very much so. the one soft landing anybody could have lived through and worked through. i remember it like it was yesterday because the first quarter of 1995, people only saw

demons. you have the tequila crisis, the orange county default. you had problems with the securitized markets. at that point, they were solving for that by liquidating. nonetheless, we had a soft landing. the fed started cutting rates and then they took 25 of that back. markets did great from 1995 to 1998. inflation 2.5 to 3% during that period. lisa: you think the fed is going to cut three times this year? how much would they have to cut to continue to feel bullish? what is the most optimistic you have felt?

>> if they came back to cut, that is another record. they're going to set a record because the longest distance of time was 2000 six to 2007. i think the fed wants to take them. it has created a vulnerability. housing affordability is the lowest on record. you are seeing it with we commercialization. 60% to 80% below their original

appraisal. you're looking at businesses funding themselves. that weakness is there. but i think we will get there torrents year-end. lisa: how aggressively are you buying right now? >> i'm trying to keep my discipline. it feels like a month and washout when you have those third week so i will wait. there is some big data coming out. you have a lot of investors

wanting to take profits or a lot of momentum investors yet to cash out. we are close and looking at levels. jonathan: that is our next question. >> i'm hoping why it in credit. i think that is too far. i am a buyer in their. corporate credit, we have already started to buy a pretty good backup. treasuries, we will be in there and i. jonathan: record issuance on some securities.

what are you waiting for? >> i'm not concerned from a longer-term budget fiscal policy. it generates revenue that the treasury collects. the entire yield curve is trading below people want to get an on the way and see what happens. lisa: i was struck by an investor survey that came out the last couple days. the number one concern was inflation. number two was central-bank policy error at a time when some people are saying that it

already happened at the end of last year with the initial pivot . what do you think the biggest policy error could be for the remainder of this year? >> that they do anything? that they see how things play out. i think there is nothing that they can do wrong at this point in time other than hike rates or be too hawkish. corporate profitability looks pretty good. inflation has not moderated at the rate we wanted. i think we are in a pretty good spot. i understand why. jonathan: the two-year at the

moment. it may be free five handle. up by three to four basis points. let's get an update on stories elsewhere. >> the military intelligence chief has resigned. the idf confirms that the head of military intelligence has stepped down after 2.5 years saying it did not live up to. calling for them to take responsibility for the attacks and resign. traders are preparing for a continued rally. the climb to the highest since january. shares have fallen, a market value.

surging to the highest since 2017 on friday. shohei ohtani broke the record for most home runs by a japanese board mlb player. there should be putting more opportunities to extend his record. that is your bloomberg green. jonathan: up next, the foreign aid will heads to the senate. we'll have that conversation, next. good morning. ♪

jonathan: welcome to the program. negative every single day last week. yields are pushing higher again. essentially at 5% on the session this morning. the foreign aid bill headed to the senate. >> not in pacific. there are a lot of sanctions and foreign policy matters. the wave, goes over those who want a more nuanced approach. jonathan: is latest a senate vote? after the bill cleared the house, also passing a bill that would force them to face a ban

in the u.s. let's talk about what you are looking for. >> all of those measures were actually packaged together. they were staying for one major passage vote. not entirely clear how it to be slow down. the first vote happens tomorrow. the second vote that passes all of the measures could be late tomorrow, could stretch into wednesday, but one major thing on the to do list in the senate for all of the foreign aid money and the tiktok measure, the sections that are packaged into one measure in the senate. annmarie: what kind of the hurdles can we see?

some of the provisions like tiktok or some of that money going to taiwan, israel and ukraine? >> it is a matter of politics now. they passed with more than 300 votes in the house. if there were a holdup, the senate has already passed a separate ukraine measure that did not make it through the house. the questions that remain are, but does that mean for mike johnson? what does that mean for a potential motion to vacate the chair? what position doesn't put republicans in heading towards the election? political questions are where there are more uncertainty around where republicans stand. this particular package looks may strong.

annmarie: could you see a future where hakeem jeffries comes to the defense of her mike johnson? >> i do not think hakeem johnson -- hakeem jeffries has to. there are democrats who do not want to see the speaker lose his position over ukraine aid. they do not even have to vote for johnson. they could decline to cast a vote, which would lower the threshold. inevitably, it would be a fairly close vote, but there are a number of centrist democrats who have made it clear that they are not interested in the speaker getting kicked out for allowing a bipartisan vote on the ukraine measure, even if democratic dealership does not want their fingerprints all over that. lisa: a lot of people are looking at this.

now you have the potential passage through the senate of additional aid. elsa was saying whoever wins the election in november will be fiscally supportive. does this represent a willingness by congress to back that type of feeling from either of the candidates running for president? >> i think there are a lot of variables to go into that. first of all, they will not be massive legislating and massive changes of direction. they struggled to do big things. there are still questions about the degree to which the tax cuts are extended. there is a deadline.

it should marry measures can bump that back. -- extraordinary measures could bump that back. they probably will not, if trump wins. this is not necessarily show a willingness to been a ton of money. most house republicans voted against the ukraine aid measure. there are a lot of questions still about what the next congress would look like after the next election, in terms of fiscal policy. i'm not sure we can learn much from this one. jonathan: whoever wins, i'm sure we will have a ton of fun. some final thoughts.

how do you explain how uncomfortable they are with politics and how comfortable others are? >> we have lived with geopolitics for some time now. we are in the third year of russia and ukraine. there is the initial shock and knees on the markets. they are dispassionate. they tried to move on with the data. it is glaring and right there. corporate profitability looks good. they are talking about a pickup over the next year. they put more on their credit cards but they are fully employed and have positive wages. there is a lot of cash on the side. $6 trillion in money market funding. i will tell you my never have to look at the senior loan officer survey again.

you look at it. jonathan: i love how you looked at least seven you said that. lisa: please. >> if you look at the book of business for seeing eye loans, it is either side of $3 trillion. what is the size of private credit? there is a non-bank lender out there. the bank's senior officer loan surveys were showing a tightening in credit conditions. most two thirds the size of the banking system was looking for every opportunity to extend credit into the system. that market is still there. it is a pretty nice tailwind. lisa: all of this speaks to a no landing scenario.

if you have fiscal spending, why is inflation going to come lower? >> we have landed. we came from some sort of double digit growth in 2021, down to something that is 2.5% real. you are looking at 2.5 to 3.5. a very high level of growth and inflation. we were talking about 95, where you start to grow at trend.

it may be a little bit above what they want, but i do not think enough with the markets. jonathan: i will repeat this for the rest of the week. you think this is stable equilibrium? >> i think for now it is. we never saw anyone on the side throwing out five plus percent as long-term neutral. it is slowing things down. at some point, they will have to come in and take rates down a little bit. taking the edge off of businesses and household, but it looks like it is a really good environment. i think, over time we will go back because there is a new demographic.

look at the millennials. now in their 30's. jonathan: always a pleasure. not a word on the liverpool football club. the seven day of losses after delivering another round of price cut. alex webb is up next. ♪

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jonathan: closing below 5k on the s&p 500 for the first time since february. equities attempted to bounce back. coming off of the worst week all the way back soon the spring of last year. the run of losses is six consecutive days, longest losing streak going back to october 2022. the nasdaq up by 0.6%. the focus for us this week has to be the nasdaq 100 given the weightings of these big tech names. lisa: moment of truth if you want to use daniel ives words about whether they can deliver their earnings that can prove and bind the dip moment. she said investor sentiment has taken a bit of a hit but it is too early to say the pullback is

over. unclear whether the dip has happened yet, or if more is to come. jonathan: we just heard from the big bull, the most bullish since the mid-1990's. lisa: they are wing to have more data coming in to confirm that. that will be earnings, pce, what happens, whether yields can keep on climbing. jonathan: let's turn to the bond market. the 2-year through 3% once again. 4.9993. the last week has been a mix of solid data, jobless claims around 200k. fed officials saying the quiet part out loud, perhaps we are

not restrictive enough. lisa: this led some including ben bernanke to come out over the last couple weeks and say they need to change their communication strategy. the dots are kind of useless. a lot of people feel like they are just a nice design, but what they should be doing, if we see inflation come up to this level, this is how we should respond. rather than this, let's take a look at this data coming in. jonathan: ben bernanke, do you find that curious that the bank of england turned to him to come up with a new communication regime when he was responsible for leading this communication regime coming out of the great financial crisis? lisa: there is a lot to digest. annmarie: i think because yellen is tied up? jonathan: that is where we are

right now. let's talk about foreign-exchange. this from kit juckes. our forecast looks for a fall below1.05 but not parity. at the moment, europe is doing everything that everyone expects it to do, not a great deal of things. we are stuck between 1.06 and 1.07. lisa: the fact that we are not closer to parity tells you a lot of things. basically you are looking at the potential for no cuts this year, so by didn't we see a bigger move? the fact that we haven't, maybe this is stability, equilibrium we were just talking about. jonathan: europe going to europe? lisa: it has been a confusing bunch of weeks.

even if you have conviction, you are bullish, you are not buying. that is the tone of the morning. jonathan: you have offended a lot of people. under surveillance this morning is the israeli military chief resigning over the failure to prevent the october 7 attack. over the weekend, some quiet. no real developments like we had in the previous week. annmarie: absolutely in terms of calm at the moment between iran and israel. i most say the israeli people have been starving for some sort of recognition by the government that they were at fault for what was happening on october 7. will the calls stopped for netanyahu to step down? i'm not sure. you are seeing protests that have not abated since that attack.

jonathan: 86.76 on brent. gina raimondo saying huawei's latest phones trails the u.s. in terms of chip technology. we have the most sophisticated semiconductors in the world. we have out innovated china. annmarie: lesley stahl says by we, you mean taiwan. she says fair. jonathan: that trip last summer, going to china, huawei unveiling that phone. is that a snapback of this? annmarie: remember also they were spying on her. leaks into her emails. she took it as, they know my work here is important. jonathan: do you just expect to be spied on as a foreign leader landing in china? lisa: i spoke with an executive who went there that serves on different boards who says they

use a burner phone and laptop, and that is what everyone knows when they go there because they know they will be spied on. it is protocol, if you are an executive, anytime you go to china. people do not bring their cell phones to china because of just that. jonathan: interesting exchange with the commerce secretary overnight. shares of tesla falling in the premarket after the automaker cut prices on a range of models potentially sparking a new price war in china with one carmaker slashing prices on their models. it cap a busy few days for tesla ahead of earnings tomorrow. the company also announcing it will reduce headcount by 10% globally. alex webb joins us now for more. i wonder how low or high this bar is for elon musk and company alex: expectations are remarkably low given what we have seen in tesla the last couple of weeks but also

compared to just how high they were a year ago, that means any surprise to the upside is likely to be taken positively by the market. huge increase in the number of sell ratings on the stock. the 12-month target rate is close to where the stock is now. it mean perhaps the bar is not terribly high tomorrow. jonathan: when these price cuts started in the last year, it was a bullish way to frame this, tesla had the margins and they were trying to ramp up production and gain market share. can we frame it as bullish lee now? alex: it is hard to do so given they have lost 4% of market share in that time. 10% last year, about 6% now. the challenge they have, companies such as byd, the more scale they have, the easier it is for them to reach scales of greater economy. that has very much been the byd

approach, get into as many segments as they can, at a low price point, which means it is cheaper to produce the vehicles at all. it is an incredibly competitive space in china. tesla's timing was pretty inopportune. they expanded production globally to 2 million units just as demand for ev's started to decline. what's more, you started to see the secondhand ev's come into the market, massive price depreciation on those which is inversely overcharging demand in the market. people see the drop off. do i want to be exposing myself to that? it makes the slowdown in the market that much more drastic. lisa: a lot of pessimism around this name. how can the robotaxis shift that? alex: hard to see how.

the struggle that i see with this vehicle, i'm not sure what the business model is. when they talk about. driving -- full self-driving, their cruise control product they have, it is not full self-driving. are they selling a new version of self-driving to the customers or are they talking about a new business, putting fleets of robotaxis on the road? if it is the latter, i have no idea how investors will see the upside of that. it is an incredibly expensive proposition. if these vehicles are annually. driving -- genuinely full self-driving, that is billions of dollars. i will be fascinated to see the business case when this comes out. annmarie: what about a bet on a lower mass-market car, what happened to the 25 thousand

dollars tesla that was supposed to be competitive? alex: certainly looks like the experience in china has informed that. looks increasingly difficult to compete with byd in that geography. if you were a corporate strategist, you would say let's not bother, let's go to the area that we can own, but they are struggling on that front. it is something investors had been hoping for for that next lego growth. for now it doesn't look like it is coming. jonathan: not just with this company but another company that you follow closely, apple, reporting next week. do you see any crossover whatsoever in the struggles that tesla is having and the struggles that apple is having in that country? alex: there might be one note of operability. there is a rise in chinese nationalism, support their domestic brands. that seems to be heading apple

at the moment. you were talking about huawei a moment ago. brands are experiencing a bit of an uplift in their home market. it is the chinese brands in the ev's that are also dominating. when they start hitting europe, that is when these companies will really reach scale to make it very hard for anyone to compete with. jonathan: any pushback from the europeans? everybody was talking about putting up the walls to chinese ev's. what does it sound like on the ground in the continent? alex: it is quite a tense matter. we have a chinese carmaker setting up a factory in italy. a lot of criticism from other parts of the region because of that. at the same time, if you want to meet your goals when it comes to climate change, you need more of these vehicles on the road. it is hard to import from china, so producing locally, the argument is at least you are

employing people locally and that is good for the economy. it is not an issue in which everyone agrees. there is increasing tension around this. jonathan: alex webb, thank you. tesla reporting after the close tomorrow. then apple next week. two top story to break down that piece on china, what is happening in the world's second-largest economy. let's get an update on stories with dani burger. dani: the new york stock exchange is acting stakeholders on their thoughts on 24/7 trading. the survey asked respondents whether there should be nonstop treating throughout the entirety of the week and how they would staff any overnight sessions. rise and shares higher in the premarket trade up by 1.5%. customers choosing premium plans. the ceo said they are on track to meet guidance for the year.

tiktok's future is looking more uncertain in the u.s. the house is passing that has passed a measure requiring bytedance to sell its stake in the social media firm. if it refuses, it may be banned in the u.s.. sources have said bytedance intent to fight the issue in court before considering a deal. the senate is expected to vote on the measure tomorrow. jonathan: they are going to drag this out. they are going to say the matter is concluded going into the election and nothing will be concluded. lisa: this is how you avoid the issue that could potentially alienate a younger demographic that uses tiktok. yes, we are aware of the concerns, we are going to do something, but it will not affect you in the foreseeable future, so out of sight, out of mind. annmarie: potentially a key donor for the republicans. jonathan: earnings season ramping up. >> there's a lot of pressure on

a handful of stocks. we will see their earnings come through on those but the momentum is not what is driving us anymore. jonathan: four of the mag seven reporting earnings this week. live from new york city, this is bloomberg. ♪.

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and chase ink was that for me. earn up to 5% cash back on business essentials with the chase ink business cash card from chase for business. make more of what's yours. jonathan: stocks up. socgen, no landing, no cuts. long copper and gold. crude negative by 0.1%. yields higher by three or four basis points. 4.6589. bouncing back by 0.6%. under surveillance this morning, earnings season ramping up. >> there's a lot of pressure on a handful of stocks. we will see earnings come through on those. netflix did better but guidance was poor.

we will see what happens with the rest of a handful of stocks but the momentum is not what is driving us anymore. i think that is key when we are looking low momentum names have actually outperformed high momentum in the last week. jonathan: mag seven earnings ticking off this week. tesla tomorrow followed by meta and google on thursday. mandeep singh joins us around the table. amazon and apple next week. later in may, nvidia. if we could give you one release, which one would it be? mandeep: microsoft. good enough to earnings will not be enough this season. you need spectacular earnings. nvidia had delivered that the last few times. this time it will not be nvidia but probably microsoft. they are the ones that are actually deploying ai. when you think about what are companies doing with all of the gpu's, nvidia and meta have the

most allocation. microsoft is the one that is actually deploying on the cloud. that is what you want to see in the numbers. jonathan: what do you expect to see? mandeep: azure growth they quantified around 2500 basis points. you want that live to be higher than last time around. lisa: there has been a feeling in markets, maybe we got ahead of ourselves and how quickly ai would be adopted and deployed. do you expect to see that sentiment in microsoft earnings, given they are trying to deploy it in some specific ways? mandeep: microsoft is uniquely positioned because, one, it is using a lot of to deploy its own ai, and that it has its own consumer facing products like copilot, how they are deploying in search with openai. what they are saying is we will be the first to deploy openai

and we also have the capacity, gpu for others. that's a great value proposition when you think about investor looking to play that ai theme. nvidia is more, everyone wants gpu's, the pricing is high, but then it will normalize. lisa: move this season be the obituary on magnificent seven, the concept that we can talk about this cohort in a cohesive way, given they all face very different outlooks, different journey with their stock price? mandeep: i put them into two buckets, the consumer facing ones, tesla and apple are the most exposed. the device refresh will be slow, car refresh will be slow. they don't have that enterprise exposure. you want to play companies that are exposed to this capex wave. every large company is investing and there are beneficiaries of that spend. these companies are exposed to

the consumer and you are not seeing that lift. that is where they will struggle with topline growth. annmarie: not only the exposure to the consumer but china. what do you expect with china eating at these earnings? mandeep: you are right even in the case of apple, 15 to 20% exposure revenue. the same for nvidia. if something goes wrong geopolitically, you will lose that revenue stream. that right now is a big risk for any large tech company being exposed to china revenue. it's a big risk. annmarie: do you think the markets have really taken that on, if there is a big geopolitical risk, there is massive downside to these companies? mandeep: some of it is embedded in the price. even the regulatory risk, what goes on in europe, what is happening with the doj, regulatory stuff, that is baked in somewhat because these companies cannot acquire any

other company right now. in terms of the overall china revenue going to zero, that is not embedded in the price, so that's a risk. jonathan: can you explain friday's price action? why were we down 10% on nvidia? mandeep: it is a crowded trade. if there is one tray that everyone has piled on, it is nvidia, the poster child for generative ai. at two chilling dollars market cap, a lot of that is embedded in the price. nvidia will not grow 15% for the next five years, that growth will taper. jonathan: do you think we will see signs of that later in may when they report? mandeep: probably not this corner given we are still supply strained. for chips it is all about when that supply demand equation will normalize. it has not normalized based on what tsmc has told us this quarter.

this corner will probably be fine. lisa: if you thought that was a big sellout, take a look at super micro computer, lower by 23%, after saying they were going to have a date where they were going to give her and didn't give guidance. does that give you a sense that maybe people want to sell? this tells you more about the sentiment and some of the fear that we already see in the market? mandeep: yes, we are, and i'm not surprised if you go back in time with any secular trend, because we are so early and you have already picked winners, you will see that nervousness and volatility around the stock. things do not go up in a straight line especially talking about 50% growth. not so much for supermicro, but at the end of the day, they attract a lot of competition. when your stock rips up like that, it will attract everyone to try to have that growth. lisa: i'm a little bit

distracted because you were talking about the two buckets of tech names but it seems that we are looking at three. microsoft, google, and nvidia. is there a new moniker? right now we can say the magnificent seven is dead. mandeep: i don't know if it is dead. alphabet, for the longest time, was perceived as the one that is going to get disrupted. now the market is realizing they are ahead when it comes to the generative ai wave, language model, even their cloud growth will pickup. it is too early to write off apple as well. they have a very good ecosystem. it is about the ecosystem and how sticky your revenue is. apple, alphabet, it is a very sticky business. jonathan: isn't that what officials are trying to disrupt, the apple ecosystem? mandeep: on the force them to open up the platform, which

everyone is doing, apple app store and google store has to do the same, that is eating into their take rate. if things are happening along those lines where they cannot even have control on their software or hardware, that it will become a problem. jonathan: google changing perceptions. how have they done that? gemini was a disaster. may putting ideology before fax. -- facts. mandeep: look at their market cap now. they were trading below nvidia but now they have caught up. when it comes to alphabet, everyone realizes how strong of a moat they have in terms of data. a lot of the large language models have pre-trained data. when it comes to live searches, you have to use google or bing. and google is much better.

everyone realizes llm is not the real-time solution and you need real-time search. jonathan: mandeep singh a bloomberg intelligence, thank you. let's go back to the calendar. separating some of these companies. the consumer facing companies, tesla, after the bell. apple next week. apple and tesla facing headwinds with the consumer, more specifically the chinese consumer. lisa: they have a number of different challenges. you have the chinese consumer and the fact that they produce and sell in china. they also have the idea of the super cycle with respect to smartphones, where we are with that, super cycle with electric vehicles. then there is this third thing that we heard nothing about, cooling consumer demand. no one is talking about that. is it cooling, heating up? very curious to see. annmarie: some investors are saying tesla and apple need to

have a lower price target for a new car or iphone that could potentially bring up this market share. alex webb said basically what made sense for tesla may make sense for apple. this week, elon musk was supposed to meet with the indian prime minister, but because of all the bad news happening he has had to hit pause on that. you are looking at india because they are potentially losing out on china. jonathan: tesla reporting after the bill tomorrow. four of the mag seven reporting this week. michael o'rourke of jonestrading, not a callous he laura reim, and ed ludlow. equity futures near session highs. units climbing four basis points. this is bloomberg. ♪

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>> the fed is going to keep rates higher for longer and that puts more pressure on the economy. >> yes, we are probably going to have slightly higher inflation and yes, higher interest rates, but to us, that is not that bad a problem.

> the economy has demonstrated he can live with these interest rates. >> overall, the picture remains fairly positive. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: how long did andrew work on that? lisa: we can have him on and ask him. you think it is good? coming up on friday, tons of tech earnings in between. tons to talk about after six days of losses on the s&p 500, equaling the longest daily losing streak back to october 2022. the good news as lisa has already said this morning, no fed speak. can't you down to the fed decision next week. we go into that decision -- decision with them wondering out loud, are they restrictive enough? it's been interesting to see official after official asked that question. lisa: and what the potential

response will be if they get a sense inflation is running too high. scenario analysis and whether they give us some sense of is a hike on the table, what has to actually happen that to be on the ace? which also would have a significant market petition. jonathan:jonathan: big deficits, sucking capital away from everybody else and perusing a much stronger u.s. dollar. complaint after complaint just last week. annmarie: absolutely, basically the u.s. also tactically acknowledged that when janet yellen had that meeting with her counterpart from south korea and japan. it on the heels of of the weekend, we are on track tomorrow coming out of the united states.

jonathan: we will ask them how long it takes to come up with a title. that is one to look for. here is another one. tomorrow after the bell, we hear from tesla. next week we hear from apple and nvidia later on in the month of may. i love what mandeep singh did. look at the consumer facing tech names like tesla and apple. a long list of problems. lisa: maybe they will be a demand on how much consumer appetite there is to spend $1500 on the iphone. ev, i am curious about dan ive'' view on friday. annmarie: he says this is the cinderella moment. he has been saying that he is

still over on this stock, he still thinks there is a story to tell. i also like what mandy did about microsoft. if this is a market fueled by this ai rally, let's see how microsoft does. jonathan: equity futures up by 0.6%. yield left by four basis points. front end of the tail curve taking out 5% briefly. in the fx market, the euro a little weaker, the dollar stronger. negative by 0.2%. we will catch up with michael o'rourke on what because an inflection point for markets, and laura rhame on why she sees the 10 year retesting 5%. u.s. data pushing it rate cuts. the preferred inflation gauged

on friday. michael o'rourke saying this. financial markets are at an inflection point. the fed's overestimation and overconfidence as to how restrictive policy is has fueled easy financial conditions and excessive risk-taking while fostering easing expectations. bearish, fair to say based on that? >> fair to say. we talk about the 10 year yield potentially going to 5%. for the past three weeks the 10 year yield has been higher than the s&p 500 earnings yield even though the s&p 500 is correct at 6%, that relationship has since stayed the same. that just continues to show you have a risk-free instrument offering a very attractive return vs. equities that are pretty expensive. jonathan: drawdown so far, 5%. how much downside are you looking for? >> i think there's a lot of potential.

i'm not going to say i can't put a number on it. we've had this easy financial condition environment that has basically fostered equity prices across the board. even the fed financial stability report released on friday and talked about equity valuations historically high, how credit spreads are tight. but if that relationship between treasury yields and earnings yields, it is traditionally the equity, the s&p 500 earnings yield over the seven years prior to the pandemic was on average 340 basis points over treasury yields. even to just get one third of that back, the s&p would drop 20%. i'm not saying we are going right back to that relationship, it just gives you an idea how into are relative bonds. lisa: bob michele also seeing a potential inflection point, but in the opposite direction.

why is this inflection point, in your view, going to inflect more negatively? >> you look at the earnings situation, we are talking about all the big earnings this week. earnings this quarter are supposed to be basically sequentially flat. the big bump in earnings is supposed to come in 2, 3 and four were aggregate earnings are supposed to rise 16%. analysts are forecasting 60% earnings jump for those three quarters in a 5.35% environment. we are not getting the rate cuts we expected, we've had an incredibly strong economy and a lot of that is fiscal monetary stimulus from the pandemic playing out the past couple years. to expect that type of jump in earnings is pretty aggressive and if you don't get that you realize how expensive it is. lisa: do you see this idea of the selloff in stocks that comes along with an ongoing selloff

and bonds as sort of something they continue the divergence that you were talking about with the 10-year treasury yield being about the s&p 500 earnings yield? >> if you go back to the 90's and probably the earlier 2000s, the old saying was stocks follow bonds. if treasury yields were coming down that big bond bull market, stocks rallied because they are competing with each other for assets, for investment assets. now we have seen treasury yields rise and basically stocks and bonds are going down and stocks should be following bonds lower to keep the earnings yield somewhat competitive with the risk-free instrument in treasuries and we just haven't really seen that yet except in the last three weeks, we've seen this dip, but they've moved together. lisa: do any of these relationships still stand or have we broken all of these? >> you go back to the late-night is, the s&p 500 earnings yield was consistently lower than the treasury yield, but that was

during the great moderation as inflation is coming down for basically decades at that point, and bonds were just cautious or investors were late to follow. this is the inverse situation where we are seeing inflation more sticky, a structurally different economy that we've seen for 2000 and 2020. annmarie: you've said the fed policy does not need to change but communication does. what are they getting wrong? >> they are being overconfident in what they're saying. in 2021 the story was that is transitory. when the fed finally raised interest rates, core pc had actually peaked. the fed raised rates in march and they finally ended qb in march. they were late and they were too confident for too long. since last summer weaver policy is restrictive, but it hasn't been. in q3 we put up a 5% gdp print. at some point the fed has to say

we are missing something in this economy and that if doing that they continue to say policy is restrictive. they keep this estimate of the long-term fed funds rate down to 2.5% which is only a 50 basis point real neutral rate where even the ds model has it at 2%. they are basically going off of a forecast that interest rates are going back to lower levels or the market is taking their focus in saying this is where we are going with futures so we can keep equity valuations inflated a little bit higher. annmarie:annmarie: we started hearing some fed officials talk about whether or not they are actually restrictive and michelle bowman said more restrictive, but we might not be sufficiently restrictive. what is the difference? >> it's massive. if you are overestimating how restrictive you are, you're making a policy mistake because policy is far looser than you believe it to be.

over the past three quarters if you include what q1 is going to look like, i think we've averaged gdp about 3.6% which is double the long term forecast. it's funny, chairman powell talks about the imbalance now. if you go back to pre-pandemic, 1.8% core pce, the fed was willing to anything to push inflation up to 2%. here we are at 2.8% pce, talking about things being balanced the unemployment rate is 3.8% which is 30 basis points lower than the fed long-term 4.1%. so we're still in an inflationary environment per the balance negative, per the models, per the forecast, but they don't talk about that. all they talked about his cutting rates into the past couple of weeks. jonathan: so why shouldn't i just buy stocks, there is no sign of them hiking anytime soon. why wouldn't i be a buyer here?

>> when you guys had torsion stock and tom keene talks about it, he is right about that. and that is something i agree with. i think the risk here is we had so many people chasing these rate cuts, chasing these higher valuations that i think we are due for that at this point. as long as these treasury yields continue to rise. if treasury yields stabilize i will start to reevaluate ones that risk-free instrument starts to become attracted i think you're due for an equity correction. jonathan: very close to 5% this morning. michael, good to see you. it has been years in prisons and be done this. thank you, sir. equities just about positive. let's get you an update on stories elsewhere. here is your bloomberg brief. >> open arguments and donald trump's criminal trial are set to begin today after jury selection on friday. the case centers on mr. trump's

efforts to cover of a sex scandal involving a hush money payment the former porn star stormy daniels. the president spent $4.9 million on legal fees in march and has just $6.8 million left in the accounts he has been using to fund his lawyers. classes at columbia university will be held virtually today after a of anti-semitic statements and actions on campus. antisemitism at the pro-palestinian presentations is drawing backlash from ember congress and the white house. columbia, latest institution on the radar of congresspeople after its treatment of anti-semitism after harvard, m.i.t. and -- all came under intense scrutiny last year. columbia's president said leaders would come together today to discuss a way to end the crisis. and the ecb will not be swayed from cutting rates in june even if the uncertainty over oil prices, according to the governor of france bank. i spoke with jane foley said

despite concerns over rate differentials, if the u.s. does not cut or cut later this year, europe would welcome the weaker euro. >> it's quite possible that a weaker euro but actually welcomed, particularly in a country like germany. i would imagine that a period of weak euro could actually welcomed given the hit to the manufacturing in germany in particular and the impact over the last few years of the energy crisis. jonathan:jonathan: great exchange, thank you very much. heard that a few times about a weaker euro a year of young welcomed. >> this support will really strength the armed forces of ukraine. we will have a chance at victory if ukraine really gets the weapons system which would mean so much. jonathan: to live from new york city this morning, good morning.

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jonathan: live from new york city, welcome to the program. equity futures positive by 0.4%. moves again in the bond market, yields up three basis points. preaching 5% a little bit earlier. under surveillance this morning, western allies reinforcing support for ukraine. >> we like to say thanks to speaker johnson and president biden. indeed, it is so important. we will have a chance for victory if ukraine really gets the weapons system which would mean so much. it is not about the territory, it is about our identity. we cannot lose hope.

jonathan: the u.s. house approving more than $60 billion in aid to ukraine. the senate set to vote on the package tomorrow. those funds coming on top of the european investment banking unthinkable allocate over four 590 million to ukraine with the money set to fund housing, energy and infrastructure projects. european investment, good to see you. great to catch up once again. you're back from washington, d.c., we are as well. we talked a long time about a lack of cooperation worldwide, a breakdown between the united states and what ukraine ultimately wants. do you sense the same thing in washington? are we coming to were moving apart? >> definitely come together. a very productive week. we had many exchanges and they really see a momentum in coming together and supported ukraine very strongly, but also deepening our cooperation within the multilateral development, to contribute to climate change

financing, peaceful and more, haven't i say, sustainable world going forward? jonathan: there has been a sense of fatigue in congress around what is happening with ukraine, the fight against russia. some people asking whether there is a different way, whether this should be something we continue with, stick with, continue funding what looks like a never-ending war. what would your view on that argument be? >> absolutely we need to support ukraine. it is a very serious situation that we are leaving. it is a threat to democracy at the end of the day and the way we see things i think in the u.s. and europe, and so from the european point of view, there is no doubt our support ukraine is unwavering. i think the decision that has been taken by the u.s. to provide support for more than $60 million is very valuable, and these previous decisions to provide 50 billion euros in the ukraine facility, which we will manage at the european

investment bank. and then i think it will provide much valuable support for the reconstruction as well as terry efforts, of course. annmarie: did you see the vote count on those aid bills? when you look at something like the indo pacific, it was 385-34 in the house. israel, 311-112. it barely got through when it came to ukraine. how concerned are you about how deeply divided u.s. politicians are about eating ukraine over, say, other issues like israel and taiwan? >> i really think that we should continue to support ukraine. as president zelenskyy was just saying, they have a chance if we continue to support them. from the european point of view, ukraine is our neighbor, a prospective member of the family if i can say it this way, and thus we need to ensure that we keep a secure environment in the region. the other conflicts are just as important, it is a source of concern for all of us, we should

try to stop that war and that conflict as soon as possible, but ukraine should not be forgotten. annmarie: the numbers show that ukraine with the hardest one for lawmakers to get through. what does this mean potentially if you were to deal with a different administration, a trump administration? >> i would like to speculate on u.s. politics and there to on the internal feelings and dealings, but i think the most important news we have today is this got through more than $60 billion support, and this will provide very valuable support ukraine at a crucial point in the conflict. lisa: how much is the uncertainty helping you to raise money for military efforts within europe, to bolster military spending within the continent? >> it's obvious that some people look up to the fact that we were more fragile than we thought because of the war in ukraine and the warranted aggression by russia.

many say we are already very wide-awake and very aware of the challenge of having this kind of neighbor, but it is absolutely clear we need to step up and support europe's security and defense industry and the european investment bank can play a role in that. lisa: when you talk about financing, how much are you on board with the idea of monetizing russian asset the harvard europe, maybe in tandem with the united states in terms of coming up with some sort of plan? >> it's very important that we are united. the g7 discussions are extremely valuable so that we move ahead as one. of course the situation is not comparable between the u.s. and europe in terms of the volume of assets we are discussing, and all the european side, we are making progress that european commission has put forward a step-by-step plan, and so we are making some progress in making sure that these assets are put to good use in supporting ukraine. lisa: in supporting ukraine, does that also involve investing

in some of the military development europe? >> i think this is a bit too soon to say how with the best use of these assets, just see that we are really unwavering and we are making progress in mobilizing all sources of financing to provide that important support. annmarie: when it comes to the russian assets, there's lots of different things being thrown around on how to actually monetize it. do you expect a decision when the leaders meet in june? >> i certainly think this is going to be on the table. it is a different issue to talk about the assets than talking about the proceeds coming from those assets. many considerations are on the table and we need to make sure there are no unwarranted side effects. jonathan:jonathan: the changes you've proposed to the eib, a plan to ultimately make it easier to fund defense projects.

what can we expect, are these changes going to go through? >> i certainly think so. what we're doing now is adapting our lending policy. last week we had an auction. i was following your program this morning and it is impressive because last week we did a five year bond or $5 billion issuance which is heavily oversubscribed, and we closed with an interest rate that wishes to 10 basis point over the u.s. treasury. that shows the important financing capacity of the bank and this is what allows us to be very competitive in financing our clients, public and private clients and contributing to growth and prosperity in europe and beyond. so we really need to calibrate our response as well.

so far the market is responding as we had anticipated and take we certainly will step up our support to europe's curate and defense. jonathan: you of course were part of the spanish government for a little while, i'm used to calling you minister. what are your thoughts on whether the defense spending will overwhelm the i could be used in developing the european economy more broadly? are you concerned about that in any way, shape or form? >> contribute into peace at the end of the day is not weakening our support to social infrastructures, innovation, the digitization, climate action which is a top priority, and the key challenge of our time. jonathan: good to see you, thanks for stopping by. enjoy new york. i think we started that in the right place, talking about the sense of cooperation. it felt like there wasn't much over the last year or so.

to annmarie's point, you can still see the cracks down in washington. lisa: which is a reason why maybe there is renewed focus on trying finance europe's own effort at a time when a lot of people are saying there were somewhat reliance on the u.s. that you were able to unleash some of that funding for some of these other programs. jonathan: up next, we will catch up with laura rhame. if you just tuning in, equities the session high positive 0.4%. this is bloomberg.

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jonathan: big week ahead, equities doing ok. positive by 0.5 percent on the s&p 500, more than 40% of the market cap on the s&p. it kicks off in a big way with tesla after the close tomorrow. nasdaq futures posited by 0.5%, the nasdaq 100 with its worst day of the year on friday attempting to snap back. the russell small caps doing ok as well. grandma with plenty to say on the supply this week. let's go through those numbers, the day after $7 billion of 5-year note the following day, $44 billion of seven-year notes. lisa: how much demand is there going to be? do we see some of that trickle in? he is a bond bull, the season at

the best buying environment going back to the early 2000 and he is waiting. or as everybody else on the sidelines waiting when we see these options, and then could we see some real messiness for additional kind of selling on forward? jonathan: he is looking for the washout to continue. youth to say things like don't get greedy and wait for the extra 20 basis points, the spread widening, buy now.it's changed . lisa: now he is saying get greedy? get greedy! this has been part of the problem, how do you fight against momentum? right now it feels like everyone assaying an inflection point is here, and so we don't know which way the momentum is going to shift costs and that is what has some investors it concerned. jonathan: more recently, higher yields biting into the fx market, eating away at g10, taking a countries like the euro down to about 106. the dollar at the strongest levels we've seen all year through friday.

a little bit more dollar strength this morning. how far can you push this? we've got all the information, how much more can you expect? lisa: especially since we've already almost wiped out all of the seven rate cuts for the remainder of this year. what more can we get in terms of hawkish data, that could shift this relationship? honestly this is a good question. do we still have dollar bears that are basically not capitulating yet, who are holding up the euro in this kind of relationship? jonathan: we've done a lot of work over the last few months, that's for sure. tiktok time is running out. house passing a foreign aid package including a provision requiring bytedance to divest the platform or face a ban. the senate expected to vote in the coming days. annmarie: already seeing reports about what tiktok's head of public policy in the united states is saying, legislation is

a clear violation of first amendment rights of tiktok's 170 million american users. a.k.a. if this goes through, prepare for the legal battle that will continue to happen, but tiktok, this is that a level where it is not thinking about banning or divesting. this potential is going to be a law and there are a number of different avenues that could happen. jonathan: bytedance and tiktok specifically are not entertaining one part of the story. what you hear them talk about is the ban. when you hear the politicians talk about is ban or divest. zero appetite, not entertaining in any way, shape or form that they would divest. lisa: china has flat out said they are not going to allow a sale. which race the question, what will tiktok look like and he is suggesting microsoft is the best position to potentially take over. again, ultimately china wants this to look like the u.s. is

anti-free speech. they want people to be angry. they say all the time, if they mention the chinese communist party, i do think that yes, potentially china is coming out and they are saying we will not allow a sale they are going to negotiate from this position of strength. jonathan: i'm sure this show just went to black in china. it will come back up in a moment when we start talking about other things. tesla reporting tomorrow the ev-maker under pressure as it cuts prices in china will again. investors worry that elon musk's focus on the robotaxi. earnings continuing wednesday with meta and thursday without that and microsoft as well. that is four of the big seven. lisa: if we are at this inflection point, and yes, i am still on that, what is this information going to give us in terms of whether this is a buy the dip moment or just the beginning of a washout they can continue? ultimately i do think the idea

of alphabet and microsoft really does lose large for me. how are you deploying artificial intelligence if there is a sign it isn't being deployed as quickly as people thought, the hopes and dreams of chatgpt. could that shift the narrative or are we looking at the thunderous three? i believed you see this as a rebranding moment. annmarie: does any of this matter until the end of may when we get nvidia? it is the most important stock on earth. jonathan: i won't try to be contrarian about this. i just want to know what apple did next week. big struggle in places like china. the bullies been talking at the end of apple, the dominance of the smartphone. things are lining up in the wrong way for that company. you think of the pushback and washington, d.c., the consumer pushback in china. they only seem to be able to pull it off. they are able to sort of blow them up and carry on as stocks go to new highs and they get a massive capital return program supporting the name. i just wonder how different

things will feel next week. lisa: especially because china is a big question mark. can they compete with artificial intelligence? every time i doubt apple i look at the line outside of the apple store of people waiting for the privilege to drive thousands of dollars on goods for them and their kids and you think ok, how can i be contrarian against this, but do we start to talk about a new paradigm like with artificial intelligence and samsung at the brand? i don't know. jonathan: siri on steroids is what we are looking for, right? lisa: do you even use siri? jonathan: never have. annmarie: i use siri only when i don't want to use shazam. so what is the name of this song? over the weekend they put out a note saying that when apple needs is a true low-end iphone, and that is the only way they are going to be able to revive growth. jonathan: apple posited by 0.6%. the fed preferred gauge coming

on friday. bloomberg survey expecting core pce to cool slightly year-over-year to 2.7%. data likely to confirm that progress on inflation has stalled, supporting a shift that rates will stay higher for longer laura, you've been talking about this for a while. looks like fed officials are coming to your side of the boat to start to think about wht we are truly restrictive. one thing you said to us last time with the prospect of surgical cuts was still on the table for you later this year. is that still the case? >> it is, because i think the fed is really determined. and that, to me, is the difference between really staying on hold or deciding that they want to take this plunge into the rate cut pool. they can stating that they want to for a long time and i think it would take a really big provision higher in their estimates to get us to a place where they really feel comfortable staying on hold.

but the data could continue to surprise to the upside. i get caught in this question of do i think they should cut or will they cut? and again, it just seems like the best argument today is that they want to. you still here that through maybe we have to wait rhetoric that has now bubbled up to the top. jonathan: i do wonder that how we reset the bar. he said there is room for upside surprise. i just wonder how much or how little it would take to reintroduce a conversation in the fed to cut interest rates sometime soon, perhaps as soonest july. laura: what we need to see is this core shelter and then the other piece of the services inflation picture really reducing. because today we are in a situation where goods prices have come down, and i think we also need to see the wages piece. it is not just one data point,

it is really the collection. the same collection that really did behave so well in q2 and q3 of last year, but that is not my expectation. my expectation is that they continue to be stubborn. i think the fed can very well see the other impetus being housing really cratering more. we've just gotten some pretty nasty housing data and i think they can be a place for the argument comes in that we do just need to develop that market along a little bit, and i think finally, the third leg of the answer is the 10-year. i expect the 10 year to retest 5% sometime this year, but if we get there really fast and the volatility and long-term rates feel out of control, i think the fed could come back in dovish just to try to cool down the volatility in that market. lisa: another thing that you said that i thought was fascinating, can markets live with higher rates?

your answer is yes, absolutely, which raises the question not about near-term communication from the fed, but longer-term, how high rates could be if they are doubly and cut rates once, that basically we are looking even at a five handle fed funds rate if not 4.75 for the foreseeable future. is that the reality you are looking at? >> it is. think about a world where we avoid a recession. this inverted yield curve has got to re-normalize. to me it is a combination of these surgical rate cuts and longer-term rates drifting higher. this is not altogether a bad thing. a normal yield curve would be welcome for our banking system and really i think it would show that we have sort of finally reached a normal, healthy outlook in the bond market. but long-term rates are something that we can learn to live with. and i think companies will start

to bake that in, and that is what we are seeing across the board. it is going to take time and i think it speaks to the need to quell volatility in long-term rates, at the same time allowing them to make a controlled move higher. and i think that is what we've really seen until the last month or so, that is what has hit market somewhat. that and uncertainty around policy. lisa:lisa: are you more interested in the pce data we get on friday in terms of personal spending and income, or what we hear from companies, the 178 reporting earnings this week? >> i think companies because this is another feature of this market. if growth is strong enough and they are expecting demand to be strong enough, that can offset the problems or the funding pressures that higher interest rates can give us. there has been a lot of talk about ai, adopting ai throughout the earnings conversations of the magnificent seven, and to me

this is a really interesting place where what is good for the economy is not always good for earnings. because investment spending plans, which are going to be required to implement ai, that is great for economic growth. i think it really could continue this virtuous cycle of slightly higher rates and stronger growth. it is not necessarily good for free cash flow margin and that could impact earnings going forward. so this is something we are going to see this dynamic play out this week and i think it will be fascinating. annmarie: if we see closer to $100 per barrel, how much is that going to impact profitability companies are able to have? >> to me that is a huge threshold point. one of the risks to the economy that i'm looking at is commodity prices, specifically energy prices. oil at $100 per barrel.

companies really seem to feel like they're animal spirits are deeply impacted at that threshold, and five dollars per gallon for the household is a really critical threshold as well. that seems to be a psychological breaking point for households and their monthly budgets. jonathan: laura, what would you expect from the fed next week just in terms of the conversation, the tone of the news conference? >> qt is finally going to be walked back. that is something we are not talking about very much but i think that is going to be the bigger policy shifts, and i think they are still going to leave themselves room for flexibility when they talk about the economy and markets. so that is going to be more of a dominant features and sort of slamming the door on rate cuts or taking a more definitive tone. i think it is going to be not now, but probably later and they are still going to keep that maximum flexibility language. jonathan: wonderful to get your

perspective on things. laura rhame, following a big repressing of the bond market. stunning, more than 70 basis point higher at the front end of the curve. if i told you we would be up 70 basis point at the front end, i'm not sure you would have 4% again to the s&p, i think we would be down 10%. lisa: michael o'rourke had a point just a couple minutes ago that i was fascinating about have the 10-year treasury yield is now above and has been about the s&p 500 earnings yield for three straight weeks. the last time that it was above the s&p 500 earnings yield was 2002. so it raises this question, ok, well then which is going to bite first? is it going to be a stock selloff, or is it going to be some sort of bond market rally akin to what bob michele was talking about? jonathan: the competition for capital continues. up just about a single basis point on the session. that's get you an update on stories elsewhere.

>> ubs is cutting the big six tech stocks. downgrading apple, amazon, meant to come out of that and nvidia alton neutral from previously overweight. the team wrote that the companies are losing earnings momentum in face tough calms. the downgrade doesn't apply to the rest of the sector. and if the big tech names, plenty of focus on nvidia. it suffered its biggest drop in for years on friday and the highest put volume since 2017. amy was silverman told me this morning that the left tail was finally waking up. >> in terms of nvidia, it is just about the weightiness. this idea of maybe positioning -wise, people have gotten long. so of course, there is simply more to hedge but there is also this idea that aztec does come the market goes. >> she spoke with me on the brief which you can watch every morning. mexico leading presidential

candidate is confident she will have a strong relationship with either donald trump or joe biden and head of the elections for both countries. both trump and biden have push for tougher restrictions on immigration at the mexican border. they told bloomberg the best path forward was to cooperate on economic development. >> i think it will be good whether president biden or president trump wins. we have a very strong economic integration with the united states. we are now the principal trading partner and that requires us to have a good relationship. i think that obviously we are always going to defend mexicans abroad. we are not in favor of any discriminatory discourse, but there is going to be a good relationship. jonathan: i love this note from jonathan dollar. downgrading the big six, maintaining the overweight to the rest of tech. what is left of it? after you downgraded, what is left of it?

lisa: and a lot of smaller companies that nobody has heard of and that can maybe catch a bit after not rallying. jonathan: they are catching a lot of ice this morning. up next on the program, it is tesla's tipping point. >> this a lot to look forward to in 2024 and tesla is currently between two major growth waves. we are making sure that next growth wave driven by next gen vehicle, self-driving projects is executed as well as possible. jonathan: that conversation up next. live from new york, this is bloomberg. ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy. with everything from managing your social posts, and events, to email and sms marketing. constant contact delivers all the tools you need to help your business grow. get started today at constantcontact.com constant contact. helping the small stand tall.

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♪ jonathan: 41 minutes away from the opening bell, equities positive by 0.1% on the s&p. 4.63.94. under surveillance this morning is tesla's tipping point. the latest, tesla shares sliding nearly 41% due to slumping sales, price cuts and increased competition in china.

elon musk also seeming to change course, telling bloomberg that mosque is stating the future of his company on robotaxi, but unfortunately tesla does not have the infrastructure for. ed, you've covered this story so well over the last few years. what is the big one you're looking for tomorrow afternoon? >> is good timing. they company that has been accustomed to chaos has reached a threshold to which they are unaccustomed, so i think it is just clarity. what we are reporting is that yes, a robotaxi is the priority, but where is it at? it is one thing to set a date for august 8, but what is the plan for that? and then i think we did give some clarity in the big take around the idea of a $25,000 tv i think the world was kind of expecting tesla to come with a kind of honda civic of the ev world and by understanding is that that is just not the case.

they did a lot of work at the component level with technology and the production level to work out how it could ring out cost. classic elon musk. my understanding is that that project was successful, it continues. what they will do long is apply that work to cost savings on their existing cars, offer them more cheaply. i guess we will see whether we are right on tuesday when he takes that call. jonathan: let's talk about margins. close to 5% in the premarket this morning. i think a lot of us were willing to give the company the benefit of the doubt when the price cuts first started. they've got the margins, they can squeeze the competition, prevent them from taking market share. i think we all understood that argument. where is that argument now? >> the margin debate puts your eye gary closely on china. the price cuts are interesting because the reaction from the sales side at least is to start to worry that some of the most

profitable cars that tesla makes in china will not even break even, let alone have positive eve it. it is really interesting economics. model y is the world's best-selling car or suv and what i learned in the last seven days is that in china, two thirds of what they sell is the lowest spec, rearwheel drive model y. because sinus -- china supply chain and cost of production is so much lower, it is much more profitable. that is changing, so we are a little bit worried about that. he with the bottom-line magician, that was his focus. my understanding is that actually, all of these cuts we are going through, all of this stuff that is happening, his motivation is actually not the bottom cost at all, it is simply psychological, but i think that is the point.

investors are looking at this going what are you focused on here? price cuts have been a useful lever, but they continue without end at the moment. lisa: what is daemon mode, ed? ed: daemon mode or wartime co mode. let's take the layoffs as an example. i'm told that mosque looked at the q1 delivery performance were deliveries fell 20% sequentially and completely outside of financial consideration he basically said ok, if deliveries dropped 20% we should cut headcount by 20% just to keep everybody on their toes, just to keep everyone in a state of paranoia where they know that if we are too big that would be bad, and this is classic elon musk right now. i also get the sense that he has been a bit busy recently with some other companies and i think he has kind of come back to tesla quite recently and look at what is going on and doesn't like it, so he is getting more hands-on.

just to kind of plug the report, i think they're making a lot of progress on the software side with robotaxi, but now he is like this is my vision and if you don't like it, you are out. annmarie: when i think of the robotaxi i think of uber self-driving cars, arizona's former governor wanted them all to come in and then there was a tragic death and then uber had to sell this off. how risky is betting the entire farm on robotaxis? ed: it is risky, but all you can do is bring the horse to water. elon musk is going to make a robotaxi. elon musk is often laid against his own timelines look pretty much always delivers on the thing that he says he is going to do. one interesting departure was tethys public policy chief who would have been the person that would have to go to the regulators and say we have a robotaxi, are you going to let us use it in the real world? he said he felt it is not worth

it for me, i don't think that is a straightforward battle to have, so you are completely right. past level operationally do what it can to make a prototype of a standalone taxi, develop the software, but the rest of it is out of their hands from the regulators point of view, and as we learned, even the most prudent and safe approaches are still fraught with risk because the regulators have a low threshold for pain or problems along the way. jonathan: do you think this is a tesla problem or a sector problem? ed: from an ev standpoint, it is pretty much both. tesla, whether people like it or not, has the specific problem of reputational risk and elon musk's behavior. that is tangibly having an impact on consumer demand. but again, why are they sort of

focusing on the robotaxi? because right now the market for ev's is gone. what i'm hearing overnight is that they kind of already given up on this marketing effort to do traditional marketing and advertising, and investors had pushed for that because they want the people who don't know anything about tesla to know about it. jonathan: this was great, we will catch up again tomorrow. bloomberg technology, 11:00 eastern time, caroline and ed ludlow. tomorrow, we will catch up with citigroup. lisa: i think it is awesome. jonathan: priya misra is going to be joining us along with mike wilson. 34 minutes in the opening bell, equity futures posited by 0.6%. this was bloomberg surveillance. ♪

her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...”

so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

manus: a spirited attempt to bounce back after six days of losses. tessa is consumed by chaos. we are counting you down to the open. >> everything you need to get start for the start of u.s. trading. this is bloomberg the open with jonathan ferro. manus: coming up, teachers ticking higher after losses. early-season kicks in with -- tesla announces another round of price cuts. to begin with a big issue.