Mike Mckee, John Well, FED discussed on Bloomberg Surveillance


Again by 9 cents of 1% on the S&P on the NASDAQ 100 down by 1.5 yields are lower by 9 basis points to two 83 35 with your economic data is Mike McKee Good morning John Well on the inflation front it looks like we're coming in a little better than anticipated on the course side PPI for final demand on a month over month basis up half a percent that is down from 1.4% in March and it matches the survey The core rate comes in up four tenths during the month down from 1% in March and less than the 7 tenths forecast for the month A year over year basis PPI is at 11% It's down from 11.2% and the core comes in at 8.8% down from 9.2% That's a little less than the 8 9 that was anticipated The rise the increase in the month primarily attributable to a 1.3% advancing prices for final demand goods So services are down it appears a little bit I haven't quite got to that number yet Final demand construction up 4% So maybe a last gasp by builders trying to get things done Initial jobless claims come in stronger than anticipated They are up by 203,000 that's 1000 more than the 202,000 last month but the forecast had been for one 93 Now we're at levels that really none of that matters It's a rounding errors It could be some sort of unique situations in any one particular state It does tell you basically that the overall job market is still very strong Michael just whip through the price action and I'll come back to you in just a moment as you get a few more seconds to go over this We're still down In fact we're lower on the S&P about one 4% call it 9 tenths of 1% and that's that 100 down by 1.6 and a major moves off the back of this in a bond market We were already lower by 8 9 ten basis points about their level now two 82 63 crude lower by 1.4% We've seen commodities get rattled a little bit more recently Earlier on this morning you wrote a dollar with a one O three handle right now one of four 24 negative 8 9 tenths of 1% on that currency pair We're gripped by growth scare off the back of some of these inflation numbers and how the fed set to respond to it and what all this means for growth further down the road Mike can you help us understand the relationship between the PPI numbers the prices that the factory gate that you just went through And the end consumer prices just the relationship for you and what this could mean in the next few months Well there's not a direct relationship because what ends up happening The PPI measures what companies are charging for their goods Their prices and it's divided into those who sell directly to people and those who sell to other businesses And the problem is is that a lot of the price increases can get absorbed by other intermediate users in their margins So it doesn't translate directly into CPI but the fact that we're seeing a bit of a slowdown in the increases is good news It is sort of what we expected to happen on a year over year basis probably has to do with the base effects we've talked about but the fact that the core comes in a little bit lower on a month over month basis is a hopeful side Maybe too much into one month I'm glad that you talked about core does core matter as much with producer price inflation as it does with consumer price inflation considering the fact that energy and materials are a lot of the bases of a lot of the factory products that are made Yeah I mean you put your finger on it there Lisa the fact that companies are charging less for some of the raw materials or raising prices less shall we say not charging less Is going to be take a little pressure off of final demand And final demand goods So in that sense it is a little bit of an improvement And again I want to stress one month does not make a trend but it is what has been expected So that is some good news this morning Thank you buddy Awesome as always joining us now Steve for shudo Chief U.S. economist at mazur America Steve is there light at the end of this dark tunnel Well there is light at the end of the tunnel Unfortunately I think we're in the final stage of what is going to be a significant bear market especially in equities As we've started to disengage stocks and bonds yesterday and it looks like again this morning I think that's recognition of the fact that what's taking place in terms of the equity market now is a wrench on the station or a recognition of the fact that the Federal Reserve is not going to be executing the Greenspan put any time And as a result of not doing that the equity market has to be intaking down earnings expectations So far the decline in equities has been concentrated in the multiple as long-term interest rates go up the multiple comes down stock indices come down Now we're at the phase I believe we're starting to see bonds go down and equity still go down at the same time Bonds go down and yield in equities go down in price I think that's telling us that we're starting to get to the point where people need to start to downgrade their earnings numbers And that's the final shoe that needed to fall on the equity market We still could get down to that 3500 on the S&P 500 and we could still wind up with slightly wider spreads But if this trend continues with the two markets disengaged IE barn yields can go down while equity prices go down We've really reached the top in the yield on the ten year note maybe three 33 24 was would have been the absolute top three O 5 eyes where we had I believe at the top on the last couple of weeks I think we could very well be at the point where we have to top in the interest rate environment Yes Okay so there's a lot to unpack there I want to just start with what you first started on The idea of we're at the final stages of a significant bear market I'm curious what kind of recession you see getting priced into markets and frankly as the most plausible in the next 12 to 24 months Yeah you guys did a great question there I mean I think when you look at what's taking place in the economy I find the hard landing which is growth recession I think the economy is going to be running well below trend that can't discount or ignore the fact that we can have another quarter of negative GDP in here unlikely to be back to back negative quarters of GDP But we're going to have an economy running in that 1% or slightly lower growth environment over the next four quarters The reason why we don't get a classical recession is there's no major inventory overhang There's no overbuilding in any major hard asset category There are no significant financial dislocations that we know about And therefore I think in that environment the hard landing is a more realistic scenario than the outright recession but an economy running at sub 1% means Q four of a Q four growth for this year is about 0.4% in contrast to 5% last year and that takes down should take down operating earnings to about 5% growth as opposed to ten to 11% growth as has been recently discounted by the marketplace Steve we don't get the sense that the Federal Reserve is particularly concerned at this point about growth There are laser focused on inflation Where do you think inflation will be able to get down to by the end of this year and where is that going to leave the fed Well again when you think about what's happening the base rate effects are going to come off So I think we're going to lose about 3% there It's everything else beyond the 3% decline in the year over year numbers from the peak that are going to matter for the fed And I think you know I think in the reality of the situation is we're going to come down more quickly I think we can lose about half of the gains that we've seen in the operating numbers year over year So I believe somewhere between July and let's say September will see sort of a pivot by the Federal Reserve away from aggressively hiking rates to developing a more shallow rate hike scenario that will probably continue over the balance of the expansion When do you expect us to see the actual tightening matter to the economy Start filtering out to whether it's the slowdown in housing the people are expecting or companies borrowing less money Well I think you're already seeing it to be honest with him and you look at the headlines of the conversation by meta you look at what's happened to Uber you look at what's happened to lift you look at the conversation from Amazon that perhaps they may have overbuilt issues You look at the inventory of some of the retailers that we see in inventory as accumulating And then you look.

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