tv Bloomberg Markets Bloomberg January 27, 2016 3:00pm-4:01pm EST
from bloomberg world headquarters here in new york, good afternoon. i'm betty liu. you's what we are watching. markets are taking a turn -- here is what we are watching. markets are taking a turn lower. the fed says it is closely monitoring global economic developments. hikes fort out rate the rest of the year? driving down the market, apple and boeing, falling the most since this summer as their forecasts fall short of estimates. is it a temporary blip or a sign of tougher times ahead? facebook is reporting after the bell. 10 mark zuckerberg impress investors again? -- can mark zuckerberg impress investors again? we are about an hour away from the close of trade.
bloombergs julie hyman has the latest -- bloomberg's julie hyman has the latest. selling off on the news. julie: it has not been as dramatic a reaction. let's take a look at stocks. all three major averages are falling to their lows of the day, down pretty sharply here. if you look at the interpretations i have been seeing and hearing about on the past hour of bloomberg tv of the fed statement, there is nothing to warn of this kind of reaction. didal -- he said the fed not do anything that differently in this statement, aside from acknowledge what has been going on out in the world, but not really raise any sharp alarm bells. if you take a look at the intraday chart of the s&p 500, this move is even more stark. some vacillation when the statement came out. after unusual as people read
through -- that's not unusual as people read through it. then, sharply lower. again, now falling to the lows of the session. interest rate expectation being priced into the fed funds futures, 21% chance of an increase at the march meeting. 30% ahead30%, 26% to of the statement coming out. the chart on the bottom, those expectations trending lower. take a look at the 10-year note. on an absolute price basis, very little change. points01 percentage changed. you saw the sharp movement lower after the statement came out. a big not seeing overall price change, but definitely directional change. betty: and directional change on the euro, too? julie: this is interesting, because it sort of contradicts what we've been seeing recently in the 10 year -- 10-year.
with yields moving lower than they were, the euro has been gaining some strength. prices,n uptick in gold which is what you might expect with that downtick in the dollar. and oil, which has sort of been a separate story today, it has talkso do with inventory, between russia and opec producers about cutting production, and it is holding onto its gains. betty: thank you so much, julie hyman. mark crumpton has more from the news that's. -- the news desk. ark: bernie sanders has a slight lead over hillary clinton in iowa. the poll has sanders with 49% support among likely caucus-goers. mrs.s clinton is at 45% -- clinton is at 45%. just 2% are undecided.
this is live from des moines, iowa, this week, ahead of next week's caucuses. it begins at 5:00 p.m. new york time. following a two-day visit to italy, iran's president hassan rouhani is in france, looking to drum up as this -- business. the associated press reports france today announced it is asking the european union to consider new sanctions against iran over recent missile tests. the head of russian state oil pipeline monopoly transnet says talks on cuts are planned. the a negotiation -- the negotiation could be within opec format. the construction workers unearthed the bones of a mammoth and other ice age mammals on the oregon state university football field. crews down the femur from one of
the ancient elephants and bones from a bison and camel, reportedly dating back some 10,000 years. 24 hours a day, from the bloomberg personal desk. betty: you never know what you are going to take up in your backyard -- to dig up in your back yard. the fed decided to sit tight on interest rates. the fed said "the committee is closely monitoring global economic incidental elements and is assessing their applications to the labor market and inflation and for the balance of risks to the outlook." that was one of the key phrases in the statement. joining us now is a senior portfolio manager at oppenheimer funds and carl riccadonna. i read your note before the meeting. you said the fed's goal is to contradict, not agitate -- two coaches take -- is to cogitate,
not agitate. think the acknowledgment here is the fed is less optimistic about the economy and therefore going to go slower, certainly not going to be delivering more rate hikes. off theit is largely table unless we see a very impressive rebound in growth -- and the the next next data point in that regard is friday's gdp report. betty: is that the impression you got, too? ira: it is important that they are looking international -- at international markets. i don't think the statement was quite as dovish. there was still acknowledgment that they want hikes. there were still two mentions of potential hikes. even if the fed only hikes twice --s year, that is still only
that would still be a tightening, maybe a little bit too far. we operate if they want to hike four times, they would be making a big policy mistake by tightening that much. the fed did not have to do anything to jawbone the market. -- in fact, if they were more aggressive in that regard, potentially the market would push that to 2017. ira: why should they wait? what would be the point in waiting for the june or september to hike? is it because there is a little bit of volatility now? the u.s. economic data is not terrible. we know that gdp in the fourth quarter is not going to be great, but the whole year of 2015 was not terrible. 2016 seems -- we talk about plus or minus 2.5% growth. that's not bad. as long as you wind up having stable core inflation and gdp
growth kind of where it is and isn't jobs numbers -- decent jobs numbers, there is not a lot of reason for them to necessarily pause here. betty: but that doesn't sound like it's a reason to hike. carl: the data is not terrible, but it is not good. growth is not good. if we grow at, let's say, 0.5% in the fourth quarter, the year on year growth three is below 2%. that's territory that creates concerns about a growth stall in the economy. it makes us more vulnerable. we think we are going through a slowdown, but that slowdown is going to be rather temporary. i think the risk is that financial conditions have gotten so tight because of credit spreads think somewhat wider. when you look at mortgages, they are not that much higher. conditions were a large push. commercial mortgages, car loans.
financial conditions are changing in different places. if they stabilize here, we don't see a reason why you cannot have this 2.5% growth this year. betty: i am not hearing a yesening yes -- screaming to a rate hike. ira: think about the tanks we st we wente ang through to get that hike. they still have to do that if they were to hike in march. betty: you are saying it is harder in june. carl: they did not want rate hike expectations to shift in 2016, so they were less pessimistic relative to what we heard from draghi last week, for example. betty: in december, didn't they buy themselves some time? carl: what's interesting is the absence of the balance of risk. that was the critical sentence
in the statement. we expected to see the balance of risk remain neutral. that was a signal that potentially they are ready to backtrack. the fed does not want to see that -- say that either. but to cloak that with invisibility raises an interesting question that suggests they are nowhere close to pulling the trigger for the next hike. ira: the balance has changed a little bit -- carl: if they were balanced, why not leave it in? ira: they want to add the sentence about looking at global conditions and how that will affect the forecast in the future. that new sentence is very important. it's an acknowledgment. in order for us to reach our four hikes this year, we need to see a stabilization soon in the outlook for global growth and for global markets to stabilize. betty: more to come on our analysis of the feds they can. -- fed statement. i would jersey and carl
riccadonna -- ira jersey and carl riccadonna, thank you. much more ahead. boeing shares hit turbulence following -- turbulence, falling the most in five months. waning demand for new airplanes. facebook earning reports -- earnings reports after the close. while keep down costs growing mobile video revenue? and here is a look at today's trade. the dow dropping big time. we have been digesting the that decision -- that fed decision. ♪
welcome back to "bloomberg ."rkets we are near lows on the s&p. nine of 10 of the major sectors are in the red right now, led by check -- tech. the dow is also down, as you can see, off by almost 2%. finally, the nasdaq has been hit the most. apple shares down. we are waiting for facebook results after the bell. the off -- that index is off by 2.5%. let's look at some of the biggest is this stories in the news right now. spotify wants to borrow $500 million from investors, eight months after it raised the same amount. the company may go public one to from now.s the company has raised more than $1 billion since its founding.
says that it launched an investigation with cyber security experts and is asking customers to watch for unauthorized charges on their cards. shares of devry education group are down as much as 20% after the for-profit college change was sued by the u.s. government. devry says accusations are without valid basis and it will contest its case against the government. that is your update. boeing is a huge drag on the dow today, down around 8%. boeing says it will deliver fewer planes in 2016. it also reduced its burning protection. joining us is george ferguson. explain to us what's going on with their deliveries and the problems around the triple -- t
he 777. george: boeing announced a delivery schedule for 2016 that looked a little bit light compared to last year, about 20 planes light. apparently part of this is the refresh of the 737. -- perhaps a little bit of caution on boeing's part. that is going to knock down revenues and profits. into 2017, they announced they will take down the 777 rate. that's their most popular international, flying-over-the flying-over-the-ocean plane. they want to transition to the 7 77x, which comes in 2020.
they are knocking the rate down. i think there is some risk here that they will have to do that again. betty: why are they doing that? what is the problem? george: they have refreshed the airplane for 2020. airbus built a competitor to this airplane. it has been a very strong seller for boeing. it's got a very -- it has been a very high margin airplane. it's almost as big as a 747, but it has two engines. it is quite efficient. it got high margins. a-350, which the is a competitor to this airplane. now, that is taking sales away from the 777. especially if you are looking at 777, the refresh coming in 2020, you would probably prefer to have the newer airplane. .hat is what we are seeing
people may want to buy used rather than new. betty: it's a combination between more opposition from airbus and -- more competition from airbus and maybe a slowdown in emerging and new markets. is it a pretty balanced mix between those? is it more because of competition from airbus? the competition from airbus is quite strong. the 350, which airbus introduced to compete with boeing, it has 700 orders, 800 orders behind it. they have sold it quite well. competition is a large portion of it. betty: what about the costs associated with the dreamliner? george: if the dreamliner costs keep coming down -- one of the challenges here for boeing is the dreamliner is going to increasingly become more and more of their wide-body production. it's going to a rate of 12 next
year. actually, here in 2016. the challenge is it makes low single-digit margins where the 777 makes mid-double-digit margins. they need to bring costs down as quickly as possible to improve margin on an airplane that is going to be the majority of their wide-body that they sell in 2016 and beyond. betty: thank you so much, george ferguson, on boeing and the deep dive that stock is taking right now. still ahead, a check on markets as the options soon. the dow is now down. 280 points. ♪
i'm betty liu. the selloff accelerating after the fed minutes. julie is standing by. julie: there does seem to be a bit of a negative reaction. joining me for today's insight, mark sebastian, joining me from the cboe in chicago. good to see you. we do have this selloff going on in stocks here, despite the fact that there -- essentially, the statement seems to have done what many traders were calling for it to do, which is to ignore knowledge what has happened -- to acknowledge what has happened so far this year. the fed says, yeah, we are keeping a ninen -- keeping an eye on it. mark: i don't think anyone raising -- ould be s&p.e off 30 in the
the bigs is not of even two up even- the vix is not two points. it makes me feel like today's selling is a little bit of a one-off event. a lot of times after fed decisions, the first way of reaction ends up being wrong and things turn around. is setting uprket and the vix is moving, it does not seem like there is a lot of fear and chasing of insurance in the overall market place. julie: amid the turmoil we had thus far this year -- we have had thus far this year in all markets, stocks, oil, do you think we are reaching any kind of point of stabilization? mark: one of the things i have been noticing is the decoupling oil.latility and monday, yes, s&p was off 28 handles on an 8% move in oil. a couple weeks ago, that probably would have been $50 or
$60. the vix only a couple dollars. we got a pretty decent rally yesterday. i see some decoupling. in al like oil may be stabilizing area where maybe it 33nces between $29 or $33 or -- $434 before it makes another $29 or $33 or $34 before it makes another leg down. i feel like, at least at a minimum, the market volatility is stopping overreacting, if only just to s&p movement. julie: one other element that has not helped the markets has been earnings. we did get apple earnings after the close yesterday. that's been putting pressure on some things today. out withompany earnings after the bell is
facebook. fromve seen this breakdown facebook, amazon, netflix, google. weyou think that there, too, are starting to see a little bit of stability or will see stability? of those names, is the one i really like. apple, i'm not a fan of. facebook is one that i think is going to move higher. as it dips toward $90, i think that's an absolute scoop. i'm going to be watching instagram. that was a brilliant purchase a couple years back. they are just now starting to monetize that thing. facebook could have a valuation your google or even higher at this time in the next couple of years. i think both legal and facebook will be worth more than apple. i like selling to volatility. facebook expiring on friday, the put spread, collecting about
$.80 to $.90, depending on where facebook is. i might even be willing to take delivery on the stock. as it approaches 90, it looks like such a value. julie: mark sebastian, interesting. he might end up eating an owner of the stock. we appreciate -- he might end up being an owner of the stock. we appreciate it. betty: still ahead, amazon reports earnings after the bell tomorrow. saying it's only a matter of time before jeff bezos is the richest man in the world. thehe is so bullish on e-commerce giant. ♪
mark: the refugee flow to europe will reportedly not slow down in 2015. according to a new report as many as one million people will seek refuge in europe this year. that's a smaller toll than year. the fighting in syria and a rack expected to be the main source of refugees. the associated press reports france has asked the european union to consider new sanctions against iran over recent missile tests. the disclosure came as the iranian president visited as -- to increase business and diplomatic ties. michigan officials say that water samples in flint are trending better but it is too soon to give the go-ahead to resume drinking unfiltered water. the water supply was tainted with lead from pipes leading to old homes. the state is working to identify neighborhoods without lead pipes
. those residents can potentially get the all clear on their water sooner. the fbi has established checkpoints around a national wildlife reserve in oregon, where some armed activists are still believed to be hold up. while they were on their way to a community meeting they were apprehended. shots were fired and one of the bundy supporters was killed. bundy's group wants the wildlife refuge turned over to local control. global news, 24 hours per day, power by 2400 journalists and more than 150 news journalists around the world. less than 30got minutes away until the close of trade. fedks are tanking after the decision. the nasdaq still continues to be the worst performer in the averages. abigail dooley at -- doolittle joins us with more on how the big tech stocks are doing. and of course, apple.
outpacingosses are the other major averages. a big pay -- a big piece of that is the overweight apple and other big techniques. apple shares, as we know, are down sharply and selling has accelerated this afternoon. a massive point drag on the index. iphone sales are dropping. the company forecast the drop in sales for the march quarter for the first time since 2003. putting this in a colorful way, they said they ripped off the band-aid, something that has not proven to be helpful for a stock that is deeply in a bear market. even so, apple is still above the support and last year's lows but you have to wonder if the negative macro commentary could send the stock lower yet. right behind apple is the biggest drag, amazon, microsoft, and facebook. facebook reporting its fourth-quarter today after the bell. jittery environments, but analysts are expecting nice solid, mobile by
advertising. bernstein has however highlighted the possibility that growth and expenses in 2015 could outpace growth in revenues. the've also said that operating expenses could hold the key for the stocks. of focus on expenses for facebook. it will be interesting to see whether or not facebook can buck the negative earnings trend playing not just apple but intel as well. betty: indeed, thank you so much, abigail doolittle at the nasdaq. facebook, already the world's most popular media site. one point 5 billion users, but that's not always enough for investors. wall street wants to see a company is gaining more users with its monetization strategies. joining us now, we are always
looking for the average revenue per user, right? aside from that metric, what else will be be looking for? -- will we be looking for? expectations were strong, because the core business was doing well. the consistent growth and the daily active users over there. and the iphone numbers, as you mentioned. the video will be the focus for 2016. they are going to come out and set the expectations for what the revenue impact could be from that. betty: let's take instagram first. ats got something like -- is 400 million users or 600 million users? jitendra: 400 million. 400 million users on instagram. how do they monetize people on instagram? it's the same playbook they use for newsfeeds. native advertising, as it's much
more visual there is a higher expectation. they have rolled it out in many more countries now, but what is interesting is in the first half they set the expectations low for how quickly these services could be monetized, but when they came out with third-quarter results what they showed investors was that there is a balancing act going on. the core business was doing well and we have these messenger strategies building in. that is sort of like helping them balance the growth expectations in the interim. betty: is there a view that they could actually profit from a prop -- platform like instagram as much as they have from their core products? absolutely. it will take some time to become as big, but what you are seeing there is a bit more color coming strategy asnger well. messenger monetization is still kind of faraway, but what's
interesting is that the ceo basically -- the head of messenger, he basically put out an info graphic about what the strategy could be and it looks like it has less to do with advertising and more to do with what they are doing with v chat, integrating services, mobile payments. that could skew the long-term expectations from those products. what about growth? you heard so much this morning from apple and their global growth concerns. will any of that affect facebook at all? are that expectations social media and radio are leading the charge in advertising. if you look at just the time spent on different applications on a mobile device, that's where this is all coming from. you will notice that 80% of the time is actually being spent on apps and facebook is right up there. if you marry those metrics,
instagram is slowing but they are coming from a very big base. 40% expectation is still strong. betty: i read a stat recently the millennial's check their phones and social media sites something like every 10 minutes. i'm like -- when are they working? ok, i get it. maybe that is work. [laughter] on the other side, speaking about mobile, they are checking their phones and watching videos, which will be key for facebook as well. it was interesting to see how quickly they turned around the volume for videos. they have these autoplay videos, but again, we have to look at how it gets impacted for the average of the company. this earnings call will definitely receive more color on expectations. betty: thank you so much, jitendra, senior social media
analyst for bloomberg. how facebook has been fought -- firing on all cylinders for the last few years, the same cannot be said for twitter. earlier "bloomberg " spoke with darrell miller, who talked about twitter. >> they are not at that point that facebook is at, to say the least. subscribers enough and viewers to last them. but that's not true for twitter. they have to grow users. >> they law -- they lost half their market value. >> it's telling them something. >> what do investors know? they look at the past. that doesn't jibe for me. >> you need investors to believe in your company. >> you know what? investors will believe in your , when theen the facts facts are trailing. they have to trail for a while,
particularly if you've been in the barrel. for whatever reason if you get trumped. if that happens, it takes time. facts will tell. >> unless you are amazon and investors just believe in you. >> the facts of amazon or just astounding. from the very first hour of the first day jeff bezos said -- we will build infrastructure to serve customers and we don't care about anything else. so, it's endless investment. i'm going to make you a prediction. jeff bezos will be the richest person in the world. within -- i don't know? certainly within five or seven years. but how can it be endless? i think that's hands down. at some point you have to make money off of it.
>> or not. >> at some point people say -- you need to make money off of it and they do make money. their capital is very good. the cash flow has been very good . they reinvest all of it, which is why it's going to be one of the most valuable companies in the world. that's why. insane, insane attention to pleasing the customer. whatever the cost. prime, amazon prime is genius. >> at the cost of all retail? we've seen the retail industry get shellacked. anyone who is selling the same product amazon does just gets carried out. does that mean it's the death of retail? >> know, something doesn't have to dive for someone else to live. >> walmart is getting shellacked . >> they are doing ok. betty: all right, that was the ioc chairman.
speaking of amazon, we will get more insight on the business tomorrow when they report results. we are watching today's stock trade, which is now sharply lower following the fed. here is the s&p right now. we tried to come off the lows of the session, but we are back down and closing in on the lows again. almost all of the major 10 sectors are in the red. ♪
this would be the worst loss for the dow this week. on the s&p, every single major sector is lower except for telecom, just squeezing and again. time for the bloomberg business flash where we look at the biggest business stories in the news right now. energy equity transfer plans to move forward with its takeover of williams company. comes despite investors speculating that the transaction may have to be reworked given the recent rout in energy prices. general dynamics proposing revenue below estimates with sales that dropped below aerospace and demand for large business weakening. the company delivered 37 jets during the quarter, one less than one year earlier. a crash that in involved an exploding tick on takkata- two, airbag --
airbag. if the inflator was the cause, it would be the 11th person killed worldwide. that is your bloomberg business flash update. the fed is sitting tight. as we saw earlier, they gave no clear sign that any future rate hikes would be delayed. looking for a liftoff in march at 22%, that's down from a high of 53% on december 30, with policymakers keeping an eye on development. joining us now is joe "what'dl, cohost of you miss?" it was at first shown that they were pushing back next six -- expectations? joe: the one line that stuck out to everyone was as a worth paying attention to what was happening globally. view was thatl
they did not change. they certainly didn't take march off the table or anything like that. betty: right, there's still a chance. joe: if they had wanted to be more dramatic about slowing the pace, theoretically they could have done that, but they didn't. they set it up at the beginning, the labor market continues strengthen. the premise of hiking overall is that the market has been strong and they are getting towards full employment, meaning that they will get there on the police inside. they are sticking to their general framework, which is that the labor market swung over into general confidence. exactly, so why do you think equity markets have reacted strongly today? joe: you don't want to lead into the move of one day, but there is still this fact, when the fed hike in december, the dots for hikes.dicated for
there is still is this gap. the expectation is that the fed will capitulate closer to the market, obviously. maybe the market had wanted to see something more explicit from the fed. the volatility that we've seen in the beginning of this year was causing them to rethink the pace of the hike. they didn't get the exclusive message that they want. that may be at. the great explanation. what's the impact going to be on the global market? how do we interpret how the other global central banks will move on this? joe: i think that most of the central banks, it won't change the situation very much. more or else is still less in easing mode or still mode and i really don't think that it's hard to imagine that this would change things very much. it's really all about the real economic data that we see. the fed acknowledged the way
that growth slowed down in quarter for was again not a strong enough acknowledgment, because the labor market was solid, that anything else about their plans was going to change. betty: joe, thank you. on their show today, "what'd you miss?," more on the fed decision and a special report tomorrow bringing you the best voices to figure out whether the u.s. is really headed for a recession. that starts at 3:30 p.m. tomorrow. close of ahead, the trade moments away. stocks as we mentioned, taking a huge tumble after the fed decision. kind of bouncing around at the lows of the session. ♪
stocks mostly selling off on the news? said: that's right, he that it's almost as though investment traders expected the fed to give more of an acknowledgment of what was going on, so we will not raise rates for the rest of the year, unlikely as that may be. there may be a stronger statement from the fed raising concerns about what's happening in the global markets this year. wanted to see, i focus on the nasdaq 100 in particular and it's trajectory throughout the day. has that decline picking up steam ever since the statement came out. a lot of that has to do not just ,ith the fed, but with apple heavily weighted within the index. it accounted for nearly 30% of the selloff, down 6.5% after a sales the klein this year.
it wasn't just apple that we saw. call it a ripple effect or a general and malaise, amazon, microsoft, facebook, out with its earnings in just a little bit, all falling on the session. lower in thep move 10 year treasury yield. , wel positive on the day saw it coming down sharply after the fed statements. the dollar, also we saw a selloff, although it has been a week throughout the day on a basket of currencies. investors that we talked to have talked about the decoupling we've seen between stocks and oil. holding on to its rally in the wake of inventory data, perhaps not as poor as we feared. talks aroundo the
betty:ting of production . thank you, julie hyman. -- production. been treating this market rout all year long to the oil pump and what we've seen in china. there is this other catalyst that's been hitting the markets. we saw that distinctly today. apple shares have been following since february. since the tech giant is so closely correlated to the s&p, this is having a huge impact. here with the details is michael regan. mike: annapolis booming and stocks were reaching new highs, a lot of attention was paid to how much that was comparing to the record index prices in the overall market. not much attention has been paid to how much of a drag it's been since it week last year.
if you go back to the markets in about 20e shaved points off the index since then, which far and away is the biggest drag among individual stocks. exxon mobil is the next biggest. apple, that's like four times as much. it really -- obviously today is sort of a microcosm of that. it's down about 20 -- betty: wow, look at how big apple is compared to the others. really puts it in contrast, how big a deal of -- that it's been. you have to wonder about the ecosystem surrounding apple. all the suppliers, all the chinese suppliers. is it clear, but that it's actually causing the markets to fall overall? or is this just a symptom of the selling? mike: i'm not sure that it's
causing them to fall, but it is falling more on the markets with all this other stuff going on. the s&p is down 200 points from its peak. breakot enough to make or the momentum, but you know, if it had gone the other way and was adding 20 points, that's it 40 point swing with a drop on the index. it's a huge deal. to me the big question is -- if you look at the big momentum stocks last year -- facebook, how for that. netflix. index hasag on the almost as positive in effect is those. is a huge deal. it is, but it will be less of a big deal the smaller it is, right? mike: that's true. that's true. it is still the largest stock in
the index, but the influence is gradually diminishing. of the stocks that we will be reporting after the bellis facebook, so we will see what news they bring. thank you, mike reagan, our bloomberg gadfly columnist. for more search for bloomberg thely in the terminal or on web. that is it for "bloomberg markets." "what'd you miss?" is next. paypal, they all report after the closing bell. here's a look at the averages again. we are right near the low of the session. ♪
you're looking at a rapid deterioration of stocks, ending down about 215 points. 1%, the nasdaq also the story, off by more than 2%. ist of this story right now about apple. apple is a drag on the dow by about -- let's take a look here -- bringing up my terminal -- by about 45 points. of course, a huge weight on the nasdaq as well. the other part of the story is boeing, taking out about 78 points from the dow. they issued a disappointing forecast for this year, they will be selling fewer jets, hitting their lowest level since 2001 with another weaker global demand proxy. most of them, apple, echoing a similar sentiment. scarlet: yet the backdrop is the federal reserve's decision. it was a press conferennd