tv Bloomberg Markets Bloomberg October 23, 2015 3:00pm-4:01pm EDT
from bloomberg world headquarters, good afternoon. i am betty liu. loss in aped out its year. china's decision to cut rates helping fuel that buying. the imf tells china that the yuan will join the fund basket of reserve currencies. what the decision means for the chinese economy and their status in the world. facebook shares are triple digits. companies are passing the $100 mark aztec shares rally. tech shares rally. hour from the close of trade. julie hyman has the latest and we are getting into the close here. the s&p in the dow
each up 1%, the nasdaq. on the strength of the tech earnings that we have had today which are contributing to the gains in the s&p 500 in particular. if you look at the s&p at one point around midday we were giving up steam. but now we are powering ahead into the close here. it is not just about earnings today, it is about that rate cut in china. helping stocks higher when it happened this morning. with these gains in stocks not just today but the recent gains we have seen, volatility has dropped off as you might expect. when you look at the vicks, it is falling to its lowest since august 18 as the s&p rises. the vix is on track to have its worst month ever on a percentage basis. take a look at my bloomberg terminal.
wait talked about technology doing the best followed by health care which is rebounding. energy and utilities are at the bottom of the list today. what about [inaudible] julie: so slowing momentum in the rig declines. raising concerns. down 1.5% although oil was falling quite sharply even before that recount came out. the oil price is pressuring those energy shares. then i mentioned utility shares of the worst-performing group today. that as we see yields higher in this risk on environment with people buying stocks and showing -- selling treasuries. higher, the dollar is going higher as well. rising today to its highest and quite some time, up about .75 of
1%. betty: let's get a check of the headlines. mark crumpton has more from the news desk. mark: the u.s. military has released the results of the investigation into the march crash of a black hawk helicopter that killed all 11 service members on board. the associated press obtained the full report which says the national guard pilot disobeyed direct orders by choosing to fly into worsening weather conditions. they were on a nighttime training mission off the florida coast when dense fog rolled in from the gulf of mexico. brettent obama has chosen to replace general alan. he is stepping down over -- after overseeing the operation
for 13 months. house republicans are chipping away at president obama's health care legislation. they approved a bill that would erase key components of the affordable care law and block federal parent -- payments to planned parenthood. it faces certain veto. lawmakers voted along party lines to approve the bill. 43 people were killed today in a fiery crash in france. it was the country's worst road accident in more than three decades. a truck collided with a bus carrying mostly elderly people near bordeaux. bus burst into flames. eight people managed to escape. asrists are fleeing hotels the strongest hurricane in the western hemisphere barrels toward the country's west coast. hurricane coul likely topatricia is cause severe weather in texas. it is packing sustained winds of
nearly 200 miles per hour. americans have some rapidly evolving views on climate change. three quarters of the u.s. accepts the scientific consensus that it is happening. that is the highest level in four years of surveys conducted by the university of texas at austin. the biggest surprise is what is happening inside the republican party. 59% of those surveyed say climate change is happening. up from 47% just six months ago. that is a look at the first word news for you and you can always find the latest news on bloomberg.com. back to you. betty: thank you. major new set of china today. thee was fresh stimulus as country cut rates for the sixth time this past year. moving stocks up. perhaps more significant is news of the imf has told chinese officials that the yen is likely to join the basket of reserve currencies. if and when this happens it would be a major boost to china
and its currency and economy. joining us now is mike mckee. is it going to be a big boost for china? boost tois a major china's press stage and the yuan will be a much more convertible, much more used as a reserve currency but it does not necessarily bring huge benefit by being in the imf because that arcane means of exchange. they are not used very much around the world. chart of have a pie what currencies make up the basket. there is no surprise. traded currencies around the world. partly it is the press stage but partly the seniorage. they are selling a dollars worth of the yuan which is about $.15.
for something that cost a penny or two to print. it is a big advantage because we are the world's reserve currency so we make it off a lot of money so it would be an advantage. it would add $1 trillion worth of yen to the world's reserves so the chinese would get a financial benefit. what about the rest of the world? will it change anything at all for the rest of us? mike: probably not in your lifetime. it will take some of the role the dollar has now. while it is considered a more widely traded currency it fullyis not if convertible currency. they are a long way from that. they are moving in that direction but until that happens and until the chinese relax the capital controls the have in place the dollar postural is not threatened at all. i want to bring in the
chief investment strategist at fifth third bank joining us now from boston. jeff, the new set of china so we are not just talking the imf but the rate cut as well. what do you make of this, does this make you more bullish? dispelhat it does is some of the bearish sentiment that was out there. we interpret the events of august as largely a loss and confidence in china's policymakers. they reestablished some of their credibility with this rate cut. the imf's decision we think is more consequential. what are the things -- one of the things missing is the way that this is a confirmation of the policy pass that the current regime has set down. they're trying to liberalize markets and deregulate. that could boost growth in china. anything that gives them political power out of this is a positive. why does it make any difference for us here?
jeff: this doom and gloom scenario precedes. we thing down the road this does offer some more potential for china to come into -- on a cleaner glide path as they come down over that double-digit growth rate they experienced for some decades. betty: china cut interest rates and mario draghi said yesterday put in more stimulus if we need it. did any of that erase some of your predictions about when the fed may raise interest rates because they are getting further on the other side. that inat did not erase and of itself. we see tightening labor markets. it is not always evident in the unemployment rates. if you look at the underemployment rate, it is
evident in the big drop we saw in september that we are taking part-timers and getting them full-time work and perhaps drying in some of the discouraged workers back into the labor pool. that is reflecting a tightening of the labor markets. that has got to result in heightened wage inflation. we will learn what -- with the employment cost index. a response.nd certainly next year. betty: do you -- did you think us so muchould power since august? jeff: i wish i had. we were looking for recovery in the markets. the traditional pattern of any pullback as the growth fears receded, you get better market performance. but this degree of strength caught us by surprise. we have been in the high conviction toward folios ready much neutral-weighted to the benchmarks. betty: would you upgrade?
jeff: too early to say. this is more of a show me and earningst for expectations to rise. i would expect that to happen. this would be a long-term trend. we do not have to catch the very bottom of it. our discipline has served us well and we will stick with that. betty: thank you. ahead in the next 20 minutes. steveways colorful ballmer did not hold back during a visit to bloomberg world headquarters. find out what he said about his investment in twitter and microsoft and rival amazon. investors are liking facebook big time. the stock has crossed the $100 mark for the first time. can anything slow down mark zuckerberg and company? while facebook is on a roll, valiant is not. they had a horrendous week. defend itselfo do
betty: good afternoon and welcome back. a look at some of the biggest business stories in the news right now. germany is feeling the pinch from volkswagen's diesel emissions scandal with a 3.4 billion dollar tax shortfall on the horizon. several towns linked to the automaker are halting projects new new probably pounds -- playgrounds, an ice rink, and roadwork. volkswagen had more than 270,000 employees across germany. shares of procter & gamble are
falling in premarket trade. the world largest consumer product weaker posted quarterly revenue that missed estimates. sales fell in all categories. they get almost two thirds of its revenue from overseas and it has been heard by the stronger dollar. said a's ceo jack dorsey want to reinvest in their people. he is starting by donating a third of his shares, valued at $200 million. they will go into inequity pool for employees and that may increase morale after recent job cuts. you can always get more business news at number.com. former microsoft ceo steve ballmer stopped by to speak about a variety of topics including twitter. the l.a.s the owner of clippers and took a 4% stake in twitter. why did he invest in the company? am -- ongoing improvements in the product. check seems to have a lot of good ideas.
product improvement, people will wake up and say well because it the end of the day, product drive is part of it. the other will be financial improvements in the business. when those show up they will show up. they could be shorter or longer turn -- term. i think the company will perform but also will perform better financially with a lower cost base. while shares are languishing over the past year, facebook has soared to over $100 a share. does ballmer think twitter can be the new facebook? steve: i think facebook and twitter are two different beasts. facebook is a social network. you could say that twitter is much more of a communication network. i think that is one of the things that direct -- jack dorsey will work on. they're more apples and oranges. ballmer is the largest
individual shareholder in microsoft owning more than 333 million shares. steve: i believe microsoft has two big muscles. one is consumer and the other is the b to b model. depending on the quarter you will hear about one or the other. theircited about transcendence into a hardware company. the xbox, the surface books, that is not a b to b business. betty: he did not resist the chance to slam amazon. steve: there is intense competition between microsoft and amazon. is intense competition in the city of seattle over talent. i think they are a place that people do not want to work. anybody who ever left could
count on them coming back to amazon. we could count on them coming back within a year or two because it is not a great place to work to do innovative stuff as an engineer. we'll hear what jeff bezos has to say about that. amazon and microsoft shirt -- shares surged. microsoft is now at a 15 year high. the rise of microsoft shares added a cool $272 million to .allmer's network jeff bezos is still worth more. still had. -- still ahead. it will keep matching lower fares. how about the will that hurt american's bottom line? ♪
american airlines reporting earnings this morning that beat estimates. the company said it had profited to 49. the ceo reiterated about to keep ticketg discount rivals prices is extending the eight domestic fare wars that are sapping revenue. mary, tell us exactly what is american bowing to do -- vowing to do? fares withwill match discounters like spirit, frontier, southwest airlines because they cannot afford to let customers walk away and lose those customers. those airlines have been adding capacity in some of america's biggest market. people -- ac it is critical to hang onto this customers. betty: what kind of discounts are we talking about that they are competing with?
about 40were talking to $50 to fly from dfw to new york. they're not doing that on every see but there are discounts and we are talking about fares in general that are $30, $40, $50. betty: that is amazing. to match the price is, how deeply will that impact the bottom line? mary: it is not too bad in terms of autumn line. the profited $1.9 billion but their topline revenue fell in their yield which is the average fare per mile which fell 10% which is pretty substantial. betty: that is substantial. is it they can do this because gas prices and oil prices are low so in a way they have some wiggle room to do this? mary: that is right. they can do it because fuel prices are so low. if they were high there is no way they would be doing this.
betty: not at all. where are they losing the most market share? seen the cities we have most impacted our dallas, chicago, orlando. chicago and dallas are both egg hubs for american. dfw, thengly enough at largest airline after american's spirit -- american is spirit. betty: are they fighting with the other major carriers on pricing? mary: it is with the low cost carriers. in some instances they are battling with the ultra low cost carriers. betty: thank you very much. in dallas for us on american airlines. republican presidential candidate ben carson has moved into a dominant position in iowa even surpassing former fun --
front runner donald trump. trump dominated cable-television he built a group of supporters in iowa. >> let me ask you a couple questions about donald trump. do you expect now that you are ahead of him that he will start to go after you and if so, what will you do about that? it depends on whether he is a gentleman or not. if he continues to talk -- attacked me i will continue to talk about the issues. my personal interactions with them have shown him to be a gentleman. there is another element sometimes when he is on camera. about being guest host on "saturday night live", does that interest you? ben: i think being president is a very serious thing and i would
not want to put in the light of comedy. you said something about what your attitude would be if you were at 2% rather than being the front runner. ben: i would leave. this is about the people and the will of the people, not about a position that i particularly want to ascribe too. you dropped it down to 2% your attitude would be, why go forward? pullinger people were much higher and there was more enthusiasm about them, i would say ok. i will do go -- i will go do something worthwhile. betty: you can catch the full interview tonight. they will be speaking with another republican presidential cruz.der, ted jeb bush not having a great time . he has had to cut his staff ordering across the board pay cuts for his campaign.
in the hole he only got 5% of the voters. before we go to commercial, i want to bring up how the markets are trading right now. we are losing a little bit of , half an hourt ago we were hitting the highs of the session and we are a little bit off. the rally we have seen via earnings, particularly technology shares but china and that fueling the rally overseas and also here. much more ahead on the bloomberg market day. there is a lot to like if you are a facebook investor. shares in the social network bricking the $100 mark for the first time. how significant is this question mark we will discuss. ♪
i am betty liu. let's head on over to the bloomberg terminal with julie hyman. julie: yes, let's look at the the bigm to look at movers. alibaba is on there along with skechers which is on the move. i am looking at alibaba along with other chinese stocks and it also got an upgrade. you can take a look at the other chinese companies listed. alsoresorts which is opening a big resort in macau. there are reported earnings today including procter & gamble. this is the company partial last their ceo.
profit did beat estimates and it rose by 31%. real caribbean's numbers had strong momentum in the caribbean and also came out with a positive outlook, saying it next year, volume and pricing both looks good. we are also looking at lexmark today, the printer maker. this usually means a potential sale. the stock is down about 20% this year and lexmark did caution that there is no timetable on the deal but it could happen. the shares are up by 7% today. lululemon is another company we are watching. we heard that their chief operating officer is departing and they are going to create a chief creative officer. there is not a lot of news on the company but if you look at that social media monitor, you may look at that twitter story that was also coming out on "was feed -- "
buzzfeed," and it was once heralded as having the top e-mail executives, but that is no longer the case here with this top executive move. at the also looking social media monitor. and fireeye were both down today and fireeye was downgraded. both of those stocks are down sharply today. julie, thank you. julie hyman at the bloomberg terminal. and here now to talk about facebook is brian wiser, he is the senior analyst at his company in portland oregon --
portland, oregon. brian, does this mean that this is not all that much or is there something more to this? fair, this is not the growing importance both to the advertising community and really to the broader ecosystem. arele and facebook together now in the same universe together. betty: great analogy. but anything changing now that the stock prices are now more effective? no, the stock prices do not matter. ty: twitter is now back in resurgence of mode and jack dorsey is trying to make them come out and be on top. can they come out and do the same and beat what facebook is doing? brian: when it comes to divisional -- digital
advertising needs, they can meet that but when it comes for verizon and aol, i think that twitter has a real strong position to be a foil in that negotiation. they thickly you need someone who can have negotiating level urge -- leverage with. niche. where you get the everyone needs to have a niche. aat is why yahoo! is in such bad position. by contrast, twitter or a handful of other players or someone who is really different and very differentiated can actually have a growing role in the advertising ecosystem even though they are much smaller than facebook is. betty: how much can they leverage in this universe? how much are you envisioning in that? have a lot of room, say like you spent $10,000 with
facebook last year, and they say, we would really like for at 14.do with us we really could send $1 million you canaol's way, so use that as your back-and-forth negotiation, because you don't have to spend all of your money with facebook to satisfy all of your goals. what if you make this 13.5 million dollars? been standing with aol because they are large enough and they have a lot of properties and they are spending money on those, so they have got a good business. that is fine. betty: interesting. will be, and so in that sense, is that an appetizer -- is that an advertiser's dream? brian: no, i think an advertiser
would like to have a more level playing field. tohink they are trying establish walden gardens and -- gardens, in a way, and you're trying to compare and is really hard for facebook and for google to do that. betty: how much do you see is the difference with facebook? brian: the most impressive thing about facebook has been their commercial focus. from the top down, yes, they care about the consumer, but when it comes about to the commercial endeavors, you can see, particularly from sheryl sandberg on down in particular, it is about the marketer as much as it is about the consumer. where google has a really stark contrast. there are plenty of people of there who have
that attitude. i don't think that marketers are necessarily evil in the google world. before we go, brian, what is the biggest risk here for facebook? brian: i guess it is just about how fast they grow or how fast they don't grow. i think there is a risk and there are regulatory issues that could come up the acre you get, but again, google is going to be the first person to be hit with that, sort of an issue. so the question is if you grow at 40% or 50% or if you grow at 20% or 30%? betty: ok, brian, thank you so much for joining us. at pivotal wieser research in portland, oregon. there is much coming up here on "bloomberg market day." andm--ing up, can valley
much they should play -- pay artists when they play their songs. jeff bezos is now the richest man in the united states, with bill gates behind him. and amazon beat wall street's estimates. cloud sales more than doubled from a year ago with microsoft. and germany is already feeling the pinch from volkswagen's diesel scandal. several towns closely linked to the automaker are helping projects like new playgrounds and ice rinks. pulling projects like
building new playgrounds and ice rinks due to the problem. you can also get more business news at bloomberg.com. it has been one rough week for shares.nd -- valeant an company is going to hold investor call on monday to defend itself against a discussion that they are creating fake sales. we spoke with one individual who called valeant's response childish. >> none of it makes sense. i a matter of fact, and maybe will do this in the next few days, if i got all of the responses and i include with it the response from the company,
you will get three different stories. the responses are amateurish. joining us now to wrap up the story is drew armstrong. this company did explain a little bit in a release what all of this is about. so who are the investors who say, ok, i accept what valeant is saying? drew: if you look at the stock, there is not a lot of them. this company has raised tens of in marketf dollars value this week. it is almost like a midsize pharma company disappeared. we are going to have to wait until monday morning, that will be thursday, friday, saturday, days sinceday, six this issue began to hear from anything from the company other than water two written statements -- other than one or
two written statements. betty: some are saying that they don't quite believe citroen or valeant. drew: it is an interesting dynamic. most of the people out there who say they know this company well say they don't believe anything about this research. that said, they brought up a lot of issues where, this company, the pharmacy that valeant had a relationship with, that relationship should have been exposed. what else is there that we don't know right now? stock prices are based on confident in the future of the company and when all of a sudden you got a company who looks very opaque and you don't have a lot of answers and you have major issues that you weren't aware of and their issues have been ongoing for some time and the veryny is not out there
forcefully and aggressively defending their business, i think that is probably what we are seeing other results in a those stock price decreases this week. betty: very much so. but i am surprised about the people who have come out. yesterday, we had one analyst who said that it has been known that this company is opaque and there are parts of it that are overpaid, and how acceptable that were as -- that was to shareholders. yes, and i think it is very fair to say that there weren't enough questions from the shareholders. their ratings may not always reflect exactly what actual market sentiment is. onyou look at market ratings the stock, they have been almost all overwhelmingly positive. 20%, 30%, or0%, 40% dives, that could affect it. if this all gets resolved, you
know, the political risks, the regulatory risks, and others who may not be happy about this process, the accounting risks, if this all gets resolved, this may be the best trying opportunity of any pharmaceutical stock. issues, weof these had the most amazing congress call, and people could say, there were all big mistakes. betty: that is a high bar. drew: a very, very high bar. betty: drew, what is expected to happen on monday? drew: the ceo of the company, mike pearson will speak, the whole board, all of their top executives, they are bringing everybody here. we have no idea what they are going to say. i expect there are going to be a lot of questions and there he will -- and they will be under pressure to answer a lot of questions. ok, thank you so much, that is drew armstrong, our bloomberg health editor. drew: thank you.
betty: welcome back to the "bloomberg market day." i am betty liu. the markets closed for the week at the top of the hour. julie hyman has a check out how your markets are doing. julie: yes, it is very interesting here. the nasdaq in particular is the winner of the day. just looking at my bloomberg the s&p 500e, volume, 26% above the 10 day average. so the buying that we are seeing today is on relatively high volume, and it does cap off a good week of stocks and earnings . thanks to mario draghi and the people's bank of china and in talksse of draghi, the
increase earnings. this is the longest streak we have seen this year, and at least in part these gains have tech earnings.om amazon, microsoft, google. industry index finished its best week since mid july. in the index, the second-best performer is ebay. this is since it had the spinoff from paypal. it is higher by about 15%. that is its best week in four years' time. let's take a look at the dollar as well. week sinceg its best may. this is after a three-week losing streak up 2.7%. this is some of those gains against the euro, going again back to mario draghi's comments.
in the dollar and selling in gold has been what we are seeing. people are feeling they don't necessarily need an inflation hedge. that is what we are hearing from traders. speaking of oil, it is having its worst week since early august. three down weeks over the past four bank. and this is after the rebound we have seen in oil prices, but that rebound has come to a halt at this point, betty. right, julie hyman at the bloomberg market desk. thank you so much, julie. for the year, the sector gained almost 2% across the board with the s&p 500 tech index. here to discuss tech's the day -- tech's big day are my guest. so tell me how much of a
contribution it has been to a rally here? about 100 seen billion dollars of additional market value created, alphabet, microsoft, and amazon, and really what has happened here is that it is $100 billion in market cap. candidates, lot of it was pretty clear, the fed has sort of mapped out its course, so people have been lading for the -- have been waiting for the next catalyst. betty: how much of this rally do ?e attribute to the tech rally >> it is about 10%. so when they move, it moves the whole market. betty: could this be a big factor? anna-louise: possibly.
imagine we could continue to see continued growth. the tech sector has been under high scrutiny, but the guidance is what people are going to be watching. merck,-myers squibb, they are watching for this price gouging scandal to go on. traditionally, due tech stocks power the stock market, at least as of late in the fourth quarter? we have seen some leadership change, especially since the market bottom and in august, so it tech stocks are really big. we kind of need them for the market to rally, but you know, it it is a good week this week, and things could change next week, too. absolutely, as, we have seen with the earnings reports. what is this do with the
strategist' targets? peter: there was a big selloff -- joseph: there was a big selloff and bloomberg surveys was 2150, and we are only at 4% right now. we are 15% away. there are some people who capitulated that there were banks that were really cutting and now there are people who didn't do that and they are the winners. that: is anyone saying they are going to be raising their targets after this? anna-louise: there might be some upside to the target at our sbc c, which is00 -- rsb $2100 right now. he just said he had been surprised with how big and how strong this rally has been and how strong the market has been and that caught him by surprise. so he said yes, there is an upside to his estimate. whether or not he will change it, who knows?
betty: is anyone pointing to the fed at all? has that become less of a factor here? joseph: yes, it has definitely become less of a factor here and they have loosened up on the reins and have given us more direction. this really has helped the market achieve these rates. it is definitely pushed off a little bit right now. i haven't really heard much about it from the people we are talking to. people are thinking a rate hike next year at the earliest. betty: where is the guidance right now in this quarter? have there been any revisions upwards from what we have seen two for -- so far? manylouise: i think so people are focused on the current quarter's reports that it will remain to be seen how far off the companies are going forward. and we are expecting to see earnings contractions for the whole market.
that includes energy, we were looking at about -7%. is positive, so people have been adjusting and people are getting more optimistic. we only had a third of the companies in the s&p report so or, so there are 30, 40, more companies reporting per day. but people are getting more optimistic and they are targeting upwards. betty: well, joe, thank you so -- andnd matt anna-louise. coming up, i am going to be speaking with ceo hank greenberg at 10:00 a.m. eastern time. don't miss that interview. ♪
♪ [closing bell] scarlet: u.s. stocks closing raisingday with the s&p higher than it has in one year. amazon and microsoft added more than $1 billion in market earnings. alix: so the question is, " miss?"you china is also combating a slowing economy. hurricane patricia is barreling into mexico. we are going to discuss the storm's implications. ♪ scarlet: the dow has closed at its highest level since