Points. All 10 major s p 500 groups are higher. We will get to 11 groups later on this week when the s p spins off greece. S p, in terms of percentage gain move, it was the best day since july 8. Joe i think its pretty remarkable. I think a lot of people would have expected some followthrough after how ugly friday was. They didnt get it at all. Even though the speech was clearly dovish, markets were rallying before that. Matt markets had set themselves up for some kind of surprise from laelchange brainard, who has always been very dovish. Obviously, that didnt happen. Here you can see the stocks up the board. across almost 2 on the nasdaq. One thing i think is interesting is that defense stocks were the biggest winners. Consumer staples, telecom, utilities. The p any ratio is up to 22. 4 22. 4. P e ratio is up to its more expensive than the 10 year average. Functionok at the sps on the bloomberg. Scarlet so much green. Green, which means volume is up over the 20 day moving average. The blue is where we are today. The greenest the 20 day moving average. We are green is the 20 day moving average. We are trading a lot more. ,oe lets talk about lawns because that continues to be the , because about bonds that continues to be the center of action. The story had been rising rates. More of that today. Lets look at the intraday spread. There was a lot of action. Out a while. Financials, the big theme is the two year yield not rising as much as the 10 year. You can see we continue to rise into positive territory. Actual yield on the german 10 , similar story with japan if we look at a onemonth chart for the japanese. Back to flat on the japanese 10 year. The pool of negative yielding bonds is actually starting to disappear. Finally, greece. We are starting to see anxiety return. People talk about concerns, backsliding, bailouts. Have been out in front on this and talking about how this is something that would rear its ugly head again. Fed president has signaled it was reasonable to raising rates. Emergingmarket currencies extending their slide, but well off their earlier lows. In brazil, the honeymoon might be fading. A six week low after a second day of protest. Has a key testnt this week. You get a sense that the corruption goes pretty deep in brazil. We mentioned the mexican peso. Day. Weaker for a fourth is also tied to Donald Trumps election prospects. Lets look at precious metals. Brainerd was dovish. We saw a bit of a pop from the lows of the days for gold. Silver did better no, it did worse. Anyway, you can still see the same pop and coming off the lows of the day, still down. Scarlet lets take a deep dive into the bloomberg. We talk about how volume has come back. Participation has come back. Summer is over, and global seems to beress making a reappearance. In february, there was talk of a global recession. This volatility has held for the most part, which indicates there is more Financial Stress than usual. There was a big jump on friday. Percentage jumps. On friday, this index jumped 112 . Matt how many days did we go without a 1 move . Scarlet 40. Matt we had a 2 move on friday and it looks like we will have a 2 move on the nasdaq. Had so the last time we much volatility was back in august of 2015. Matt and the demand for treasuries has dropped. Have a chart, the bid to cover ratio. 20 billion, i think of 10year notes and 24 billion, threeyear notes. This has come down to below average, obviously. There are 11 auctions here. I think one of the interesting things, also, is the primary deal or cut of the auction is negligible in this auction. Its a massive auction, 44 billion. The primary dealers arent showing up. Over the weekend, we had a story about someone who applied for a primary dealers license, tried for years, and when they finally got it said you know what . We dont need the stress. At whatm looking scarlet was talking about. Strategy that is long equities, long treasury. It had its second worst day in the last year on friday. Everything got crushed, a lot of the same degree. The last time we had a day that that was in december. For more on this and Everything Else going on in the markets, lets bring in Oliver Renick. , i think everyone after friday imagined we would get some sort of continuation. Regime change, higher rates, what does it mean . Today, we get a huge pop. What do you make of that . Pretty incredible. Do you go from a zero volatility environment to 2. 5 down and then up 1. 5 the next day. Scarlet and this is a steady progression of gains. It really is incredible. Theink that tells you that dip after the speech hey, how much more dovish could she have been . Rumors sell the news, buddy. People wereaybe feverishly selling in the market on friday, a lot of stocks down 4 5 . A veryy, things get oversold and then you want to go in and buy it. That kind of stuff can trigger that kind of turnaround. Ultimately, i think there was a big concentration on the speech. Aret of Market Participants looking at the daily trades that morning. Kind of exacerbated something already happening on the back of what joe has been following going back to zero. Suggested there is not more on the plate as far as stimulus goes. People will continue to suss out what the Central Banks will do. Course, we are paying attention to the correlation between stocks and bonds. Matt or everything. Scarlet here is what you brought to us. S p 500 earningsyearolds in white. S p and purple. Panel youly, the top can ignore, but its there. This is valuations. Bonds were very highly valued. Stocks are highly valued on an historical basis. But if you look the cash at the bottom panel, this is the parity story joe was pointing out. Getsthat correlation negative, thats a very far down in the red. One is around big taper tantrum. Even though we have learned, ok, friday didnt mark the beginning of some new regime change or er Interest Rates, i dont think people will forget about this. This will come back. Whether it is in two months before the fed actually does hike or further down the road, when you continue to have more and more money going into bond type investments, youre going to get those deals on winding together. If they rally together, they will unwind together. Lookingething you are at right now is momentum stocks. Is this something that jumps out at you . It all blends together. Monthlly, you have a six rally from january to the end of june. Bond stocks are doing well. That puts them on the radar for strategies tracking momentum. Momentum is just about pick a time frame and see what gain the most over that time frame it could be and anything. Up the ishares momentum etf right now. There were no utilities in it. Less than 1 of the holdings were telekom. About 50 were staples. Today, the same 50 of staples are there, but you have 10 utilities and 5 telecom. Suddenly, you have roughly 30 portfolio areum stocks that are not usually momentum stocks. Joe i want to look at the two year yield, which has not moved. This is supposed to be sensitive to policy, but this is not where the action is. Arent we seeing any action . Its really about the long end, international, Central Banks outside the u. S. Perhaps the Interest Rate talk is not driving the twoyear , but thats a great point. Jobink theyve done a great telegraphing this over the past 48 hours of trading. The movement in the bond market has been much more on the longer and. Withw that work expectations on friday. Scarlet when you look at the economics price monitor, you can see that the last couple of reports we have gotten, mainly jobless claims and wholesale inventory, we have a string of negative surprises. Yes, and that has been the tram breaking the previous trend over the last couple of months. That was happening, it seems like the market was reacting pretty favorably. Situationt really the now, at least it doesnt seem like that for friday. You have jamie dimon who said its time to raise rates. Scarlet he has a vested interest. The same time, he voices the opinion of a lot of people out there we talked to every day. They are saying lets do it for the right reasons. Matt the board said lets get the hike done and he is running a Huge Consumer company. Surveys of cycle indicators. Maybe it is not all bad for u. S. Consumers. All right, olli rehn it, thank you for josh Oliver Renick all right, Oliver Renick, thank you for joining us. Is a september rate hike off the table . This is bloomberg. Mark time for first word news. Donald trump was back on the campaign trail today, wordssing a National Conference in baltimore. He criticized Hillary Clinton for calling his supporters a lastt of deplorables week. Mr. Trump it was perhaps the most explicit attack on the American Voter ever spoken by a major Party President ial nominee. Total disrespect for the people of our country. Said such comments should disqualify clinton from seeking the presidency. Will meet with top leaders of congress this hour as another Government Shutdown deadline fast approaches. Lawmakers in the white house are deal to fightng a the zika virus. Also on the table, the asian free trade deal. Investigators believe a fire at a mosque could be a hate crime. Video shows someone approaching the mosque moments before a flash was seen in the fire started. Extensive there was damage. The mosque was attended by the shooter at the orlando nightclub, the worst mass shooting in u. S. History. In syria is now in effect. It marks the latest attempt to end the fiveyear conflict, which has killed more than a quarter Million People and driven some 11 million more from their homes. State johnary of kerry gave an update this afternoon in washington. Mr. Kerry there will be challenges in the days to come. I expect that. I think everybody does. But despite that, this plan has a chance to work. Said secretary kerry also the u. S. Could approve strikes by Bashar Alassad against isis and al qaeda as part of the new. Easefire global news 24 hours a day analysts inver 2600 over 160 countries. Fed board member Lyle Brainard keeping a dovish tone Lael Brainard keeping a dovish tone in her remarks today. She said banks would be wise to keep policy loose. What can we make of all the fed speak . Lets ask the chief u. S. Economist for barclays. He joins us now. Michael, thank you very much. Everyone knew that brainard has a dovish reputation. She is very concerned about inflation and the labor market. Thought she would set up a september rate hike. D not do that at all. What do you make of where we stand now . Would say her comments were in line with expectations, even a bit more dovish. She made an argument for caution in light of what other fmo see members have said. We think the data has cleared hurdle for a strike. Cleared the hurdle for a september hike. It has evolved in line with forecasts. The problem is, markets are praising it. Historically, the fed doesnt move and less the markets have it appraised in. Communications in recent weeks against a mildly softer data backdrop hasnt been enough. Goal of all the speeches to move the market more toward the prospect of a rate hike . It may be. Surprising inwith a speech or article, but not fine with surprising in the decision. Historically, rates have hiked when volatility has been a 70 or higher. Scarlet this is something jamie dimon has spoken about in the past. Fed officials had no problem surprising markets. Matt listen to what jamie dimon had to say. Mr. Dimon right now, we kind of tell you its going to happen. We forecasted going forward. Federalto look at the over. Paul volcker raise rates in between meetings on a sunday night 200 basis points. There are other ways to do this. You can not make that which is uncertain certain, and we should stop trying to do that. Way, you are the section chief for the board of governors watching the Financial Markets reaction. Does the fed take Financial Markets reaction more seriously in 2009 . Id should they be as concerned sout Financial Market reactions . Yes in the following cents. The world looks different today than it did 10 years ago or back can 19 80 with volker. The u. S. Is diverging from back in 1980 with volker. The u. S. Is diverting from other economies, but slowly. We have seen examples of feedback in a negative manner to the u. S. Economy. There is a correlation between the news and how the economy develops. About september, december. Does any of it matter. Of whenw, regardless they go, there is still an expectation of Forward Movement at a shallow pace. Right now, you have action seemingly driven by the long end. I think the debate between september and december is largely irrelevant, based on what you just said. The main question this year was are we headed into a recession and is a coming soon . The labor market said no. We are better than we have been. Frontend rates should go gradually higher. Markets are looking for what is the issue that causes a breakout from the environment we are in. Look at a moderate growth, very patient fed, and that doesnt change things. Matt there is an important event between september and december. What would that be . [laughter] politics person said fed policy. In does anyone believe him . If you are moving the front end rate today or the Balance Sheet with the hope of getting financial conditions further down the curve. Think it makes sense to incorporate that. Politics, i mean, everybody generally has their own bias, but i do think they tried to walk into the meeting and say what has happened and what should we do . I think they try to take the politics aside. To be a there is going lot of data that comes out that is pretty critical. Saleil sales, whole inflation, tpi. Will any of this be enough to sway the fed to make a significant change . Crexendo think so. Right now, the paperwork it i dont think so. Right now, the paperwork is being developed for the meeting. Moves, i thinkor the major decisions will be made before. You mentioned the interview with the fed. The data is still a little short on inflation but trending in the direction they expected. The labor market recovered from the may swing pretty nicely. On the other hand, whats the rush . It doesnt look like there is any real prospect of inflation breaking out. Brainard made it clear that 2 is a symmetrical target that can on the upside as well as the downside. Why the rush . What you led into this segment with, equity prices moving ever higher. Its what rosenberg says out of boston. Bad things happen when Monetary Policy is to lose for too long, and we have been pretty bad at seeing those things and judging them in real time. Had a chart up that i would love to bring up again that i find fascinating. Tradable goods and domestic cpi. Tradable inflation is basically nonexistent. Global trade causes deflation and so forth, but the domestic cpi and services, what we do here, quite firm. Should that be what the fed looks at . Can it really control the other one . This is where the committee is split. Energy, and we separated out based on value. Greater import value ads are tradables. The people who want to move now on the fed are the ones looking and saying the domestic economy looks fine. When that Dollar Energy starts moving away, inflation will be higher. That is what the focus should be what the rest of the world is saying. Matt thank you so much for being here. , do we have more to go in the bond market. Apantrum this is the chart you cant mess. I am mark crumpton. Lets get to first word news. Hillary clinton will release more medical records following her stumble at a 9 11 ceremony in new york. The Campaign Later revealed that clinton has pneumonia. Her press secretary and other staffers say they made a mistake in handling the situation. Hasrace for the white house nine more weeks to go, but some voters have already started casting ballots. Early voters will make up more than half of the electorate in the crucial states of north carolina, colorado, florida, arizona, and georgia, according to projections from the assist you to press. In 2012, 30 5 of voters did so before the general election before thers did so general election. President obama said he will veto legislation that would allow 9 11 families to sue saudi arabia. It passed the house and senate. Congress could override obamas time in his first presidency. The senate could move soon on a 10 billion Water Project bill million fors 220 flint michigan and other communities struggling with leadcontaminated water. The bipartisan bill would authorize 29 projects in eight teen states. In 18 states. Powered by journalists in over 120 countries. I am mark crumpton. Scarlet, back to you. Bounce back from friday, and look what happened here, the dow industrials up, the s p gaining 1. 5 . The federald reserve governor, was dovish. Ngly sounding more hawkish after what said. Osengren joe they said this could set up a september rate hike. This is one of the reasons they paid so much attention to it. I went to take a deep dive and talk more about the japantrum scarlet did you just make up that word . It up earlier today. In 2013. The blue line is the japanese 10year. I am always a little skeptical of these charts. Nonetheless, it is fun, and even if the pattern is somewhat nonsense, it does be to the idea that people are worried about, once again, a central bank not doing as much qe, not as much money coming into the market, and that is reverberating across asset classes. Keep an eye on this. We will see if it continues to track. Scarlet and the 10year way to go. Ave a long for more, i want to bring in a global strategist with a security company. Bob, thank you very much for coming in. You think japantrum is a dumb that is ok. What do you think about this in general . What is going on with the rates that is driving it and calling the shots right now . Think that is what is driving Market Street dont forget, we had an ecb meeting i think that is what is driving the markets. Forget, we had an ecb meeting last thursday. I am not sure there is much left for them to do, and on top of that, there was a presentation today, which some people thought was a signal, so you had a lot of th