美债上涨，就业报告降温加息预期

ROMAINE: THE NET CURVEBALL OF THE U.S. JOBS REPORT, LIVE FROM STUDIO 2 HERE AT BLOOMBERG HEADQUARTERS IN NEW YORK, I’M ROMAINE BOSTICK. BAYLEY: A LOT OF RED ON THE SCREEN. S&P 500 DOWN ABOUT 26 POINTS. ALSO THE FACT THAT THE BIG DRIVER FOR THAT SELLOFF TODAY HAS BEEN IN THE TECH SECTOR. NASDAQ 100 DOWN ALMOST 2%. UNCERTAINTY ABOUT WHETHER OR NOT THE A.I. UNCERTAINTY IS GOING TO LAST FOREVER. A LOT OF RED ON THE SCREEN STARTING US OFF HERE IN JULY. ROMAINE: ABSOLUTELY. STARTING IT OFF WITH THAT JOBS REPORT. FROM AN ECONOMIC PERSPECTIVE, IT CERTAINLY WAS DISAPPOINTING. A SLOWDOWN IN HIRING FOR JUNE AND THAT’S AFTER APRIL AND MAY WERE REVISED LOWER FROM. A TRADER’S PERSPECTIVE, THE BAD NEWS DOES LESSEN THE INTEREST RATE RISK, TO THE EXTENT THAT IT GIVES THE DOVES AT THE FED AN ARGUMENT TO STAVE OFF RATE HIKES AND MAYBE PUSH CLOSER TO THE CENTER OF THE TABLE AN ARGUMENT FOR RATE CUTS. SWAPS TODAY SHOWING TRADERS PRICING IN LESS THAN A 20% CHANCE OF AN INCREASE AT THE JULY MEETING AND THAT’S DOWN FROM ABOUT 40% AFTER THAT MID JUNE MEETING JOLTED EXPECTATIONS HIGHER. >> I THINK THIS IS A GREAT REPORT FOR KEVIN WARSH. I THINK IT’S A GOOD REPORT FOR THE BOND MARKET. I THINK IT TAKES ANY PRESSURE THAT THERE MIGHT HAVE BEEN WITHIN THE COMMITTEE AROUND THE PEAK OF INFLATION AND POLICY RATES BEING TOO ACCOMMODATIVE AS A RESULT, KIND OF PUSHES THAT STORY BACK. IT DOESN’T ELIMINATE IT, BUT IT GIVES HIM ROOM. ROMAINE: EARLY IN THE SESSION, THE JOBS REPORT GAVE A BOOST TO CYCLICAL STOCKS, INCLUDING MATERIALS AND BLOOMBERG INTELLIGENCE SAYS THAT SEASONALITY ACTUALLY IS ON THE SIDE OF THOSE CYCLICALS. A DISTINCT ROTATION, THEY SAY, FORMING OUT OF MOMENTUM STOCKS AND INTO SOME OF THOSE LOW BETA CYCLICAL NAMES. CASE IN POINT, THE PHILADELPHIA STOCK EXCHANGE SEMICONDUCTOR INDEX HAS UNDERPERFORMED THE BROAD MARKET IN EVERY OTHER SECTOR UNDERNEATH THE SURFACE FOR TWO STRAIGHT WEEKS NOW. THE FIRST TIME THAT’S HAPPENED IN MORE THAN A YEAR. THERE’S BEEN A MATERIAL WIDENING ON INDIVIDUAL BONDS LIKE THOSE ISSUED BY SPACEX AND CORE WEAVE, REFLECTING MORE CAUTION ABOUT SOME OF THOSE LOFTY SALES AND EARNINGS PROJECTIONS AS WELL AS THAT RISK OF ANY SORT OF MEANINGFUL DURATION MISMATCH. BAILEY: WANT TO TALK ABOUT TWO COMPANIES THAT ARE EXPECTED TO GO PUBLIC SOMETIME SOON, THAT’S OPENAI AND ANTHROPIC. JUST LOOKING AT SOME OF THEIR ADOPTION RATES, THIS IS A BIG PART OF THIS ENTIRE A.I. BULL THESIS, THIS BULL MARKET, WHETHER OR NOT THE CHIP BUILDOUT IS BEING OVERSUPPLIED, JUST WANT TO LOOK AT THAT ADOPTION RATE, AS YOU CAN SEE, PRETTY MUCH PARABOLIC FOR ANTHROPIC BUT SEEING A BIT OF A PULLBACK OR AT LEAST A CATCH-UP FOR OPENAI. SO BACK AND FORTH AS IT RELATING TO THESE LARGE LANGUAGE MODELS BUT THEY ARE HELPING PIN UP THIS MARKET, EVEN IF THEY’RE NOT PUBLICLY TRADED AND PART OF IT. ROMAINE: LET’S KICK YOU OFF TO THE CLOSE ON THIS THURSDAY AFTERNOON WITH C.I.O. OF THE PORTFOLIO SOLUTIONS GROUP AT MORGAN STANLEY INVESTMENT. MANAGEMENT. JIM GRARYCTS TO SEE YOU. I WANT TO START OFF WITH STOCKS HERE. REALLY JUST WHERE THE BROAD MARKET RIGHT NOW IS KIND OF FEELING THINGS HEADING INTO THIS SECOND HALF. DO YOU REMAIN OVERWEIGHT GIVEN THE GAINS, THE OUTSIZED GAINS WE HAD IN THE FIRST?

>> I DO. I THINK THAT THE PROGRESS IN THE MARKET HAS BEEN VERY, VERY WELL UNDERPINNED BY GOOD FUNDAMENTALS. WE’VE SEEN EARNINGS THAT HAVE COME OUT REALLY STRONG THE FIRST QUARTER. AN EXPECTATION FOR SECOND QUARTER EARNINGS TO BE REALLY GOOD. THE OTHER IS THAT WE’RE NOT SEEING THAT THIS GAIN IN EQUITY PRICES IS COMING FROM MULTIPLES. IT’S COMING FROM THE EARNINGS SIDE. IN FACT, MULTIPLES ARE STARTING TO CONTRACT A LITTLE BIT. IN MANY WAYS, WHAT PEOPLE THOUGHT WERE AN OVERVALUED MARKET, WE SAW THAT EARNINGS ACTUALLY GREW INTO THIS. WE’RE ALSO SEEING AS YOU WERE POINTING OUT, WE’RE STARTING TO SEE MUCH MORE OF A CYCLICAL STORY, THIS BROADENING. VALUES OUTPERFORM GROWTH IN THE FIRST HALF OF THE YEAR BY ABOUT 10 PERCENT ANT POINTS -- PERCENTAGE POINTS. THIS IS NOT A MARKET THAT FEELS FROTHY. IT HAS A NARRATIVE OF IT’S JUST ABOUT THE MAG-7 AND SEMIS AND TECH IN FACT, SEMIS AND TECH HAVE ACTUALLY HAD A MORE DIFFICULT TIME. ROMAINE: I’M GLAD YOU BROUGHT UP THAT BECAUSE I WAS LOOKING AT THE END OF THE MONTH, QUARTER, I SHOULD SAY, EVEN AS OF TODAY, THE S&P EQUAL WEIGHT INDEX OUTPERFORMING S.P.X. FOR A SECOND STRAIGHT WEEK. I WAS LOOKING AT THE FACTORS TO WATCH AND YOU MAKE A GOOD POINT. I WOULD THINK MOMENTUM AND GROWTH WOULD HAVE BEEN RIGHT AT THE TOP BUT IT WAS VALUE AND DIVIDENDS, A LOT OF OTHER THINGS THAT OUTPERFORMED THE BROADER MARKET. IS THE ECONOMIC BACK DROP GOING TO BE SUPPORTIVE OF THAT GOING FORWARD?

>> SO I THINK IT WILL. I THINK NOW THAT WE HAVE SOME OF THE HEADWINDS OF HIGHER ENERGY PRICES, HOPEFULLY THE U.S.-IRAN CONFLICT IS ON THE MEND. WOULD ERR GOING START TO GET MORE CLARITY. ONE OF THE THINGS THAT WE’RE LOOKING AT IS ACTUALLY ONE OF THE LAG ADDER THAT’S OUT THERE WHICH IS THE CONSUMER. MANY PEOPLE HAVE BEEN WORRIED ABOUT IT BECAUSE HIGHER GAS PRICE, YOU KNOW, WHERE ARE THEY GOING TO GET THE MONEY TO SPEFNLTD THE CONSUMER’S BEEN RELATIVELY STRONG BUT IF YOU LOOK AT THE VALUATIONS IN IN THE MARKET, MANY PEOPLE ARE NEGATIVE ON THE CONSUMER. WE SEE THIS AS A SECOND HALF OF THE YEAR THAT’S STILL LIKELY TO GROW, YOU KNOW, A LITTLE ABOVE 2%. LOOK AT THE PAYROLL NUMBER THAT CAME OUT TODAY. WAGES ARE STILL GOOD. UNEMPLOYMENT RATE’S RELATIVELY LOW. WE THINK THE CONSUMER IS A LOT STRONGER THAN WHAT MANY. MARKETS ARE GIVING IT CREDIT FOR. SO I’M GOING TO SAY, YEAH, LOOK, CONSUMPTION IS 70% OF G.D.P. AS LONG AS G.D.P. GROWTH STAYS, YOU KNOW, REASONABLY STRONG I THINK THE CONSUMER DOES WELL AND I THINK THE BROADER ECONOMY DOES. BAILEY: BUT IF THE CONSUMERS DO WELL, DOES THAT REPRESENT AN OPPORTUNITY TO INVEST IN SOME OF THESE LAGEREDS?

I’M LOOKING AT A MARKET AGAIN, WE’RE SEEING CHIPS KIND OF THROUGH THE ROOF BUT WE’RE ALSO SEEING ANYTHING AROUND INDUSTRIALS THAT HAS A SMALL PART TO PLAY IN THE A.I. THESIS BOOMING. >> YEAH, SO LOOK, I THINK THE A.I. TRADE IS -- IT’S GOING TO COME IN WAVES. THERE’S GOING TO BE VOLATILITY AROUND THIS. I THINK THE CONSUMER OVERALL IS STILL GOING TO REMAIN RELATIVELY HEALTHY. I JUST DON’T THINK THAT IT’S AN OVERVALUED SECTOR AT THIS POINT AND I THINK WHAT WE’RE LIKELY TO BE SURPRISED WITH IS THE RETAIL DATA, THE CONSUMPTION DATA THAT CONTINUES TO COME THROUGH. I THINK THIS BROADENING IS REAL. SO YEAH. I DO THINK THAT THE A.I. TRADE IS OBVIOUSLY TAKING A LITTLE BIT OF A BREATHER RIGHT NOW. THERE’S SOME VOLATILITY AND BUMPS. I GET IT. BUT WE’RE ON THE SIDE THAT THIS IS STILL, YOU KNOW, A VERY BIG MARKET CHANGING EVENT, ECONOMIC CHANGING SECULAR STORY. AND WE JUST HAVE TO MANAGE THE VOLATILITY AROUND IT. BAILEY: YOU MAKE AN INTERESTING POINT IN TERMS OF THE SECULAR NATURE, IT’S TOP OF MIND THAT WHEN YOU LOOK AT SPENDING IT’S REALLY OBVIOUSLY DRIVEN BY MAG-7 BUT IT’S CAPEX FROM COMPANIES, NOT NECESSARILY CONSUMERS SHOWING UP AND SPENDING A LOT. >> THAT’S A GOOD POINT. SO WHEN WE THINK ABOUT THE CAPEX STORY, SO THE NARRATIVE IN THE MARKET IS THAT THERE’S A LOT OF CAPEX, THAT’S WHAT’S DRIVING THE MARKETS AND A LOT OF THESE BIG TECH COMPANIES AND THE GAINS BUT, LOOK, THE REALITY IS THAT RIGHT NOW THE WAY PEOPLE THINK ABOUT A.I. IS AS A COST-CUTTING TOOL. AND THAT’S GOING TO ADD TO THE BOTTOM LINE AND THAT’S GOING TO DRIVE PROFITS AND THINGS LIKE THAT. OK, FINE. IN THE INITIAL PART OF THE STORY, THAT’S CORRECT. ULTIMATELY WHAT I THINK HAPPENS IS THAT A.I. WORKS ITS WAY INTO BECOMING A MUCH MORE PRODUCTIVE, EFFICIENCY STORY, AND A CREATIVE DESTRUCTION STORY, WHERE NOW COMPANIES SEE IT AS AN ENTERPRISE SOLUTION WHERE IT NOT JUST DRIVES PROFIT BUSINESS CUTTING COST BUT IT DRIVES PROFITS BY INCREASED VOLUMES, INCREASED SALES, INCREASED PRODUCTION. AND THAT’S WHERE I THINK YOU GET THE SECOND LEG UP IN THE A.I. STORY AND IN THE TECHNOLOGY STORY THAT SURROUNDS IT. SO STILL VERY POSITIVE BUT I’M WAITING FOR THAT. ROMAINE: IS THAT KIND OF MAYBE WHAT WE’RE SEEING KIND OF PLAY OUT OVER THE LAST FEW WEE