Five Things You Need to Know to Start Your Day: Americas

Good morning. Stocks rise before key CPI data, Bank of America upgrades its outlook for US earnings growth while Jamie Dimon punctures optim [View in browser]( [Bloomberg]( Good morning. Stocks rise before key CPI data, Bank of America upgrades its outlook for US earnings growth while Jamie Dimon punctures optimism over a soft landing. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. CPI Day Global stocks are in an [upbeat mood before today’s crucial US inflation data](, with Asian and European stocks climbing and S&P futures signaling a stronger open. The rally comes even as the headline number is expected to accelerate slightly on a monthly basis, while the core gauge cools. The data is seen as perhaps the [key release of the month](, with options traders  hedging for moves in the S&P 500 of 0.9% in either direction after the report — more than after the Fed’s interest rate decision next week. That’s according to Citigroup analysts, who said that a surprise reading might break the equities rally. Bloomberg reporters also flag that the release [poses a risk]( to a $61 billion slate of Treasury auctions this week. Not So Fast Still, Bloomberg Economics says today’s print is [unlikely to enough to convince Federal Reserve officials]( it’s safe to begin lowering rates. While economists Anna Wong and Stuart Paul say the annual core reading may drop to the lowest since April 2021, that won’t “provide clear enough evidence of disinflation to boost the Fed’s confidence to cut rates.” However, they say the Fed may finally ease as soon as May — which is their base case for the first cut — as inflation and the labor market cool. Earnings Hopes Away from inflation, analysts are turning more optimistic on the outlook for 2024. Bank of America strategists say US equities are entering a virtuous cycle after another strong earnings season, prompting them to raise their S&P 500 EPS estimate to levels that imply 12% growth year-on-year. They also see the US economy growing 2.7% in 2024 — almost double a previous forecast. The upgrade comes after the strategists [said Monday]( they see little evidence to support the worriers on Wall Street, who say the stock market has risen too far, too fast and is approaching bubble territory. Dimon Pessimism This kind of optimism hasn’t rubbed off on JPMorgan CEO Jamie Dimon, who said today[ he wouldn’t take the prospect of a recession in the US]( “off the table.” The world is pricing in a soft landing, at probably 70-80%,” he [told the Australian Financial Review Business Summit](. “The chance of a soft landing in the next year or two is half that. The worst case would be stagflation.” Dimon added that economic indicators have been distorted by Covid-19 and he takes them with “a grain of salt,” saying the Fed should wait for more clarity before lowering interest rates. BOJ in Focus Away from the US, the big questions in markets are swirling around the Bank of Japan. Toru Fujioka and Sumio Ito report today that officials there are [edging closer to raising interest rates]( and will decide whether to move this month at next week’s policy meeting, with the outcome currently too close to call. Regardless of whether the first rate hike since 2007 comes in March or April, the assessment of officials is that the bank is close to liftoff, our team writes. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Traders add to [BOE rate cuts bets]( after slower wage growth data. - John Authers looks at whether [tech stocks are in a bubble](. - Chinese stocks[gain 20% from lows](, fueling market bottom calls. - Xiaomi surges most in year after setting up [showdown with Tesla.]( - Argentina [cuts rates to 80%](in shock move after inflation cools. And finally, here's what Joe’s interested in this morning AI is pretty cool. You can see why investors are enthralled by it. The various chatbots and image generators that have become popular over the last year half genuinely feel magical at times. But where this is all going to go economically remains highly uncertain. Will they reduce the need for lawyers? Will they make customer service better? Will they change how the medical industry works? Will they augment the capabilities of normal office workers and make everyone way more productive? There's no shortage of theories and thought pieces out there. It's definitely a bull market for tech pundits and podcasts. In the hear and now, while AI is extremely fascinating, what we could really use are some better robots. At a time of persistent -- and perhaps structural -- labor market shortness, it'd be great if we could get some robots to make burritos, or serve as life guards, or do other types of labor that requires a certain level of physical dexterity. Yes, of course, robots already exist, and that company Boston Dynamics [has put out a lot of wild videos](. But it's not clear that they've moved the dial in terms of economic productivity. There was a [fantastic interview in Wired magazine]( back in February with Nvidia CEO Jensen Huang, in which he suggested that a new era of robotics may soon be at hand, thanks in part to the same type of advances that have powered the chatbots. When asked about the next generation of technological breakthroughs he said: "If you could generate text, if you could generate images, can you also generate motion? The answer is probably yes. And then if you can generate motion, you can understand intent and generate a generalized version of articulation. Therefore, humanoid robotics should be right around the corner." Yesterday in his [newsletter Import AI](, Anthropic co-founder Jack Clark [wrote about a brand new paper]( discussing similar ideas as what Jensen Huang was talking about. Why this matters - robots are about to get really good counterintuitively quickly: For many years, training robots sucked. Either you had to train them in reality and it was very slow and they overfit. Or you trained them in simulation then dumped them into reality and watched them fail. Or you spent a huge amount of money in data and compute crossing the sim2real abyss. But over recent years, algorithms have got more efficient, data collection has got easier, and new paradigms have emerged like the dumb 'just embed everything and train a prediction model' approach popularized by LLMs. And as we see elsewhere in this issue in the domain of bioscience, these next-token prediction paradigms work very well and seem like they can unlock progress in challenging parts of AI. Plus, companies ranging from Tesla to Figure are all busy working on the VC funded robot platforms and software versions of the research described here, so we can assume that they're already pursuing the kind of scaling law curve-climbing implied by this research. Add it all together and we can confidently say bipedal real world robots are going to get very good very quickly. The actual paper 'Humanoid Locomotion as Next Token Prediction' [can be found here](. Obviously a world with really good, bipedal humanoid robots opens up all kinds of new and weird Sci-Fi possibilities. But from a simple economics standpoint, the demand for robots with more human dexterity and more human intuition seems obvious. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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