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00:00GLOBAL NEWS -- GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I AM MARK CRUMPTON. THIS IS BLOOMBERG. ♪ > > THE MOST CRUCIAL MOMENTS IN THE TRADING DAY. "BLOOMBERG MARKETS THE CLOSE" THIS IS -- THIS IS "BLOOMBERG MARKETS THE CLOSE". CAROLINE: IT IS 2:00 P.M. IN NEW YORK, 7:00 IN LONDON. I AM CAROLINE HYDE. PLUS, INFLATION IS CALLING. VERIZON JOINS AT & T IN RAISING HOME BILL CHARGES, INCLUDING AN ADJUSTMENT CHARGE. WE FIND OUT WHAT IT MEANS FOR CUSTOMERS. ROMAINE: GOING BACK TO MID APRIL HERE. NEVERTHELESS, NOT GETTING MUCH -- THE UPSIDE TO THE S & P 500. GETTING A LITTLE BIT OF AN UPSIDE FROM META AND MICROSOFT. THE BIG PART OF THE REASON I THINK HAS TO DO WITH THAT THIRD LINE. THAT IS A RECORD HIGH. YOU ARE AT $4.40 A GALLON. WE THROW IN A LOT OF CONCERNS ABOUT HIGHER CRUDE COST. YOU GET A SENSE OF WHY YOU ARE SEEING SO MANY -- AND SO MANY OUT THERE NOW TALKING ABOUT RECESSION. TAYLOR: TO LOOK AT A 10 YEAR YIELD. THE COULD WE -- THE EQUITY MARKET IN THE BOND MARKET. BIG ECONOMIC NEWS WITH GOLDMAN SACHS. I WANTED TO SHOW THIS CHART OF THE S & P ESTIMATES GOING FORWARD FOR THE REST OF THIS YEAR. THE TERMINAL CONSENSUS, FOR NEXT YEAR, THE CONSENSUS FOR ANALYSTS. ROMAINE: DID YOU JUST MAKE UP THESE COLORS? ARTICLE BLUE. TAYLOR: EVERYTHING I HAD TO SAY, THAT IS YOUR TAKEAWAY? [LAUGHTER] CAROLINE: WORRIED ABOUT RECESSION IN THE MARKET. BOTH WITH COLORS. TAYLOR PAINTS A PERFECT PICTURE OF THE WORRY IN THE U.S.. THE DATA OF THE TIMING IS PRETTY WOEFUL. > > BOND YIELDS HAVE ALREADY PEAKED AT THIS POINT. THE TREASURY YIELD, PEAK AT ABOUT EARLY MAY. WE THINK THE WORLD IS GOING TO GO FROM WEARING ABOUT -- FROM WORRYING ABOUT INFLATION TO WORRYING ABOUT A RECESSION. ROMAINE: JUST TO PLAY DEVIL'S ADVOCATE, IF EVERYONE SEES THE RECESSION COMING, IS IT REALLY GOING TO, IF WE ARE ALL PREPARED FOR IT AND WE MAKE ADJUSTMENTS, BUT WE ALL MAKE THE ADJUSTMENTS -- COULD WE AVOID IT? BARBARA: I DON'T NECESSARILY THINK SO. WHEN YOU LOOK AT A LOT OF THE INDICATORS SUCH AS UNEMPLOYMENT CLAIMS, THOUGH STARTING TO RISE. STARTING TO SEE EARNINGS CUT BY COMPANIES. STARTING TO SEE SOME WEAKENING OF A NUMBER OF DATA POINTS. EARLY CYCLES STARTING TO ROLL OVER. THAT IS A CONCERN. IT APPEARS AN ECONOMIC SLOWDOWN MAY OR MAY NOT BE IN RECESSION, BUT IT MAY JUST FEEL LIKE IT. TAYLOR: WHAT CAN THAT DO FROM 8 -- PERSPECTIVE? BARBARA: BONDS HAVE NOT BEEN VERY GOOD. THAT IS SOMEWHAT AN UNUSUAL ENVIRONMENT. INCREASING HIKES BY THE FEDERAL RESERVE, WORRIES ABOUT INFLATION. WORRYING ABOUT INFLATION FOR GROWTH SLOWDOWN, A VERY GOOD BALANCE FOR PORTFOLIOS. CAROLINE: I AM INTERESTED IN WHETHER THERE ARE ANY OTHER HEDGES YOU ARE USING TO PROTECT THE DOWN OF THESE MARKETS? BARBARA: IF YOU TAKE A LOOK AT SOME THINGS, THE COFFEE INDEX, THEY ARE ALL DOWN TREMENDOUSLY. THE CYCLE IS BEGINNING TO AGE AND A VERY RAPID PACE. THE DOWNSIDE, TREASURY INFLATION, A BIT CHEAPER FOR US AT THIS POINT. FOR US, IT REALLY COMES DOWN TO YOU NEED TO TAKE AWAY FROM SOME OF THOSE PRICES IN THE MARKET. YOU WOULDN'T NECESSARILY WANT -- A BIG BREATHER AT THIS POINT. VERY HIGH QUALITY. AT WHAT YOU, WE DO NOT INVEST IN CASH -- VERY OFTEN. WE USUALLY USE -- IF YOU'RE TRYING TO PULL MONEY OUT FOR A PURCHASE, CASH IS FINE. BUT THAT IS NOT HOW WE THINK ABOUT INVESTMENTS. WE THINK ABOUT BEING FULLY INVESTED. TAYLOR: I'M CURIOUS HOW YOU ARE THINKING ABOUT SOME OF THESE VALUATIONS AT THIS MOMENT. MAYBE THE EARNINGS WERE LOW ON THE HORIZON. IT WOULD LOWER VALUATIONS BARBARA: BARBARA: --? BARBARA: CHINA IS GOING TO BE COMING OUT OF LOCKDOWN AT SOME POINT. CHINA AND EUROPE EXPORTS ARE GOING TO BE UNDER A LOT OF PRESSURE FOR CHINA. THAT SEEMS TO BE THE LONGEST SINCE. TALK ABOUT PORTFOLIOS AND ALSO SEEING SOME OF THE HIGHER QUALITY. STAYING AWAY FROM SOME OF THE SMALL -- PORTFOLIO AND SMALLEST OF. ROMAINE: COMING UP WE ARE GOING TO TALK A LOT ABOUT INFLATION. WE HEAR FROM THE WHITE HOUSE, DEPUTY DIRECTOR OF THE WHITE ECONOMIC COUNCIL. HE TALKS ABOUT WHAT HE THINKS AND IF THE FISCAL PROBLEM -- IF THE FISCAL -- SHOULD BE DOING MORE. WE WILL HEAR FROM THE COMPANY. YOU CAN LOOK AT THOSE SHOWS. VERIZON RAISING PRICES FOR THE FIRST TIME IN TWO YEARS. THIS IS BLOOMBERG. ROMAINE: A GOOD LOOK AT WHAT CHINA'S COVID ZERO POLICY IS DOING TO THE ECONOMY. IT IS NOT GOOD. DROPPING TO THE WORST LEVEL SINCE THE PANDEMIC BEGAN. > > CLEAR SIGNS, THE ECONOMY -- SHORTLY. IT'S TWO WEALTHIEST CITIES, SHANGHAI AND BEIJING UNDER COVID RESTRICTION. RETAIL SALES PLUMMETED. A WORSE THAN EXPECTED 11.1% LAST MONTH AS TENS OF THOUSANDS OF PEOPLE ARE CONFINED TO THEIR HOMES. ONLY 2.9%, THE LARGEST AND ONLY SECOND YEAR OF THE MONTH AND -- NATIONWIDE JOB RATE IS UP 6.1 PERCENT. SHANGHAI HAS BEEN LOCKED DOWN FOR NEARLY TWO MONTHS. THIS WEEK IT IS STARTING TO RELAX SOME OF THE MOST STRICT -- IS COVID CASELOADS AND INFECTION START TO FALL. BEIJING HAS CENTERED -- BEIJING HAS SIGNAL POLICYMAKERS WILL STEP UP SUPPORT. CUTTING MORTGAGE RATES FOR FIRST-TIME HOMEBUYERS. COVID OUTBREAKS IN APRIL HAVE AN IMPACT ON THE ECONOMY. CHINA -- ECONOMIC ACTIVITY SHOULD RETURN GRADUALLY. THE ZERO-TOLERANCE APPROACH TO VIRUS CONTAINMENT ARE OBVIOUS TO PUSHING CHINA'S GROWTH TO FIVE POINT -- 5.5% FURTHER OUT OF REACH. TAYLOR: REALLY TAKING IT GLOBAL FOR US. WHEN WE THINK ABOUT THE ECONOMIC DATA COMING OUT FROM CHINA OVERNIGHT. THE LARGEST U.S. WIRELESS CARRIER -- THIS IS THE BIG STORY WE ARE GOING TO TOUCH ON LATER IN THIS HOUR. BUSINESS CUSTOMERS ALSO WILL HAVE THEIR BILLS INCREASE. MCDONNELL SAID THAT CONTINUED OWNERSHIP AND RUSSIA IS NOT CONSISTENT WITH THE COMPANY'S VALUES. WE ARE FOLLOWING ANOTHER BIG STORY WE HAVE BEEN TALKING ABOUT ALL DAY LONG. INFLATION AND SOME OF THE RECESSIONARY RISK IN WELL. HE SAYS THERE IS A VERY HIGH RISK BUT A NARROW PATH TO AVOID IT. DEPUTY DIRECTOR OF THE WHITE HOUSE ECONOMIC COUNCIL WHICH ADVISES THE PRESIDENT ON ECONOMIC POLICY, GOOD TABBIES HERE. HOW ARE YOU THINKING --. > > THE UNEMPLOYMENT RATE IS 3.6%. WHILE WE TAKE THIS VERY SERIOUSLY AND WE WORK ON A DAILY BASIS TO MONITOR, WE BELIEVE CURRENTLY THE ECONOMY IS IN VERY STRONG POSITION. CAROLINE: TUESDAY AND THE ONGOING INFLATIONARY AND SUPPLY CHAIN WOES, DON'T EVEN GET US STARTED ON THE FORMULA CROSS IS -- THE FORMULA CRISIS, BUT HOUSING, RENT INCREASING. WHAT ARE YOU MAKING OF THAT AT THE MOMENT? BHARAT: HOUSEHOLD VALID -- HOUSEHOLD BALANCE SHEETS, IT IS THE CALM BEFORE THE STORM. IN THE CONTEXT ABOUT A YEAR AFTER THE RECESSION. ON THE SUBJECT OF HOUSING, WE AGREED THAT HIGHER COSTS ARE A SIGNIFICANT CONCERN. THE ADMINISTRATION PUT OUT A REVIEW PLAN TO CLOSE THE GAP WITHIN THE NEXT FIVE YEARS. MY BOSS, THE DIRECTOR OF -- ROMAINE: IS IT COMING DIRECTLY FROM THE FEDERAL GOVERNMENT TO THE PEOPLE WHO BENEFIT IT OR ARE YOU GOING TO FUNNEL THAT MONEY FIRST TO THE STATES AND LET THEM DECIDE HOW THEY ROLL THAT OUT? BHARAT: IT INCLUDES BOTH TACTICS THAT YOU DESCRIBED. A LOT OF IT IS DIRECT FROM THE FEDERAL GOVERNMENT. STREAMLINING AND IMPROVING, MAKING IT EASIER TO FINANCE. AN EASY WAY TO BRING IN MORE SUPPLY. STATE AND LOCAL GOVERNMENT -- A LOT OF THEM ARE ALREADY INDICATING GIVING MONEY TO AFFORDABLE HOUSING. ROMAINE: THERE HAS BEEN A LOT OF CRITICISM ABOUT HOW THE STATES USED THE STIMULUS MONEY. THE BIDEN ADMINISTRATION ROLLED OUT LAST YEAR. IT TURNS OUT THE STATES DIDN'T PUT THAT MONEY TO THE BEST OF USE. A LOT OF CRITICISM NOW HAS BEEN USED IN THE ELECTION CYCLE HERE. AMERICAN VOTERS OGLED BY THAT DETAILED ACCOUNTING PLAN YOU HAVE PUT OUT. THEY GO BY MESSAGING, A NARRATIVE. WHAT IS THE NARRATIVE YOU WOULD GIVE TO THEM? BHARAT: LOOK AT THE DATA AND SEE HOW THEY USE THIS MONEY. THEY USED IT FOR AFFORDABLE HOUSING. THEY DID A LOT TO HELP FAMILIES. THEY HELD A LOT OF SMALL BUSINESSES GET THROUGH THIS PANDEMIC. WE ARE NOT GOING TO STAND HERE AND SAY THAT EVERY SINGLE DECISION THE GOVERNMENT HAS MADE IT IS BEEN THE OPTIMAL DECISION. THAT IS PARTICULAR TO LOW INCOME AMERICANS. CAROLINE: YOUR PRIMARY MESSAGE IS UNDERSTANDING HOW THE CONSUMER FEELS ABOUT INFLATION. DO YOU THINK THIS IS SOMETHING YOU'RE GOING TO LOOK AT THE FEDERAL RESERVE MORE OR IS THIS SOMETHING YOU DO IN FROM HIS PERSPECTIVE. IS THERE ANYTHING OTHER THAN HOUSING THAT THE GOVERNMENT SHOULD BE DOING THIS? -- IS HIS MAIN PRIORITY. THE PRESIDENT HAS BEEN PUSHING FOR OVER A YEAR TO REDUCE THE COST OF -- INVESTMENTS AND CHILDCARE. TO INCREASE THE SUPPLY OF OUR ECONOMY. IT ROMAINE: REALLY APPRECIATE YOU TAKING TIME TO BE WITH US. DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL. KRI GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M MARK CRUMPTON. THIS IS BLOOMBERG. ♪ CAROLINE: THE INFLATION WE ARE ABOUT TO DIG INTO. WE SEE A BID YIELD. TAYLOR: COMING OUT OF THAT, STOCKS ARE BETTER AND BONDS DO FALL. ROMAINE: THIS IS "BLOOMBERG MARKETS THE CLOSE". ANOTHER WILD DAY IN THE MARKET. YOU ARE SEEING GAINS AND LOSSES. WE HAVEN'T REALLY GOTTEN TO THE STAGE YET WHERE YOU ARE SEEING REAL INFLATION OR REAL CONVICTION. YOU WONDER IF THAT PUTS US IN A TIGHT TRADE? TAYLOR: WE ARE NOT RIGHT THERE. WHICH IS WHY IT COULD GET A LITTLE BIT ROMAINE:. ALL THE TALK RIGHT NOW IS ABOUT SOME OF THOSE YIELD -- AT ONE POINT WE WERE AT A RECORD HIGH. THE RECORD HIGH BACK TO 2004. TALKS ABOUT THOSE DIFFERENTIAL PROBABLY -- DIFFERENTIAL PRICES. GOING BACK ON RECORD, THEY HAD THAT ON FRIDAY AND TRADED ABOVE THAT LEVEL EARLIER TODAY AND NOW SETTLING IN RIGHT AROUND 54 HERE. THERE ARE ALSO SEEING THE EFFECT OF SOME OF THOSE MARKETS. ON THE BACKS OF THAT CHINA DATA, THERE MIGHT BE A FINE. THE CHINESE GOVERNMENT IS SUGGESTING THEY WILL PUT SOME SUPPORT INTO THEIR PROPERTY MARKET. THAT BRINGS US BACK TO THE FOOD INFLATION WHICH IS A REAL CONCERN HERE. MORE THAN $12 A BUSHEL. WHEAT AND OTHER GRAIN COMMODITIES. MEANWHILE IN THE U.S., WE ARE DEALING WITH OUR OWN PROBLEMS FOR A WIDE RANGE IN FOOD PRODUCT. CAROLINE: OUR NATIONWIDE PORTAGE OF BABY FORMULA, THE HOUSE WILL VOTE THIS WEEK ON TWO BILLS TO GET MORE ON THE SHELVES. CEO FOUNDER -- A SELLER OF BABY FORMULA. YOU GO ONTO YOUR WEBSITE AND SAY WE ARE HAVING TO SELL OUR CURRENT CLIENTS AND CUSTOMERS. WE CANNOT TAKE ON NEW ONES BECAUSE THE DEMAND IS SO --. WHAT CAN BE DONE NOW TO ALLEVIATE THE SITUATION? > > IS GOING TO BE A HARDER DECISION THAN WE HAVE HAD IN THE LAST TWO WEEKS. HOW WE CAN MAKE A TOUGH DECISION TO SAY WE COULD OWN -- AND MAKE THE RIGHT DECISION FOR PEACE OF MIND. ROMAINE: TALK A LITTLE BIT ABOUT HOW IF YOU HAVE POTENTIAL CUSTOMERS KNOCKING ON YOUR DOOR, IS THERE A STRATEGY WHERE YOU THINK YOU WILL BE IN A POSITION TO ACCOMMODATE THEM? BHARAT: -- WE HAVE MORE CONTROL. BUT WE HAVE TO MAKE THE COMMITMENT. THIS IS NOT A PRODUCT THAT YOU MAYBE TRY AND YOU WANT TO SWITCH. IF YOU WANT TO BE ABLE TO CONTINUE, IT IS ANOTHER . TAYLOR: THE HIGHLY REGULATED -- IS THERE ANYTHING YOU COULD IDENTIFY THAT WOULD HELP? ANY GUIDANCE FROM THE FDA THAT WOULD EASE SOME SUPPLY CHAIN ISSUES? LAURA: PRODUCT LIKE THIS, YOU DO NOT WANT TO SACRIFICE SAFETY OVERSPEED. WITH THAT, IF YOU COULD UNDERSTAND THE MARKETPLACE, YOU COULD TAKE A VERY QUICK LOOK AND SAY RAMPING UP PRODUCTION IN OUR CURRENT FACILITIES IS NOT THE ANSWER. THE ANSWER IS WE NEED TO LOOK AT ALTERNATIVES. BOTH THE FDA, THE GOVERNMENT ARE COMING TOGETHER WITH WHAT IS -- WITHIN OUR RULES THAT WE HAVE IN PLACE TO GOING TO THE MARKET AND EVEN LOOKING OVERSEAS. THE FLEXIBILITY. CAROLINE: PAINT THE PICTURE OF HOW HARD TO PENETRATE THIS MARKET. WE ARE STARTING TO SEE MORE ENTRANCE. SPEAKING WITH ORGANIC. FOREIGN FLORIDA, U.K. FORMULA IS INCREDIBLY POPULAR AMONG CERTAIN PARENTS. THEY FEEL IT HAS BETTER, QUALITY INGREDIENTS. LAURA: THAT WAS A HUGE INSPIRATION FOR GETTING DOBBIE OFF THE GROUND. WHEN YOU SEE THE BLACK MARKET RISING, YOU HAVE TO AS, WHAT IS IT THAT WE ARE NOT SERVING IN THE U.S. TO BE ABLE TO MEET THAT LINE. I TRULY CALL IT THE BALANCE BETWEEN INNOVATION AND REGULATION. WE NEED TO GET TO A PLACE WHERE REGULATORS SEE THE BENEFITS OF NEW ENTRANTS COMING IN AND PROVIDE THE SUPPORT SO THAT IT IS DONE IN A SAFE WAY. CAROLINE: FROM YOUR PERSPECTIVE, YOUR OWN SUPPLY CHAIN, YOUR OWN PROCESSES WHEN WE WERE IN JANUARY IS DIFFERENT AND WE ARE IN TODAY. LAURA: WE NEED TO TAKE A HARD LOOK AT BACKUP SUPPLIES. TODAY, WE MADE SOME ADJUSTMENTS TO OUR PRICING TAYLOR: -- TAYLOR: WE HEARD EARLIER FROM SENATE MAJORITY -- HE SPOKE EXCLUSIVELY WITH OUR VERY OWN DAVID WESTIN. TAKE A LOOK. > > THEY SUSPENDED THE OPERATIONS. WHAT WE ARE FINDING IS PRICE GOUGING GOING ON BY MANUFACTURERS AND PRODUCERS. I CANNOT THINK OF ANYTHING ANYMORE IN CITIES THAN A COMPANY BELIEVING THEY CAN MAKE A BUCK OFF KIDS WHO NEED TO BE FED THE BASIC FORMULAS SO THEY CAN THRIVE. IS THERE ONE THAT YOU THINK IS MOST IMPORTANT AND DOABLE BEFORE THE MIDTERM ELECTIONS. THIS DECISION FROM THE SUPREME COURT IS GOING TO BE A CHALLENGE ACROSS AMERICA AS TO WHETHER WE CAN DEAL WITH THE BASIC FREEDOM THAT WOMEN CAN HAVE THE. THAT IS GOING TO BE A MOTIVATING FACTOR FOR MANY. CAROLINE: THIS IS BLOOMBERG. ROMAINE: NETFLIX UPGRADED, ANALYSTS SAY THERE'S GOING TO ADDRESS SOME OF THE ISSUES WITH THIS COMPANY. A GAIN FOR NETFLIX. SEEING SIGNIFICANT INJURIES OVER THE YEARS. FINALLY, TAKE A LOOK TODAY -- THOSE ENTERIC -- WE GO TO CAROLINE FOR SOME OF THE TOP --. CAROLINE: ELON MUSK SPEAKING AT AN EVENT SAYING BUYING TWITTER IS NOT OUT OF THE QUESTION AT A LOWER PRICE. HE SAYS THERE ARE QUESTIONS ABOUT THE ACCURACY OF TWITTER'S PUBLIC FILINGS. MORE AROUND THE NUMBER OF ROBOTS, FAKE ACCOUNTS. HE IS CONCERNED -- WHETHER THIS DEAL GETS DONE AT $44 BILLION. WE CONTINUE TO WATCH SHARES UNDER PRESSURE. ROMAINE: SHE IS QUESTIONING THE TRUTH AND ACCURACY? CAROLINE: SHE IS. MEANWHILE, TAYLOR: YOU CAN MAKE THE CASE THAT IF THERE WAS IN A GLOBAL SUPPLY CHAIN CRISIS FROM THE PANDEMIC, THIS MIGHT NOT BE COMING IN. -- THIS BID MIGHT NOT BE COMING IN. ROUGHLY $9 MILLION IN CASH AND STOCKS. IF THAT WAS ABLE TO GO THROUGH, THAT WOULD MEAN JETBLUE WOULD BE THE SMALLEST DOMESTIC CARRIER. AIRBUS, IF THEY WERE TO BUMP UP TO BEAT THEM, THERE IS THAT SUPPLY CHAIN RIGHT THERE. THERE ARE ALL KINDS OF ISSUES. INCLUDING THE FACT THEY ARE TRYING TO MAKE THE NORTHEAST ALIGNED. JETBLUE AND SPIRIT AIRLINES ARE NOT AT ALL SIMILAR. JETBLUE IS CERTAINLY HIGHER IN SPIRIT. > > THEY ARE IN COMPOSITION WITH A LOT OF THESE PLAYERS. IF WE SEE THIS DEAL GO THROUGH, THIS IS HINT AT THE OVERLAP OF MAKING THESE MORE VIABLE? ABIGAIL: SPIRIT DOES NOT WANT JETBLUE TO BUY THEM FOR A NUMBER OF REASONS. IT IS GOING TO BE A LESS COMPETITIVE SITUATION BY COMBINING THOSE TWO AIRLINES. ROMAINE: PEOPLE KEEP SAYING, HOW DO THESE COMPANIES ALIGN? THEY ARE CLEARLY TRYING TO GET TO THE TOP OF THE ORDER QUEUE. WHATEVER THEY DO WITH THOSE ROUTE, THAT COULD BE SORTED OUT AT THE END. ABIGAIL: ABIGAIL: I WANTED TO REPEAT THAT JETBLUE IS PROBABLY DOWN TODAY, IF YOU GO THROUGH THE INTERIORS OF THE JETBLUE PLANE AND THE FRONTIER PLAN, THEY WOULD HAVE TO COMPLETELY REFURBISH THOSE PLANS. THAT WOULD ALSO TAKE A WHILE. RIGHT NOW THEY ARE BEHIND SOUTHWEST AIRLINES. AND THEN IT COMES IN SPIRIT AND FRONTIER AND THEN HAWAII AIRLINES. HOW DO WE EVEN PUT HAWAII AIRLINES IN THERE. I HAVE NOT FLOWN THERE. ROMAINE: I HAVE FLOWN THERE ONCE. IT WAS INTERESTING. ABIGAIL: IT SEEMS THIS DEAL COULD BE CALLED AGAIN. JETBLUE BEING SUED . ONE OF THE REASON SPIRIT DOES NOT WANT THIS TO GO THROUGH IS, THE TERMINATION FEE FOR SPIRIT SHAREHOLDERS IS JUST NOT LARGE ENOUGH. ALL KINDS OF HURDLES HERE. THEY HAVE UNTIL JUNE 10 TO DECIDE. THEY ARE SAYING IT IS GOING TO BE A SUPER COMPETITIVE COMBINATION WITH JETBLUE AND FRONTIER HAVE THOSE TWO DIFFERENCES. TAYLOR: LET'S TURN TO SOMEONE ELSE WHO CAN GIVE US SOME PRETTY GOOD OBSERVATIONS. JP MORGAN STRATEGIST COMING OUT AND SAYING THE STOCK MARKET IS OVERPRICING RECESSION RISKS. ARE YOU SEEING THIS WHEN YOU LOOK AT THE MARK -- THE MARKET PRESSURE UNDERWAY? > > WE ARE PRETTY CLOSE. WE GOT PRETTY CLOSE TO THAT LAST WEEK. THEY DIDN'T PRICE IT OFFICIALLY, BUT CLOSE ENOUGH. WE HAVE SEEN TREMENDOUS MARK OF AN INFLATION WITH HIGHER INTEREST RATES AS WELL AS EARNING RATES COMING LOWER. IT SEEMS TO BE -- TRYING TO NAVIGATE SOME SORT OF SOFT LANDING. THE MARGIN PRESSURES ARE BUILDING. GINA: IT IS GETTING WORSE. SIX MONTHS AGO WE STARTED TALKING ABOUT MARGIN INFLATION SPECIFIC TO CONSUMER SECTORS. CONSUMERS PRICES ACCELERATING. WE HAVE SEEN THAT PERSIST MONTH AFTER MONTH. WE SEE IT AGAIN LAST WEEK. CONSUMER PRICES STILL RISING FAST. THE RESULT IS THESE MARGIN PRICES, SIX OF NINE OF THE S & P 500, THE DOW DROPPED IN OPERATING MARGINS IN THE SECOND QUARTER COMPARED TO THE SAME QUARTER A YEAR AGO. THE CONSUMER SECTORS ARE STILL THE WORST, BUT -- MARGIN COMPRESSION BUT IT IS A --. ROMAINE: OVER AT BLOOMBERG INTELLIGENCE, YOU CAN USE THE FUNCTION BI < GO > ON YOUR FANCY BLOOMBERG TERMINAL. COMING UP, IF YOU ARE A VERIZON CUSTOMER, YOU'RE GOING TO PAY JUST A LITTLE BIT MORE ON YOUR NECK BILL. ROMAINE: INTERESTING STORY OUT OF THE BLOOMBERG TERMINAL ABOUT VERIZON. FOR THE FIRST TIME IN TWO YEARS PLANNING PRICE HIKES FOR ITS CUSTOMERS. LET'S BRING IN BLOOMBERG LEVEL BUSINESS EDITOR TO TALK A LITTLE BIT MORE ABOUT THIS STORY. CATHERINE, LET'S START WITH THE GENERAL IDEA WITH WHAT COULD CONSUMERS EXPECT ON THE NEXT BILL? > > CONSUMERS WILL SEE A SMALL INCREASE STARTING IN JUNE. $1.35 . PRETTY QUICKLY IN THE NEXT MONTH. TAYLOR: THEY HAVE BEEN PRETTY DEFLATIONARY HERE FOR -- PRETTY DEFLATIONARY HISTORICALLY. HOW DOES THIS IMPACT BEING AFFORDABLE, NOT HAVING MUCH OPTIONS? > > A COUPLE WEEKS AGO THEY DID A VERY -- THEY DID A BIGGER PRICE HIKE OF SIX TO $12. THAT PRESSURE NOW IS ON T-MOBILE. I WOULDN'T BE SURPRISED IF WE SEE A PRICE HIKE FROM THEM AS WELL. CAROLINE: IN MANY WAYS, -- MADE MORE BY OFFERING MORE FOR LESS. HOW DO YOU THINK INFLATIONARY THEY HAVEN'T BEEN EXPERIENCING? > > WE MAY STILL SEE SOME OF THOSE OTHER MOVES TAKE PLACE. IT WILL BE A HIGHER VALUE, MORE EXPENSIVE PLANS TO GIVE PEOPLE PREMIUM SERVICE FOR MORE MONEY. AT & T SAID -- THEY HAVE CONSUMERS STILL WILLING TO PAY FOR HIGH-QUALITY ACTIVITY. THEY MAY TRY TO PICK BACK A LITTLE. ROMAINE: FOR A LOT OF FOLKS, THIS IS AN ESSENTIAL SERVICE AND YOU ARE NOT GOING TO BE ABLE TO CUT BACK EVEN IF YOU WANTED TO UNLESS YOU HAVE SOME SERIOUS COMFORT ENGINE. THAT HAS BEEN A DRAG ON INFLATION FOR YEARS. IT WAS ACTUALLY ONE OF THE BAIT -- ONE OF THE GREAT BIG CONUNDRUMS. THEY SAID SEVERAL TIMES PUBLICLY THAT THEY DIDN'T REALLY GET A HANDLE ON THIS, THIS WAS GOING TO BE A MAJOR IMPEDIMENT. NOW THAT YOU'RE STARTING TO SEE THIS COME UP HERE, I WONDER IF THIS BEGINS AN UPTREND, NOT JUST FOR WIRELESS SERVICES, BUT SOME OF THOSE OTHER METRICS THAT HAVE BEEN DEFLATIONARY OVERALL. CATHERINE: IT WILL BE AN INTERESTING PLACE. WE ARE GOING TO CONTINUE TO WATCH AND REPORT ON. FOR MANY PEOPLE, THIS IS AN ESSENTIAL SERVICE. THEY CAN'T RAISE PRICES SO MUCH THAT THAT KEEPS PEOPLE OUT OF THE MARKET. WE ARE WATCHING CLOSELY. ROMAINE: GLOBAL BUSINESS OUT -- GLOBAL BIT IS -- GLOBAL BUSINESS EDITOR IN CHICAGO. > > CAP DOWN TO THE CLOSE. BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE AHEAD OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. CAROLINE: THIS IS COUNTDOWN TO THE CLOSE. 60 MINUTES LEFT IN YOUR TRADING SESSION. I'M JOINED BY COLLEAGUES. CAROL MASSAR ON ASSIGNMENT. WE WILL BE WELCOMING -- SHE'S IN PANAMA, I THINK. BUT WE ARE TALKING TV, RADIO, AND YOUTUBE. MARK: SHE'S WORKING -- TIM:SHE'S WORKING, I PROMISE. CAROLINE: AND WE ARE DOING DEEP DIVING. TIM, WE ARE UP .3% AND LOWER EARLIER. BUT SHROUDED IN CONCERNS ABOUT RECESSIONS. TIM: THAT SEEMS TO BE THE WORD OF THE DAY OR THE WORD OF THE WEEKEND. YOU MAY NOT BE SURPRISED I'VE GOT MY EYE ON CRYPTOCURRENCY. BITCOIN WAS DOWN MORE THAN 6% EARLIER. IT IS DOWN 3.7% RIGHT NOW. LESE GOODMAN MAKES A GOOD POINT HERE. THE DECLINE IN CRYPTO WE ARE SEEING TODAY COULD BE A BEARISH SIGN FOR RISK ASSETS, PERHAPS. BITCOIN HAS A STRONG STRING OF A 30 DAY CORRELATION WITH THE S & P 500. BUT CORRELATION IS NOT CAUSATION. KRITI: I BELIEVE I HAVE THAT TATTOOED ON MY ARM SOMEWHERE. TIM: BITCOIN OR CORRELATION? KRITI: CORRELATION IS NOT CAUSATION. AND YOU MENTIONED CRYPTOCURRENCIES, I THINK VOLATILITY. WE HAVE TO KEEP AN EYE ON THE VIX. IT IS THE SECOND DAY OF GAINS IF IT HOLDS. THE VIX IS BELOW 30, THE POSTWAR NORM TO BE ABOVE 30. IF IT CONTINUES DROPPING LOWER, IS THIS A SIGN THE MARKET IS STARTING TO BOTTOM OUT? CAROLINE: THE MARKET CURRENTLY TRYING TO FIND SOME SORT OF HAD HIGHER. THE S & P 500 14 POINTS HIGHER. WE ARE LOOKING AT WHAT IS HAPPENING ON THE DOW, UP .8%. SEE THE NASDAQ STILL UNDER PRESSURE. HE MENTIONED CRYPTO AND THE SELLOFF THAT HAD BEEN PAINFUL FOR BIG TECH. A GLIMMER OF GREEN, UP .1% FOR RUSSELL. TAYLOR: TAKE A LOOK AT THE INDIVIDUAL SECTORS. ENERGY, GOODNESS. YOU ARE UP 3.5% FOR THE DAY. THAT HAS BEEN THE THEME OF THE YEAR. TABLES ARE UP THERE AS MOST UTILITIES AND INDUSTRIALS AND TECHNOLOGY ARE IN THEIR. YOU ARE GETTING A LITTLE BIT OF EVERYTHING. FINANCIALS AND DISCRETIONARY AS WELL. ROMAINE: WE CAN GO BACK TO ENERGY BECAUSE NINE OF THE TOP 10 BEST PERFORMING STOCKS BELONG TO THE ENERGY SECTOR. IT'S ONE OF THE FEW REASONS WE HAVE BEEN FLUCTUATING IN THE GREEN. SOME TECH STOCKS ARE PARTICIPATING TODAY. META-PLATFORM IS HIGHER BY 2%. BUT WHATEVER THE UPSIDE IS BEING DRAGGED DOWN BY AMAZON, ALPHABET, AND APPLE. A CHEAPER ON THE DAY. THERE IS A WEIRD SAGA GOING ON WITH TWITTER. ELON MUSK SPEAKING FROM SOMEWHERE RIGHT NOW. NOBODY KNOWS WHETHER TO TAKE THIS GUY SERIOUSLY OR NOT. WE ARE LOOKING AT 37.92 RIGHT NOW ON TWITTER. DOWN 7% ON THE DAY. BELOW THE LEVEL IT WAS ON APRIL 1 JUST BEFORE ELON MUSK DISCLOSED THE 9% PASSIVE STAKE. ALL THE GAINS UP ABOVE 50 HAVE BEEN ERASED AS INVESTORS REALLY DOUBT WHATEVER THE HECK HE IS DOING IS GOING TO HAPPEN. ABSOLUTE NONSENSE. AN INTERESTING STORY WITH MCDONALD'S. THE END OF AN ERA WITH A DE-ARCHING IS HOW THEY DESCRIBED IT IN RUSSIA. THEY WILL SELL OFF PROPERTIES AND BUSINESSES. NOT ONLY A BIG DEAL FOR MCDONALD'S, BUT IT'S THE END OF AN ERA FOR THAT KIND OF WESTERN CAPITALISM OVER THERE. TIM: I WAS TALKING ABOUT THIS EARLIER ON THE SHOW. I REMEMBER WHEN I WAS A KID SEEING IMAGES AND VIDEO OF PEOPLE WAITING IN LINE IN THE COLD FOR TRYING MCDONALD'S FOR THE FIRST TIME. IT REPRESENTED THE OPENING UP OF THE SOVIET UNION. ROMAINE: IT REALLY WAS. TAYLOR: AND FROM THE BALANCE SHEET PERSPECTIVE, THE COMPANIES DOING THESE WRITE-DOWNS AND WRITE-OFFS TRYING TO FIGURE OUT THOSE ASSETS IS A DIFFERENT FINANCIAL GOAL AS WELL. CAROLINE: AND GO BACK TO THE TECHNICALS FOR A MOMENT HERE. GO BACK TO THE CHART. YOU SAID THE WORD OF THE DAY IS RECESSION. THE NEXT WORD WE WILL LISTEN FOR HIS CAPITULATION. ARE WE THERE YET? WILL WE FIND WE'VE HIT SOME SORT OF BOTTOM? ARE WE AT THE BEGINNING, SECULAR, CYCLICAL? WE ARE FINDING RELATIVE RESILIENCE. U.S. EQUITY BREADTH NOT FLASHING STRESS SIGNAL. THE S & P ARE NEAR 52-WE CLOSE -- WEEK LOWS. NOWHERE WHAT WE SAW IN THE 2020 SELLOFF. ROMAINE: PERHAPS WATCH OUT BECAUSE THERE COULD BE FURTHER WAYS TO GO. -- RECESSION THE WORD OF THE DAY. A LOT OF YOU HEARD WHAT BLANKFEIN SAID OVER THE WEEKEND. CUSTOMERS GIRD FOR A U.S. RECESSION. CHECK OUT WHAT HE SAID AT FACE THE NATION ON SUNDAY. > > DO YOU THINK WE ARE HEADED TOWARDS RECESSION? > > WE ARE CERTAINLY HEADING -- IT IS A VERY HIGH RISK FACTOR. THERE IS A PATH. A NARROW PATH. BUT I THINK THE FED HAS VERY POWERFUL TOOLS. IT IS HARD TO FINALLY TUNE THEM AND SEE THE EFFECTS OF THEM WEEKLY ENOUGH TO ALTER IT. -- QUICKLY ENOUGH TO ALTER IT. IT IS DEFINITELY A RISK. IF I'M RUNNING A BIG COMPANY, I WOULD BE PREPARED. IF I WAS A CONSUMMATE -- CONSUMER, I WOULD BE PREPARED. BUT IT'S NOT BAKED INTO THE CAKE. TIM: THAT WAS LLOYD BLANKFEIN ON CBS'S FACE THE NATION YESTERDAY. IT'S NOT BAKED INTO THE CAKE BUT HE DID WARN THAT COMPANIES AND CUSTOMERS SHOULD BRACE FOR IT. KRITI: WE HAVE SEEN AN EVOLUTION OF WHAT THE CONVERSATION HAS BEEN WHEN IT COMES TO INFLATION. WHETHER OR NOT THE U.S. IS INSULATED, EYEING RECESSION THAT WAS ONLY GUARANTEED FOR EUROPE. ROMAINE: I THINK IT'S PRETTY CLEAR FROM ALL THE STRATEGISTS WE TALKED TO ON THIS PROGRAM AND BEYOND. THEY MADE IT CLEAR THE BASELINE FOR GROWTH WILL BE LOWER. THE TALK WAS ABOUT THAT NOTE. YOU TALK ABOUT THE EUROPEAN CONDITION AND THE OUTLOOK FOR GROWTH OVER THERE, MAY BE POTENTIALLY MORE IF THERE IS A MAJOR DISRUPTION IN THE GAS AND OIL MARKET. AND WE LOOK AT THE DATA OUT OF CHINA. THERE IS A REASON WHY WE ARE TALKING ABOUT RECESSION TODAY. CAROLINE: RETAIL SALES PLUMMETING 11% WHEN YOU SEE INDUSTRIAL PRODUCTION DOWN THAT MUCH IN CHINA. NOT ONLY IS THE GROWTH OUTLOOK GANG CUT AT GOLDMAN, IT WAS THE OUTLOOK FOR THE S & P 500. WE HAVE HAD MONEY MANAGERS SAY YES, THEY INVESTED IN STOCKS, THE ENERGY SPACE, BEING DEFENSIVE. AND FOR A LITTLE WHILE, I THOUGHT IT WAS IN THE BOND MARKET AS WELL TO USE THAT AS YOUR HEDGE. TAYLOR: YOU WONDER IF HEDGES ARE OVER GIVEN THE CORRELATION. TIM, ONE OF THE MORE INTERESTING NOTES I READ IT, -- I READ, BTIT , YOU COULD GET A BALANCE TO 4200. BUT IT COULD BE A FAKE OUT. HE IS LOOKING AT 3500 WHEN WE GET TO THE SUMMER JOBS. TIM: WE SEE QUITE A FEW REVISIONS WHEN IT COMES TO THE YEAR-EDGE TARGET FOR THE S & P 500. EIGHT MORE MEMBERS OF THE FEDERAL RESERVE ARE SPEAKING THIS WEEK. WE HAVE A LOT TOMORROW, WEDNESDAY, AND THURSDAY. CERTAINLY LOOK FOR CLUES AS TO WHAT THEY ARE THINKING WHEN IT COMES TO MONETARY POLICY. THAT WILL DO IT FOR NOW. WE ARE BACK TOGETHER AGAIN LIVE ON TV, RADIO, AND YOUTUBE AT 4 P.M. FOR BEYOND THE BELL COVERAGE WHERE WE TAKE YOU THROUGH THE MARKET CLOSE. ROMAINE: AND WE CONTINUE OUR COVERAGE HERE ON BLOOMBERG TELEVISION AS WE COUNT YOU DOWN TO THE CLOSING BELL. TRACY CHEN, PORTFOLIO MANAGER ON THE GLOBAL FIXED INCOME AT BRANDYWINE WHICH HAS ABOUT $64 BILLION IN ASSETS, WE ARE GOING TO START THIS CONVERSATION OFF WITH THAT RECESSION CONVERSATION. I DON'T THINK A LOT OF PEOPLE WERE USING THE WORD A COUPLE MONTHS AGO, BUT A LOT OF FOLKS ARE TALKING ABOUT THE POSSIBILITY THAT IF WE ARE NOT HEADED INTO A RECESSION, WE COULD BE CLOSE TO IT. WHAT DO YOU THINK? TRACY: YES. I THINK THAT IS A VERY VALID FEAR. IF YOU LOOK AT THE DATA FROM CHINA, IT HAS BEEN HORRIFIC TODAY BECAUSE OF THE LOCKDOWN IN APRIL. AND AGAIN, THE UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT INDEX ACTUALLY INDICATES RECESSION LEVEL. THAT FEAR IS VERY VALID. BUT IN THE U.S., I WOULD NOT SEE RECESSION PROBABILITY THIS YEAR, BUT MAYBE NEXT YEAR. IT DEPENDS ON HOW AGGRESSIVE THE FED MOVES AND HOW MUCH TIGHTER THE FINANCIAL CONDITIONS ARE. CAROLINE: WE HAVE SEEN A STOCK MARKET SELLOFF TO SOME EXTENT HELPING WITH THE FINANCIAL CONDITION TIGHTENING. TALK TO US ABOUT IF THIS IS THE MOMENT YOU SHOULD BE LOOKING TO BUY BONDS? WE SEE YIELDS COMING DOWN AT THE LONGER END. WILL THE FED BE AGGRESSIVE? IT COULD GO HIGHER. TRACY: THAT'S A GOOD QUESTION. TALKING ABOUT BONDS, LET'S REWIND TO LAST WEEK AND MARKET REACTION TO THE FED HIKE. POWELL GAVE MORE FORWARD GUIDANCE LAST WEEK AND HIKING 50 BASIS POINTS. THE BOND VIGILANTE HAS BEEN THINKING THE FED HASN'T DONE ENOUGH. WHY DOES POWELL AVOID THE 75 BASIS POINT POSSIBILITY? AND THE MARKETS THINKING MAYBE HE'S NOT FIGHTING INFLATION SERIOUSLY. WE SAW A MASSIVE BOND SELLOFF. ON FRIDAY, THE MARKETS ARE REVERSAL. SO THAT TELLS YOU THE FEAR OF THE MARKET HAS GONE BEYOND INFLATION AND INTO RECESSION. IN MY VIEW, THE CONSENSUS WAS INFLATION IS IN THE PEEKING PROCESS. I THINK IT IS A LITTLE BIT TOO EARLY. THIS TIME AROUND, THE REGIME HAS CHANGED. EVEN THOUGH YOU CAN SAY INFLATION A SLOW DOWN FROM HERE, THERE ARE A LOT OF STRUCTURAL FORCES THAT CAN PUSH INFLATION. THERE ARE MORE STRUCTURAL FORCES BEHIND INFLATION THIS TIME AROUND. TAYLOR: AND ALSO PIVOT TO THE WAY THAT BONDS REACTED DURING THE TIMES OF STAGFLATION AS WELL. A WORD THAT HAS ENTERED THE CONVERSATION. TRACY: YES. IF YOU HAVE A GROWTH SPHERE, IT MIGHT BE A GOOD INVESTMENT. BUT IF YOU THINK THE SCENARIO IS STAGFLATION, THAT IS A MORE COMPLEX STORY. IT'S NOT AS SIMPLE AS BUYING THE DIP IN THE STOCK MARKET. NEAR TERM, WANTS MIGHT HAVE BEEN OVERSOLD. -- BONDS MIGHT HAVE BEEN OVERSOLD. OVER THE MEDIUM-TERM, I I DON'T THINK BOND YIELD HAS YET. -- HAS PEAKED YET. ROMAINE: I'M CURIOUS ABOUT THE GLOBAL NATURE OF SOME OF THE RECESSION CONCERNS AND STAGFLATION CONCERNS. AND WHAT WE SAW WITH THE MORE MAJOR ECONOMIC CRISES, THERE DOES NOT SEEM TO BE A REAL COORDINATED EFFORT PUBLICLY THAT I CAN SEE AMONG POLICYMAKERS WHETHER ON THE MONETARY POLICY SIDE OR ON THE FISCAL SIDE AS WELL. DO YOU THINK THAT THERE NEEDS TO BE MORE COORDINATION TO STEER US TO THAT PROVERBIAL SOFT LANDING? OR CAN EACH AND EVERY COUNTRY SIMPLY GO IT ALONE? TRACY: THAT IS A GOOD POINT. THERE IS NO SYNCHRONIZATION OF GLOBAL MONETARY OR FISCAL POLICY. WE ACTUALLY SAW A DIVERGENCE. THE FED WOULD BE HAWKISH AND BOE AS WELL. BUT TODAY, BOE SAID PROBABLY IT WOULD NOT MOVE PO P BECAUSE OF THE CURRENT ECONOMIC SITUATION, THE SLOW DOWN. AND THE OTHER EXTREME OF THE SPECTRUM, YOU SEE THE DOJ -- THE BOJ IN JAPAN STILL BUYING JAPANESE GOVERNMENT BONDS. AND THE CHINESE CENTRAL BANK ARE ALSO TRYING TO EASE, THEY ARE SQUEEZED BY THE FED TIGHTENING. SO THEY WON'T HAVE MUCH ROOM TO CUT THE INTEREST RATE. I THINK SYNCHRONIZED ACTIONS SHOULD BE REQUIRED. AT THE SAME TIME, WE ARE FIGHTING TWO WARS. YOU HAVE THE RUSSIA-UKRAINE WAR AND CHINA FIGHTING THE COVID WAR. I THINK MORE MEANS MORE INFLATION. AND PROBABLY STAGFLATION. UNFORTUNATELY, I THINK STAGFLATION IS HERE TO STAY. CAROLINE: A COUPLE OF AREAS -- GIVE ME A COUPLE OF AREAS YOU THINK ONE SHOULD INVEST. TRACY: ON THE CURRENCY SIDE, I THINK IT'S A LITTLE BIT GETTING MORE OBVIOUS. THE BOJ'S PACKAGING THE 10-YEAR JGB'S YIELD. JAPANESE YEN HAS MORE ROOM TO WEAKEN. PBOC IS ALLOWING RND TO -- RMB TO DEPRECIATE. IT IS ONE AREA TO MAKE SOME EFFORT THIS YEAR. AT THE SAME TIME, BEING A BIT DEFENSIVE AND INVESTING IN PART OF THE MARKET WHICH WILL BENEFIT FROM INFLATION. MEANING THEY HAVEN'T BEEN VALUED FROM QE. AND THERE ARE COMMODITY FACTORS LIKE CASH. STAY AWAY FROM HIGH DATA SECTORS . I THINK YOU HAVE TO BE VERY CAUTIOUS. CAROLINE: TRACY, GREAT TO CATCH UP WITH YOU. TRACY CHEN, GLOBAL MANAGER AT FIXED INCOME FOR BRANDYWINE GLOBAL. COMING UP, PRIVATE WEALTH ADVISOR FOR MORGAN STANLEY PRIVATE WEALTH MANAGEMENT. AND WE FOCUS ON THE SLOW DOWN IN FAX. -- IN FACTS. WE WILL ALSO BE TALKING FUNDAMENTAL GLOBAL. TOMORROW WE BRING YOU SPECIAL COVERAGE FROM THE GREATER BOSTON CHAMBER OF COMMERCE. WHO IS GETTING ON A PLANE THIS TIME? TAYLOR RIGGS AS WE CHALLENGE THE OPPORTUNITY. 2 P.M. EASTERN. THIS IS BLOOMBERG. ROMAINE: THIS IS THE COUNTDOWN TO THE CLOSE NUMBER 42 MINUTES LEFT TO CLOSE ON THE TRADING DAY. WHILE SWINGS ON THE S & P 500, UP AND DOWN. FLAT ON THE DAY. WE SHOULD POINT OUT THE ACTUAL TRADING RANGE IS ONE OF THE TIGHTEST WE HAVE SEEN, BELIEVE IT OR NOT, GOING BACK TO MID APRIL DESPITE THE VOLATILE SWINGS WE ARE GETTING. 2.87 ON THE 10-YEAR YIELD. CRUDE OIL 114 WITH SOME OF THE REFINED PRODUCTS AT THEIR HIGHEST LEVELS ON RECORD INCLUDING GASOLINE. BITCOIN NOT REALLY GOING ANYWHERE. IF YOU ARE LOOKING FOR A BAROMETER OF RISK SENTIMENT, THAT'S ONE OF THEM. RISK SENTIMENT IS NOT ON THE TABLE. THERE WERE A LOT OF CONCERNS ABOUT THE SELLOFF THAT WE SAW AN APPLE OVER THE PREVIOUS FEW DAYS AND WEEKS YEAR. THE REBOUND WE HAD TOWARDS THE END OF THE WEEK, GIVING UP A LITTLE BIT HERE, DOWN .6%. WHEN YOU LOOK AT SOME OF THE BIG CAP TECH NAMES, THE ONES THAT HAVE CASH, GOOD BALANCE SHEETS, AND EARNINGS HERE, NOT SEEING MUCH. MATERIALS DOWN 5%. A QUARRY SHUT DOWN IN MEXICO AND THIS COMPANY MAKES MOST OF ITS PRODUCTS IN THE U.S., BUT IT SUPPLIES ASPHALT FROM OUTSIDE OF THE U.S. THIS IS STARTING TO BECOME A BIG ISSUE FOR THIS COMPANY. KEEP AN EYE ON NUCOR. THEY HAVE PROFITED FROM A LOT OF SUPPLY CHAIN ISSUES OUT THERE. THEY'RE PUTTING THAT CASH TO WORK. THEY WILL BUY THE MAKER OF OVERHEAD DOORS TO TRY TO DIVERSIFY AWAY FROM JUST MAKING STEEL AND MOVING INTO ACTUAL FINISHED PRODUCTS. MANTECH SHARES UP ABOUT 15%. THAT COMPANY ABOUT TO GO EITHER. 40 COMPANIES IN THE LAST YEAR HAVE ANNOUNCED PLANS TO GO PRIVATE HERE IN THE U.S. LET'S BRING IN ABIGAIL DOOLITTLE AS WE DO EVERY DAY AT THIS TIME FOR OUR OPTIONS INSIGHT SEGMENT. WE HAVE BEEN TAKING A LOOK AT THE VOLATILITY IN THIS MARKET AND EVERYONE IS TRYING TO CALL THE BOTTOM OR WHAT WILL BE THE NEXT LEG OF THIS BULL MARKET. OR ARE WE HEADING TO A LONGER-TERM BEAR MARKET HERE? HARD TO FIGURE OUT WHERE WE ARE GOING, BUT IT DOESN'T SEEM GOOD. ABIGAIL: IT IS PRETTY BRUTAL AND THAT'S WHY FOLKS WANT TO CALL THE BOTTOM BECAUSE THEY WANT TO FEEL GOOD. IT'S BEEN A PAINFUL YEAR AND VERY UNPREDICTABLE. WHEN YOU THINK BACK TO THE FIRST WEEK OF JANUARY, THERE WAS A BIG RALLY AND HAS BEEN DOWN SINCE THEN. WE WILL SPEAK WITH MARK NEWTON, GREAT TO HAVE YOU WITH US. YOU ARE SOMEBODY WHO IS CLEARLY SAYING NO, THERE IS NOT A BEAR MARKET RALLY. THERE WILL NOT BE A BOUNCE AND WE CERTAINLY HAVEN'T HIT THE BOTTOM. SO MANY FOLKS AT LEAST WANT SOMETHING IN THE NEAR TERM. TALK TO US ABOUT WHAT YOU ARE SEEING AND WHY YOUR VIEW IS A LITTLE BIT -- FOR MONDAY. MARK: CUSTOMERS ARE ENAMORED WITH TRYING TO BUY DIPS AND WE HAVE NOT SEEN ANY EVIDENCE OF CAPITULATION. OVER 50% OF S & P NAMES ARE DOWN 20% OFF OF THEIR HIGHS. WE HAVE SEEN A LOT OF DAMAGE. SENTIMENT I WOULD ARGUE IS BEARISH BUT WE HAVEN'T SEEN TRUE FEAR. WE HAVE SEEN THE START OF OVERSOLD CONDITIONS, BUT THERE IS INSUFFICIENT EVIDENCE TO SAY IT IS TIME TO GO HIGHER. WE HAVE SEEN A BIG PULLBACK IN IMPLIED VOLATILITY OVER THE LAST WEEK. JUST REALLY A TWO-DAY RALLY. WE SEE EVIDENCE OF TECHNOLOGY NOT REALLY PARTICIPATING TODAY AGAIN. FOR ME, IT'S A TIME TO CONSIDER STILL BEING DEFENSIVE AND USING ANY SORT OF BALANCE SECTOR TO ADD PROTECTION. ABIGAIL: TALK TO US IN TERMS OF YOUR VIEWS ON VOLATILITY. YOU USED THE WORD CAPITULATION AND SOME OF THE PEOPLE ARE LOOKING FOR CAPITULATION. AT THE SPIKE IN THE VIX, ARE YOU LOOKING FOR 40? OR ABOVE 80? WHAT DOES IT MEAN FOR THE S & P 500 IN TERMS OF A LEVEL? MARK: I THINK WE ARE LIKELY IN THE EIGHTH INNING OF THIS PULLBACK, BUT I DON'T THINK THAT WE GOT TO LEVELS WE SAW BACK IN MARCH AND JANUARY AND THE VIX. ALL THE TO LIDDY IS HIGH BUT THE IMPLIED HAS PULLED BACK -- VOLATILITY IS HIGH BUT THE IMPLIED HAS PULLED BACK QUITE A BIT. I THINK THAT THE VIX DOES GET BACK TO LEVELS IN THE UPPER 30'S, EVEN 40. I'M NOT CALLING FOR A MOVE UP TO 80 BY ANY STRETCH. OVER THE NEXT FOUR WEEKS TO SIX WEEKS, WE WILL BE PUTTING IN A BOTTOM. BUT IN THE TIME BEING, IT'S TIME TO APPLY VOLATILITY AS A CHANCE TO BUY. I THINK YOU SHOULD STILL CONSIDER PROTECTION. MARK: A LITTLE BIT OF A SILVER LINING THAT IT'S NOT GOING TO BE SO UP. I THINK -- IT SOUNDS LIKE YOU DON'T THINK 3400 IS THE CASE. CAN YOU TAKE US MORE THOROUGHLY THROUGH YOUR TRADE IDEA AND WHY YOU ARE SETTING THAT LEVEL? MARK: AT THE BEGINNING OF THE YEAR, I THOUGHT THE S & P COULD GET DOWN TO 3815 BY JUNE. A BREAK OF THAT COULD LEAD TO 3500. I DON'T THINK WE GET BELOW THAT. THAT WOULD BE FEBRUARY 2020 HIGHS AS WELL AS A 50% ABSOLUTE REPLACEMENT OF THE ENTIRE RALLY UP FROM THE 2020 LOW. THAT WOULD BE A BIG MOVE. THAT BREAK OF 3800 WOULD CAUSE I THINK A REALLY BIG RUSH FOR THE EXITS IN IMPLIED VOLATILITY AND SPIKES. IT'S NOT THE KIND OF MOVE I WOULD CONSIDER TAKING PROFITS ON THIS TRADE AND THEN SELLING OUT OF IT. WE COULD BE CLOSE TO A LOW. ABIGAIL: THAT COULD BE THE SITUATION IF THE FLOOR FELL OUT AT 3800. MARK NEWTON, THANK YOU FOR JOINING US. FROM NEW YORK, THIS IS BLOOMBERG. TAYLOR: WE TALKED A LOT ABOUT THE CALLS ON THE STREET. AND ANOTHER ONE, BLACKROCK INTERESTING. COMING OUT THIS MORNING AND MAINTAINING LIGHT OVERWEIGHT ON EQUITIES. THEY THINK THE SOME OF THE TOTAL RATE HIKES IS MORE THAN THEY WERE ACTUALLY GOING TO GET. THEY ACTUALLY SEE A LOT OF THE RISK ALREADY PRICED IN. SOME OF THE RECESSION FEARS OVERBLOWN ARE THE COMMENTS WE'VE HEARD FROM J.P. MORGAN AS WELL. CAROLINE: I FEEL MANY HAVE BEEN STARTING TO SAY TO BUY THE DIP TENTATIVELY. BUT FOR EVERY J.P. MORGAN, THERE IS A MIKE WILSON AT MORGAN STANLEY. HE WOULD BE MAKING A TON OF HE'S GETTING A DOLLAR FOR EVERY TIME -- ROMAINE: THIS IS NORMAL. WHENEVER WE ENTER A RECESSION, EVERYONE SAYS TO DO IT AND ONE CODGER SAYS THIS TIME IS DIFFERENT. NO ONE REALLY KNOWS UNTIL YOU KNOW, RIGHT? UNTIL IT ACTUALLY HAPPENS. WHAT EVERYONE AGREES ON IS THE BASELINE FOR GROWTH WILL BE LOWER THAN WHAT IT'S USED TO. MORE THAN 2700 JOURNALISTS IN MORE THAN 100 AND 20 COUNTRIES. I'M MARK CRUMPTON. THIS IS BLOOMBERG. > > THE MOST CRUCIAL MOMENTS IN THE TRADING DAY. THIS IS BLOOMBERG MARKETS: THE CLOSE WITH CAROLINE HYDE, ROMAINE BOSTICK, AND TAYLOR RIGGS. [BELLRINGING] CAROLINE: LESS THAN HALF AN HOUR TO GO. ROMAINE: A TOPSY-TURVY DAY IN THE MARKETS. TAYLOR: AND YOU CERTAINLY SEE THAT IN THE SECTOR LEVEL AS WELL. COMING OFF A DECENT RALLY ON FRIDAY AND A DIGESTION OF ALL OF THAT TODAY. HALF IN THE GREEN AND HALF IN THE RED. NO SURPRISE. IT CONTINUES TO BE A RELENTLESS GAIN IN ENERGY. DOWN AT THE BOTTOM, I SOUND LIKE A BROKEN RECORD. TECHNOLOGY OFF WENT 7%. ROMAINE: ENERGY IS WHERE IT HAS BEEN AT ALL YEAR LONG. TAKE A LOOK AT THE BIG CAP NAMES. ALPHABET SHARES LOWER ON THE DAY. THE REASON WE -- WHY WE HAVE BEEN SWINGING BETWEEN GAINS AND LOSSES. A BIG PART OF THE REASON WE ARE TREADING WATER. AND OF REPRESENTATIVE OF SOME OF THE ENERGY STOCKS THAT ARE MOVING HIGHER HERE ON THE DAY, UP ABOUT SIX PERCENT. I THINK WE GET TO TWO IMPORTANT EARNINGS TOMORROW MORNING BEFORE THE BELL. HOME DEPOT AND WALMART EXPECTED TO REPORT. WALMART EXPECTED TO CLOSE A LITTLE BIT MORE THAN 2% ON YEAR-OVER-YEAR. AND WHILE, HOME DEPOT EXPECTED TO POST GROWTH ON -2% YEAR-OVER-YEAR. INTERESTING TO SEE THE TRENDS. LAST TIME, THEY TALKED ABOUT HIGHER TICKET PRICES BUT NOT NECESSARILY MORE CUSTOMERS. CAROLINE: FACING INFLATION PRICES, HOW MUCH ARE WE SPENDING ON OUTDOOR FURNITURE? MEANWHILE, LET'S LOOK AT WHERE ROMAINE LEFT OFF ON THE TECH SIDE OF THINGS. AT THE MOMENT, WE SEE THIS PRESSURE ON VALUATIONS. WE SEE THIS PRESSURE ON HITTING CAPITULATION. I BRING YOU ANOTHER GREAT CHART. AT THE MOMENT, WE ARE SEEING BOTH IN EUROPE AND U.S. BENCHMARKS WHEN IT COMES TO TECHNOLOGY, YELLOW THE NASDAQ 100 AND THE STOXX 600 IN THE WHITE. WE ARE GETTING HEALTHY AND THEN FAR MORE REASONABLY PRICED PRICE-TO-EARNINGS RATIO. WE ARE LOOKING AT A 20 LEVEL WHICH IS ABOVE THE LONG-TERM AVERAGE. BUT IS THAT ENOUGH? WHAT ABOUT THE OTHER TECHNICAL AREAS PEOPLE ARE LOOKING AT FOR SIGNS OF CAPITULATION? ABOUT THE OVER BEARISHNESS IN THE MARKET SENTIMENT, TAYLOR? TAYLOR: GREAT SET UP. LET'S GO TO CAMERON, WRITING ABOUT HOW MAJOR STOCK MARKET BOTTOMS RARELY LOOK LIKE THIS. I'M CURIOUS WHAT SORT OF INDICATORS YOU ARE WATCHING. GINA MARTIN ADAMS SAID 39% FROM S & P IS MORE THAN 20% BELOW THE INDEX. AND THE KEY TECHNICAL LEVEL, IF YOU WILL. WHAT ARE YOU LOOKING AT TO DETERMINE A BOTTOM? CAMERON: YOU LOOK AT A COUPLE OF PRISMS. IF YOU LOOK AT THE NUMBER OF S & P 500 NAMES TRADING BELOW THE 200 DAY MOVING AVERAGE, IT'S ABOUT TWO THIRDS OR 70% WHICH SEEMS LIKE A LOT. BUT IT'S LESS THAN YOU TYPICALLY GET AT BIG BOTTOMS. YOU CAN ALSO LOOK AT IT THROUGH THE PRISM OF MONETARY POLICY. IT'S KIND OF THE FED AND THE FED'S REACTION TO THE ISSUE THAT HAS DRIVEN THIS YEAR'S WEAKNESS. GOING BACK BASICALLY TO THE EISENHOWER ADMINISTRATION WHEN WE FIRST GET DATA ON THE FED, WE CAN SEE WHAT THE MARKET POLICY BACKDROP LOOKED LIKE AT THE TIME OF MAJOR MARKET LOWS WHICH WE KIND OF DEFINE AS BEING THE LOWEST CLOSING PRICE VERSUS THE YEAR PREVIOUSLY AND THE YEAR SUBSEQUENTLY. IT'S A WAY TO LOOK AT IT VISUALLY ON A CHART. I LOOKED AT THE PREVAILING LEVEL OF THE FED FUNDS RATE VERSUS THE PEAK OF THE PRIOR YEAR. THE THREE-MONTH CHANGE IN THE FED FUNDS RATE, AND THE THREE MONTH CHANGE IN THE 10-YEAR YIELD. I IDENTIFIED ABOUT 18 PRIOR MAJOR LOWS. AND ON 14 OF THOSE OCCASIONS, INTEREST RATES HAD BEEN FALLING. EITHER THE FED HAD BEEN CUTTING OR AS WAS THE CASE ON CHRISTMAS EVE 2018, THE MARKET ESSENTIALLY STARTED TO PRICE IN EASIER FINANCIAL CONDITIONS VIA A LOWER 10 YEAR YIELD. SO THE EXCEPTIONS TO THE "RULE" WERE 1957. ANOTHER IN 1962. YOU CAN DISPENSE WITH THOSE BECAUSE BOTH OF THOSE SAW THE 10 YEAR YIELD RISE ONLY A FEW BASIS POINTS. ROMAINE: I'M CURIOUS, WHAT DOES THAT MEAN FOR THE FED AT THIS POINT? GIVEN WHERE WE ARE AT THE CURRENT CYCLE WITH FINANCIAL CONDITIONS HERE AND THE IDEA OF WHAT THE FED IS COMMUNICATING, WE ARE STILL 1%. WHAT DOES IT MEAN? CAMERON: THEY HAVE TOLD YOU VERY CLEARLY THAT THEY STILL ARE LOOKING FOR FINANCIAL CONDITIONS TO TIGHTEN. THEY LET THAT RADIATE ACROSS ASSET MARKETS. POINT OF FACT, GOING BACK TO THE EISENHOWER ADMINISTRATION, WE’'VE NEVER HAD A MAJOR BOTTOM WITH THE FED HIKING THIS AGGRESSIVELY. YOU ARE PROBABLY ULTIMATELY GOING TO NEED TO SEE THE FED CAPITULATE OR GIVE SIGNS OF A MODERATION IN THE PACE OF TIGHTENING BEFORE YOU CAN FEEL MORE COMFORTABLE SAYING THAT A MAJOR LOW IS ENDING. CAROLINE: DO YOU HAVE ANY HYPOTHESIS OR A TIMEFRAME FOR THAT? INFLATION PRESSURES ARE NOT GOING ANYWHERE. CAMERON: YEAH, IT IS GOING TO HAVE TO COME AT THE EARLIEST YOU THINK IN THE SECOND HALF OF THE YEAR. THE OBVIOUS VECTOR FOR THIS TO HAPPEN WOULD BE A SIGNIFICANT DETERIORATION IN THE LABOR MARKET. RIGHT NOW, THE LABOR MARKET RUNNING AS HIGH AS IT IS, THAT JUST IS AMPLIFYING INFLATION PRESSURE. SO THEY AT LEAST NEED TO SEE SOME SIGN NOT ONLY THAT REALIZED INFLATION IS MODERATING AND PERHAPS NARROWING, BUT THAT THE LABOR MARKET IS DETERIORATING WHICH WOULD PROJECT LOWER DEMAND INTO THE FUTURE AND AN EARLY RETURN TO BE THE MUCH FABLED SUPPLY-DEMAND BALANCE THAT WOULD BRING INFLATION TO MORE PALATABLE LEVELS. ROMAINE: WE HAVE TO HAVE YOU BACK ONTO LOOK AT THE LABOR MARKET DYNAMICS IN THE CONSTRUCTION SECTOR. OUT OF TIME, CAMERON, ALWAYS GOOD TO CATCH UP WITH YOU. BLOOMBERG MACRO STRATEGIST, CAMERON. WE COUNT YOU DOWN TO THE CLOSING BELL HERE. WE ARE AT THE LOWEST ON THE DAY WITH THE MAJOR INDICES. I GUESS WILL BE JOINING US IN JUST A SECOND TO COUNT US DOWN TO THE CLOSE. THIS IS BLOOMBERG. CAROLINE: 17 MINUTES UNTIL THE MARKET CLOSE AND WE HAVE BEEN WHIPPED FROM ONE DIRECTION TO THE OTHER. WE ARE WORRYING ABOUT VALUATIONS, INFLATION, AND WHERE THE 10 YEAR YIELD IS GOING. WE ARE SEEING A BID FOR SAFETY. COMMODITY INDICES NOT LETTING UP ON THE INFLATIONARY PRESSURE. THE LIKES OF OIL PRESSURE PUSHING HIGHER. CRYPTO MIGHT BE TELLING US THE DIRECTION OF RISK ASSETS. IT CONTINUES TO BE UNDER PRESSURE. SHERRY PAUL IS WITH US FROM MORGAN STANLEY PRIVATE WEALTH MANAGEMENT. ALL COME TO THE SHOW. AS WE MARCH TOWARD THE MARKET CLOSE, WHAT CAN CRYPTO TELL YOU ABOUT THE DESIRE TO BE HOLDING RISK ASSETS? SHERRY: IT'S IMPORTANT FOR INVESTORS TO UNDERSTAND ECONOMIC PREDICTIONS AND EVEN TRYING TO CALL MARKET BOTTOMS SHOULD NOT BE CONFUSED WITH INVESTMENT STRATEGY. WE ARE TALKING TO CLIENTS ABOUT BUILDING ALL-WEATHER PORTFOLIOS THAT WILL ALLOW THEM TO BE DYNAMIC, DISCIPLINED, AND DOMESTIC. THAT IS WHAT IS ON THE MIND OF INVESTORS WHERE TO PLACE THEIR CASH AND THEIR MONEY. TAYLOR: CAN WE TALK ABOUT THAT CASH? WITH INFLATION WITH A 70 HANDLE, CASH IS LOSING AND YOU NEED IT TO INVEST AT LOWER LEVELS. WHAT IS THE APPROPRIATE USE? SHERRY: THANK YOU FOR THAT QUESTION. THE WAY I WOULD ANSWER THAT IS THAT MARKETS FLUCTUATE. IT'S WHAT PEOPLE DO DURING THEM THAT DEVASTATES RETURNS. FOR INDIVIDUAL INVESTORS, PLASH -- CASH PLAYS A CRUCIAL ROLE FROM A PLANNING STANDPOINT. THE FIRST STEP WOULD BE TO UNDERSTAND WHAT EXPENSES ARE IN THE NEXT SIX TO 12 MONTHS. THEN EXPENSES FOR THE NEXT WHEN TO FOUR MONTHS. DATA AND MARKET TIMING CONDITIONS TELL US WE ARE IN FOR A VOLATILE RIDE. PREPARE FOR THAT NOW SO YOU CAN DEPLOY YOUR CAPITAL ON RISK ASSETS NOW AND SELLOFF PRICES. ROMAINE: IS THERE A TACTICAL NATURE THAT FOLKS CAN TAKE, MAY BE PUTTING THAT CASH TO WORK? SHERRY: COST AVERAGING FOR PEOPLE THAT MISSED OUT ON THE LAST FEW YEARS OF RETURNS THAT DON'T HAVE THE EMBEDDED TO THE PANDEMIC, WHICH THE BOTTOM HIT IN MARCH OF 2020. THEY CAN START TO BUILD PORTFOLIOS HERE PRACTICALLY. AND AT THE SAME TIME, UNDERSTAND THERE ARE A LOT OF NEW INVESTORS IN THIS MARKET. I'M ENCOURAGING PEOPLE TO UNDERSTAND WHETHER OR NOT THIS IS AN ASSET CLASS THAT YOU ARE DESIGNED TO HOLD. THIS MARKET BOUNCES. YOU HAVE TO BE PREPARED FOR THAT. AND TO UNDERSTAND AND APPRECIATE THE MARKET WHAT -- FOR WHAT IT IS, NOT TO MAKE IT STABLE INCOME. ROMAINE: WE ARE IN CONVERSATION WITH SHERRY PAUL, PRIVATE WEALTH ADVISOR AND PRIVATE WEALTH -- AND WE SHOULD POINT OUT THE BOUNCE OF 3980 WAS THE MAIN SUPPORT. MARKETS NOT GETTING ANY TRACTION HERE. MOVING TOWARDS THE LOWS OF THE DAY. CAROLINE: THIS IS COUNT DOWN TO THE CLOSE. I'M CAROLINE HYDE. TAYLOR: I'M TAYLOR RIGGS. ROMAINE: I'M ROMAINE BOSTICK. CAROLINE: WE HAD A SWINGS IN THE SESSION WITH FOLKS TRYING TO REBOUND. REALLY THERE WAS NEGATIVE HEADLINE AFTER NEGATIVE HEADLINE. WHEN YOU FIRST CAME INTO THE OFFICES THIS MORNING TO PUT MONEY TO WORK, WE SAW THE DATA COMING OUT OF CHINA THAT LOOKS ROUGH FROM AN ECONOMIC PERSPECTIVE. THEN WE SAW MANUFACTURING DATA IN NEW YORK AND THE NOTES COMING FROM GOLDMAN SACHS. WE SWUNG BETWEEN GAINS AND LOSSES. THE S & P 500 CURRENTLY UNDER PRESSURE. ROMAINE: A BIG PART OF THE REASON WHY WE ARE LOWER IS A LOT OF DISCRETIONARY NAMES. AMAZON BAKED INTO THAT, DOWN 2%. THE SECOND-TIER SOFTWARE STOCKS ALSO MOVING LOWER. THEY HAVE BEEN A BIG BAROMETER FOR POOR RISK SENTIMENT. A LOT OF THEM DON'T HAVE THE SAME TYPE OF BALANCE SHEET AND EARNINGS THAT YOU GET FROM APPLE OR MICROSOFT, TO BE SURE. IF YOU ARE LOOKING FOR A BID, YOU ARE SEEING IT IN HEALTH CARE. TAKE A LOOK AT THE RUSSELL 3000 ARENA TRANSPORTATION INDEX. I KNOW. I KNOW. ALL THE TANKER COMPANIES ARE RALLYING TODAY AND IT APPARENTLY HAS TO DO WITH THE DATA OUT OF RUSSIA THAT THEY ARE SEEING AN UPTICK IN OIL EXPORTS USING TANKERS AND MORE IMPORTANTLY THE RELAXED RULES COMING OUT OF EUROPE. TK TANKERS UP 14% AND FRONTLINE IS THE BIGGEST COMPANY IN THE BASKET UP ABOUT 8% ON THE DAY. TAYLOR: STILL WITH US IS SHERRY PAUL AM A SENIOR PORTFOLIO MANAGER FOR MORGAN STANLEY PRIVATE WEALTH MANAGEMENT. ROMAINE WAS TALKING ABOUT THE HEALTH AND BALANCE SHEETS FROM CORPORATIONS. WE ALWAYS SAW THIS AS A TAILWIND OF THE ECONOMY, AND I THINK WHAT IS INTERESTING IS THAT IT IS ACTUALLY A HEADWIND. THAT IS WHY THE FED HAS TO BE HIKING SO MUCH BECAUSE OF ALL OF THESE INFLATIONARY COURSES. ARE YOU VIEWING THAT IS HELPFUL OR HURTFUL? SHERRY: IT'S A GOOD QUESTION. YOU ARE BRINGING IT BACK TO TRANSITORY AND STRUCTURAL AT THE HEART OF THE QUESTION. IT'S PROBABLY A LITTLE BIT OF BOTH AT THIS POINT. THE MEANINGFUL THINGS WE ARE SEEING THAT ARE CAUSING STRUCTURAL INFLATION AT THIS POINT THAT WE NEED TO BE MINDFUL OF IS THIS POTENTIAL OF THE UNRAVELING OF GEOPOLITICAL AGREEMENTS THAT MAY PERMANENTLY DISRUPT SUPPLY CHAINS IN A WAY THAT MAKES IT MORE EXPENSIVE FOR COMPANIES TO PRODUCE THEIR GOODS AND SERVICES BEYOND JUST A TEMPORARY DISRUPTION. CAROLINE: I LIKE WHAT YOU SAID JUST BEFORE THE BREAK ABOUT TRY NOT TO MAKE THE STOCK MARKET WHAT IT ISN'T. PEOPLE LOOK AT IT AS A LONG-TIME STORE OF WEALTH. OUR PEOPLE LOOKING FOR DIFFERENT TYPES OF ASSETS? WHETHER IT BE PUTTING MONEY INTO ART, REAL ESTATE, OTHER THINGS. OR PEOPLE COMMITTED TO VALUATIONS? SHERRY: I THINK THAT'S A GREAT QUESTION. TWO THINGS. NUMBER ONE, RECESSIONS ARE PART OF MARKET CYCLES. IT'S WHAT PEOPLE DO DURING THEM THAT ENHANCES OR DEVASTATES THEIR PORTFOLIO RETURNS. TO YOUR POINT ABOUT LONG-TERM INVESTING, HAVING ALL-WEATHER DIVERSIFIED PORTFOLIOS WITH NON-CORRELATED ASSETS -- CAROLINE: BUT IT CAN BE CORRELATED. SHERRY: BUT PUSHING OUT THE TIME HORIZONS CAN BE CRUCIAL. THERE MARKETS ARE PART OF BULL MARKETS. THE ONE BIG DIFFERENCE IS BULL MARKETS DON'T LAST AS LONG AS -- BEAR MARKETS DON'T LAST AS LONG AS BULL MARKETS DO. IT'S ALL ABOUT EXTENDING TIME HORIZONS. TIMING THIS MARKET IS NOT SOMETHING FOR AN INVESTOR -- IF HE THINKS HE WILL TIME HIS WAY OUT OF THIS MARKET, IT'S GOING TO THE PAST AND DOING THINGS THAT DON'T WORK. BUT FOR INVESTORS THAT BUILD DIVERSIFIED LONG-TERM PORTFOLIOS , WHERE SHE IS LOOKING ACROSS HER ASSET BASE AND LOOKING AT WHAT HER MONTHLY BUDGET IS OR WHAT HER ANNUAL COSTS ARE, BUILDING A PORTFOLIO THOUGHTFULLY TO SPEAK TO THAT OVER TIME -- THEN THIS IS A WINNING ASSET CLASS THAT FRANKLY EVEN LONG-TERM IS A GREAT MARKET TO BEGIN. ROMAINE: TALK TO US ABOUT THE COMPLEXION OF GEOGRAPHIC DIVERSITY. GIVEN THAT THERE ARE SOME BIGGER ISSUES GOING ON IN EUROPE WITH THE WAR IN UKRAINE AND OF COURSE CHINA WITH THE DATA WE GOT TODAY. I'M NOT CLEAR WHAT THE ECONOMIC STRATEGY IS OVER THERE. [LAUGHTER] JUST AN OBSERVATION, GUYS. [LAUGHTER] TAYLOR: LET'S TAKE ABOUT. ROMAINE: -- TAKE A VOTE. ROMAINE: I GUESS WHERE DO YOU FIND RELATIVE SAFETY. I HATE TO USE THE WORD SAFETY. SHERRY: I AGREE WITH YOU NOT A GREAT WORD TO USE WHEN WE ARE TALKING ABOUT EMERGING MARKETS. THE MORGAN STANLEY ESTIMATE IS ABOUT ONE THIRD OF THE CHINESE ECONOMY IS OFF-LINE BECAUSE OF COVID SHUTDOWNS. EXTRAPOLATE THAT AND SAY IT IS THE SECOND-LARGEST ECONOMY IN THE WORLD AND YOU START TO TAKE A LOOK AT EUROPE WHICH IS FACING ITS OWN SUPPLY CHAIN CHALLENGES. WE HAVE TWO THIRDS OF THE WORLD ECONOMY. IT'S NOT UNHEARD OF THAT THE REST OF THE WORLD COULD GO INTO A GLOBAL RECESSION. THAT'S NOT OUR BASE CASE AND NOT HAVE THE U.S. GO INTO IT. BUT TO SPEAK TO YOUR SPECIFIC QUESTION ABOUT GEOGRAPHY, DISCIPLINED, DYNAMIC, AND DOMESTIC FOR U.S. INVESTORS RIGHT NOW. AS FAR AS LOOKING AT VALUATIONS, THERE IS A BIG ARGUMENT. IF YOU LOOK AT THE MATH HAVE THE NUMBERS, STRATEGISTS SAY EMERGING MARKETS, EUROPE, CHINA, THERE IS A HUGE POLICY RISK HERE. IT IS PRUDENT FOR INVESTORS TO LOOK AT IT AND MODIFY THEIR GEOGRAPHY AND THEIR ASSET ALLOCATIONS. THAT MONEY ON THE TABLE, TAKE A LOOK AT HERE WE HAVE THESE INCREDIBLY HIGH TECHNOLOGY STOCKS AND CONSUMER DISCRETIONARY STOCKS DOWN 20%, 30%, 40% FROM THEIR HIGHS. YOU KNOW WHO THAT IS NOT A HEADWIND FOR? SHAREHOLDERS. THAT'S WHEN COMPANIES WILL DEPLOY THEIR CAPITAL FOR THE BENEFIT OF SHAREHOLDERS. IT MIGHT BE DIFFERENT FOR HOW THAT AFFECTS THE GDP AND THE ECONOMY. TAYLOR: CAN WE TALK ABOUT COMING OUT OF THE QUARTERLY RESULTS AND EARNINGS SEASON? WHAT DO YOU THINK OF THE BUYBACK? THE CAPEX SPENDING PLAN? THE INVENTORIES ON THE BALANCE SHEET? THE SECONDARY EFFECTS YOU ARE LOOKING AT FOR JUST THE FUNDAMENTALS OF THE COMPANY. SHERRY: THAT IS REALLY CRUCIAL TO STOCK SELECTION. ONE OF THE GREAT BENEFITS OF DIVESTING OUT OF EXCHANGE TRADED FUNDS WHERE YOU HAVE THE BENEFIT, IN THEORY, IF YOU ARE DOING AN EQUAL WEIGHTED ETF, YOU HAVE GREATER DIVERSIFICATION THAN MARKET CAP. IN THIS CASE, YOU ARE ABLE TO BUY BUSINESSES THAT HAVE DECISION-MAKING COMMUNITIES, RIGHT? LEADERSHIP THAT WILL LOOK TO DEPLOY CAPITAL DURING RECESSIONS. AND CONCERN AROUND INFLATION THAT WILL BENEFIT THEIR SHAREHOLDERS. BUYBACK, DIVIDEND INCREASES, STOCK SPLITS. WE ARE SEEING THAT IN SOME OF THE BIGGER NAMES. I WOULD EXPECT, AND THIS IS WHAT HISTORY TELLS US -- HISTORY GIVES US BENEFIT OF PERSPECTIVE AND AWARENESS IN MOMENTS THAT FEEL LIKE THEY ARE NEW. BUT REALLY, IS IT NEW AGAIN? THAT WE ARE FACING RECESSION AND THEN A MASSIVE RALLY ON THE MARKET, NOT REALLY. IT'S NOT THE MORGAN STANLEY BASE CASE, BUT YOU START TO SEE THE DRUMROLL THE WAY WE DID WITH RATES NOT BEING THE BASE CASE. ROMAINE: THANK YOU TO SHERRY PAUL, PRIVATE WEALTH ADVISOR AND SENIOR PORTFOLIO MANAGER FOR MORGAN STANLEY PRIVATE WEALTH MANAGEMENT. WE COUNT YOU DOWN TO THE CLOSING BELL ON BLOOMBERG TELEVISION AS WE TAKE YOU TO THE BELL AND BEYOND. > > BEYOND ROMAINE: RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY, ROMAINE BOSTICK, TAYLOR RIGGS COUNTING YOU DOWN TO THE CLOSING BELL. BEYOND THE BELL AS OUR GLOBAL SIMULCAST WHERE WE ARE JOINED BY TIM STENOVEC AND CAROL MASSAR. PRETTY GOOD DUCK, WE ARE ALWAYS TREES TO HAVE YOU. -- ALWAYS PLEASED TO HAVE YOU. LET'S START OFF HERE WITH WHAT WE ARE SEEING IN THE MARKET. UNCHANGED ON THE S & P, UPSIDE DOWN ABOUT 5/10 OF A PERCENT ON THE S & P 500 NASDAQ IS DOWN MORE THAN A PERCENT HERE AND IT SEEMS LIKE EVERY TIME YOU SEE COMBINED ACTIVITY, IT LEADS TO STRONG GLOBAL SELLING AT SOME POINT. TIM: SELLERS OUTWEIGHING THE BUYERS CONTINUES TO BE THE PATTERN. HE MENTIONED THE S & P 500. A REALLY CHOPPY DAY TO GET TO THE CRIME -- TO THE DECLINE OF A PERCENTAGE POINT. CAROL: WE ARE DOWN 5/10 OF 1%, BUT PUT THAT IN CONTEXT OF LOW VOLATILITY WE HAVE SEEN. THE 2% RALLY IN THAT CONTEXT, A DECLINE OF 5/10 OF 1%, TAYLOR, IS NOT THAT MUCH. TAYLOR: I'M SEEING A LOT OF COMMENTARY ABOUT BIG RALLIES. I THINK OVERALL, A LOT OF THE COMMENTARY TODAY CONTINUES. WATCH OUT, THERE COULD BE MORE PAIN AS SHOPPING SUMMER SEASON IS NOT ALL CLEAR JUST YET. CAROL: FRIDAY WAS WHEN WE GOT MONEY GOING BACK I'M TOLD. DOWN BY 1.2% ONCE AGAIN. ROMAINE: THE CLOSING BELL ON THIS MONDAY AFTERNOON, WE HAD A STRONG RALLY ON FRIDAY. A LOT OF QUESTIONS ABOUT WHETHER THAT WOULD CONTINUE INTO THIS WEEK. IT DOES NOT LOOK LIKE THAT IS GOING TO BE THE CASE. THE DOW JONES INDUSTRIAL AVERAGE IS DOWN BY ATTENTIVE A PERCENT, UP ROUGHLY 40 POINTS AS WE WAIT FOR THESE NUMBERS TO SETTLE. S & P 500 GOING TO FINISH THE DAY IN THE RED, DOWN FOR TENTHS OF A PERCENT. THE NASDAQ COMPOSITE IS DOWN ABOUT ONE POINT 2% ON THE DAY. THAT IS YOUR RELATIVE UNDERPERFORMER ON THE DAY, DOWN ABOUT 142 POINTS. SMALL CAPS, RUSSELL 2000, GOING TO FINISH THE DAY DOWN ROUGHLY BY ABOUT NINE POINTS OR FIVE TENTS OF A PERCENT. TIM: THE S & P 500, 100 92 STOCKS FINISH THE DAY HIGHER, MORE THAN 300 -- 300 AND 12 TO BE SPECIFIC FINISH THE DAY LOWER. TAYLOR: AND WE REALLY CAN SEE THAT. TAKE A LOOK AT OUR SECTOR LEVEL FOR OUR RADIO AUDIENCE AS WE ALWAYS DO. BEST PERFORMERS, WORST PERFORMERS, IT LOOKS MOSTLY EVEN. THERE IS A LITTLE BIT OF RED AND SOME OF THE AGREEMENT. IT IS UNBELIEVABLE. ENERGY JUST CONTINUES TO PLOW AHEAD HERE, 2.6% UP. WE ARE SEEING FOOD AND BEVERAGE AND HOUSEHOLD PROJECTS AND STAPLE COMPANIES, THOSE ARE UP ABOUT ONE HALF OF 1%. I WILL BRING YOU DOWN QUICKLY TO THE BOTTOM OF THE SCREEN. SOME OF THE BIG TECH HIGH FLYING COMPANIES THAT WE CONTINUE TO SEE. THAT AND HARDWARE, SEMI CONDUCTORS AND COMPONENTS ARE UP ANYWHERE FROM TWO TO FIVE AND A HALF PERCENT. > > I WANT TO STICK WITH WHAT YOU SAID ABOUT CONSUMER STAPLES. FOOD EXPOSED COMPANIES, ESPECIALLY THE MAJOR GAINERS. REMEMBER FOOD SECURITY HAS BEEN A MAJOR TOPIC. WHEAT, COPPER, OIL, ALL OF THESE COMMODITIES ARE GAINING, BUT FOOD CONTINUES TO BE SOMETHING THAT THE BOLT CASE IS STRONG ON. SO DANIEL MIDLAND AND MOSAIC ARE TWO OF MY GAINERS, THEY ARE HIGHER ON THE SESSION AND THIS IS IMPORTANT TO TALK ABOUT. THIS IS A RESURGENCE FROM SOME OF THE PAIN THAT WE ARE SEEING IN THE COMMODITY MARKET. WE ARE SEEING OLD CASES IN THE COMMODITY MARKET THAT HAVE A DIRECT TRANSLATION INTO SOFTWARE. -- INTO STOCKS HERE. KEEP IN MIND AGRICULTURAL EXPOSURE, THAT IS THE MACRO THEME. ONE OF MY GAINERS, S ABE FOR MY RADIO AUDIENCE ON THE TICKER, CLOSING UP ABOUT 13 AND A HALF PERCENT AFTER AGREEING TO CONSIDER A 3.3 BILLION DOLLAR OFFER FROM JETBLUE. OF COURSE, THAT CONSIDERED A HOSTILE BID. THEY ARE TRAINED TO HARGETT SHAREHOLDERS AHEAD OF THE GYM 10TH MEETING. NONETHELESS, GOOD NEWS FOR ANYONE BETTING ON THE UPSIDE. TIM: SPEAKING OF HOSTILE BID, IT IS TIME TO CHECK IN ON TWITTER'S DAILY MOVE. IT IS IN MY BEAD DECLINES. ROMAINE: 54.20 TODAY. TIM: NOT EVEN CLOSE. 37.39 IN FACT ROMAINE. WIPED OUT ALL OF THE GAINS. ROMAINE: I BELIEVE THAT IS THE LOW. TIM: EXACTLY RIGHT. YEAH, THE MARKET IS SAYING IT HAS GIVEN UP ALL OF ITS GAINS SINCE ELON MUSK ANNOUNCED THAT HE TOOK THAT STAKE THERE. I JUST DON'T UNDERSTAND WHY. OVER AT WEDBUSH, THEY WROTE THAT THE MARKET IS TAKING THE CHANCE OF MUSK WALKING AWAY AS MORE THAN 50%. THE CHANGING RICK AND -- RISK ENVIRONMENT HAS CAUSED HIM TO GET COLD FEET ON THE TWITTER DEAL IN THE BOND ISSUE THAT HE IS BLAMING IS NOT A NEW ISSUE. HE CALLS IT A SCAPEGOAT TO PUSH FREE AT LOWER PRICES. WHAT YOU THINK? WE GET A LOWER PRICE OR WALKWAY? ROMAINE: I COULD CARE LESS TO BE HONEST. TIM: THEN YOU WILL REALLY CARE ABOUT TESLA'S MOVE. 5.9%, A COUPLE OF REASONS THIS HAPPENED. TESLA HAS HAD TO RECALL MORE THAN 100,000 CALLS IN CHINA OVER SAFETY RISKS. ALSO WRITERS REPORTING THAT THE COMPANY IS LAYING A PLAN TO RESTORE PRODUCTION AND ITS SHANGHAI PLANT. STICKING WITH EV'S, RIVIAN FINISHING THE DAY DOWN BY MORE THAN 7%, EXTENDING HIS LOSSES. AFTER THE WALL STREET JOURNAL REPORTED THE EV STARTUP IS IN A LEGAL BATTLE WITH THE SUPPLIER FOR THOSE AMAZON DELIVERY VANS, THE COMMERCIAL VEHICLE GROUP, IT ALSO COMES AS THE NEWS THAT WE GOT ON FRIDAY FROM THE FILING THAT FORD HAD SOLD 7 MILLION ADDITIONAL SHARES OF RIVIAN ON FRIDAY. SO IT FOLLOWS THE 8 MILLION SHARES THAT THEY SOLD EARLIER IN THE WEEK. CAROLINE: I'M GOING TO GO BACK TO YOUR TESLA NEWS CASE THERE BECAUSE THE FACT THAT THERE THINK ABOUT SHANGHAI AND MANUFACTURING, WHETHER OR NOT THE CITY IS REOPENING. THAT INJECTED A LITTLE BIT OF BUYING INTO THE METAL SPACE EVEN THOUGH WE HAVE THAT WOEFUL ECONOMIC CHINESE DATA OUT OVER THE EVENING QUARTER. WE STILL SEE HOPES THAT SHANGHAI COULD BE REOPENING SOON. THE BID BACK IN TWO MORTGAGES PERHAPS COMING DOWN A LITTLE BIT MORE. WHILE HOPES THAT WE COULD SEE IT MORE HOUSE BUYING AND THEREFORE BUILDING AS WELL, ENGINEERING. WE ARE SEEING METALS ON THE HIGH SIDE, STILL PUSHING HIGHER. OIL PUSHING HIGHER. WE SAW THE GASOLINE PRICES IN PARTICULAR, DRIVING SEASON ALMOST UPON US, WORRYING ABOUT SUPPLY AND DEMAND AND THAT DYNAMIC. WTI CRUDE UP. BRENT CRUDE TO HAVE PERCENT. HUNDRED $14, DR. WHERE WE ARE. ALL OF THIS PROCEEDS THE FX STORY AND THAT IS WHERE WE ARE SEEING THE CANADIAN DOLLAR LOOMING. THAT IS ON THE HIGHER SIDE ONCE AGAIN. THIS IS ALL ABOUT INFLATIONARY PRESSURES. YOU SEE THAT IN THE COMMODITY SPACE, THE OIL MARKET, WE ALSO SEE IT FOR THE SECOND STRAIGHT DAY, THE DOLLAR AND PRESSURE UP BY 3/10 OF A PERCENT, SO NOT A HAVEN FOR THAT PART. WHAT ABOUT THE BULL MARKET HAVEN? TAYLOR: IT WAS A QUIETER DAY IN THE BOND MARKET, GIVEN THAT WE HAVE HAD A RAISE OF BASIS POINTS HIGHER IN ANY GIVEN DIRECTION. COMMENTS ON THE FRONT END OF THE CURVE, YOU'VE GOT HIGHER YIELDS LOWER BY ABOUT FIVE BASIS POINTS IN NEW DELHI. THAT IS FOR YOU, ROMAINE TREATED THE YIELDS RISING LITTLE BIT ON THE LONG END, BUT I THINK THE NARRATIVE THAT HAS ALWAYS BEEN TODAY COMING OFF OF THE BIG WAY THAT THE STAGFLATION, RECESSIONARY RISK, THE FEDERAL RESERVE NEEDS TO MOVE. CAN THEY MOVE THOUSAND HAVE IN THE MARKET, IN THE VOLUNTEER DUST IN THE BOMBS HERE. CAROLINE: WE SEE HOPES OF A MOVE . YOU ARE SEEING THE FED SPEAK ALREADY THIS WEEK. TIM: NINE TOTAL CRUDE WE HEARD FROM ONE, WE GOT EIGHT MORE, MOST OF THEM TOMORROW. > > IT'S INTERESTING FOR GO TO HEAR ANYTHING NEW PRETTY OF STOCK TO A SOURCE AND THEY SAID WHY ARE WE GIVING SO HYPED TO THESE FOMC MEETINGS 150 BASIS POINTS PRETTY MUCH BAKED INTO THE MARKETS IF 75 BASIS POINTS IS TAKEN SERIOUSLY. ROMAINE: IT IS TAKEN SERIOUSLY AND I WOULD SAY LOOK, THIS IS THE FED KIND OF CHASING THE DATA AT THIS STAGE HERE. SO IF THEY BELIEVE 50 IS WHAT IS GOING TO BE, LET'S WAIT SO WE GET A FEW MORE BEES ECONOMIC REPORTS AND SEE HOW THEY FEEL WHEN THEY HEAD INTO THE MEETING NEXT MONTH. BUT I THINK AT THE END OF THE DAY, THE BIG DEBATE RIGHT NOW IN THE MARKET IS NOT SO MUCH NOW ABOUT SPECIFICALLY FED POLICY. REALLY IT IS ABOUT THE STRUCTURING OF THE ECONOMY AND THE BELIEF THAT THE FED, WHATEVER THEY DO RIGHT NOW, IS STILL CHASING THE NARRATIVE. > > I THINK IT IS INTERESTING, CHASING THE NARRATIVE. WE'VE HEARD SOME CALLS FROM KEY ECONOMISTS. I'M NOT AN ECONOMIST, BUT CERTAINLY A BIG NAME WHEN IT COMES TO ECONOMICS AND BANKING AND THE FINANCIAL INSTITUTIONS, IT'S ALL ABOUT HOW THESE MARKETS REACT. ROMAINE: CAROLINAS IN PANAMA. CAROLINE: APPARENTLY IT IS RAINING. ROMAINE: THERE IS A RAIN FOREST RIGHT BY THE CITY. CAROLINE: IT MIGHT BE LUSCIOUS. TIM: IF YOU'RE GOING TO SPEND THE WHOLE WEEK WORKING, IT MIGHT AS WELL BE RAINING. CAROLINE: I'M THE EQUIVALENT OF A MANAGING DIRECTOR. I'VE GOT UNLIMITED VACATION, UNLIKE YOU. TIM: YOU COULDN'T SWING THE EVENT TO GOSHEN A PACIFIC OCEAN IN THE SAME DAY. -- YOU COULDN'T SWIM THE ATLANTIC AND PACIFIC OCEAN IN THE SAME DAY. CAROLINE: I WILL NOT BRING ANY OF YOU. ROMAINE: FOR SOME REASON, THEY'RE TELLING ME IT'S TIME TO GO. I DON'T KNOW WHY. I HAVE NO IDEA. TIM: I'M JUST WARMING UP TO YOU. ROMAINE: WE'VE GOT ALL DAY TOMORROW, DON’'T WORRY. THAT'S GOING TO DO IT FOR OUR CROSS-PLATFORM COVERAGE OF THE MARKET CLOSE ON TV, RADIO, AND YOUTUBE. WE WILL BE BACK TOMORROW AT THE SAME TIME, SAME PLACE. CAROLINE: RIGHT HERE, RIGHT NOW, WE'RE GOING TO BE LOOKING FOR TO THE DATA THAT WE ARE GETTING, TELLING US ABOUT THE FED COULD WHAT ABOUT THE DATA THAT IS DICTATING THE FED'S MOVE? WERE GOING TO TALK ABOUT U.S. CONSUMER RETAIL SALES. COMING UP. THIS IS BLOOMBERG. > > THE MUSIC TURNS SOUR TOWARD THE END OF TRADE. MONEY COMES OUT OF THE S & P 500, UP BY FOUR TENS OF 1% CURRENT BIG TECH CAME UNDER PRESSURE, THE NASDAQ UP BY ONE WOULD YOU HUNDRED -- 1.2%. THIS IS IT A BEAR MARKET TERRITORY, 27% IN THE MOMENT. WEEKS OF PRESSURE ON THE S & P 500. NOW WE GET TO SMALL-CAP FOLLOWING SUIT INTO THE RED. THIS IS WHERE WE SEE WORRIES ABOUT RECESSION, THE WATCHWORD. WHERE BACK TO TALK ABOUT IT OVER THE COURSE THE WEEKEND COULD WE THINK ABOUT RECESSION, WITH NICK ABOUT THE INFLATION THAT THE FEDERAL RESERVE IS TRY TO TACKLE THAT COULD GIVE UP THE HARD LANDING THAT THEY HAVE BEEN TRAINED TO NAVIGATE AWAY FROM CRUDE WE ARE SEEING INFLATION PRESSURE IN THE BLOOMBERG COMMODITY INDEX UP AT MOST 2% CRUDE OIL UP COME METALS UP, WE ARE ALSO SEEING, SOME COMMODITIES PUSHING HIGHER AS WE WORRY ABOUT THE SUPPLY DEMAND DYNAMIC AND THINK ABOUT INDIA, PERHAPS, STOPPING SOME OF THEIR EXPORTS. INFLATIONARY PRESSURE UP. PERHAPS WE SHOULD HAVE FOLLOWED WHERE THE RISK ASSETS WERE GOING TO KNOW THAT WE WOULD HAVE ENDED THE DAY LOWER IN EQUITIES. SOME PEOPLE POINTING TO WHAT WAS HAPPENING IN THE CRYPTO MARKET. WE ARE UP BY ALMOST 5% ON THE DAY, BUT WE REMAIN LOWER JUST AFTER THE LUNCHTIME TRADING. . SO THIS WAS AN ASSET CLASS THAT IS PUSHING ITS WAY TO WHERE SENTIMENT WAS GOING. TAYLOR: WENT HOME FOR LUNCH AND NEVER CAME BACK. LET'S TALK ABOUT THE U.S. STOCK MARKET AS WELL COULD WE CONTINUE TO GO ACROSS ASSET ON THIS PROGRAM. AND IT HAS BEEN SORT OF IN THE NARRATIVE TODAY WE ARE SEEING INFLATIONARY FEARS AND SEEING INFLATION BEHIND US. LET'S BRING IN A BLOOMBERG FX AND RATE REPORTER. AN INTERESTING NOTE ALEX THAT CAUGHT MY ATTENTION, IT TURNS OUT THAT THE DOLLAR STRENGTH, SOME OF THE HIGHER REAL YIELDS CREATE THAT TIGHTENING FINANCIAL CONDITION AND THE KEY GAINS WILL BE HOW CONSUMERS REACT TO THAT. HOW DO YOU THINK ABOUT THAT? ALEX: THE OTHER THING I WOULD THINK ABOUT IS HOW ARE COMPANIES REACTING? WE ARE COMING OUT OF AN EARNINGS SEASON, WHAT ARE THEY HAVING TO SAY ABOUT IT? BECAUSE A STRONGER DOLLAR, A HIGHER DOLLAR MEANS HIGHER COSTS FOR THEM. SO THESE ARE THINGS THAT COMPANIES ARE THINKING ABOUT MORE BROADLY AS WELL. AND ONE OF THE THINGS I THINK AN OPPORTUNITY WAS MISSED AT THE FEDERAL RESERVE MEETING A COUPLE OF WEEKS AGO -- AND FROM PEOPLE I HAVE SPOKEN TO IN THE MARKET, THERE IS NOT ENOUGH QUESTIONS ABOUT THE STRENGTH OF DOLLAR AND HOW THAT WILL TRANSLATE TO TIGHTENING AT THE SAID. AT THAT IS SOMETHING TO BE CONCERNED ABOUT. THE DOLLAR HAS DEPRECIATED ABOUT 13 TO 14% THIS YEAR. BUT THAT IS NOT NOTHING. AND THAT, WHEN WE TALK ABOUT ALL OF THESE OTHER THINGS AND FACTORS SORT OF CREATING A TIGHTENING EFFECT FOR THE FEDERAL RESERVE, THE DOLLAR SHOULD BE ONE THING WERE TALKING ABOUT. AND I DO NOT THINK WE ARE TALKING ABOUT IT ENOUGH. ROMAINE: FOR THOSE OF US WHO ARE ON THE OUTSIDE LOOKING IN AND TRYING TO FIGURE OUT MAY BE WHERE WE ARE HEADED HERE, ARE YOU STILL PAYING ATTENTION TO THAT SHORTER END OF THE CURVE OR IS THERE SOMETHING A LITTLE BIT LATER THAT WE SHOULD BE LOOKING AT? ALEX: I'M ALWAYS LOOKING AT THE SHORT END OF THE CURVE. YOU KNOW, ONE OF THE THINGS WE ARE WATCHING IS TRYING TO UNDERSTAND HOW QUICKLY LIQUIDITY IS GOING TO DRAIN FROM THE SYSTEM WHEN THE FED STARTS ITS BALANCE SHEET NEXT MONTH. YOU KNOW, THAT IS A REALLY BIG DEAL FOR US AT THE MOMENT. WE ARE LOOKING AT THE REVERSE REPO FACILITY, BECAUSE RIGHT NOW, THE OFFERS COME IN AT 80 BASIS POINTS AND THAT IS REALLY GENEROUS COMPARED TO WHAT TREASURY BILLS ARE GETTING RIGHT NOW. I THINK AS WE SEE, THERE IS A BIT OF A BUYER'S STRIKE IN THE VERY FRONT END OF THOSE TREASURY BILLS BECAUSE I THINK INVESTORS ARE SAYING ENOUGH IS ENOUGH WE DO NOT WANT A TREASURY BILL THAT -- WE UNDERSTAND THERE'S NOT A LOT OF SUPPLY BUT WERE NOT GOING TO KEEP BUYING AT THESE LEVELS, YOU'RE GOING TO HAVE TO GIVE US SOMETHING MORE. THESE ARE THINGS THAT WE ARE STILL WATCHING. WE ARE TALKING ABOUT REVERSE REPO FACILITIES AND GETTING CLOSE TO CLOSE TO 2 TRILLION BY THE END OF THE WEEK. AND THIS IS ALSO SOMETHING A LOT OF HAWKS ON THE FEDERAL RESERVE HAD FLAGGED AT THE END OF 2021 AS REASONS TO WHY THEY NEEDED TO START UNWINDING THE BALANCE SHEET AND SHEDDING ASSETS SOONER RATHER THAN LATER. THESE ARE THINGS WE CONTINUE TO WATCH AND WE CONTINUE TO WATCH BANK RESERVES BECAUSE RIGHT NOW, THOSE ARE LEAVING VERY QUICKLY. IF THEY ARE LEAVING TOO FAST, I THINK THE BANKS ARE GOING TO SAY WHY ARE WE GOING TO BUY TREASURIES FOR OUR OWN PORT OLIO? THIS DOES NOT MAKE SENSE. WE NEED TO HOLD OFF AND SEE WHAT LIQUIDITY CONDITIONS LOOK LIKE. HOW THINGS COULD CONTINUE TO LEAD BEFORE DECIDING WHAT THEY'RE GOING TO DO WITH THE CASH. CAROLINE: YOU BRING UP THE LIQUIDITY SITUATION CREATE SOMETHING THE FEDERAL RESERVE WAS HIGHLIGHTING LAST WEEK. ALL OF THE MARKET MOVES YOU SAY THAT THEY'VE GOT THEIR EYE ON WHAT'S HAPPENING WITH REVERSE REPOSE, WHAT ABOUT THE OTHER PART OF THE MARKET? THE SELLOFF WE SEE IN EQUITIES AND THE LIKE? WHAT MOVES TO WE NEED TO SEE IN THE BOND MARKET FOR THE FEDERAL RESERVE TO START MOVING UP FROM WHERE THEY HAVE BEEN SELLING SO HAWKISH? ALEX: THAT IS A REALLY GOOD QUESTION AND I THINK THEY SORT OF HIGHLIGHTED THIS IDEA. ANOTHER THING THAT WE REALLY DO NOT KNOW FROM THE FED IS HOW WILLING OR HOW FAR ARE THEY WILLING TO CUT EQUITIES LIKE CRYPTO, LIKE ASSET CLASSES. SORT OF PULLING BACK BEFORE THEY STEP IN OR BEFORE THEY STOP. AND I THINK ONE OF THE THINGS THAT STRIKES ME IS THAT IN 2018 -- YEAH, 2018, WHEN THEY WERE STOPPING THAT BALANCE SHEET ON WHY JEROME POWELL -- WAR ON AUTO PILOTS AND THE EQUITY MARKETS. ABOUT A MONTH LATER, THEY SAID NO MORE MASSIVE UNWIND OF THE BASSET DECIBEL AND SHE TREATED WERE NOT DOING INVESTMENT CAPS. SO THAT IS ONE OF THE THINGS THAT I WANT TO UNDERSTAND IS WHAT KIND OF STOMACH TO THEY HAVE FOR VOLATILITY AND SELLOFFS OF DIFFERENT ASSET CLASSES? BECAUSE WE REALLY DO NOT KNOW. AND I HOPE THAT THAT IS ONE OF THE THING THAT THE FEDS HAS MORE OF A STOMACH FOR IT DEEP VOLATILITY THAT WERE ABOUT TO SEE BECAUSE BITCOIN IN THE SELLOFF OF EQUITIES AND OTHER CRYPTO'S, YOU KNOW, STABLE POINT, WE ARE JUST SCRATCHING THE SURFACE HERE ON HOW BAD AND HOW UGLY THIS COULD POSSIBLY GET . CAROLINE: WHETHER IT IS RETAIL TRADERS, THEREFORE, THE CONSUMER. THANK YOU FOR BRINGING US THE PERSPECTIVE. MEANWHILE, WE KEEP YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD. THIS IS THE FIRST WORD. > > THANK YOU. THE GUNMAN ACCUSED OF MASSACRING TENANT BLACK PEOPLE IN A RACIST RAMPAGE AT A SUPERMARKET OVER THE WEEKEND PLANNED TO KEEP KILLING IF HE ESCAPED THE SCENE. THAT IS ACCORDING TO THE CITY'S POLICE COMMISSIONER, WHO SAID THE POSSIBILITY OF SEVERAL HATE CRIME OR DOMESTIC TERROR CHARGES LOOMS. PRESIDENT BIDEN NOTED THOSE WHO LOST THEIR LIVES, INCLUDING A POLICE OFFICER WHO CONFRONTED THE SUSPECT. WE PAY TRIBUTE TO > > ALL LAW-ENFORCEMENT BOSSES AND FAMILIES TO UNDERSTAND WHAT IT TAKES, WHAT IS AT RISK, TO SAVE AND PROTECT ALL OF US. THAT INCLUDES PAYING TRIBUTE TO THE BUFFALO POLICE OFFICER AARON SLATER, WHO GAVE HIS LIFE TRYING TO SAVE OTHERS WHEN A GUNMAN SHOT AND KILLED 10 INNOCENT PEOPLE IN A GROCERY STORE IN BUFFALO ON SATURDAY. HE ACTUALLY WAS ABLE TO SHOOT THE ASSAILANT TWICE BUT HE HAD ON A BULLET-PROOF VEST AND HE LOST HIS LIFE IN THE PROCESS. > > THE PRESIDENT MADE HIS COMMENTS AT A WHITE HOUSE CEREMONY HONORING LAW ENFORCEMENT. PRESIDENT BIDEN IS ALSO AUTHORIZE THE U.S. MILITARY TO SEND HUNDREDS OF SPECIAL OPERATIONS TROOPS BACK TO SOMALIA TO REVIVE A COUNTERTERRORISM MISSION ACCORDING TO A WHITE HOUSE OFFICIAL. THAT OPERATION WAS ENDED BY THE TRUMP ADMINISTRATION. NEW YORK CITY COULD SOON IT A HIGH COVID CHANCE MISSION LEVEL THAT WOULD HAVE HEALTH OFFICIALS RECONSIDERING MASK REQUIREMENTS IN PUBLIC PLACES. NEW CASES PER 100,000 PEOPLE OVER THE LAST SEVEN DAYS SURPASSED 300 CITYWIDE, ABOUT 8% OF PEOPLE TESTED FOR COVID-19 OVER THE LAST SEVEN DAYS HAVE BEEN POSITIVE IN NEW YORK CITY. GLOBAL NEWS, 24 HOURS A DAY. ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M MARK CRUMPTON. THIS IS BLOOMBERG. ROMAINE: WELCOME BACK. WERE GOING TO PUSH AHEAD TO THE BIG RETAIL SALES NUMBERS WERE GOING TO GET FOR APRIL. FOR MORE ON WHAT THEY EXPECT TOMORROW, LET'S BRING IN GLOBAL BLOOMBERG INTELLIGENCE HEAD IN COMMERCE AND ATHLEISURE. WERE GOING TO TALK ABOUT THAT IN JUST A SECOND, BUT LET'S START UP THAN THAT. WERE GETTING RETAIL SALES NUMBERS, IT LOOKS LIKE IT HAS BEEN PRETTY VOLATILE. IT SEEMS IT GOES UP, MODERATES AND GOES BACK UP AGAIN. WHAT IS THE TRENDLINE THAT YOU'VE BEEN LOOKING FOR HERE? > > I THINK YOU'RE GOING TO LOOK AT POSITIVE FIELDS FOR THE MARKET, BECAUSE WE DO SEE FUNDING. SO I SAY ON A RELATIVE BASIS, PEOPLE ARE GOING OUT MORE, SO SPENDING IS GOING TO SHIFT. THOSE NUMBERS A LITTLE MORE MUTED THAN IT LAST MONTH ON A MONTH OVER MONTH BASIS. PEOPLE ARE TRAVELING MORE WEATHER FOR SPRING BREAK OR JUST BECAUSE THEY ARE OFF WITH KIDS. THE NUMBERS THAT YOU REPORTED ARE EXPECTED TO RISE LESS THAN 1%. AND AS WE MOVE FORWARD, I THINK THE REAL QUESTION IS IS INFLATION GOING TO BE IMPOSING ON CONSUMER SPEND GOING FORWARD INTO THE NEXT THREE MONTHS? AND INTO THE BACK HOUSE, WHERE COMPARISONS GET EASIER, BUT COULD CONSUMER FUNDING SLOW ACROSS THE BOARD? CAROLINE: WHERE WILL THEY SLOW? I SUPPOSE THERE IS REAL PENT-UP DEMAND FOR EXPERIENCE, BUT IT IS IMPORTANT THEREFORE THAT THE COMPANIES ARE COMING OUT WITH EARNINGS TOMORROW. HOME DEPOT, LOOKING AT WALMART, BUT FROM YOUR PERSPECTIVE, IS THE SERVICES SECTOR REMAINING ROBUST IN SPITE OF THESE PRICE PRESSURES? POONAM: I THINK SO. THE CONSUMER HAS THE PROPENSITY TO SPEND, SO TOPPED BY RISING WAGES, IT IS A HUGE PART OF SPENDING RATE. DATA IS STRONG IN MOST OF THE U.S., THEY ARE EMPLOYED. THAT IS WHERE IT IS DIFFERENT. EVEN THE WE HAVE UNPRECEDENTED LEVELS OF INFLATION, THE CONSUMER HAS SPENDING POWER, BECAUSE THEY ARE GETTING PAID MORE, BECAUSE THEY SAVED UP MORE FROM THE STIMULUS AND EVERYTHING ELSE. DURING THE PANDEMIC. SO SO FAR, DURING THE NEXT FEW MONTHS, THE CONSUMER WE THINK HAS THE CAPACITY TO SPEND. WE'LL SEE SPINNING ON TRAVEL AND APPAREL, BECAUSE THAT WAS A CATEGORY THAT THEY PULLED BACK WHEN THEY WERE SHELTERED AT HOME TAYLOR: I'M HEARING INVENTORY LEVELS HAVE IMPROVED AND IN MANY CASES, WE NEED TO SELL DISINFLATIONARY FORCES. HOW DO YOU FEEL ABOUT INVENTORY LEVELS AND RECOVERY FROM THE BIG SUPPLY CHAIN JAM? POONAM: THEY ARE IMPROVING BUT I WOULD NOT SAY WE ARE WHERE WE WERE PRIOR TO THE PANDEMIC. IT IS A TIGHT ENVIRONMENT. IF ALL OF A SUDDEN, THE ENTIRE PRODUCTION GETS CLEARED UP AND YOU'RE GETTING YOUR DELIVERIES EXACTLY WHEN YOU WANTED THEM, WE'RE GOING TO GO BACK INTO -- WHERE YOU HAVE TOO MUCH INVENTORY AND RETAILERS WILL HAVE TO MARKDOWN TREATED DO NOT EXPECT THAT TO BE THE CASE ANYTIME SOON. I STILL THINK WE WILL BE IN A PLACE WHERE INVENTORY WILL NOT OUTPACE SALES GROWTH FOR AT LEAST THE NEXT TWO QUARTERS. ROMAINE: ALL RIGHT, SO TAKING A LOOK HERE. HOME DEPOT, WALMART, IN THE MORNING, TARGET, KOHL'S, COSTCO, MACY'S A LITTLE BIT LATER HERE IN THE WEEK, I AM CURIOUS IF YOU TALK A LITTLE BIT MORE SPECIFICALLY ABOUT MACY'S AND SOME OF THE I GUESS APPAREL MAKERS, FOR LACK OF A BETTER PHRASE. I THOUGHT SOME OF THOSE COMPANIES ARE ACTUALLY REBOUNDING A LITTLE BIT, NOT JUST BECAUSE OF WHATEVER SORT OF PENT-UP DEMAND THERE WAS, BUT THERE WERE STRUCTURAL ISSUES. THEY WERE HELPING TO LIFT UP COMPANIES ON THE RETAIL SIDE. HOW IS THAT GOING TO SHAKE OUT? POONAM: I THINK THE STUFF THAT YOU'RE TALKING ABOUT GOES TO COMPANIES SUPPORTING ONLINE SALES GROWTH. WHEN YOU LOOK AT THE DEPARTMENT STORES, SOME OF THE OTHER RETAILERS, THEY AREN'T MAKING A MORE BIGGER SHIFT TOWARDS ONLINE AND THAT IS HELPING THEM BROADEN AND REACH A WIDER CUSTOMER BASE. THE COMPANY A COVER, THAT IS A VALUE. YOU GO THERE BECAUSE YOU'RE LOOKING FOR THAT BIG DEAL. AND WE THINK THAT THEY ARE GOING TO REPORT NUMBERS THAT ARE AHEAD OF EXPECTATIONS, JUST BECAUSE THE CONSUMER HAS COME BACK FROM THE OMICRON VARIANT THAT WE SAW OVER THE WINTER. AND THAT WAS NOT FACTORED INTO THEIR GUIDANCE WE THINK. ROMAINE: ALWAYS WONDER TO CATCH UP WITH YOU. YOU TELL ANALYST -- RETAIL IN WAS FOR BLOOMBERG. THOSE NUMBERS COMING AT 8:30 AM TOMORROW AND A LOT OF EARNINGS OUT OF THE RETAIL AND APPAREL MAKERS THIS WEEK. I WANT TO GO BACK TO SOME BREAKING NEWS. THIS IS ALL THE BIG FORMULA SHORTAGE. ABBOTT LABS THE MAKER WOULD REOPEN. THE HEADLINES CROSSING THE BLOOMBERG IS THAT DEBIT IS IN A CONSENT DEGREE WITH THE U.S. FDA TO REOPEN THAT PLANT. AND SAID IT WILL NOT AFFECT THE PREVIOUSLY ISSUED GUIDANCE FOR 2022. WE WILL KEEP AN EYE ON THAT AS WE WRAP UP COVERAGE OF BLOOMBERG MARKETS THE CLOSE. TRIPLE TAKE COMING UP, BUT WE ARE FOCUSED ON THE FACTS. RIGHT? CAROLINE: NO. I THINK THAT'S THE WHOLE POINT. ROMAINE: THERE YOU GO, THERE'S OUR SHOW YOU GUYS. WE'VE GOT A LOT OF GREAT GUESTS COMING UP HERE. TRIPLE TAKE ON DECK HERE IN JUST A SECOND. DON'T GO ANYWHERE. THIS IS BLOOMBERG.

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Bloomberg Markets: The Close (5/16/2022)

Caroline Hyde, Taylor Riggs & Sonali Basak bring you the latest news and analysis leading up to the final minutes and seconds before the closing bell on Wall Street and tackles rally in stocks, Musk's temporary hold on Twitter deal and the art market Guests Today: Sylvia Jablonski of Defiance ETFs, Don Vultaggio ogf AriZona Beverages, Angelo Zino of CFRA, Max Levchin of Affirm, Omar Aguilar of Schwab Asset Management, Chris Sheldon of KKR, Brian Levitt of Invesco, Guillaume Cerutti of Christie's. (Source: Bloomberg)

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