tv Bloomberg Daybreak Americas Bloomberg April 13, 2017 7:00am-10:01am EDT
jpmorgan takes the stock higher in premarket. a presidential u-turn. why china is not a currency manipulator and nato is not obsolete. treasuries rally. city, goodrk morning. a warm welcome to "bloomberg daybreak." despite that beat at jpmorgan, features this morning looking a little softer. futures down .3% in the united states. yields lower by two basis points. lower by .25%.in alix: 8:00 a.m., we get earnings from city and wells fargo -- citi and wells fargo. april's luminary
desperate luminary -- april's preliminary university of michigan sentiment. david: welcome back to the program. is it as good as he makes it out to be? >> so far. i haven't been through the full release. the biggest surprise coming from trading, whenever they have a big beat like that, that is the first place i look. fixed income coming in better-than-expected. growth came up 17% year-over-year. analysts expected trading to be down and was actually a bit higher. long growth came in around 9%. trading, weok at focus on the net interest margins. the industry statistics have shown a big slowdown.
question andk the there wasn't a solid answer as to why the industry was showing slowdown. some of the regional banks have been sing that they've been saying slower growth -- saying that they've been seeing slower growth as well. david: it is tapering off somewhat. >> yes. last year, a lot of the growth came from mortgages. holding more mortgages on your book. where investors are focusing this quarter is the slowdown in commercial and industrial lung growth -- loan growth. that should be positive and yet, we are seeing a slowdown. alix: provision for credit losses on a quarterly basis up 52%. what part of that is higher net charge-off versus making more loans? >> in general come all the banks have said they will be provisioning more this quarter. that is related to loan growth.
if you look at comparisons compared to one year ago, you will see easier comparisons. last year, the banks were taking big provisions for energy. up $96 million. that is impressive. >> the banks have said we will be provisioning for growth. ,wo areas i will be looking at auto and commercial real estate. areas investors have been concerned about because of isid growth and credit cards also becoming a worry. it weaker underwriting becoming an increasing concern for the industry. jon: i want to bring in charles peabody. great to have you with us. let's start with the expectations management. is that what this is? charles: it is. in the last two weeks of the
quarter come all the big banks were trying to rein in expectations. toimates fall from $1.58 $1.51. billion falling to $125 -- they tried to tamp down expectations. these numbers are in line with mine, except for charge-offs. charge-offs of $1.7 billion higher than anybody expected. i'm curious if it's in the card numbers. that's where we been getting cardive surprises, in ch charge-offs. what the progression of capital revenues were during the quarter -- we know january was robust in february was solid. werese the big banks raining in expectations in the last two weeks of the quarter, i
wonder what happened in march. jon: what happened in march? the comment at investor day was interesting. normally they say, at this point in the quarter, we are running at x percent above. we expect to be modestly better. it's all about march. we haven't gotten dimon since then. we want to hear what's happening in march, we want to hear what the outlook is. somebody will ask on the call, what's happening in 2q? management will say we are only a couple weeks into the quarter. that's what analysts will be focused on. alix: you mentioned the chart jobs of 1.7 million. -- charge-offs of 1.7 million. -- 1.7 billion.
charles: we've been expecting down year-over-year credit card earnings at jpmorgan for the first half of the year. part of it is the reward costs they are having to absorb related to the contract renewals with their partners. the other is the rising loan loss provision. jon: the net interest margin up 11 basis points. , it is at the situation great passing on the higher rates to those you loan to. the deposit beta, when does that start to kick in? the margin was better than expected, but the net interest income was in line, which reflects the softer loan growth. going forward, they should expect to benefit again in the second quarter from the march rate hike.
what happens to the deposit beta going forward? once you get over a 1% nominal rate, the deposit beta starts to pick up. you are looking at diminishing returns come a still positive, but diminishing returns from higher rates. costs 1.7,edit consensus for 1.3. were up 380 million year-over-year. the student loan portfolio, i'm not sure if that is responsible for the whole higher delta. david: what do we know about auto loans? allison: it looks like there is -- thatp in their ratio will be the focus. 3.3 card charge
ratio is above their guidance. they've been talking about below 3%. autos much a morgue and super prime. autos, jpmorgan tends to be prime and super prime. they did a 13% return on tangible equity on the quarter. they are beating their competition in that sense. targeting $80. what is taking us down? charles: three things. you will see bad volatility or merge in the capital markets. i think you will lose some visibility to the rate hikes, particularly the june rate hike.
, we've been forecasting the inflection point on the credit front. you are seeing that in the jpmorgan report. david: when you look at the value of the stock, how much capital will return to shareholders? on theome more leniency regulatory front, what do these earnings tell you about the likelihood of shareholders getting money back? charles: i think you will see substantial returns of capital. jpmorgan has talked about returning about 75% of their earnings this year. moving more towards 100% in the ensuing years. alix: thank you very much. charles peabody, you will be with us in the studio later. all the data from jpmorgan and citi and wells fargo coming up at 8:00.
because people have confidence in me. that will ultimately hurt. , the best thing about a strong dollar is that it sounds good. would see ont we monday. the president weighing in on the dollar. mike: very unusual. he had said on the campaign that on day one, he would name china a currency mix later. then, he said we would do the report for this weekend. donald trump has figured out what everybody else already knew. not meeting the legal definition of current simulation. they had the large trade deficit current account surplus with the rest of the world and they have not been minute deleting their currency for advantage. geopolitics is coming into this.
he's making friends with the chinese. it may be to his advantage not to do this. jon: interesting trade-off between foreign policy and economic policy. would give up some things on foreign policy to gain some things on economic policy. it seems to be the other way around. you're not a currency manipulator. it's great if you go to the u.n. and the votes on syria don't abstain this time around. mike: washington people were saying this coming in. what trump was understanding was how the world works. on situations like syria and even more so on north korea. embarrassing them and labeling them a currency manipulator, not .n the u.s.'s best interests david: he got elected by saying
the chinese are taking jobs away. now, he says i've got a deal with the chinese president, i give up your jobs, but we are getting help on north korea. mike: the same question after strike --missile what next? where thoseuation people didn't get new jobs -- that is what helped elect trump. the people who lost their jobs to chinese competition and didn't get new jobs. he has to come up with some way to help them without angering the chinese so he loses the geopolitical gains he's made. david: he said the chinese were responsible for us losing our jobs. he never said the russians were taking jobs away. no, he's being nice to the chinese and going after the russians. where are we going here? >> there was a lot of talk
yesterday about five campaign promises broken in one day with nato being another one. what does he do next? the pragmatists in the white house are starting to win the battle for donald trump's soul versus the nationalists. we will see how long that lasts. how does he follow this? how does he continue to appeal to the base and make the decisions he needs to make that are in the best interests of the united states? in "the wall asked -- whojournal" interview is running the white house? alix: michael mckee with thank you. with more, yianos kontopoulos and jordan rochester. i'm trying to get my head around this. we go back on china and there's a more favorable feel here.
is this risk positive or risk negative going forward? yianos: it's quite likely that the market may be looking at a slightly risk negative on equities. just because it might create the wrong connection with how people might feel about the connection for reflation. this is probably supportive of risk. yields are heading down, the dollar moderately weaker. those are signals that are very helpful for deflation. alix: what's really interesting is yes, the dollar took a steep slide yesterday. we are backing off the lows of the session. yields are what are really getting hit here. if the market has to readjust to a weaker dollar, what asset is most mispriced? jordan: from here, it is congratulations to donald trump it he managed to move markets.
we were talking about diminishing returns with donald trump's suites. the best way to play it still is dollar-yen. we get out this french election risk, we are looking at the euro to finish the year 115 against the dollar. of athe diminishing return single donald trump tweet. the idea that has been quite likes the fed chair janet yellen. consensus that she won't get a second term -- what is your best case now? jordan: when it comes to guessing who will be the next fed chair, it's always a big guess. i remember when it was going to be summer's versus yellen. -- summers versus yellen. whoever he will replace janet yellen with will be a bit of a hawk. he said the dollar is too strong.
it says a lot about the low interest point he made. david: we heard donald trump his mojo back. that is a good thing. is it a good thing for him to be interviewing on currency markets? it is the treasury secretary, not the president. now, we have the president talking it down. what does that mean for the markets of the president starts setting rates? yianos: surprisingly, the markets will follow their own cue anyway. whether it is the treasury or the president, it might not make that much difference at the end of the day. over the short term, those things matter. ultimately, you need to follow through. it's a question of what policies will be followed and how quickly. this is what the market checks for. at this point, it's just rearranging expectations. jon: it is my job to ask outrageous questions -- was this
a message to the fed chair yesterday about the kind of policies the president does like? in a maybe not so blurred way. i want a weaker dollar. you want a second term. kerry on. -- carry on. jordan: there used to political pressure. they will reaffirm their independence from the president. i don't think they will react just because donald trump says so. jon: it could be that the next fed chair could. alix: you want to buy cyclicals where you will get an uptick in global growth -- if that we still be in al search for yield environment? yianos: primarily because of
peak acceleration and growth data, it was quite likely that we were shifting more from the reflation theme to the ca rry theme. the cyclicals will not do as well as before. that is already well underway. it doesn't necessarily mean that people should buy long on the treasuries side. there are plenty of opportunities to replicate good opportunities in carry. david: yianos kontopoulos of ubs and jordan rochester. both of you are staying with us. coming up, we will take a look at washington, d.c. we will talk about the ppi numbers and what president trump had to say about the dollar and janet yellen. ♪
emma: this is "bloomberg daybreak." qualcomm has one crucial backing for the semiconductor business -- american company has lined up financing from three japanese banks and the private equity firm silver lake. they are offering to buy the .oshiba unit bes largest health insurer in the u.s., edna is exploring a sale of its preventative unit. tna is trying to rebound from that failed megamerger with humana. alix: i want to highlight banks, kicking off earnings here. stocks up .6% for jpmorgan.
killer revenue and killer earnings. the difficulty is the revenue in the credit card unit was down 3%. net charge-offs for credit cards was up 2.9%. $1.7ll charge-offs up m billion. we will get an update from wells fargo and citibank in the next half hour. hsbc down 2% in london. the biggest drag on the stock 600 today. -- stoxx 600 today. hsbc has said it plans to relocate 20% of its trading staff to paris. it's all about managing expectations, still planning for contingencies ahead of the official decoupling from the eu. hanes brand up 10% premarket. preliminary --
yields are lower. 2017 lows. down another basis point on a u.s. 10 year. we come in by .25%. let's get you up to speed on the headlines outside the business world. emma: president trump has indicated there are deep divisions between the u.s. and russia and that relations could not be worse. the president spoke at a news conference with the nato secretary-general. president trump: it would be wonderful if nato and our country could get along with russia. right now, we are not getting along with russia at all. we may be at an all-time low in terms of relationship with russia. we will see what happens. emma: meanwhile, at the u.n.,
russia vetoed a resolution that would have demanded syria cooperate with an investigation into the chemical weapons attack. u.s. says assad carried out the attack. russia rejects those allegations. in asia, north korea may be on the verge of conducting its sixth nuclear weapons test. site korea's nuclear test is primed and ready to conduct a trial. analysts say satellite images still,tivity at the site south korea's downplaying expectations that a nuclear test is imminent. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. david: for more on how president trump is dealing with north korea and those other geopolitical tensions, we are joined now by kevin cirilli.
you covered this man as a candidate. we heard a lot about china. we didn't hear much about north korea. are you surprised at the extent towhich he's dealing with xi bring pressure on north korea? kevin: yes. what we heard frequently from then candidate donald was essentially china is going to have to play ball in north korea .o address this dictator he's hoping to juxtapose these trade agreements with national security. where it remains unknown is exactly what he wants out of north korea. heard fromwe saying theillerson u.s. and russia are united on the policy argument of the nuclear rising north korea -- nuclearization of
north korea. david: china has leverage. it is up to president xi. what is the likelihood he can bring president xi to do things his predecessors couldn't? n: he will not be labeling china a currency manipulator. that would be one of the potential bargaining chips. when you get to some of these other things that the chinese want, such as dealing with auto -- the auto industry and working with the u.s. in terms of regulatory structure for autos, that's where things get interesting. he wants a win with north korea. jon: six u.n. security resolutions on china.
towed -- vetoed by china. kevin: when you look at the , clearly,ey've had this is a signal from the chinese that they are willing to work with washington. while they disagree with the u.s. in terms of how they are communicating with syria and russia on assad, they waited to put out their stamens until after xi left mar-a-lago. -- statements until after xi left mar-a-lago. the rumblings out of washington are all interconnected. david: we had rex tillerson meeting with his counterpart lavrov yesterday. they had a full and frank exchange of views yesterday.
kevin: they played a little bit nice in terms of optics -- just hours later, president trump butcher andd a secretary tillerson saying they are at an all-time low -- speaker ryan leading a bipartisan delegation to europe to meet with nato allies. david: still with us is yianos kontopoulos and jordan rochester . heard a lot about geopolitical risk and how it might affect markets. we are now seeing real can creep geopolitical risk. -- concrete geo-political risk. how are the markets responding at this point? yianos: i don't think they truly are. this is hard to pin down. there's elements of it here and there. i wouldn't say there's something distinct. issues like the elections in france are much more concrete
evidence where politics plays in. david: is that complacency or just a good hard look and saying were not sure anything's going to happen? yianos: the markets are experienced, too. they have seen this movie before. unless you have concrete evidence that things are distinctg in a more fashion, i don't think they will position themselves in that particular fashion. market, thefx president talking about a strong dollar that's the biggest winner has been the mexican peso. -- it has hadble a massive bid throughout 2017 so far. it looks like the ties between united states and russia may not be this close -- as close this time around. arean: the markets really
-- thethis is a rerun markets need to do their homework. how to approach these trade negotiations, you start far apart and then come in. theory inl just game trade negotiations. i find the french elections fascinating. want to go, no one wanted to talk about it. -- months ago, no one wanted to talk about it. do more work to understand the politics -- the markets are back to where they were before trump. alix: we've been covering the french elections for months. we are seeing volatility pick up in the treasury market.
treasury 10 year u.s. no volatility index. this has picked up in the last few weeks. we are a stone throw away from zero. how long this that last before people start doing their homework? jordan: it lasts for probably the next month before we get the elections out of the way. we are just under two weeks time. we will be in the mid-round after the first round. 23rd, in the evening, we will be finding out the election results for the first round. it with le pen? character melenchon -- if he's featured in the second round, it will be much tighter.
he has a two-part plan. it will be very uncertain over the next month. jon: i know where you're coming from. nobody around this table has a clue what you're talking about. jordan rochester is sticking with us. yianos kontopoulos is sticking with us as well. yields at 2017 lows on the 10 year. in the markets this morning, we are one hour 51 minutes away from the open. downes a little softer, .2% on the s&p 500. you are watching bloomberg ♪. ♪
emma: this is "bloomberg daybreak." coming up in the next hour, , bloombergcherlakota view columnist and former minneapolis fed president. now, to are bloomberg business flash. global oil supplies increased in the first quarter despite production cutbacks by opec and russia. marginally.expanded they are said to cut back should the oil stockpiles be seen in the second quarter. berkshire hathaway cutting its stake in wells fargo -- limiting
its ability to do business with the bank. the sale hathaway says had nothing to do with the stock valuation. discovery, viacom and amc networks in talks to create new online services without sports channels. sports free tv would cost less than $20 a month. channels like espn 10 to be the most expensive in the pay-tv wreckage -- tend to be the most excessive in the pay-tv package. jon: what is to be without sports? -- tv without sports? alix: everything. david: espn doesn't want to think about it. jon: we look ahead to the french election. this time come extra uncertainty from a man that many bond investors have probably never heard up until a week ago. still with us from london them
, yianos kontopoulos and jordan rochester. jean-luc melenchon. someone asked, does anybody know who he is? the answer was no. the french election has known him well. the market wasn't thinking this would be a four-way race. it was marine le pen versus macron, maybe fillon. now, jean-luc melenchon is a chance. that has a chance. he has a two-part plan. he wants to end austerity and leave nato and so forth. plan b, they leave the euro and start their own currency.
the you see the same thing, the high risk candidate has turned more towards the far left ? yianos: no come i think the highest risk candidate is still le pen. it is a competent in factor to have melenchon in the picture. he had a pretty significant bump in his numbers last week for three or four days in a row. i think that momentum has stopped. really following it on an hour-by-hour basis. let's keep that in mind. finally, don't forget greece. we had cases where the agenda was pretty interesting, to say the least, in terms of the specter of europe and how much you want to negotiate and all
those great things they were going to achieve. then, we had reality. this movie will play in many different chapters. david: what happens after the election is another question. on do what he wants to do? in hise drag macron direction to beat him in the first round? jordan: it's already going on, just the numbers -- it's not just the socialist candidate who's losing votes to melenchon, it's both from fillon and macron. what can he do if he wins? he's unlikely to get a majority in the national assembly. a soft frexit or no
frexit. he doesn't want to go straight away with a referendum on leaving the eu. it is part b of his plan. he wants to negotiate first. with hist will react victory and then there will be opportunities to buy back. the initial reaction will be lower, of course. alix: are we looking at the margins win, too? what will be the risk priced in if we have a wider margin? jordan: for the first round coming to get above 29% for le pen, that's outside the margin of error for her polling. higher,as 31 or 32 or
maybe the second round polling is incorrect as well. swing, you see a right-wing swing in the polls in france. the undecided voters tend to have a more nationalistic move. let's lay out what jordan was saying. if you wind up having the risk off move right away, it might be time to buy because of the parliamentary rule. ae consensus is you will see huge rally in european stocks if you get a mainstream candidate. deutsche bank saying we are fully valued in euro stocks. economic surprises will not continue to rise. yianos: there is a risk premium and bedded here. part of the move we've seen in treasuries is originating from the french risk in terms of the first round.
to claim the market knows it all and everything is predetermined is ae we know the results bit stretching it. if you want to be 1g10 currencies going into the first round, which is it? jordan: the yen. alix: he likes the dollar-yen. yianos kontopoulos and jordan rochester. great to see you guys. go to tv to interact with us directly. very helpful when we break citi and wells fargo in a few moments. this is bloomberg. ♪
the revolving question on loan growth. on set my charles peabody. you had an hour to look through the numbers. where are we in terms of loan growth and credit charge-offs? where's the biggest weakness you found? charles: in the first quarter, it was across the board. the weakness we are trying to find out is what is happening to see ancni. the cni weakness has been persistent. peaked at growth high single-digit rates and is now running at low to mid single-digit rates. something more than just a trump affect or energy. there is concern. small business optimism is
good. job hiring is picking up. that doesn't square with the negativity you are finding. charles: the hard data is not following the soft data. alix: these are both hard data points. charles: 9% loan growth is not bad. that is pretty good loan growth. it's outside what they had been hoping for. david: where is the loan growth coming from? on the commercial side, you said commercial real estate is down. perhaps because of regulatory constraints. charles: it is slowing. david: where is the loan growth coming from? the 9%? charles: it's a function of the weakness from a year ago. you are still getting inventory -- some acquisition finance. it is not a robust environment david:. what about the quality of the
credit at this point? what about charge-offs and provisions? charles: my position at compass point is that we are at an inflection point. when you get into a negative credit cycle, the surprises are on the downside manatt on the upside. -- downside, not on the upside. the charge-offs higher-than-expected at 1.3 billion. heldmoved a portfolio from to sale, meaning that will probably offload that. card losses are proving to be much higher than people were expecting. jon: what do you think is driving that? charles: the consumer is living week to week, paycheck to paycheck at the lower end. you are starting to see that
show up. jon: then, how did these guys get any topline growth when the consumers are reaching credit tolerance levels? charles: this is the dangerous part of the cycle. that's why i've been negative on the banks. there's three things that still have to be priced in. we are moving toward bad volatility. we will lose some of the rate visibility. people have to rate hikes elton to their estimates. -- two rate hikes built into their estimates. jon: what is bad volatility? charles: markets become il liquid. it becomes hard to manage inventories and that kind of ment.on alix: cannot offset the week loan growth -- manage the inventories in that kind of
environment. weak can that offset the loan growth? charles: they told you the reason they hiked in march was because of a window of opportunity of stability on the international front. instability will take away from their ability to hike rates. jon: charles peabody is taking with us. coming up, narayana kocherlakota . he has a friend in the white house. he likes low rates, too. from new york city, you are watching bloomberg. ♪
big across-the-board for jpmorgan and it looks like citigroup joins them as well. it is the presidential u-turn. why china is not a currency manipulator. the fed chair making a second term and nato is not obsolete. a fifth straight week, treasuries rallied. 10 year yield fault with 2017 low. from new york city, good morning. this is bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. ,lix: citigroup coming out fixed trading revenue at 3.2 6 billion dollars, which really trumps estimates, well over the increase expected. at $1.35.solid the market trading revenue coming in a little bit late on this range at $759 million. investment banking revenue on the higher end at $1.2 billion. overall the company made $18 million in the first quarter. that was up 3%.
it was about global consumer banking and institutional clients. jon: ups comes in at one dollar bank. one dollar. . wells fargo comes in at 605. the estimate is not 09.2. first quarter residential mortgage at $44 billion. a little bit softer in the free market -- in the premarket. the headline associated with this bank was berkshire hathaway. it gets below that fed limit of 10% in 50 days. alix: we should point out that provisions for credit losses were down quarter on quarter. they are making less loans to we will have to hear more. 30%, that isate of not 20. that is not 15. interesting from wells fargo. michael porter out -- jon:
michael corbin released a statement on a significant better overall performance than a year ago. you can implant that into the jpmorgan press release as well. during us now is kate moore, black rock equities strategist. .harles, let's begin with you the top line for you, your takeaway? >> there are two unusual things that we know are going to be in this quarter. theis the right down and servicer rights. they didn't quantify. number and the number were actually good numbers. up 39%vestment banking at $1.2 billion. >> when you talk about capital markets revenues there are three buckets of counterparts. the hedge fund managers, the asset managers and the corporate player. city is really strong with the corporate player. when you look at primary debt underwriting issues in the first
quarter it was very strong from january through march. that drives secondary trading. the primary customer, the corporate customer, they did well. alix: a loan of actually 2% year on year to 629. 2%t do you make of the versus jpmorgan with was up 9%. -- which was up 9%? transition still the stage of the business where they are restructuring their businesses so they are trying to build out their cards as well, they are trying to generate stronger mortgage growth. we expect slower and low growth. david: they also have a costco deal now. should that be kicking in in this quarter? that is supposed to be a big deal. they are looking at the second have to be a big payback. i is going to have an
analyst day at the end of july. they have not had an analyst day in over a decade so they are feeling pretty good about where they are. alix: pointing at credit cards, citigroup is a consumer bank. profits fell 16%, to one billion as a result. your take? >> we knew that consumer credit costs were going to be rising and we were debating the ramp up. i can remember the numbers off the top of my head. but what we are looking for is, did they generate positive operating leverage which includes the credit costs? that would obviously be higher credit costs. the revenues in their international and domestic banks are arriving faster than expenses. that is usually what the market will pay for. jon: if you have a bloomberg terminal, you can do it. for those of you trying to dimon,jpmorgan, jamie
the ceo is on the call right now. charles, stepping away from banks like citigroup, like jpmorgan, your framework for singing about financials at the moment, who is going to do well as things play out the way you think they will and who do you think will do badly? look at my belief that we are moving towards bad volatility in the capital market and the trading environment gets more difficult i think the witherparties associated asset managers will suffer the most. that would be more of a goldman sachs type name. if you look at a loss visibly to , morgan stanley is definitely being bid up on higher short-term rates. alix: if you look at that volatility, what kind of volatility and move do you expect them over the next year? >> our thesis was that we seek -- we see peakty profitability in the first quarter and then we downgrade those banks like bank of america
and morgan stanley in march. we are thinking we get 20% downsized from their peak in march. a 10 or 15% downside from here. a 16% downside and financials. >> to be fair, i take a more top-down approach when looking at financial stocks. ,n a very different time frame probably. from our perspective there is actually a lot of great things in place for the financials. one of our takeaways is the regulatory pressure on the bank is continuing to ease. it will continue to ease and there is broad acceptance and support of that across congress and the white house. we also think that we are in a strong reflationary environment. some of that has abated in terms of consensus view. we are still in that camp that we are seeing overall economic expansion and i think the last part of it is that it is still a sector from an overall asset allocator and a global equity
owner that is not well owned. we saw people pick up their positioning in the election and they backed off. it has been a sector people rotated out of, with enthusiasm for trump trade's fading in the first part of this year. >> in terms of the rate environment, that is the main reason i hear bond only's are in this. if the fed starts to taper, do they do that mutually exclusive to rate hikes? do rate hikes come out of the equation? i ask that because there were two rate hikes built into those estimates. >> verification is that they stop normalizing policy rates in the just the balance sheet. we will get more information about how they view the balance sheet that is going to be a very slow and gradual process. we are not getting a huge sale of assets which are high-quality assets. they are not well bid by the rest. >> so they can do both. hike rates at the same time?
>> >> it is >> a macro environments. it is strong enough. if there is a slowing in activity or there is some kind wea global shot, i think will have different conversation but our base case right now is that we are going to be above trend economic growth in the u.s. and that will allow the fed to get back to normal policy same timethe considering how they will think about the balance sheet over the next three years. alix: the banks are pricing in two rate hikes. the markets are only pricing in one hike in 2018 right now. that is when the rewriting has to happen. >> the analysts have rate hikes in their estimates. hikes're going four rate and seven cumulative's, what does that say about credit? there is no built-in expectation of deteriorating credit in the 18 numbers. alix: look at the bloomberg here, charting the five years minus the six months. this has gone steeply down.
the fed is a yellow line and the white line is estimated eps revisions we have seen. if we get this we don't get the steeper curve. how do you still feel good? >> i think the expansion and interest margins we would get from a steeper curve is a reason not the exclusive reason to lightbank stopped at this point. we don't get that expansion. it is worth asking why is the market rising in something different when we think we are experiencing it in terms of economic growth? i think it is an end of constructive use of the medium term. david: net interest margins helped only borrow money. so how many laws are being made? up year-over-year. we saw in jpmorgan they are up 9%. are we concerned about loan origination? >> it is a great question because we have seen a slowdown in lots of activity, not just in
the first quarter of 2017 but in the back half of 2016. we are talking about companies having lack of clarity about policy, looking at risks both domestically and internationally. saying, "let me wait this out." they tell is going to be in two or three quarters. when people really think about the future of their businesses and their consumption. jon: you see the wells fargo numbers quite clearly. david: also, kate put her finger on it. it is not just regulation of the bank but also of the borrowers. borrow more will money. when trump was first elected there was a sense that all of this is coming. but we are not seeing it? >> no. the senior loan officer opinions survey shows that demand was actually declining for credit. i absolutely degree. the regulation will be a positive but it is not a positive in the central-lower-cost.
it is a positive in that it will be freed up to take advantage of activity. we need activity though. we don't have activity yet. >> we have been in paralysis for some time now so if we just remove the pressure, one wonders how different is this is or banks will operate. we can't say with certainty but if we get more clarity on tax there will benly great beneficiaries of lower effective tax rates. if we get more clarity in terms of trade, more clarity in terms of expending, that will help businesses and individuals think about the future. jon: thank you very much. pamela -- if you go to the bloomberg terminal, follow the latest on bank earnings this morning on to live go. coming up, bloomberg's new economist and former minneapolis fed president. i can tell you, jamie dimon says he doesn't care too much either way about a stronger dollar or a weaker dollar.
david: this is bloomberg. i am david westin. president trump spoke to the wall street journal late yesterday and in one interview he managed to reverse or's several aspects of his economic plan. among other things he said "i think our dollar is getting too strong and partially that is my fault because people have confidence in me. but that is hurting. that will hurt ultimately. there are some very good things about a strong dollar but usually speaking the best thing about it is that it sounds good." you're with us to sort through it all is mike mckee, economics
and policy correspondent. sort through it for us. this is unusual. he is changing his position but also the president of the united states is speaking out on currency. >> this is not necessarily a good idea. the past history of leaders talking about currency has not been a successful one because what ends up happening is the markets take it as, we are going to do something about this feeling. the famous impact in 1994 when lloyd bentsen said, "i want a weaker yen" and bill clinton said our biggest problem was they supported the young couple of years later because the dollar got so strong. and then they just called a strong dollar and stayed out of that. it is unusual he would do that. david: it is unusual. is it unexpected in this sense? he is a real estate developer. they tend to like low interest rates and the low dollar that comes with it.
is this a big shock? >> it is not a big shock. he campaigned the opposite way throughout 2016 and now he is becoming more realistic. the gary cohn wing in the white house is its planning some of the facts of life to him. david: but is it a coincidence that in the same interview he said, i would really like a weaker dollar and i would be willing to keep janet yellen around. is this sending a message over the fed? once you go in that direction -- >> you can't possibly into it what donald trump is thinking but he can't really do better for his policies than janet yellen. most of the people that the house republicans and republicans in general on the hill would like would be more hawkish. if you are trying to stimulate the accompany the last -- the economy the strong fed is the last thing you want. you can see why there would be a
n advantage to get yellen in place. it is still early. jon: not necessarily a change in policy from him and not the first time he has said he was a low rate guy either. problem with the federal reserve, in many conversations, publicly, was the political allegiance of the federal reserve. it had that. that was the issue. is this really a change in policy from the administration or just a change in the wording? >> it is a difficult call because we didn't know in the campaign or in the first stage what his policy was. that has been one of the calls from wall street, from investors, from companies, to give us greater clarity on how you view each of these topics. what the white house wants to do is, as opposed to just saying what the house republicans and the democrats want to do, what does the white house truly feel on these policies? i feel encouraged by these comments trump made specifically around the dollar and
acknowledging that an immediately stronger dollar is not a good thing for the u.s. growth and a good thing as we start the earnings season. jon: we have to get the white house talking about the economy differently, almost joking about it. you can necessarily take that line. a lot of people would agree with him. >> that is part of the problem. what does he do next? he made all these promises he is going back on. businesses like the fact that he is going back on these but a lot of things out there that he said would happen are not going to happen now. so alix: what do you do as a portfolio manager when you have in -- have a structure for investments? for small caps, a high tax corporation, how do you deal with the big shift? >> first let me make the point -- we have been talking about this over the last five or six months -- all of these caps were not perfectly insulated in the case of a stronger dollar. so many things were part of the supply chain. we really get hurt in a
situation where the dollar depreciated 15 or 20%. what we are getting from a lot of portfolio managers is a reluctance to take a huge amount of active risk. i was taking about this in terms of the dollar. without question, border adjustment, if that were to go through as part of the tax policy reform, would need to be potentially offset by stronger dollars, even if it was a more neutral position. if we say we don't want a stronger dollar, does that change about the border adjustment and what does that mean for the white house's proposal or counterproposal in terms of taxes? this is a big question. so we get better clarity. david: it is not just the border adjustment tax. he got his way on infrastructure, tax reform, but what would it do to the dollar? >> this is a great question and
i think we are all trying to puzzle through, if we get great spending, that should be great for growth. but does that actually translate into an immediately stronger dollar. one of the points we have been making is that these reflationary trade is great but it is not isolated. we are getting reflationary around the world. and the positive signals we got from sentiment in the two -- in the part of 2016, have expanded in europe and asia and we are seeing a better global growth picture. so even without policy adjustments, it is hard to make the case that the dollar should have rallied meaningfully in the first part of this year. it is interesting that we have been talking to a lot of presidents recently and they all greatos are telling us confidence out there. things are going to get better. is saying, arep they spending? and they say no, we are waiting to see what happens. we don't know if this is going to come true. >> i think some of the spending we have seen has forward
projects that were already allocated for 2017. the real question is, do we get a new set of project out there as a result of greater confidence? i think your point is right, is there a disconnect between sentiment and activity? jon: to david's earlier point, do you pay more attention to the centrist -- census indicators for the logo for the banks? >> both of them. our data, soft data and the changes in these indicators. we try to aggregate that to come up with our view on growth and most of the points are positive interactions. but can sentiment get much more buoyant from here? if it doesn't translate from the corporate side, into more aggressive spending and hiring activity, do we have to temper our enthusiasm? alix: thank you so much. kate more of blackrock and michael mckee as well. jamie dimon not worried about the outcome of the french election or the dollar. david: he's not worried about much of anything. reviewoming up, we will
alix: back with us, final thoughts, from kate more of blackrock. you are the strongest connection trader right now. >> with the equity markets, our highest conviction is the emerging markets. this is a call we have had for some time. more of the street has become comfortable. but in terms of the dollar, without a huge amount of pressure from a stronger dollar, at least -- that leaves emerging markets. we are seeing a good story because of earnings growth and earnings expectations and aggregates. high teams were overall msci e.m.. very strong for china. we are getting a good story on trade, where we have to be
not goingbut we are to get the big overhaul of trade that people feared immediately following the election. alix: are there specific regions ? >> a lot of it has to do with china but across the whole region as well, we are seeing good and consistent improvement evaluations.rowth, a region that is not that well owned by most investors. jon: what about the credit overhand -- overhang in china? >> it is something we have to because as of but it is acknowledged by the government and we are expecting further administrative efforts to deal with that and tightening over the next couple of quarters and specifically in 2018. we are not seeing any big blowups. the growth and the breadth of the growth is making it a nonissue. alix: if you want to talk about normalizing the balance sheet and hiking at the same time, how does that disrupt the trade? >> i think the fed will be able
to hike at the same time and normalize the balance sheet at the same time. if the global growth is good. that depends on china. if we were having a significant slowdown in terms of chinese growth it would have a huge impact on u.s. growth. i think the fed will have to think about what their projections are very closely. david: now we have the president making nice with president xi which doesn't hurt. >> and i think him wanting to make president that make nice with the president of united states. kate more of blackrock, thanks for being with us. next, we have bloomberg columnist and former minneapolis that president. we will join us with those numbers out in a couple of minutes. this is bloomberg. ♪ [ engine revs ]
boom baby! rated pg-13. [ screams ] did you know slow internet can actually hold your busins back? say goodbye to slow downloads, slow backups, slow everything. comcast business offers blazing fast and reliable internet that's over 6 times faster than slow internet from the phone company. say hello to internet speeds up to 250 mbps. and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. jon: from new york city to our viewers worldwide we are watching bloomberg daybreak. i am jonathan ferro on a two-day losing streak. potentially poised for a second straight loss as well. we are lower in the premarket if
you look at futures. we are up despite some of the beats you see in the city and jpmorgan down by about 10. treasuries been through yesterday and today, unchanged. 2.24 on the u.s. 10 year as the economic data looks across the bloomberg. initial jobless claims come in at downside surprise. we dropped from a previous number by just a touch higher from 235,000 to a drop of 1.235. the median estimate here at bloomberg. you are looking at cpi final demand month on month. that came in as a negative surprise. median estimates zero. a positive 0.3. strip out food and energy, your month on month is unchanged, 0.0%. the previous rates, 0.3. the estimate, 0.2. cpi numbers, not so much. cpi, you look at it
personal consumption services are down. it can be finished services coming in at about -.2% as well. a little bit of weakness across the services area. with us now is michael mckee, economics and policy correspondent helping us break on the numbers. can we look at cpi? we are seeing some weakness. >> we are seeing weakness across the board. when you look at that it doesn't feed directly into cpi, we should point that out. the surface is number, -- the services number down 1/10. over the past couple of years it has been goods in part because of the dollar that have been held down and now we are seeing services down, not clear exactly what brought that on. short-term thing or is this something we watched in terms of cpi? >> it isn't clear. normally there would be major
cyclicality in the services component. you would see it in some areas of good depending on what kind -- what time of year it is but it doesn't really feet into cpi. has beenover of that home prices and energy. i got a chart here of cpi once we get to tomorrow. in trend has been going up cpi and the fed has been watching that. they follow the cce numbers and that won't be out until the end of the month. those numbers run a little bit lower than the cpi numbers. david: one data point, as we always say and it is not that for medical shift if you look at the year-over-year. but put together with the job numbers we've got, which were disappointing, much more dramatic actually, at what point do you start putting these together and start thinking there is some weakening in the economy? >> here is something i want to watch tomorrow. we get the retail sales numbers and another chart that shows how
we had a big decline in auto sales. if retail sales follow that, then there is a reason to watch what is going on the economy. -- in the economy. the reason people are worried as the jobs report. ,e saw a big decline in hiring a decline in total payrolls for the retail sector of about 30,000, two months in a row where we saw big declines in the numbers. it is something to keep an eye on as a signal of what might be happening. david: stay with us. we will be joined from rochester where he is a professor of economics. emmanuel ibe kachikwu -- narayana kocherlakota is the former resident of the federal reserve. do you see these numbers? what do you make of them? >> i'm afraid i couldn't really hear what the cpi announcement was. .avid: it is a ppi announcement the ppi announcement was a disappointment. on 1/10 of 1%.
the consensus was it was going to be right out flat. a slight decline. year-over-year it is 2.3% growth as opposed to 2.4% growth which was the consensus. >> yes, i wouldn't put much stock in those numbers. i think the fed will be watching more closely. they will see what is happening at the pce. the link between ppi and consumer prices is over the long haul a very tight one but in the short run -- david: are you concerned that there is gathering evidence of maybe some cracks or weaknesses around the economy? look at the job numbers from couple of weeks ago. i have been concerned for some time that the economy is maybe not quite as strong as my former fomc colleagues would like it to be. i think we continue to see signs that low price pressures, low wage pressures -- i would say that is a sign of weakness but the good news is the fed can do more to bring in and stimulate
demand and bring in more people off the sidelines and into the workforce. jon: just to pick out one data point, 34,000 is the print for initial jobless claims. we haven't had that since the 1970's. what does that data point tell you about the labor market? >> yeah, i think that -- we have definitely seeing some
signs. this is the good news. we are seeing signs of people coming in without seeing -- we are seeing some pick up in wages but we are not seeing some kind of explosive take off in wages that i think some theorized would be needed to have the kind of growth and employment that we have actually seen. to 54 age in the 25 group which is the so-called prime age group. we continue to see strong growth over the past three or four years. i think the fed should be doing what they can to facilitate that. alix: what is nehru? >> that is a great question. but i am not sure it is really the right metric right now. i think the right metric is going to be about continuing to watch what is going on in the employment population ratio, the cracks in people who have a job. as long as we continue to see growth there, and without seeing unduly high wage pressures, i think that we should be doing what we can to facilitate that
growth. >> if i had to say, i would say 4.7 and 4.5% or something in that range but it really is a question of how much employment can we get off the ground? >> you are with janet yellen and we are below those numbers so extrapolate for me if you can, from your time around the table, how do they get from that to higher inflation? it is just not happening. what is going to drive inflation up? i think certainly, eventually, when we have unwound and more of a slack in the labor market, so we have brought in more people from the sidelines, eventually we will see wage pressures that will translate into inflationary pressures. the good news is i think the fact that inflation remains as low as it does is really good news for the fed. we should take advantage of it by taking -- keeping rates low in order to stimulate demand and bringing more people to the sidelines. me, to bene once told
a great central banker you got to be a great liar. now that you are no longer on fomc, if the- the president likes a weaker dollar, how does that change the question of the fomc? >> absolutely not. now that i am not on the fomc, it really doesn't change anything -- any of the conversation at all. on theink that people committee find it easier to do their job without having a collective -- having elected officials commenting so directly on monetary policy choices but they are independent. the use that independence and they will do what is best for the economy. alix: fed chair janet yellen might do that but the conversation is if she doesn't want of getting renominated in 2018, the next person president trump will put in won't have
that kind of independent mindset and will have a closer relationship with the white house in a credible it -- it really issue. what are the chances of that? >> i think that yesterday's comments from president trump about chair yellen were quite -- i thought they were -- i welcome them. i thought he seemed more open to the idea of re-nominating or reappointing her. for a good reason. if you look at the outcomes the fed has enjoyed, unemployment is low, inflation remains close to target. it is hard for him to argue that she hasn't done the job that has been given to her. i would say that i continue to be concerned that the president not aligned with some of the boundaries we have seen other previous presidents respect with respect to the fed. i am concerned that you might employment to someone of
that job that isn't as independent from the white house but it is early days. we have to give the president of chance to see what happens. jon: the other question i would raise about the pressure from the president, does it affect the transition mechanism of the federal reserve's policy in the following sense. privatize of monetary policy but the president is out saying, "i like low rates" does that complicate things for the federal reserve? >> i don't really think so. -- it obviously creates some political pressures but that is the benefit of being politically insulated. as the fed is. they don't really have to be taking that on board. in his nextdent conversation says something the opposite of that it won't affect her that either. -- won't affect that either.
the fed is focused on achieving economic justice. david: to what extent do geopolitics affect the fed's ability to do that? you have things like north korea, the growing dispute with russia over syria. things like that. is that something that actually could cause you to have a pause in raising rates? >> now you are talking about how political this is for the course of the economy. i think that is something the fed has to take on board. i have been a little concerned that i feel a lot of uncertainties, myself, politically, that can spill into the economy both here at home and overseas. when you are so close to the lower around on interest rates, you really have to because this about raising rates. because any kind of downside risks you face, there are tools to deal with. we want to keep economy as healthy as you can to avoid
those downside risks. geopolitical wrists -- risks show up certainly and the fed has to take that kind of uncertainty on board. wayd: and how does that against the question of the balance sheet? if you have the question of reducing rates, how does it affect your decision about what to do in your balance sheet? fed has talked probably a little bit about these tools, the interest rates and the balance sheet, as being separate. they are really one combined package of stimulus the fed has in place. about are thinking changing a reinvestment policy that has to have an influence on the speed of increase on interest rates because now you are tightening through another mechanism. --ouldn't say that it has the economy has any effect on how it would choose between those instruments. it is just two different ways to get the same end which is to
tighten policy so that you don't have unduly high inflation. alix: thank you very much mckee, bloomberg news commonest and the fed president narayana kocherlakota. coming up next, nigeria's minister of state for petroleum resources will be joining us with the likelihood of extending the cuts in may. we will ask. this is bloomberg. ♪
jon: from new york city to our viewers worldwide, i am jonathan ferro. this is bloomberg daybreak. we are 45 minutes away from the open in new york. we are on a two-day slide on the s&p 500 with potentially two weeks of losses. futures is a little bit softer, down 2/10 on the s&p. off by 10 on the dow. on the day, on the session, crude at 53.22. a rebound up for brent as well, trading at $56 a barrel despite the geopolitical risks we had seen and that oil keeps slowing and building in the first quarter. emmanuelington is dr. ibe kachikwu, nigeria's minister of state for petroleum resources and chairman for exxon mobil africa. it is great to see you. you have geopolitical risks and you have stock draws in march for oac be inventories. give me a percentage of likelihoods that opec will
extend the cuts in may. >> we will watch those very jealously. we will see how well it was done. and see what resources we need to put in place. we will make these stronger. we are struggling with issues of increased production out of the u.s. and shale and the rest of them are problems we will have to deal with as they come. ultimately, it is going to be collaborative. also, -- alix: can you give me a sense of the conversation around the table right now? are you thinking about a three-month extension versus a six-month extension, raising the quotas? there is a cut about a huge cut. what is the conversation like? >> everybody is watching. we haven't had major conversations but i think there is a lot of it around the six-month extension.
the markets are fluctuating and prices indicate that we will have some extensions. they have not been discussed. we will see how strong they get. ultimately, opec -- there is no way opec on its loan can carry this continuously. alix: it seems like you are making the pitch to russia. russia continues to have to step up and commit to the cuts but the rumor is russia is skeptical . we didn't get the price boost in many market participants that they were looking for. they are's potential conflict between the saudi's and the russian as well as the u.s. gets involved in syria. what is your case on russia? >> russia is collaborative so far. they have been at the table for the first time ever. they have engaged in some talks to see what more will happen. but in the system -- what is important is that we are talking and collaborating, working at
least. ultimately, russia will have to come to the block. alix: it is really russia. the u.s. is not going to commit to any kind of cut because they are not managing sle at the end of the day. -- sle at the end of the day. is russert five now debt is russia's five now as good as it was last december? >> it is. ultimately oil prices are reflective of that. the more everybody cooperates, the better for everybody. alix: does that mean you need a signal from the u.s. that they are willing to do something about production to move forward? >> sorry, i didn't get that. alix: does that mean you need some kind of commitment or conversation with the u.s. in terms of production for opec and russia to move forward with an extension? >> we probably don't need that. ultimately, we are hoping we will get to a point where the u.s. feels comfortable to talk with us and see the long-term
benefits in collaboration. positivet had receptions than we are going to pump of the mission on engagement. alix: who do you talk to about that? >> obviously it is going to be the secretary of energy, the u.s. officials who make policy decisions on that. i am not directly involved in those things. alix: but in theory would he be reaching out to companies? it is going to be the company's decision, not the secretary of energy, what the company do in the u.s. there are a lot of major american companies like say nigeria where you have major u.s. companies active. ultimately they will also carry the conversation under the opec umbrella. that is one policy the u.s. needs to matter to support long-term growth. alix: one question on the deal and then we will move on to international oil companies. if we don't get time extensions,
what is your price thought? >> i don't get that. alix: if we don't get an opec deal what happens to prices? >> if we don't get an opec deal -- alix: but you've got to be worried about a downside when you've got so many wrongs already in the market better on a deal -- betting on a deal. opec haslutely believe found a way to cooperate amongst itself. we will find a deal. the deal will probably be a look at the extension. so i am sure we will get there. alix: let's talk about international companies operating abroad. you were in texas talking to exxon. what is your pitch to invest money in nigeria? >> the economy has improved a lot over the last three months. engagementy huge with technology under the
president and the vice president is working wonders for us. we are deeper in those engagements. that is beginning to shift under measures of consent. -- it -- we have negotiated our way out of the business climate itself with we are working hard to improve. alix: but your production was down in march. are you saying that wasn't at all due to disruptions of diligence -- and actually maintenance? >> the oil companies were shutting down for routine maintenance. that was taking 2000 barrels off the marketplace. production, we suggest with the plan in place -- do, and you suggest the militants are in a better
place, would you we willing to participate in a cut? >> we realize the formula for calculation in terms of heavy barrels, it30,000 is into our utilization. we are going to try to get those refineries back on place. we are seeing it to combat for exports at 2.2. whatever improvements we make, we are going to try to -- part of that is going to be, within the year, once we get to the asset number, we will participate and support it. alix: based on that the maintenance that you attributed the march production decline to is that over now? >> the production decline is over. it is rising because the infrastructure that was damaged has got to be repaired.
we have downtime because of maintenance which covered 50,000 barrels. requirege is going to amounts of production but in terms of actual production, -- alix: but the point is the maintenance is over? is the maintenance issue over for you? >> yes it is. we are working, basically. once it is back online we should be ok. hopefully we do not have any more issues and we will continue to drive engagement. alix: one less question as you head into the meeting. there is one wild card out there now and that is the iranian election on may 19, just days before you guys meet. the issue there. how does that factor into your thinking of whether or not to extend the cut?
>> i didn't get your question. sorry. ahmedinejad is going to run for iranian president may 19. how's that increase her likelihood of not taking the cut? any going have forward or not in terms of internal policies. i think the position of iran has been basically, very thin on some cooperations. i don't think the concern is high and most of the majorities tend to pull everybody. it should be ok. great to talk to you, thanks so much for your time. goodmmanuel ibe kachikwu, to chat with you. it is interesting, as these risks continue to heat up between the saudi's and russia, what is the impetus to extend the cut with the geopolitical
boost? >> the impetus is the ipo. david: that is exactly right. in the markets this morning, let's get you up to speed as we can you down to the opening bell. about 34 minutes away. this is how the stage is set. -31 points on the dow. down six points on the s&p 500. could a two-day slide become three? risk off in the other asset classes as well. it has been a bid on treasuries surrounding yesterday and today. 2.24 is your yield on the 10 year and a 2017 low. you are watching bloomberg. ♪
beats. if consumers are feeling good, where is the long growth? currency is not a manipulator the fed chair make it a second term. and nato is not obsolete. treasuries rallied, benchmark fall to aelds 27-year lope year good morning. we are counting you down to the opening bell. then,rkets this morning this is the state of affairs and features -- state of affairs. the s&p 500 poised for a second straight week of losses. the president likes low rates. treasury yields heading that direction or 2.14%, we hold onto gains from yesterday in the treasury market. that is your yield for the 10-year, a low for 2017. the euro retracing a recent bounce, down by .3%. the cable rate down to
1.242524. let's get you to some movers. alix: citi turning negative in premarket. jpmorgan just a .2%. there are other big movers. this one is down by about 2.5%, amd. the of chips may not disrupt intel's dominance. the performance may like. and the longest streak down since november, but their overall move his opera that samir. hanes brands up to 5% but off the highs of the premarket session. arning 28 cents to 29 cents share. earnings helping a late in the stress from weak the part traffic, which had been the anxiety of the retail area for hanes brands.
a lot more on banks in a few minutes. david: how about right now? we have heard from three of the five largest u.s. banks this morning. we are putting together this story from jpmorgan, citi, and wells fargo with our reporter from memphis, tennessee, and the raymond james head of equity portfolio. we start with our reporter. we have earnings for the three big banks. we shouldany themes take away? >> the theme i see is that the wall street set of the banks are doing quite well. trading is buoyant. trading, which some were not expecting to do well, are doing well. citigroup had his bets -- had its best quarter in fixed income trading. the main street side is not as strong. the loan growth is not what people would have hoped, given
the optimism in the market. there is a variety of reasons given for this. you are seeing some expenses rise at wells fargo. david: talk about the long growth. the worst of the bunch is wells fargo, off more than $9 billion in loans. auto loans, cards, mortgages, all of these. why are we seeing the demand for loans that we anticipated, frankly, in the wake of donald trump's election? >> a lot of reasons have been given. wells fargo, they give a call out to auto lending. they are tightening their terms on that. auto lending has been a little bit bubbly, so they are pulling back on that. fo of jpmorgan said part of it is the seasonality and mortgage warehousing and part of it is more of the financings going to the capital markets, rather than being made by bank loans. certainly, a jpmorgan they are
not saying it is a sign of any kind of economic problem, but looking back at jpmorgan's letter, jamie dimon wrote that he thought something was wrong. i think we hope to get more today. jonathan: at this time last year , it was the same game but with energy loans, loans associated with those provisions. why is this different two energy? is also a factor the people said last year they had to make these loans to companies to tide them over, now they are refinancing them in capital markets so there is not a repeat of some of that loan growth. with autos, that is a form of consumer loans that was really strong and year ago and is not as strong now. jonathan: i want to bring in james.bbs from raymond
let's look at the soft data versus the hard. soft data shows consumers are feeling good. the loan data from the banks says they are ok but not us it as what was indicated it would do you say? >> obviously, i am not a bank analyst. sawgenerally, the note i this morning is that it is a good start to earnings season for the banks. yes, there are some push backs, but remember, a lot of what has been going on in this economy has been sentiment polls, which have probably gotten ahead of themselves. i am not sure the market may be was looking for a little bit more based on the senate polls, is off thely, it board when it is all said and done. when you look at the grand total of what they put up, you come away saying it is justified and looks like what we have seen. a 2% growth economy, in general. for that reason, i think we will get through this and the banks will look like good numbers and we move on to the next leg.
alix: i know you are not a bank and lows, but if you want to buy banks, you want to have a strong view of the yield curve. when you have a yield on the 10-year under 2.3 percent, how do you make the case for buying a bank stock? >> i actually look at that and a positive manner appeared the reason is you look at the yield curve and the way it has traded. we traded down technically, and now at the 2.30% level, everybody thought panic in yields are going lower. what has pushed them lower here? is it the bond market telling us the economy is weaker than expected or is it more of a trading move? look at the short coverings that took place and look at some of the geopolitical risks in the last few days. that is one reason why the oath is pulled back the way it is. i am not a bond market expert, but i'm interested in the banks at this level because i think the general tendency will be for rates to take backup. the fed wants to tighten.
the yield curve is slightly steeper up your do you have got an economy that might not be as robust as the sentiment polls put it, but we have a decent economy that is growing. all of those are good for the banks and should push interest rates of slightly. over the last year it, the correlation of bank stock prices with the 10-year yield is 93.6%. it would get a bounce back up, even slightly, towards the top of the range, 2.50% come i think the bank stocks will outperform. that is why i am looking at what is going on today and how these are trading, how the bond market is trading, as an opportunity to take advantage of it. things got ahead of themselves. to be cleared,ks like we have seen. i am more positive. david putt we're going to go to julie hyman, who is listening in on the jpmorgan earnings call. what are you learning? julie: it is not just jamie
dimon, but it is also the cfo, and they're both having a heated, lively discussion about deposits. curtain raiserg for this bank earnings season pointed out, there has not been much pressure on they banks as of yet to raise rates on deposits are do is this expectation that they may happen, that there is competition between the banks. jpmorgan confirming it has not yet happened. jamie dimon was trying to make clear that if you look at different types of deposits, different types of loans, you are going to see different types of pressures. marion lake said you could start to see more of that pressure after the next couple of interest rate increases. something that is still a big topic on the minds of analysts and something that is to watch. something else to point out, jamie dimon making a couple of comments on politics, one on politics outside of the u.s.
on the media calls this morning, he said he is concerned about the outcome of the french election. he said it would be silly to expect smooth sailing from the trump administration in trying to achieve what he says is his progrowth agenda. a says what you're getting two after the first 100 days will be what he calls the sausage making period of policymaking. thank you. deposit data, as it is called, how much you have to pay people to get their money into deposits , and the point about the correlation between bank stocks and the 10-year -- you know have a president who told the wall street journal yesterday he sort of likes rates lower. what does that tell you about the future of things? sounds like we not going up very fast. >> yeah, obviously, investors have been hoping rates would move up fast and that the difference between the deposit would keepow income
widening it what is interesting, one thing we paying close attention to in the newsroom is what is called the net interest which expanded about 11 basis points a jpmorgan from the fourth quarter, which was much higher than expected. pretty much flat at citi and wells fargo. somehow jpmorgan, even though deposits are basically remaining flat, they are not having any problem increasing the margin. jonathan: the composition of the deposit exchange, most of the deposits are non-interest-bearing deposits, compared to 2007. maybe we now to consumer that would actually like rates, obviously, on their savings, but actually, their tolerance to low rates has increased a significant amount since the financial crisis. you're right.nk the story going into the quarter was this expectation that
deposit rates could remain low, which is how it historically has worked out, and it may be wrong this time. so far, it has been ok. like jpmorgan, if you look in some of the commentary, they are trumpeting their success, showing that they can keep clients and our building a strong deposit base. wells fargo is still dealing with the aftermath of their scandal, so they have a different story. jonathan: pristine, great to have you on the program. mike gibbs of raymond james will be sticking with us. it has been a rough week for the bond bears. yields break through 2017 lows and stay there on the 10-year. time, 30. new york minutes dedicated to fixed income, 5:00 p.m. in london. from new york city, you are watching bloomberg. ♪
this is bloomberg. donald trump was outspoken on any number of topics when running for president. now that he is president trump, he is equally as spoken, even when disagreeing with himself about what he said a few months ago. kevin's candidate trump and is now covering president trump. -- kevin cirilli covered candidate trump and is now covering president trump. ofsident trump gave a number announcements about the economy which seemed to contradict what he said during the campaign. kevin: in the past, he talked about the export-import bank and growing capitalism are he said china is a currency manipulator, we are seeing now that that is not what donald trump is governing now. when he talked to the base of the party, the tea party or the
senator rand pauls of the world, they are concerned about this. this is a pivot to the middle and not to the right. david: there is concern of the right wing of the republican party. they are not the offense of china. it goes down the line. he is running away from his base to some extent a kevin: and putting himself at political risk. with the xm bank, when jeb bush was going to be president, he came out against the export-import bank, there was backlash. david: and he is generally perceived to be pro-jobs. kevin: yeah. so now you have people like the chairman of the banking committee, who does not really want to go against the house
financial services committee chairman on this issue. this is a move to the middle. when you look at the headlines in the washington post, wall street journal, new york times, everyone is signaling it is a move to the middle. david: you know washington well and donald trump well. if you are running a business and you are out in financial markets, what do you make of this? in this sense, which was the real donald trump? what is going on in the white house? is this an ascendancy of what might be thought of as the more moderate ring of the -- moderate wing of the white house? kevin: i remember on the when a campaign manager had members of the family step in to remove him, and know what you see with jared kushner and yvonne could trump, -- ivanka trump, aligning with folks like gary cohn. david: thanks. jonathan: let's check out the
markets. 10-year yield breaking to the low end of the range yesterday. 2.24% is the yield before on the u.s. 10-year. geopolitically speaking, there are the moves of donald trump in others. i want to bring in mike gibbs from raymond james and michael mckee. i asked about the fed's transmission mechanism to the market when the president says they like low rates and we dropped to 2.20%-something on the 10-year, what does that say about the flex ability to tight monetary policy? -- treasuryreserve yields have just done this, rolled over. mike: is suggested different dynamic underway now in the markets. they have tightened three times since the process began, and financial conditions are looser than they were before they started. it also says something about the
president's ability to move markets some. depth, it is the overall and liquidity of the markets, the effect we have spent so much money in this country, and you have north korea and syria and russia, and you get a bit of a haven trade and people keep coming in. dynamic,interesting and you wonder how long you can go on their they have to react at some point. jonathan: we have had this big haven bid over t past couple of weeks. now 2.24% on the 10-year. have you seen a re-price in this market but show some thing to go along? >> oh, yeah. i am still on the risk-on category. i think in the near term, some of the things we're seeing in the market showed that the market is a little soft at the moment. looks like it will probably come down a little bit more. we remain in the camps that the downside will be limited it we also remain in the camps of the
economy is ok. we think earnings are growing. we think the bond yields, it is a reaction where they are today. did you notice the record amount of short covering as bonds rallied? you had this little bit of risk-off because of geopolitical risks and then the president says he likes low yields. that is all setting the table that we have cleared the decks here the sentiment was just too positive postelection it we got extended an overbought, one-sided. you need to clear the decks and markets, and that is what is happening. that is why we continue to like risk-on. alix: look at the technical levels. this is the s&p and the 50-day moving average. we just breached that leveled at we briefly did late in march. but the last time we touched it was really back in november right around the election. how much downs i do you expect, and when do you want to be
buying? >> ok, well, the 50-day, yes, we have undercut that. i can give other technical indicators right now that lead me to believe the market is going lower. but i am looking at 23.22, the march low, and if we undercut that, then you are looking at the market going down in trading at the 20 to 33 level, maybe on the downside, 2282 on the upside, and that is the best area of technical support we see. and there is a market that had gotten ahead of itself, and it has got to have some fear, get in the markets, and then you will have the sectors coming down. look how the semis rolled over yesterday and look at how transports are not keeping up. i do not think the degree of downside is that dramatic. if you are a short-term trader, yeah, you have to be on the negative side to it but if you're looking at 3, 6, 12 months out, you look at this as an opportunity. that is why we would be focused on is technical levels as places
to start to move into some of these risk-on factors. alix: what are they? telecom off by 2%, industrials off by 1.5%. is that where you will be buying? >> oh, yeah. we have a favoritism towards tech, financials, industrials, and energy. those are all risk-on factors. we have reasons fundamentally that valuations will be there. in the context of what i see, which is a market going through in normal pullback and a market going through what it needed to go through. you need an introduction of a little bit of concern, and we're getting that not i do not think this reflation trade, i do not think this positive economic environment and the recovery in the earnings stream is over. it will not stop overnight. based on that, you have a pullback. alix: good stuff. thanks so much. coming up, gerard cassidy will be joining us on bank earnings.
alix: the vix over 16 for the first time since election day in 2016. what do you do if volatility picks up? joining us is mike gibbs of raymond james. the vix is a coincidental indicator, not a leading indicator, and it is telling us what is going on in the marketplace. you have the geopolitical rhetoric that has picked up and other good stuff. it is clearing the deck.
mix moving up is telling us there is some weakness ahead of us, very near term, but it is a buying opportunity -- the vix moving up as telling us there is some weakness ahead of us. but the world is not coming to an and related to the economy. alix: it is saying volatility will pick up. do you see it getting back to 20 average, for the vix? >> what is level going to be? i don't know. you never know. when it was laying down at this levels, sentiment was too positive, stocks were going up, and you saw that. this is what the market is supposed to dupe alix: you have to have a call if you're going to make a trade? how do you do that when you do not have a target? higher, it will trade from here. it is starting to break out. it is not going to the mid-20 levels, not going back to some of the levels we have seen before. as it moves up, you would be
buying it. i would do it in conjunction with watching the overall market. as the s&p pulls back to get it near support levels, then i would want to be buying. jonathan: mike gibbs from raymond james. let's wrap up the markets ahead of the opening bell. futures softer, down .60% on the dow. down .5% on the s&p 500. losses it will we make it three? potentially a second straight week of to client on the s&p. treasuries, tough one. yields at the low for the year on the 10-year -- 2.20 4%. you are watching bloomberg. ♪
attention homeowners age sixty-two and older. one reverse mortgage has a great way for you to live a better retirement... it's called a reverse mortgage. call rfree information kityour with no obligation. it answers questions like... how a reverse mortgage works, how much you qualify for, the ways to
receive your money and more. plus, when you call now, you'll get this magnifier with led light absolutely free! when you call the experts at one reverse mortgage today you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home... and here's the best part... you still own yohome. call now! take control of your retirement today! jonathan: from new york city, i am jonathan ferro. let's get you up to speed. weekend, we wrap up the trading week with the following move.
30.dow down by almost the s&p 500 down by almost five. if you switch of the boards, and the treasury market, -- noisy today down there, what is going on? it will be a rough one for gently for the bears. the bulls hanging in there. yields at the low end of the range for 2017 it we made a new low yesterday. the president likes a weaker dollar. down by .4%. crude with a little bit of a bid. we are 30 seconds in. alix: weaker dollar, lower yield. soft bank earnings. no good for equities. the s&p down by about five or six points but below that 50-day moving average to the last time we had that level was the end of
march. how much follow-through selling will we see or will we bounced back up? the dow off by .3%. the nasdaq off by about .1%. caps andet to the big a second, but i want to hit on regional banks, like pnc and citizens financial. pnc up by 1.5%. they let off the original earnings reports today. it was pretty good. this is truly about loan growth. they wrote off less bad loans and made better profit. the net interest origin exceeded estimates. they're subject to this net interest margins because of they loan so much. other names in the sector a touch weaker. fixed trading awesome as i type and jpmorgan, but now it is about loans and growth. -- jpmorgan by 1.1% off by .1%. total net charge-offs for the
portfolio to be up by $5 billion in 2017. overall charge ups were about $1.79 billion and core loans only up 9%. you have core loads up but not as much. charge-offs raising. citi, a similar story. they said this is not a robust economy. brings at the consumer down 16%. same story from wells fargo and they had a $9.2 billion drop in loans. weakness zynga cards, mortgage paydown, and auto loans. more on: joining us for the financials is gerard cassidy from rbc capital markets. and we have our bloomberg stocks reporter in our new york studios. there are some data points in the releases from the banks this morning that people have jumped all over, and it is about loan rejuvenation. have seen the weekly
reports from the federal reserve that loan growth was slowing in the quarter. it is our belief that the slowdown in loan growth can be attributed to the uncertainty with the new administration, of course you'd second, we point out that the energy leading area is much slower today than it was over a year ago. finally, the debt capital markets to go out of the bank loans in record numbers for jpmorgan and citi, so that is contributing to the slower loan growth. jonathan: soft data versus hard data, sentiment indicators for businesses and consumers have been right appear, really high. for you, if you look at the hard data, the loan growth, it is hard to reconcile the soft hard data story. how will that spread be reconciled? >> i think we will see that this is a seasonally soft quarter for consumer loan growth. taking the credit card numbers,
jpmorgan, wells, citi, they all had lower critical talents is in the first quarter. that is because of the holiday season in the fourth quarter. so it is a seasonal trend on the consumer side, similar to the mortgage business. we expect if consumer confidence numbers remain strong, you will see better lung growth in the consumer and the second through fourth quarter. if there is ander wells fargo specific issue that has weighed on them more heavily or if it is a broad trend they are suffering from. >> i think it is both, but you are right, they have the unique problem their wrestling with in terms of the consumer fraud activity that went on last fall. they are addressing that aggressively. but that is a complicating factor or their loan growth, no doubt about it. david: matt bailey is from miller tieback and comes from us from newton, massachusetts. welcome to the program. , some look at this year
gains have been given back. where are we headed next. because not only has the rally since the election been strong, it is really a 14-month rally. people talk about that banks have this one spike in the few weeks after the election, but the bank etf is up 70% over the last 14 months, at least 11. it has given back 10% since then. it has had this great move. my concern is it can give a little bit more back to the biggest thing we have to worry about is the yield curve. people have been pricing in a significant steepening of the yield curve. we have gotten the exact opposite. you look at the spread from the 2-year and the 10-year yields, and it is back down to where we were before the election. this whole thing, i mean, i do deregulationth
coming, that should prevent a floor, but i think that floor will be a little bit lower. 10% is a big pullback, but after a 70% rally, it is not as much. jonathan: bank bulls or bond bulls? >> over time, over the longer term, it will be the bank bulls. i was very bullish on bonds of the beginning of the year because of positioning. everybody was on one side of the boat, short the market. those shorts have been covered to a large extent. it is now more of a neutral basis heard but we are seeing some weakening in the economy, some of the data coming in little bit weaker than expected after a significant period of better numbers. i think yields will go little bit lower and banks will go a little bit lower, and it will be a great buying opportunity. we second half of the year,
will get some things out of washington to turn it around a little bit. i would hold off and the bank stocks right now. david: who is driving the bus, donald trump at the administration or janet yellen and the fed, when it comes to bank stocks? >> when it comes to bank stocks, i would say janet yellen and the fed, because one of the things that is very distinct in this quarter's numbers is that the nets that beat on the interest margin, their stocks are up right now. the two banks that missed on the their, wells and citi, stocks are down. so janet yellen and the fed. and when they start the unwind on their balance sheet, which is 4.5 trillion dollars, that we'll push the long end up and we will get the steepening of the curve later this year when they decide to do that. that is the reason investors want to own bank stocks, because these margins are widening and we expect loan growth to wreak salaried. much foranks so joining as, gerard cassidy. turning from banks to tech.
the us of the s&p tech sector has fallen for nine straight tech sectorthe s&p has fallen for nine straight sessions. the second time in history it has had this many down days. bloomberg. us from how much of this is a harbinger of larger things in the equity market and in the economy if tech really turns over? >> tech is an important sector. look at the nasdaq 100. the same stocks that account for , so ifthat market cap tech is taking a leg lower, it is indicative of larger market moves. these are big multinational companies. so you might have ideas perhaps that the domestic economy is looking a little bit frightening. a also have issues of perhaps weakening dollar that will hurt exporters. there are a lot of different things in the mix. we looking hedge fund positioning, for example --
before they were taking off a lot of positions on banks, now it is interesting. if you look at the data, that is seeping into tech, which means it is not necessarily just that the market has run up a lot and they are taking profits. we see indications that there are concerns about broader sectors such as tech. alix: part of that was semis. they were super popular for a while. look at the semiconductor index, below its 50-day moving average, no surprise. what is the downside here? where do you buy? index,he semiconductor what we are seeing, i am afraid, is the same thing was on the bank stocks. offkb bank etf, it bounced that 7, 8, 9 times since the summer. we saw the same thing in the semiconductor index. now that it is broken below, it is accelerating. you see the high 50 to traders
and the algorithms they use here at when they break a key level, they turn from buying every time to spilling it over. that could cause a good downtrend. as for a support level in the 500 bank, i think the key will be the 200-day moving average. we talk about the 50-day moving average. only a slight rake so far. but if the tech group, which is been a key leader, and that starts to roll over, which it is areaing to do, that is an we will see, the 200-day moving average on the s&p. we bounced strongly off of that to crimes -- two times in last six months. reallytech has been a strong indicator, really gone up since the election of the other one is banks. if it does, tech goes to the 200-day moving average, is that the market voting on the likely success of donald trump and his
administration? >> the thing i find is it is so important right now that we have to have congress do something. forget about donald trump for a minute. we agree that deregulation and some of the tax benefits will be positive. but if we do not get those things in quick fashion, at least two somewhat of the degree heat has been looking for, we will have some problems. we cannot relay on central bank liquidity and monetary policy the way we used to. the problem is this monetary policy, since 2000 eight, has basically been an enabler for congress. we cannot do that anymore, sit on the side. monetarylk about why policy cannot be relied on the way it used to be, but these guys in congress -- i mean, donald trouble be of a to point to them and say -- what harry truman did years ago and say that is a do-nothing congress. if they do not turn things
david: this is bloomberg. it is a note making the rounds on wall street, talking about two of the top performers in the dow since the u.s. election. that would be apple and the walt disney company, both hovering around record highs. today's note says that disney may be a logical target for apple, who is looking to get into the media and content sector. that callt behind joins us on the telephone. this is provocative, two very attractive stocks. is there anything to this possibility really? >> yeah, there are two things that get us to this point. one is apple has been focused on growing the services business. they have talked about increasing their content portfolio. the second part is they talked about their ability to do deals, and size is a big factor, with
the potential of repatriation. add those up, and there is the potential that apple can make a big play in media. we think it is very large, but disney would make sense for them. david: bob iger is on the board of apple. believe thatson to disney wants to get out of the content business. on the other hand, apple has almost a theological objection to obtaining a lot of the content. i thinke second point, apple is trying to play the playbook, if you may, from the success they had in music. it is to partner with everyone and have the broadest product. it worked great with itunes. the challenge is i do not think the content guys today are as a desperate to get the deals done as the music guys were a decade ago. so they have not been able to
replicate the playbook very successfully. the logic is you have to acquire your way into it at some level versus partnering up like in the past. disney is definitely probably not a willing seller or on the combinationt is a that would make sense to both of them in the long run. david: you have seen bob iger and how he negotiates. he will not sell for a cheap price. >> no, and in the framework that we did with media analysts is even if you assume they pay 40% premium to disney assets, you assume minimal synergies right now, lesson 2% cost them and you get 15% of the model. the math is there for the asset to work. david: why is disney worth more inthe hands of apple than
the hands of its current shareholders? say thatow, i would the accretion math comes from the fact that apple is sitting -- $200 million in cash, most of it overseas, and disney has much higher net income margins than apple's 1% return on cash positions they would be getting. david: fascinating, very provocative note. thank you very much for joining us. out tv . contract with us directly. ask the guest a question. we may ask the guest for you. this is bloomberg. ♪
time for the trading diary. cpi.row at 8:30, also a retail sales. joining us is the bloomberg international economics and policy correspondent, michael mckee. on a holiday.t what are we looking for? michael: it is not a holiday. it is a tradition that grew up in the early part of the last century where the new york stock exchange would close on good friday, and the bond market finally gave in and said we will close, as well, but it is not a federal holiday. the government is open. everybody in washington is working, including the folks at the commerce department it will put out the numbers. jonathan: we are on holiday. that is exactly what it is. anhael: but it is not
official holiday. we are expecting a small gain in retail sales. i brought my chart of autos versus retail did the big drop for auto retail sells for the month of march -- doesn't get replicated in the retail sector? particularly the department store in clothing store sectors? that would be a real concern for people about the strength of the economy going forward. we saw 30,000 jobs eliminated in retail in the last 12 months. it will be an interesting report to watch. we also get cpi. we will see if inflation is moving up towards the 2% target. alix: what will be the risk? you mention autos, but looking forward, it is about looking at personal consumption. where areowngraded, we? michael: 70% of the economy is consumer spending. if the consumer is slowing down, we will not get a jump in growth. the fed maybe slows down its tightening cycle if we see that.
and it helps make the argument in washington for additional fiscal stimulus. but it raises a conundrum. if we have 4.5% on implement and those people are getting paid, where is that money going? unemployment 4.5% and those people are getting paid, where is that money going? jonathan: what about the banks? -- itl: it has showed. has plateaued. some say businesses are slowing down investment. we are also talking about the largest companies that are swimming in cash. they do not need to take out loans, so it may have nothing to do with that. alix: thanks so much, michael mckee. hyman is joining sp or jpmorgan is up by 1%. you have been on the call. what were highlights from jamie dimon? julie: one of the analysts asked the bank about its retail exposure, and jamie dimon said
something like, you're way off base on this here it the analyst said the bank has a relative significant level of retelling is are, and jamie dimon said we don't. in the cfo came on at the end of the call with the numbers in front of her, she said it is hotel exposures, about $20 billion, commercial at $11 billion. sales that most of it is an investment grade. she said not that it is nothing, but in the context of the overall portfolio, it is not. back retailging concerns. jamie dimon talked a little about politics or decent regulations have crept first-time homebuyers in particular. as he has said before, it is not about our company, it is about america. he said it is not good for american growth and said the trump agenda is a progrowth smoothbut it will not be sailing necessary to get that through. david: bill daley said it was actually student loans affecting
first-time homebuyers, not regulation to her julie: they could bp was not asked about that in particular. car loans came up on the call to some extent. he said there are some delinquencies there but not out of line with what we were expecting. alix: and when they are going to raise the deposit rate. many analysts raised to that. the cfo gave more color on that they both basically said on the retail citing consumer side, they are not getting a lot of pressure to raise deposit rates yet. she said it could happen after the next couple of increases. on the wholesale side, they're getting low bit more pressure to raise those rates. jonathan: julie hyman, thank you very much. michael mckee will be talking the data points tomorrow on twitter. i will check in. alix: we will be here tomorrow
at 8:00 a.m. michael: alix is bringing breakfast. positive back into territory after a couple of days of losses on the spicy doing. no drama, no price action. the big price action has been the treasury market over the last couple days. a big repricing of yields yesterday. -- tworning, treasuries point 26% is year yield on the 10-year. for those taking a long weekend, enjoy it. bloomberg markets is up next. ♪
vonnie: from new york to london this hour and cover stories out of san francisco and also turkey. first, breaking economic data. sentiment beating expectations, analysts were looking for 96.5%, coming in at 98 percent for april, rent conditions also better than forecast as our expectations. university michigan, in place and expection -- expectation. inflation readings are not changing and sentiment is improving. let's get to market reaction. for that, we have taylor riggs. taylor: take a look at the majors. it looks like we are agreeing, we have losses earlier, but turning green a little bit, king led by tech and the financials