tv Bloomberg Markets Bloomberg October 30, 2015 3:00pm-4:01pm EDT
markets." good afternoon. i am betty liu. markets are trading mixed. finishing out of banner october. party the ending soon thanks to the fed? a new reality for oil giants. the latest earnings reports provide valuable information on how the giants are adjusting in -- to life in a world of $45 oil. -- valeant in the news. they have a better chance of hitting zero thean the target herbalife.
julie hyman has the latest. the s&p is near its low. not so happy friday if you are long stocks. all the major averages here all down .3 of 1%. trajectory inhis the last half hour. we could be seeing some end of the month rebalancing. there was a big sale order coming through. at 2 p.m. ase stocks have taken a leg lower but this movement mirrors the move that we have seen in the financials. with financials the biggest drag on the major averages, lower all day but that decline starting to accelerate at the same time we saw declines in the major averages start to accelerate. e saying so decline -- some
declines. we are seeing them drag down on the s&p 500. [indiscernible] the federal reserve. speaking to some of the challenges that face the bank. the largest u.s. banks could ofe a $120 billion shortfall long-term debt. that is under the proposal that theired at ensuring failure would not hurt the broader financial system. deal with any financial emergencies. that could be approved this afternoon. some investors are looking at this. we saw financials rise and yields are down. that could be something that is causing some pressure. >> they are bucking the trend. julie: expedient is leading them. they sent the earnings report
that the estimates beat -- the numbers beat estimates. -- the shares were up by 7% and we are seeing other gains throughout the travel industry. not as large as we are seeing in expedia shares. trip advisor and home away also rising. mark: good afternoon. today the center of the diplomatic world was in bni, austria where the u.s., russia, and more than a dozen other nations directed the u.n. to begin a new diplomatic process with syria's government and the opposition. the goal is to reach a nationwide cease-fire in the country's five year civil war and to reach a political transition.
john kerry: the answer to the syrian civil war is not found in a military alliance with the sod from our point of view. but i am convinced of that it can be found through a broadly supported diplomatic initiative aimed at a negotiated political transition consistent with the geneva communique. -- how long union could remain in power under a transition remains unclear. president obama said he is eager to sign legislation that will keep the government from defaulting on its debt. the government can keep borrowing until march of 2017 and it lifts of budget caps. that means the next $80 billion in spending. there are public and national extending its
partnership with nbc. that comes after the heavily criticized debate on cnbc. notrnc chair said it did focus on economic issues as promised and operated in "bad faith." work in goody will faith to resolve the matter. you can always find the latest news on betty -- bloomberg.com. betty: where less than hour away from the closing bell. the best monthly gain in four years. most of that fueled by central banks. is this as good as this is going to get? wonder, is this the end of the bull market? to be tougheroing going forward.
be aought valuations would challenge. and it looks more challenging. we are transitioning from the neutral weight into overweight in europe and looking more global in equity space for better evaluations -- valuations. it will be a headwind for the market. doesn't mean the bull market is ending, are we in the last stages? guest: i think we are in the latter stages. the economy looks to be doing ok. we do not see a recession for this year. twice 16 we do not see a recession in the united states. valuations as you are maturing through an earnings cycle and with the economy, we think there is more risk-adjusted return elsewhere. betty: we were ruminating about this this morning off of a bloomberg story on whether the fed may be because of its
[indiscernible] yesterday, it is putting an end to the rally by saying by the end of this year expect that we are going to raise interest rates. guest: i think that is part of it. i think they want to go positive. they had a change of heart in september but we think december is a live meeting for the federal reserve and that is one of those latter stages. they will go 25 to 50 basis points as a range and then tighten it up to 50 basis points in the early part of 2016. the european central bank is beginning a quantitative easing. they are not ending it. they are going to be in quantitative easing until further notice. willy markets, risk assets like that more stability policy. betty: what do you make of the rotation you're saying in the last few weeks given this rally? guest: it is incredible. the markets sold off rather
dramatically. perhaps overreacting and i am not convinced it was the china numbers that were driving the market selloff. the chinese economy has been decelerating. for years now. we have been asking ourselves for the better part of the decade, how will they respond when the fed raises its rates. there is a lot of volatility. is digesting that the fed will raise rates in december next year but it will be a low rate environment, very gradual. betty: that is what the fed said as well. guest: it will be a low rate environment. i think the take away low yield environment, investors need to look globally. it is not just equities or bonds. this is going to be a global low return environment. betty: the opportunity to make money is where? i know you say international but what about here in the u.s.?
despite valuations getting extended there have to be some opportunities. guest: we think it will be an average year. we're not calling for a big drop. we're looking for that mid-single digit. it becomes more [indiscernible] equity space is one area. we are in different between cap. growth will be -- demand something of a premium in this market but also looking where valuations make sense. areas like health care which are going to do reasonably well given the budget deal that we have seen come through but there is areas where we can pull back a little bit. betty:? where would you stay away from -- where would you stay away from? guest: [indiscernible] betty: good to see you this
afternoon. much more ahead in the next 20 companies start a number of willing project. why the reduction could mean a huge payoff for investors in the coming years. while stocks have enjoyed a big is undervaleant scrutiny. our guest tells us why three matters -- numbers matter to you, 8, 4, and zero. he will explain in a moment.
betty: good afternoon. a look at some of the biggest business stories in the news right now. theirs suspending pop-culture blog. it was considered a pioneering smart storytelling online contact -- connecting audiences to digital media. profit growth will be less than expected. simmons called the decision to terminate the site "appalling." goal is to help advance an internal probe. the investigation is lagging because many suspects are refusing to cooperate.
dupont says it is making ethanol from corn stocks and leaves instead of the green itself. at thepany is doing it world's largest ethanol plant. they opened a refinery and plans to make 30 million gallons of fuel additives each year. the new plant comes at a tough time for the ethanol industry. it is battling the petroleum industry about how much ethanol the government will require for the nation's gasoline supply. you can always get more business news at bloomberg.com. and exxon mobil. or drops in their third-quarter .rofit even with a massive drop in prices those results were good enough to beat estimates and shares or higher. buoyed.any's are being more is andyr
in these oil are companies you want to get paid out. in the big dividends and those are increasingly seeing to be in danger here. if you are an oil investor now and one of these big oil companies do you just wait it out? andy: oil prices will recover in 2017 so i think between now and the first quarter of 2016 is the darkest before the dawn. good time to get into oil producers. betty: why oil producers? andy: they will benefit the most. there are a lot of shale reserves. as oil prices recover this is the oil that will hit the market first.
betty: what about these dividends, are they in danger here? and it all and there is some danger out there because dividends used to be sacrosanct and what we saw that -- was that marathon cut their dividends. -- companiesrament have promised to maintain their dividends. if they are cash flow negative those dividends are going to be at risk. betty: how will you protect them, what are the alternatives if you keep losing money? andy: the oil companies are cutting investment, cutting personnel and lowering their breakeven cost. if they are going to be spending more money than they are taking and those dividends are going to remain at risk. betty: who do you think is most at risk here? andy: concerned seeing these big
multibillion dollar losses with anadarko and conical phillips. they have to cost there --cut their costs substantially. betty: would you buy the refiners right now? i would because refiners look pretty good. we saw good earnings from tellips 66 and to sorrow -- soro. to go up another 1% and refining capacity has been at a high utilization rate. we are not able to make any more gasoline in this country as demand increases. what about m&a? we keep talking about energy m&a. what would be the trigger point here? andy: i think there is a lot of cash on the sidelines looking for distressed referees to come up in there looking for these companies with weak balance sheets to look for a savior at
these lower oil prices. you will continue to see consolidation. the amount of bankruptcies we have seen is rather small even though we are at $45 a barrel. betty: what do you make of that? and he: the buyers and sellers of equities are far apart on price because they have the same opinion as i do that oil prices are going to recover several years out due to the lack of investment. so the sellers are willing -- willing to wait it out unless it decent offer comes up in the buyers are waiting for the prices to come down his companies become distressed. we have a standoff at the moment. when oil prices do come back, do you expect it to be a snapback or weeks -- will we see a gradual rise? andy: it will be a gradual rise through 2016 as the market dynamics get balanced. the market has very little
geopolitical risk any right now. we should see things get -- if we see things get unstable in the least you could have a five dollar to seven dollar barrel a move on the risk factor. betty: thank you. during our interview, saudi arabia's credit rating was cut to apa -- to a plus from aa negative. ahead, valeant shares take another beating. hitr ceo thinks they could $44 a share. we look closer at the conference call.
bush'ential candidate jeb s coo has left his campaign. let's get back to the markets and to one story we have been following. bill ackman held a nearly sayingur conference call that the companies's stocks could reach new heights, all the way up to $440 a share in three years. from where the stock is now that is long way to go as wall street did not buy it. the stock continued to fall as he talked. he wanted to blame bad public relations and complex business model. investors saw through that after
questions were raised about their accounting and their relationship with a specialty pharmacy. resoundingike a review is that he perhaps does not know as much about the company as anybody else out there. >> he still has a lot of questions. they said it would be a few years before the investigations conclude. after four years at one point. one of the answers -- in one of the answers to the questions about it. he had bullish projections for the upside but i think part of that is he was saying operationally they need to execute in the can do that without [indiscernible] but the selloff started because [indiscernible] betty: because the strategy is what fueled their stock gains.
44% of sales came from that pharmacy. they say it is only 6% or 7% of the business. we have to see that in there has to be a couple quarters to show with the earnings really are without having ties. i think investors are happy to wait and see even if bill ackman is still on board. down sohey are shutting what happens to all of those drugs they were selling, do they spread them out to other pharmacies, what exactly happens here weston mark >> they can go through the specialty pharmacy network or find other channels. they can distribute the drug through traditional challenges -- challengchannels. they can go back into the traditional channels and there will be a trick -- a bit more
transparency about how sales are going and what they're up against. people are waiting to see, with a able to get the numbers and reimbursements from insurers to deliver on earnings. put?: is he staying confident with mike pearson and seemed to think the strategy should incorporate m&a and that was an interesting piece of the story. he was not necessarily set on the idea that they should buy back stock. he thinks they can execute on strategy. question is whether or not anyone else believes it. is w weighing on the shares is uncertainty. hat is he has something and investors are waiting to see what it is. that is the hangup right now.
betty: is there any other investor that is coming along with him or and -- or supporting him? cynthia: everyone has been t tell the world what is going on. that seems to be what the big investors are doing. it is still early days. there is lot that will come out and next --in the next few weeks. our guestll ahead, joins us to give his perspective on whether the fed will hike rates and he says watch out for three numbers, 8, 4, and zero. he will tell you what that means. ♪ . . the only way to get better is to challenge yourself,
meeting inmats vienna to discuss ways to end syria's civil war. they agreed the country must remain unified and independent, but officials cannot agree if bashar al-assad or his opponent should be in charge. the united states, russia, and more than a dozen nations have directed the united nations to begin a process, the goal of which is a cease-fire and political transition. secretary kerry: the charge is nothing less than to chart a course out of hell, and that will not happen overnight, but i'm convinced that the steps we worked on today, if followed up on, if worked on in good faith, can begin to move us in the right direction. came the sames day the white house announced a small number of special operations forces will be sent to northern syria to work with
local troops in the fight against islamic state militants. he is eagerama says to sign legislation that will keep the government from defaulting on its debt. the senate gave final approval to the measure earlier today to give the government authority to keep borrowing until march 2017. and it lifts the budget cap, which means an extra $80 billion in spending. the united nations says promises by 146 countries to reduce emissions are promising but not enough. many countries have been too conservative in their pledges. the goal is to keep the temperature from rising by the end of the century. a 16-year-old oregon girl is being treated for bubonic leg. areth investigators investigating along with state and local public health officials. they say she may have contracted .he disease from a flea bite that's a look at our first word
news right now. you can always find the latest on bloomberg.com. betty: thank you. markets are closing for the week and for the month in just about 30 minutes' time. julie hyman has a check on some company movers. julie: i'm going to do a trio of solar. sun edison is a beaten-down solar stock that surged yesterday on speculation on that david tepper hist be talking during television appearance. he said he is not talking about it and maybe people are smoking too much marijuana as an exclamation. let's take a look at my bloomberg terminal for the top shareholders of sun edison. greenhorn capital.
omega advisors. a lot of hedge funds have invested in this stock, and holders of valley and has been sort of battered as years go on. seen the stock tumbled. there we have the share price. here we go. here's the year to date chart. people who have been holding the stock have been feeling a lot of pain. solar city also feeling some pain today. for the folks who are long. it's an installer of solar panels, mostly for residential use, and the company has been focusing on growth and top, saying today however that it will vocus more on trying to .oost the bottom line investors, though, don't like
that. shares are down by 22%. finally, one gleam of light perhaps. even though it beat estimates from the sale of a stake in a project, it looks like investors are still happy about that move. seems one rarity, it like. julie: at least for today. betty: thank you. says's tony crescenzi there are three numbers that make the case for the fed to raise rates in december. only four members favor delaying until 2016, and zero, the number -- greatheight backers height backers after a relatively weak jobs report. all of that means we will see a rate hike in december. tony joins us from pimco headquarters.
betty, good to see you. see you.od to give me the odds of a rate hike in december. tony: probably slightly higher than the market is projecting. probably higher than markets are saying now. in essence, it's a bet on what .ayroll data one of the major things that has game of 42,000. felt like i was winning a game of clue in looking at this. it indicated that the range that they want that would satisfy them is pretty low.
the key is that labor force growth, the amount of new americans that enter the labor force in each month looking for a job has increased by 70,000 persons per month the last three years. the fed is saying job wrote is 150, that's 80,000 more than new entrance, so that's good enough to guess at this stage of expansion, this is something we desire. they: you mean, given all jobs growth we've had so far that you expect to see a slowdown at this point in recovery? its own model projects payroll growth will slow by december, so maybe that is already happening. two 130,000 per month next june. and under 100,000 a month,
closer to labor force growth in all of 2017. the fed expect the jobless rate to be the same at the end of 2017 as 2016. the only way that can happen is if job wrote slows materially. it is important for investors to recognize job growth is likely to slow materially, and red, as long as it is about labor force growth in the near term, will be happy and satisfied because it does not want rapid improvement now because that could future -- and the then to curtail the expansion because it wanted to go on for a long time. absolutely. they want to keep creating jobs, but i look at a number that we broadcast earlier this week, which was 6 million. 6 million is still the number of people -- that's right, the part-timers in this country. while the labor market is recovering, there are still 6 million people out there who are working part-time. many of them do not want to be working part-time. it is down several million
workers, and you are absolutely right -- it is an unfortunate number and far too high for america. there is progress to be made. this is summed up in the unemployment rate. there's one that the public sees, but the particular rate you are referencing that includes the part-time workers is at 10%. what is probably normal is 9%. it will probably take a year or so to get there. the fed knows it has to move -- it's likedog walking a dog with a long leash. they want to calibrate the interest rate to produce a certain result in the economy and job growth. remember, moving the interest rate up a quarter point probably will not slow -- could slow progress, but they will continue to see progress, and that's what the fed ultimately desires. me before we go, if
it is going to be a 25 basis point hike, not that huge a difference to the economy, what is the difference between going in december and waiting until march or another time next year? one of the points janet yellen made was there are long lags between changes in monetary policy and their impact on the economy. she said a second factor is risk to financial stability as investors crowding to assets because they are not so worried about the interest rate climate, so that's trying to normalize this story to let financial assets move on different things other than liquidity. more like growth and profit. those are more typical things to be moving on, rather than the fed's provisions of money. it is trying to normalize the process and normalize markets. betty: great to see you this afternoon. have a great weekend. much more ahead in the next 20 minutes of bloomberg markets. putting a big scare into wall street, we look at some of the financial chart that are giving investors the shivers.
betty: good afternoon and welcome back. it's time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. largest u.s. banks could face a 120 billion dollars shortfall. banks like wells fargo and jpmorgan will be required to hold enough debt that could be converted into equities if they were to fall through. six of the nation's biggest banks would need to raise an additional $120 billion to
comply. g court dropped the most in tune of months after some analysts said the lender overpaid. they've agreed to pay $1.4 billion to buy first niagara, a regional bank that is grappling with rising costs and a sluggish stock. block's tvrom the network is on the block. we've learned that fuse, the cable channel that merged with nouveau lopez's backed tv is talking to media companies that may be interested in targeting a u.s. hispanic audience. a deal could be difficult to complete because many u.s. media companies are not looking to buy networks ascable pay-tv bundles shrink in size and breakup. you can always get more business news at bloomberg.com. for a look at the u.s. markets, gabrielle has -- abigail has the
latest. abigail: here we are about 15 minutes before the close of the last trading day of the month. while the nasdaq may be down slightly today, it's on track for its best monthly performance since october 2011. it is up a little more than 9.5% at this time, and again, the best performance in about war years. four years. one of the notable performers we talked about just this morning. pnc sierra, the chipmaker up on a total return basis on the news that sky works is buying the company for $11.60 per share. turning to china, tina companies and 62% respectively on the news the companies are coming together to form china's largest online travel services company. lastly, rounding out the group, .ynn resorts the stock is up 32% on the month
even after the stock reported a disappointing quarter and steve wynn and the government of the cow had a scuffle. it's hard not to notice that three of those for stocks are china-based or china-related in the context of the recent china relate -- china rate cut. thank you. inorrow is halloween, and honor of the occasion, we want to look at some of the charts that are putting a scare into wall street. from inflation to liquidity to real estate, these charts of putting traders on edge. julie, who wrote that story, joins us now. it's one of the most read on our terminal and on our website. tell us first about the first chart you point out about commercial real estate. chief economist pointed out that commercial values are soaring, close to levels they were during the
housing boom in 2007-2008. he said it's looking frothy right now. that chart was probably the scariest when i saw on the list that we got from a number of analysts and economists. betty: frothy. may be a bullish sign. maybe there is more demand for office space. it would be interesting to look at commercial real estate stocks as well. betty: we do not have time for that because we want to move to the other chart. the second chart is something called five-year forward inflation. >> a sickly, this measures where people expect inflation to be five years from now. forex.com senior market analyst matt weller pointed out inflation is not going anywhere as the market is predicting right now, so it's below 2%, and if you are the fed, you might be kind of worried about that. right, you might be worried, and why would you raise
rates at this time? the final chart is on equities and liquidity's. what is this about? measuringe is liquidity where it was at before the financial crisis, but liquidity risk has increased. .ou will be paying more betty: does it remind people of other tipping points? >> you look at the chart, the flash crash, it skyrocketed, and if you look at the chart again back in the financial crisis, it was really high, too, so not necessarily something you want to see spike like it has recently. halfway little over where we were when we had the financial crisis. thank you for joining us. much more ahead on the "bloomberg markets."
betty: welcome back to "bloomberg markets." top of these at the hour for the month of october, and it has been a month -- a monster month. daye: we will look at the and then how it's been for the month. looks like we are coming off the lows of the session. down about .1%. we had some economics out this morning that did not help matters. we had some earnings that did not help matters. financials with the biggest drag even as energy rises, but let's look at how the month has been. take a look at my bloomberg
terminal. this is one of matt miller's favorite functions. this is the heat map. you might really want to focus on this column. october, going back the past several years. the s&p 500 has risen about 8%, it's best since 2011. the best october for the s&p since 2011 is what we are looking at here as stocks have rebounded from selling over the past couple of months. let's also look at the internals in terms of the group in the s&p . here they are, all the groups for the month in s&p, and energy and tech are the best-performing groups, but all of them are in the green. it has been a broad-based rally this month. some of them driven by earnings, some driven by at least a finally,ebound, and let's look at the individual stocks and how they have done, the winners and losers. member-ranked returns is what we call them.
the first best tina performers had to do with an industry that has been a very busy over the past month -- semiconductors. a lot of murder -- merger and acquisition activity and also sort of mixed earning pictures. first solar, which is gaining today after its earnings announcement, rounding out the top three, and on the downside, consol energy, the coal and gas producer, which has been doing poorly along with underlying commodities, but also, as it reports earnings-related news, and the rest have something to do with earnings as well. a mixed picture, of course, on the individual stocks side, but overall, it has been a very strong month for equities. betty: julie, thank you. julie at our markets desk. talked about, stocks have been fluctuating, and i
want to talk about what we've seen this month. what are some of the big takeaways from this month? mike: the federal reserve came out and were more hawkish than people expected, so you saw a pretty big movement upward in the odds of a rate increase in december, and the stock market actually rallied, so it's nice to see that. >> --betty: seems like they are ready for it. mike: if you contrast with september when they were more for a, we tell -- we fell couple of days and lost the rebound we had from august. the banks obviously shot up right after that. they are back after a report from the federal reserve. that's a little bit of the weakness we are seeing today,
but overall, to me, obviously, earnings is the big story. , the earningsnot expectations a surprise. it's interesting where the big beat came. energy companies beat by, like, 20%. we are entering -- used to earnings companies beating by a .ittle bit obviously, a strong point for the month. for the week, it's good to see health care, to me, anyway, in the leadership this week. obviously, one of the biggest drivers in the bull market -- betty: has been health care, yes. mike: really saw some cracks in the armor. found these earnings results, and they did a forecast all the way through 2020 predicting double-digit growth that far out, and that sort of
reinforces the long-term pieces for the bullish outlook. they make arthritis medicine. betty: we all will go gray one day. what about utilities? mike: utilities have been a little bit on the weak side. bond yields are up after the fed -- again, the expectations of a rate hike for december going up pretty significantly. estate utilities, real investment trusts, the proxies for yields in the stock market are a little week. betty: correct me if i'm wrong, but we did notice rotation from some of the small tech stocks, some of the big tech stocks, right after there was a little rotation there you go mike: absolutely. betty: what does that tell us you are mike: when you have a market up ,% for the month, the risk finally, everyone wants to know
what year this is. everyone wants to compare this year to years past, and it is starting to look like 2011. what was the biggest october rally since 2011? had the summer brought back significantly. other really good news coming into the market. we are bulking up back to those levels we were before the big spoon in august, and we might get stuck in a trading range we saw in august. betty: thank you. that is it for "bloomberg markets." miss" and the market close is up next. find out what you missed this october. ♪
stocks are closing lower as we hadn't the weekend. equities had their biggest month in four years. the question is, as always, what did you miss? this has been the best month in four years for global equities. we have this chart you cannot mix. miss. we take a look at what is driving this move. >> dark days for banks in europe. his 2016 going to be even worse --estion mar the s&p is reporting its biggest monthly gain since 2011, rebounding from a dismal third-quarter. the s&p 500 has climbed roughly