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tv   Bloomberg Markets Americas  Bloomberg  February 2, 2018 2:00pm-3:30pm EST

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we are live and bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and from around the world. equities feeling pain. u.s. stocks on track for the first week in two years after jobs data increases the likelihood the fed raises rates next month. and the long-awaited memo drops. house republicans finally released the memorandum they es bias of the top of the justice department. john kline of deutsche bank says he still is hoping for a turnaround at germany's largest lender, but investors are running out of patience. we have a selloff in stocks. that's take a check of how the indexes are trading right now. we were treated at the start of the week and at the end of the week. offe: and it is a risk
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seeing across asset classes that are seeing the stocks lower. it is the biggest one-day goinge for the s&p 500 back to august. we saw that earlier in the week as well, and we are also seeing simultaneous -- at least 1% decline for each of the major averages. this has become increasingly uncommon until the past week or so, when we see volatility returned to the market. scarlet mentioned what has happened on the week as well. as well,500 down and you have to go back to february 2016, or depending on the lowest today, maybe even january 2016 to find this kind of magnitude of a drop. it is being felt in a lot of different ways in the market today. we are watching media stocks among the groups that are selling off today. are both trading lower, discovery communications as well.
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analyst who covers media was on bloomberg earlier, and he says he believes the cbs ceo is reluctant to go ahead with some sort of combination between cbs and viacom, something that has been talked about recently. in other asset classes, we are anching race, and this is interesting phenomenon. here is the 10 year yield in blue, and we see that climbing to its highest since early 2014. the dollar continues to push lower and lower. it is relatively unusual to see this kind of a divergence for this long with correlation between the two. it has indeed been falling. one more area we are seeing this risk off sentiment being felt -- two more areas, i should say, is bitcoin, which has fallen 42% in the past month. we have seen the air coming out of that, and marijuana stocks, most of which are in canada, why it is a canadian index.
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that is down 30% over the past month. it has been soaring, so the more speculative assets are definitely seeing moves. julia: let's get up check on the first word news with mark crumpton. mark: julia, thank you. house republicans have released a memo that they say shows surveillance abuses in the early stages of the fbi's investigation into the trump campaign and russia. the memo, prepared by republicans on the house intelligence committee, says there was a "troubling breakdown of legal process through the investigation. " president trump made these remarks before the memo was released. disgrace whatis a is happening in our country. when you see what is going on, a lot of people should be ashamed of themselves and much worse than that. i sent it over to congress. they will do what they are going
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to do. whatever they are going to do is fine. let's see what happens. and former fbi director james comey tweeted a short time ago "that's it? " calling the memo dishonest and misleading. with the future of nafta still in doubt, secretary of state rex tillerson is in mexico on the start of a five nation trip to latin america. this comes at a time of president trump's insistence that mexico pay for the border wall, also made doubts of the future of nafta. exican officials were expected to discuss migration, the fight against crime, and the situation in venezuela, which has been hit by u.s. sanctions in the past year. the united nations secretary-general says he is encouraged by the improvement of relations between the two koreas , but the goal is still what he calls "the peaceful denuclearization of the korean
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peninsula." he told reporters today that he was pleased with the reestablishment of a military hotline between north and south korea to "avoid situations that get out of control." russian astronauts are taking a spacewalk to upgrade and antenna at the international space station. they are replacing an old electronics box with a main antenna on the russian side of the space nation. this is the spec and safe -- second spacewalk in as many weeks. i'm january 3, to u.s. astronauts installed a new hand on the station's robotic arm. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. julia? julia: thank you, mark. let's get back to the disputed memo. the house intelligence committee has released the memo, alleging surveillance abuses by the fbi. president trump declassify the
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poor page document, despite "grave concerns from the fbi and the justice department." joining us from washington is bloomberg's national political reporter. we heard from james comey saying that is it? the president has said this is effectively proof of the politicalization of the rest of investigation -- russia investigation. what is actually in the memo? >> the memo centers around what is known as the steel dossier, the collection of information that was provided by a former british intelligence agent. that seems to be the first indication that u.s. intelligence agencies got that russia was trying to meddle in the united states election and potentially swing the outcome with potential of electing donald trump. white house republicans are alleging -- and they wrote this objections of the
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democrats -- that there was an overreliance on the steel dossier, parts of which have not in corroborated and what makes a laois's allegations against the president of the united states to get a fisa warrant. is to carter page, an american citizen, and former campaign advisor to president trump. they say that is an abuse of power by the united states government, and that it harms the liberties. that is essentially the allegation being made. what democrats come back with is that is not the entirety of the basis of the counterintelligence investigation, that republicans are in -- exaggerating the proportions of the steel dossier, and trying to blow it out of proportion, given that the democratic national committee had some ties with these people and help fund the intelligence that led to this. scarlet: is there anything in this memo that we did not already know? >> that's a good question. i think it is more a matter of magnitude.
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what it was that led to the warrant. it really depends on how you look at it, because what house republicans see in this information is that there was an overreliance on the steel dossier, so in their view, we are learning that the government relied more on what they consider a politically motivated document to obtain a warm and -- anrant, not surveillance on american citizen. but with the democrats are countering with is that this does not reveal much importance. without looking at the entire application for the fisa warrant, there are more questions. and there is a question on whether they could have gotten that warrant with just this. it is not the explosive document ont some pro-trump forces the right wing of the media have made it out to be, but the real question is what happens next, how the white house handles this and what happens, in particular, in my view, to rod rosenstein,
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the deputy attorney general who is the linchpin of this investigation right now. general jeff sessions is recuse, who appointede bob mueller. he's removed, the whole thing could go off the rails. julia: is there any pretext in this memo to dismiss mueller? not in particular. this memo does not physically deal with him, because they are of time,bout a period mostly around 2016, that led to the beginning of the counterintelligence investigation, that the trump administration ended up getting roped up in. pointedrt mueller was in 2017, much later than that. it is not an apples to apples comparison, but there is a direct comparison, that people on theve been working memo, trump's allies had gotten some leaks suggesting it would undermine the investigation, and
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trump himself, according to cnn, has told people close to him that he believes release of this memo will undermine the russia investigation. the real question is, and the real answer is we do not know yet, but it might pending on how the white house sees it. scarlet: cast doubt on the objectivity of the doj and fbi. do voters care about the memo? the democrats of tried to minimize this, but what about the american public? is there a clamoring over more information? >> the party basis does not care about it. pro trump core base has been hearing from media sources that this has been an explosive memo that exposes bias among investigators in the united states government against president trump, what they call some "the state conspiracy" thenst their government and president of the united states. it sounds far-fetched, but this narrative has gotten a lot of
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play in certain quarters. i think the core republican base cares about it. i think the democratic base has also come to care about it because they view this as a partisan attempt by republicans and some people in the white house, by potentially even the president himself, to undermine the russia investigation and potentially fire bob mueller, potentially removing rod rosen's nine from the justice department. that could have huge applications going down the road. they see this as potentially sparking, an attempt to potentially spark a constitutional crisis where an investigation that connect to the president is being undermined by that president for political reasons. julia: quite interesting, because this information was being collected under the obama presidency. so let's try to talk a little bit about policy at the end of this. 8, shutdownfebruary moving once again. what is going on as far as efforts to tackle that? >> unclear right now. there are talks among some
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republican staffers about potentially doing another stopgap funding measure through march 23. i colleagues have reported that it is not final, they have not decided if they will move toward with that. it could be something shorter. what we know is it will almost certainly have to be another stopgap measure. there have been four in this fiscal year so far, because it is highly unlikely they will be able to come to a deal on spending measures, on a budget deal i february 8. onrlet: not much movement making sure the government does not shut down. let's talk about the u.s. economy. it added a better than estimated 200,000 jobs in january, the on employment holding steady at 4.1%. as you can see, average hourly earnings gaining 2.6% as well. we are joined by seth harris, former acting u.s. secretary of labor, and a distinguished scholar at cornell university's
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school of industrial and labor relations. like are starting to look they are firming up, and they are moving in the right direction, along the right trajectory. the question is whether we can read too much or not enough into this one month of wage data to get a sense of whether wage growth will be able to keep pace with a quick rate of inflation? seth: i think you always want to be careful from drawing too many conclusions by one month of data. this 2.9% increase is pretty good. we have to take into account, however, that a long list of states raised their state minimum wages, along with several cities raising their minimum wages. so that drove an increase in january. there was also a little bit of an atypical workweeks during the survey week here. the other thing you have to take into account is inflation. you have to subtract inflation from this very robust wage increase, and with that amount
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workers really only feel an increase of about .8%. that is really not enough to get them spending in the way we want them spending. we have good news, but to be careful about getting too excited about it. you want to see multiple months of large, real wage increases before we can conclude we have turned a corner on wages. scarlet: that is my fault for misreading that chart. we just rose 2.9%, the consensus was for 2.6. me aboutts, talk to the impact of tax reform, because the president has been tweeting out the benefits are already accruing, and we have seen that in some sense of the bonus payments that have been awarded, but as far as the data is concerned, it is too soon. and i look at the confidence survey, and 22% of consumers were spontaneously mentioning that tax reform would have a positive impact. we are seeing it in the confidence stages, but not in the real data yet. seth: i agree with you. there are so many talks about
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the tax cut bill in the media that you expect people to be thinking about it and for it to be uppermost in their minds. i think the likelihood that the tax cut bill actually had any affect on this month's jobs or wages data is pretty unlikely. remember that employers who are the vehicles for the money getting to the government into the pockets of workers really have not started to adjust, or have just begun to adjust the withholding of federal taxes from workers wages. ofy have until the middle february to do that, so it is unlikely that workers or most workers have seen a big change in their take-home pay, and it is very unlikely that employers or big corporations who got many, many billions of dollars of tax cuts were able to turn on a dime and immediately make decisions that would
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have produced more jobs and wages increases. we have seen a bunch of bonus announcements, that is a very good thing. that is not the same as wage increases. those will not be lasting increases in workers' take home pay. we will have to wait another month or two before the impact of the tax cut bill will be felt. scarlet: very quickly, i know you were engaging with someone on twitter about this. talk a little bit about the job market for people with disabilities, because the jobless rate for that segment of the population is different from what we are seeing for the broader population. that's exactly right, and this has been an issue in our country for many, many, many years. the unemployment rate for people with disabilities was 8.8% in january, but that does not take into account that only one in five workers with disabilities or people with disabilities are in the labor market. so a lot of people with disabilities are not looking for work and are not working. that is the real shame of the labor market four people
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with disabilities. we need to break down the barriers that are excluding people with disabilities from opportunities for work or opportunities to search for work, and we will see the unemployment number go down, and most importantly, the labor force for some patient number for the people with disabilities will increase. scarlet: you could say it is a tighter job market, but not across all segments of the population. set harris, thank you so much. coming up, we will keep our eye on markets here. we have u.s. equities at the lows of the session, with the dow now off by 492 points, approaching 500 points. all 30 members of the dow are , and even walmart is off by 0.04%. julia: bond yields closing and continue to track hire is well. we will discuss. from new york, this is bloomberg.
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♪ julia: this is bloomberg markets. i'm julia chatterley. scarlet: and i'm scarlet fu. we need to keep you what -- updated on what is going on in equities. we saw declines in europe earlier. 507 pointoking at a decline in the dow, so we are at session lows. all 30 members of the index are lower. a better-than-expected job report. we need to pick up its rate past rate increases? julia: that is what we are seeing with rates tracking higher, and we pointed out earlier this is not just about the united states, this is a global reassessment we are seeing in the pickup and bond yields. we have been talking about why they have not been higher for a while, but now we are getting some response. scarlet? scarlet: coming up, we will talk about smart beta etf's. stocks have seen a volatile week, and etf have taken and a lot of money, but this market
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etf is not doing quite as well. -- the smart beta etf is not doing quite as well.
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♪ this is bloomberg markets. i'm scarlet fu, with the dow tumbling almost 500 points. we have just come off our lows, and all 30 members of the dow lower. it has been a pretty volatile week for u.s. equities, so no better time than to bring in our smart beta etf report. etf and index funds took in more than 100 billion dollars since january, but almost none of that went to smart beta etf's. here to discuss what did get some love and why that is, why smart beta etf's are not getting much attention, is eric balchunas. earlier this week, we were looking at flows, and even though stocks have decline, etf 's have continued to take in money, like spy. eric: it is a phenomenon i have never seen. this means it could be more by
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the dip rally. spy volume today is very low. that is a good sign that this will not be a long-lasting selloff. indicators work very well for me here. it is not definite, but when the vix spikes, it means the selloff will not last. but the smart beta is interesting. beta is all you need. -- and if you&p go back 12 months, the s&p is up 26%. you can get that for free. and pay asmart data little more -- when data is working, smart beta will struggle. today is a perfect day. if you watch, smart beta flows will come back up. scarlet: you will need to pay more than four basis points is a liftstied everything. can we draw it came from all of these? >> the ishares momentum etf is killing it, and this creates
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what is called a shiny object moment. it is beating the s&p at 26%. this is about 43%. that is enough for people to go i need me some of that. they taken $1.3 billion this month, and $2.6 billion in the last six months. it is the best telling smart beta etf. what it is doing, it has a lot of tech exposure and is very concentrated, but it does have a volatility screen. it has an active share of 71%, but it is geared to when it works, it will work, and be in the market by that much. growth are not doing it. it is not moving outside of the s&p as much. julia: his momentum as a whole a style of investing? eric: it is a factor. it is competing with growth a little bit. the question is how long do you hold it? period is 10-20
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years, mtm looks like more of a play, but it should be held long-term. scarlet: eric balchunas, thank you so much, our senior etf analyst. another update here on how equities are performing at the of the week, we are looking at stocks at session lows, and continued sinking. and that is a relative term, because we have not seen losses like this in a while. been ant has interesting week, a punishing weak in comparison to what we have seen over the past several months. we will continue to discuss. from new york, this is bloomberg. ♪ we use our phones and computers the same way these days.
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and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to scarlet: from bloomberg world headquarters in midtown manhattan, this is bloomberg markets. i'm scarlet fu. julia and i'm chatterley.
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let's get a check on where the markets are trading with julie hyman. julie: we are seeing the selloff steepening here as we get further into the session. the dow is down the most in a single session, going all the way back to september 2016. the s&p, since may of last year, and the nasdaq since august of last year. the dow declines go to more than 550 points at this stage. initially, what sparked the selloff was the jobs report this morning as well as earnings report from the tech heavyweights that disappointed some investors. that send rates higher, and had a feedback loop with stocks. we will get to more in treasuries in just a moment, but i wanted to look at the big drags on the s&p 500 today. techntioned the disappointments. we have apple down 3.8% after the company revenue forecast disappointed some investors. alphabet, the other big tech it spends more to get traffic, so expenses going higher, and exxon mobil production and
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earnings-per-share missing target. let's get to treasuries, and to that i turn to the bloomberg. look at this five day chart of the to year yield. 5.8%, the highest since january 2014. to look at the talents of the week, we started out with inflation data, the state of the union and the treasury refunding announcement and the fomc decision, but the big move coming yesterday and into today. past half hour or so, we heard from robert kaplan of the federal reserve, speaking at an event in austin, texas, cautioning against the fed getting behind the curve. he said perhaps three in increases thise year is the base case, and there could be more until we saw the treasuries go back to the highs of the session yields following his comments. julia: thank you, julie. strategist,in our and therein lies the problem. all of this is having an impact on the rates market, and
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everyone is going oh, hang on a second. >> there are a number of factors but firstocks lower, and foremost it is interest rates. it is the joke that you never get the memo you never -- when something will happen in the market, but as soon as the 10 year yield went up, stocks started to trade poorly. it is refunding a notion the fed could be behind the curve, but will have to do more than they are currently projecting. julia: not even at the fed is behind the curve, but the market is behind the fed and they have to catch up. >> as soon as the fed started putting rates up, the market has never priced what the fed has projected in the dot plot cell not this rejecting what the fed is projecting. there is upside risk to what the fed is going to do. this suggests that interest rates have further to go, and
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higher rates will require a higher earnings yield, high yield, lower price for stocks to make that allocation balance. scarlet: the two-year yield has gone -- 10 year yield has gone up 2%, 3% in the past. it got there in early 2014, late 2013. so it is not as if we have been here before and we have come down again. yield of thernings stock market was a lot higher as well. so essentially, the higher the price-earnings ratio in the stock market, the more sensitive it will be to rise of the interest rates. julia: and that was a qe world. scarlet: it was, but people -- i guess what i am trying to say is the macro environment has gotten better, but people are still thinking in the past couple of years. i also wonder about robert kaplan's speech, because he is not a voting member of the the, is he? cameron: no, he's not. scarlet: do his comments hold
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that much water? cameron: it tells you about the volatility of the market and what it is sensitive to. if the market was not concerned about potential increases in the pace of fed tightening, yes, people would ignore that. but the fact that this is not jour, notssue du even the issue of the year, i think this is being taken significantly. and we are also italy -- obviously having a handover from janet yellen to jerome powell, and was a bit of an unknown quality in terms of his thought leadership. we sort of assume he will carry on the trajectory that yellen has laid out, but even that seems to be changing of it. around the time of fed chair handovers some increase in equity volatility because of this uncertainty
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inherent in the trajectory market calls. julia: i want to get these performances here and the relative winners, which i assume in part is due to a steepening yield curve and financials, losing most today like the energy stocks, technology stocks. as julie was pointing out, some of the underperformance has seen growth, but they are forming the most. is this still a healthy move lower when it is having such an incredible run off even this year so far? cameron: we are a little more than what -- 3.5% of the all-time highs? by the standards of the last 15 months, this is a cataclysmic, catastrophic move. by the standards of whatever it is, the 120 years since the dow was first published, it does not even matter. it is just a drop in the ocean. scarlet: let's talk about the fed going forward, because
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jerome powell has taken over at the federal reserve is now the new chair. march 21, everyone is pricing in 100% odds of three increases following the jobs report. may 2 is not a live meeting, but if people are factoring in more than three hikes, they will start thinking that maybe some of the live meetings, non-live meetings may become live? cameron: you could argue if they do four, they could stick to the quarterly schedule. there is some speculation on the street that maybe they would contemplate doing five, and obviously if you do five and there are only four orders, at some point you will have to start making the intro quarterly meetings -- intra-quarterly meetings live. the u.s. has always said they are like him but the u.s. has always said they like a strong dollar. what they say and what they do our two different things. week: and snapping a seven losing streak. michael mckee -- this is one of the reasons why i love him.
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the dow was down 508 points, a 1.96% drop. in 1987, the dow fell a similar a 22% was julia: it sounds big, but it is smaller than the past. let's get a check on the headlines on the bloomberg first word news at this hour with mark ronson. mark: i am not surprised michael mckee is putting things in perspective. prime mr. theresa may insist the u.k. does not have to choose between frictionless trait with the european union and the ability to forge new trade deals around the world. prime minister may said "i do not believe those are the alternatives." her conservative government is split between a clean break with the european union and those that want to stick close to the terra free,
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single market, and customs union. importing an embargo on -- the u.s. is restricting all sales of defense equipment and services to all parties to south sudan's conflict, saying it is appalled by the continuing violence. mexicans living abroad sent home to their$28.8 billion families in 2017, an increase of almost 6% from the year before. the amount has been rising steadily, to become mexico's most important source of war -- foreign income after auto exports. they send their loved ones was more than mexico earned inm gas exports or tourism 2015. day at the fed,
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janet yellen will start a new job monday at the brookings institution, as a distinguished fellow in residence. one of her colleagues was her predecessor, former fed chairman -- ben bernanke, who joined the think tank in 2014 when he stepped down from the central bank. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. julia, scarlet? scarlet: thank you, mark. as you were speaking, we said we need to cover bonds a little bit more closely, because so much what we are seeing in equities is driven by the move higher in yield. yields,r price, higher that is what we are seeing across the curve today. , the 30curve, 2.84% year yield -- we talked about this earlier -- going past the 3% level, now at 3.08%. and it is not just the united states, it is across the world's -- germany, italy, those bond yields moving higher. it is a global movie are
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seeing, and having an impact, as cameron was saying there. it is a reassessment of the pessimism attached to the fed predictions and what they are going to do as far as hiking. reassessmentis the that we have been asking why has this not happen sooner? scarlet: when it does, it moves markets. toia: we will continue discuss this market news and plenty more to come. from new york, this is bloomberg.
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♪ this is bloomberg markets. i'm scarlet fu. julia: and i'm julia chatterley. julia: time for our -- scarlet: time for our stock of the hour, and what are you looking at? >> jigs to you and scarlet, and
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we are looking at the select spider etf, down now more than 25%.2. imap, look at the s&p 500 this is a great way to see what is happening sector wide for the s&p 500. ed, notall r surprising. energy is the worst sector, down 4%, but not far behind technology, down more than 2%. the big drag, the point drag for the tech sector is apple. shares of the iphone maker are down sharply, on pace for the worst day since june of last year. they are now down about 3.5% after the company did miss the forne unit sales forecast the december quarter, and the disappointing guidance for the ofch quarter confirming some the concerns that analysts have had, and the fact that the average selling price was higher
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is not making investors feel better about the situation. the shares are lower. also lower, some weakness in the chip sector. if you look at the semi conductor index, it is down sharply, being weighed on by research and advanced micro devices. advanced micro devices earlier this week did report they beat estimates, but there were some concerns around counting changes and the possibility that management is conservative. these stocks tend to selloff when there is a risk off case, such as we have today. we have some weakness here, but the stock of the hour is the biggest percentage loser for the tech sector at this point, alphabet. shares are on pace for the first -- worst day since may 2017. driven by higher than expected traffic and acquisition costs, and if we hop into the bloomberg, we will see the percentage of revenues -- this is moving in the wrong direction. we see the traffic acquisition costs at the percentage of revenue -- we would want to see
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that moving down, and it is moving steadily higher after having moved down, so investors the structural change. but there are some other issues, including a $9.9 billion tax hit to overseas cash, and higher marketing spending on some of the consumer devices over the holiday season. investors are not liking this report at all. scarlet: so the tech change, i can see that being a long-term concern, but the other things sound like issues that will dissipate by next quarter? >> you are exactly right. the tax hit will disappear, and the marketing charge will disappear as well. but relative to the network member tax or the money paid for engines, ad execution that will be an issue this year. if you look at the chart of google, this is the longer-term chart and a weekly chart. we see there is a nice uptrend. this is a one-year chart, but i want to take a look at this in two different views.
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here we see there is an outside candle, which means this week's highs and lows are outside of this week's candle -- last week's candle. a drop of equal measure down, perhaps down to the uptrend. if we move this back a little bit further to 2010, we will see that -- actually, it disappeared, but this is the uptrend out of the crash back in 2008, suggesting there could be some more weakness ahead for alphabet. julia: still up more than 30% in the last 12 months. scarlet: that is the theme for equity that large, right? all the volatility we might see in the short-term, let's keep in mind the perspective, they have gamed quite a bit. abigail, thank you. that's get more on the retreat in u.s. stocks. we are joined by tony dwyer. would you categorize this as a more 100may be seeing
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point declines before people come in? is this a game changer? corrections are only considered natural, normal, and healthy until you get one. and when you get one, by definition it has to feel different otherwise no one would sell it. so moving up on the 10-year that is obviously creating a little bit of anxiety ahead of the weekend. and people that have been chasing stocks up, they are coming out of stocks. was so extended it is really not so outside of expectations. it, a as you said correction feels healthy until you get one. but we have been asking the question for weeks about why interest rates have remained so low and the back end is so depressed. at what point did it become a more broad problem for the valuations we are talking about an equity markets, beyond a few percentages shift that we have seen so far? tony: history shows the spread
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between short-term and long-term interest rates. the only time our perspective -- i have said that so many times on air -- for perspective, the only time you want to become very negative on equities is when you have inverted the yield curve, which means short-term interest rates are higher than long-term interest rates. this has made that less likely, so i would make the case over the past two weeks, the movement its theong end along cycle, it does not shorten it. it makes for a more volatile environment, and there is a great chart i have used from my bloomberg terminal, which is monetary policy uncertainty index. -- through afor historically low level on monetary policy uncertainty. the realitiesnto of what a strong economy does when you come off historically low interest rates, and that creates volatility. even when you have further upside, you will have more volatility getting there. julia: and when you look at in terms of market pricing, the
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two-year round was driven by 100 basis points in september. cameron was talking about this earlier on. there has been a real said pricingof here. we were behind the curve, or at least the curve was behind the federal reserve, and that could continue a bit here. the data looks good. tony: the data looks good, but when you look at the things like pricetigroup economic index, it is high and taking lower. so you have a conundrum where the data will be very strong, appearing very strong to the fed , and it will be good data, but it will come in a little bit below lofty expectations. that creates high expectations, and good data will create an arbitrage between short-term and long-term rates that creates volatility. we have been looking for a some, maybe,nlike that might be the death of me, but when you get serious drops in the context of such a strong
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fundamental backdrop, especially for credit, it is not to be sold. julia: that is really interesting, tony. wendy recommend people get back in? tony: there are certain thecators we use, like vix over 20. there are certain parameters that happen in the context of a normal correction that is bad enough to say ok, even if it gets worse it will bounce back. when you look at the last time the investors intelligence was as low as they were now, it was 1986. -- sorry about that -- you had four corrections of 5% or more over the course of six months. , thank youny dwyer so much. julia: go on to your phone. scarlet: i think he has gone to do just that. let's remind everyone, one of the catalysts for the decline this afternoon, robert kaplan, the dallas fed president, made some headlines while he was speaking in texas. he said we will likely overshoot
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full employment this year, the on employment rate will dip into the three percentage point area this year. the base case for the path of 2018,ikes is three in 20' and responding to the stronger-than-expected jobs report and our average -- average hourly earnings growth better than expected. robert kaplangot talking about the prospect of upside here, risks to inflation, and that is creating some of this movement we are seeing in rates. it is interesting that the two-year is beginning to rally here, and implying that the tightening of financial conditions may mean market thinks the rate hike path cannot adjust too much far higher. an interesting point and shift. from new york, this is bloomberg.
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♪ julia: welcome back to bloomberg
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markets. chatterley with scarlet fu. deutsche bank taking a beating after reporting revenues that fell to a seven-year low. the bank also reporting its third straight annual loss. matt miller spoke with ceo john kline about those results. >> i am more confident this year than last year. even though it is sad to say, i do not think any bank anticipated what happened in the trading markets last year. it turns out although we were very disappointed with the year on year and quarter on quarter revenue, we have gained some market share, which is perhaps reflective of the fact that we are on this recovery phase. right now, i think that there is probably -- there has probably not been as good of a time to be in banking and the three main economic blocs, because the major economic backdrop is marvelous. i think client activity levels are picking up. much more on the corporate side than on the institutional side. there are some drivers on the
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institutional side, particularly looking forward to euro rates going positive again, which i think will drive a lot of economic activity. >> one of the reasons were the main reasons you will have to extend or push those out is you did not dispose of 900 billion euros in assets on time. >> it is 900 and -- 900 million euros in assets on time. >> it is 900 millions and costs, and they are not caught up to what deutsche bank is. the asset management ipo fall under that umbrella? in london in november, you said you hope to get that done by the first order. do you still think he will stay on schedule than that -- with that? >> i am not allowed to say, need to be careful about what you say. we made great progress. we are not there yet. dot, t's to to
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cross. but we will take the first available window once we are absolutely ready. julia: that -- scarlet: that was matt miller, speaking with deutsche bank ceo john kline. of next, we break down the possible sale of a $15 billion biotechnology company, and keeping an eye on the decline in u.s. equities, although one should note that the 2-year note has begun rallying and the yields are now lower on that particular security. this is bloomberg. ♪
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>> it is 8:00 in new york, 8:00 in london. i am julia chesley. scarlet: i'm scarlet fu.
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welcome to bloomberg markets. we're live in bloomberg headquarters in new york. here are the top stories. pain.ors feel the we bring you the latest on the market moves. and apple enters a bear market. qualcomm.ersus inook at the other sectors their big deals. let's check markets with julie. it felt like a long week. julie: what a difference a week makes. there was a huge rally. been an eventful week with the much predicted
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pullback on the week, which is its biggest going back to years. nasdaq, trading near the lows of the session. that yield going back to the highs of the day from the dallas fed president robert kaplan saying in austin that three interest rate increases will not be enough. with the declines we are seeing there is an uptick in volatility. are the low volatility days over? this is the longer-term average. the price shows change, the drop we are seeing
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this week. puts things in perspective. we are still below that longer-term average of 19 and a half. when you look at stocks the has not been deepening. it has been widening. we can go back to that. groupsseeing different that are lower. some groups were still hanging in on. energy down 1.3%. disappointing earnings with the likes of weatherford pulling it down. alphabets, really no rhyme or reason in terms of defensive versus cyclical. canide of stocks you
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clearly see the risk off trend. down one point 5%. bitcoin continue to selloff. well, it is it down that much in percentage terms. the fact that it is down along with the market am a showing this is asset wide. we want to get to the bloomberg first word news with mark crumpton. mark: a newly released gop memo questions about the department of justice and the fbi's handling of the rush investigation according to the white house. james comey is not impressed. he asked, that is it? he says it is dishonest and misleading.
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the memo was declassified by president trump and released by house republicans and claims the fbi abused its surveillance powers in the russia investigation. syrian refugees have decided to return home despite warnings from the united nations that the country is still not safe. burnedfugees have through what savings they have and either can't find or are not allowed to work. hundreds of thousands of others remained in refugee camps. a far right supporter who drove a van into worshipers outside of a mosque has been sentenced to 43 years in prison. the attack killed one person and injured 12 others. and singercron ou for raise money from education.
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posted rihannan last year after she challenged him on twitter to contribute to efforts to fund education in developing nations. he promised to hundred million euros to her education foundation. global news 24 hours a day powered by 2700 journalists and analysts in 120 countries. this is bloomberg. i was distracted because the s&p 500 is now down to percent. this is not a massive selloff but it is noteworthy in a year in which stocks gained as much as five and a half percent. deals.ring you the hammond.s now, ed on a $13 billion
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biotech that loses money. >> it is 15 billion now. less than a year ago it was worth substantially less. bitcoin type run-up in valuation. stage.ery early potentially there is a takeover. they have had some interest. going to be difficult here, do they find a buyer for the whole country? that now.isky to buy a lot of potential agreements. there will be a lot of partnerships in the drug space. you could see both.
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it doesn't rule out the possibility of doing a full scale turned down the road. >> in the of the big drugmakers, they could be looking at this kind of company. they have a range of products. into that sweet spot. one of my favorite stories was the broadcom qualcomm potential megamerger. talks potentially of a higher bid? >> we have good color on this. of noise been a lot and endless speculation. from what we understand next week is the timing of that
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offer. initiallyt will be significant but there will be some room left to make a sweetener. they are planning to make some reassurances. getting that over the line. another crucial thing, whatever they do, they are going to be saying you need to come to the table. so this is going to be the chance to say let's sit down. we are going to put a number in front of you that is real. julia: i would be thinking to a really want to up my bid when the big defense here looks risky at this point. >> it does. he is an extremely experience to guide. he will realize if he is going
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to get this done he has to put a big number on the table and knock and over. , what is holding it up, the regulatory approval from the chinese. it now looks like it might fall after. potentially the whole timing of the next move, everything gets jolted back a week or two. >> whether they ultimately buy it or not, it is what is in the best interest of the state. >> does that make them less likely to pay up? it was quiet for a wild. what has qualcomm been doing? saying theyhas been
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are a great company. they have really good things going on. ,he issues in the past year they are to do with these legal issues with apple. this is a wonderful company. it is a different proposition. antitrust is a huge issue. broadcom, one of the k messages will be we have some revenues here. scarlet: trying to talk down the prospects. s&p 500 down, off by 630 points. have been doing well for the second half of last year.
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from new york, this is bloomberg.
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julia: this is bloomberg markets. a quick look at what is going on in the markets once again. , the worst drop since 2016. the worst weekly performance on track since january 2016. steep losses as we head towards the close. for the dow jones. i want to point out the rates market. we are seeing a shakeout here in terms of treasury positions. year at 2.8.
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higher, it was the catalyst. when i look at the s&p 500, apple is the biggest point contributor which tells you what is going on here. >> some of the biggest gainers losing. apple is in a bear market. for more on this story at let's get to san francisco where emily chang is standing by. giles.i'm here with tom we are talking about apple shares down 4% on the back of iphones. million the average selling price close to $800. i talked to tim cook. he was not worried about it. he is proud of how it has done.
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andhere is positive negative. average selling prices. very closely watched metric. they went up. that is an indication they gravitated to the higher end. it starts at $1000. the other thing is installed base of users. one .3 billion people are on the iphone. that is people we can sell apps, services, all kinds of things. they are getting away from the idea of the net increase in the number of iphones sold. iphones thaner analysts expected. analysts even brought those numbers down for -- further. this idea that,
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this was going to create a wave of buying, mass purchases, that is receding from the conversation. it is a very big base. in any givene that quarter. >> was this not a super cycle or has not been one? >> there has only been one super cycle when the iphone got really got one this was pronounced dead. emily: let's talk facebook. the key metric is for the first time the number of users declined. this is the biggest market for a long time. we are hitting a saturation point. >> that is right.
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mark zuckerberg has a lot on his hands. those metrics are going to go away. investors don't know how to measure things going forward. , they are going to keep going. >> importantly though the , theys they are making are decreasing engagement. it is not ultimately going to lead to more time spent. want -- it has been your interaction. your experience will be more meaningful. in the short term there are a lot of changes.
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they are saying this isn't the facebook i remember. some of those videos, i am not saying them. that is not keeping you there the way it used to before. >> let's talk amazon. is it all smiles? >> if you are jeff bezos you are smiling. it is hard to find the bayer case for amazon. they haves investment been making is starting to pay off. we saw a big time in the fourth quarter. we are buying stuff for christmas. that was gangbusters. also pay off in terms of the amazon web services business. this thing they created for their own cloud computing business, they have started to sell that. they saw more and more results of that.
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it looking for words kinds of new businesses jeff bezos is getting into. they bought whole foods. as they bring technology into whole foods stores. this week we solve them announcing this health care initiative with j.p. morgan chase. we are going to create a new health care paradigm for our millions of employees and their families. you can see them taking that on the road. scarlet: and doubling down making his first turn in a super bowl commercial. go, the jury selection has happened. the trial has begun. what happened? regular typed a jerry. there are argument is going to
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be he left, he stole our stuff and he is not nice. tookis going to say he some of the stuff with him and even the stuff he took is not what we are developing. emily: this is something we going to keep watching. i will send it back to you in new york. julia: let's get a check now on how the majors are faring. we are seeing losses today, the sinceweek for thejulia: dow january 2016. that is the performance on the dow. it pointed to the losses we are seeing particularly after the earnings. one of the big drivers, energy. let me give you a look. just to give you a sense, we have just bounced off the lows.
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the closer is going to be important. bouncing off of the lows. a quick check of the rates market. this is the weekly chart. 18 basis points higher. significant. 13 basis points higher. this is the crux of the overall market moves we are seeing over the week. from new york, this is bloomberg.
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julie: it is time for options. i am so glad you are here today. eventful day. we are seeing stocks selloff. what exactly is going on?
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you have been calling for this for a while. >> we solve this relentless bull market. blowoff is a tough thing to figure out. maybe now that hindsight is 2020. it was continuing to rise. an unusual circumstance. >> we look at the moving averages, just to put this in perspective. with the selloff deepening, the percentage of s&p members. how concerned should they be? >> the consensus hasn't been broken yet. we haven't then given the year
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to date. be asymmetric in their response to selloffs. let'she market goes down run kicking and screaming and freak out. a lot of that is positioning. we are starting to use a lot of stock positions. that is leading to a lot of discomfort. options, you turn to the volatility of volatility, what are the opportunities you see? >> we have seen volatilities exhaust themselves. has spiked. before the spike, to remind people if you are crazy enough
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to short it you better be aware volatility, because it is a second order, it is going to be far more volatile. the trade was more or less to say if you are crazy enough to short this thing, here is a way to protect your upside, which are at money. expensive you would be borrowing to protect. thank you. interest rate banks. the way for its biggest decline. the 10 year now at 2.839%. ♪
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scarlet: 30 minutes from the close of trading. we are looking at09 a selloff. it is down by better than 2%.
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this would be the worst day for u.s. stocks into years. we saw the worst week in two years as well. thenasdaq is the better of indexes. a lot of the tech names have been leading the way loeber. we have just bounced off of the lows. it is going to be important. steepening we have shift.ut the overall it is interesting. we are seeing the two-year price rallying. we have seen a tightening of financial conditions. at some point the market will say how much is enough? the catalyst was a better than expected jobs report.


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