tv Bloomberg Markets Bloomberg February 2, 2016 10:00am-11:01am EST
betty: from bloomberg world headquarters, good morning. i am betty liu. half an hour into the trading session and stocks are lower. dow is off almost 250 points following the losses in europe. oil is renewing its plunge. electionrtainty for 2017. ted cruz topped donald trump in iowa. and hillary clinton hang onto a narrow win over bernie sanders. now it is off to new hampshire. and google's alphabet prompting selloff as it is now the world's most profitable company. and yahoo! is reporting after the bell. marissa mayer is laying out her plan again to revise.
let's head straight to the markets desk with julie hyman for the latest on this selloff. it has to dond with oil. if you look at the major averages we are seeing a deep decline of nearly 250 points for the dow and that is despite the fact that one very big company in the s&p is actually on the rise. market cap does indeed surpass apple. up 4% today. just around 543 billion dollars is where it is right now. that is not helping overall because as you take a look at the number of terminal, energy is such a big drag. down near 3% are and financials are falling and industrials. so it is a broad-based decline.
energy may be leading but by no means is that exclusively accounting for the declines. oil is down nearly 5% today and once again, we have a two day loss in oil. 2011 if west since hold at these levels. there is trepidation over the weekly inventory report. a couple of large cap oil companies. a 91% drop in profits. exxon mobil reported a drop in profits as well. earnings-per-share beat estimates but they are still declining. this is a real result of the real price to climb. conjunction, a sharp drop in a treasury yields. julie: yes, it is remarkable. 1.87%, which is the lowest since april so investors are ramping
back their expectations for the federal reserve to raise rates this year. but they aren't just buying treasuries, there are other places that investors typically go for safeties as you take a look at gold. that is one of the places we see it go. people are buying the yen. betty: thank you so much. we will keep a close eye on these markets. let's check in with on the bloomberg first word news with vonnie quinn. vonnie: thank you. good morning. are underwaytalks in geneva. but the expectations are not very high. a united nations mediator met with syrian opposition leaders yesterday. there will be a government delegation today. the two sides refused to negotiate directly with each other. the pentagon is asking for a 35% increase in funding to fight. want $3.4 billion for security initiatives aimed at
countering russia's aggressive moves towards the ukraine. the fbi is working with a multiagency team investigating the lead contamination in flin since january it has been investigating the water pipes with the epa but officials have not said whether criminal or civil charges may follow. back in 2014, they switched to the river to save money. but the river water was not treated properly and lead pipes leaks into water supply. the presidential campaign ended up with surprising results. broken side and a near upset on the democratic side. ted cruz and hillary clinton were the winners. donald trump was upset with marco finishing strongly in the third. marco rubio had 23%, donald
trump had 24%. >> we will go on to get the republican nomination and we will go on to easily beat hillary or bernie sanders or whoever they throw up there. >> iowa, we love you and we thank you. you are special. mike huckabee and martin o'malley have to opt out of the race. -- bloomberg news powered 24 hours a day. back to you. but theowa is a wrap race to the white house will be reset again in new hampshire which holds the first primary next tuesday on every night. megan murphy joins us now from manchester in new hampshire. -- youstand what you took the winners airplane? to new hampshire? with hillary clinton? megan: i'm not sure it felt like
airplane. her people were focused on making sure it was a win. i would like to point out that iowa officials have yet to declare that. it was less than one percentage point. bernie's perfect demographic and enthusiasm. hillary clinton wants to do anything she can to shed the image of 2008 when jihad the crushing loss to barack obama. but bernie sanders coming back into the state had a tremendous amount of momentum and he will be out everywhere telling -- was a win able for him. betty: it will certainly be a challenge for her in new hampshire. what about four ted cruz? that was a surprise win by the ted cruz campaign. what happened? megan: a big surprise last night.
the fundamentals in organization the campaign manager in three days before the race and the amount of specifics he knew about the numbers -- he knew exactly how many phone calls they needed to make. they knew exactly the turnout numbers that they had to stay within in order to give them that margin of error. tofor ted cruz it really was bring out the court evangelical support and to show planning and discipline in their approach. we have be clear that in new hampshire, these are independent voters and independent minds who are not in sync with any of the evangelical fundamentals. he'll be looking more to south carolina. betty: so what does donald trump do in new hampshire? and what does ted cruz do? even though he may not play as well. megan: we will see some
recalibration. we are looking at donald trump as trying to be a comeback kid. [laughter] it'll be interesting to see. he has the lead in new hampshire and he has had the lead for quite some time. was last night the first of what we suspected? the tracking of the donald trump balloon?onald trump is not really following the larger trend. so it will be a surprise here just like iowa. we will see if he can really sustain the momentum in the campaign. betty: and let's not forget marco rubio talking about a comeback kid. we have to leave it there but thank you so much, megan murphy.
she was the liver to new hampshire by hillary clinton herself. looking at the money funneled into television and digital advertising in this campaign cycle maybe four times more than 2012 but so far, who is getting the biggest bank for the buck? has a company that advises political campaigns on how to reach their target audiences. data,according to your donald trump got the biggest bank for his book in iowa? yes, what he is about is trying to make sure you get the .iggest bang he has been leveraging off the free airtime. and he has had quite a bit over the number of january. 15 times the amount of marco rubio.
so he does need to step up his game. thes the dog that caught car. nowe is in the big leagues and he has to match how the other campaigns are spending their money. in 2012 used smartmedia planning and target and you can win a campaign with that. what is google all about? target advertising. using data to better target the right kind of consumers betty:. -- consumers. betty: why is spending going to be four times more this year? mark: it will be four times more on the digital side. about 50% tog up
$50 billion. and why the difference? cable gives you the ability of targeting. so the best campaigns are the ones that can blend the front. donald trump has not been doing that. that may be why he came in second. he has to be smarter. wony: even though ted cruz despite all of the free isertising for donald trump, the exposure becoming a bigger factor for voters? >> it is. but you have to come up with that as a blended strategy so you can complement it. if you are a brand and you are trying to find a consumer, you have to think about what your message is on both the debate and then complement that with whatever your advertising is. betty: thank you so much.
that was mark lieberman, the ceo of the a media. up, vincent reinhart is joining me to weigh in on the fed's next move. and how the collapse in oil prices is factoring in, if at all. also, take a look at how markets are trading. -- the dow is down more than 250 points. all the sectors are in the red. ♪
information and we make our decisions on that basis. not on the basis of a set up you predetermined decision. fischerhat was stanley on the council of foreign relations yesterday on how the fed decides. if you look at treasury yields right now. take a look at this here in the 10 year yield -- it is now below ae 2% level so there has been slide back. and also doubt as to how far and fast the fed can move. vincent reinhart. it is so good to see you. what do you make of that? what do you think? vincent: i was at the council of foreign relations this morning.
fedare seeing that when the uses financial conditions, it is a lot more subtle. treasury yields have fallen a lot and that is actually supportive. betty: because of lower borrowing costs? exactly. you have to ask, why are they lower? betty: does this prevent the fed from lifting off further? it is the million-dollar question. vincent: i think it is the billion dollar question. physics is important at this. a body at rest stays addressed. that is why they waited for so long. it is tough to make a decision and they wait until probably it was a little too late which means that a body in motion
stays in motion. not to tightened might mean december decision wasn't right. are will say all decisions data dependent, made meeting by meeting. but what you don't want to do is going to the march meeting and actione probability of -- what you would do is surprise markets. if it is above 1/3 then you can play. areen to them say, they dated dependent. betty: what if they decide to pause in march? how do they convey that to the markets? vincent: part of it is that it has to be taken out of the pricing. just let it happen and don't say anything. absence of saying things will convince people that we
won't move. a lot of opportunities to --rect any misperception they have the minutes. betty: so they do have moments where they can drink it with the markets? vincent: exactly. have an opportunity to communicate and to push the march meeting back. betty: what do you think they were trying to accomplish? vincent: the u.s. is the best house on a bad block. but they are also looking at the rest of the block. understand that it isn't a surprise to us that what is going on in the rest of the world. they are taking that into consideration. they are basically saying grown-ups are in charge. don't worry. and you will hear that again. betty: so other central banks around the world are easing.
japan with the negative interest rate policy? who is doing it responsibly? is anyone annoyed at all of the easing going on? vincent: the one thing to a central is that bank has a national charter. it can do things with its own national economy. means is that right now all of the global finance sits on a table with floor likes -- with water legs. ecb, bank of japan, people's bank of china -- and guess what? they are not equal. upset exchange markets and it has implications for the mobile outlook. they did know that when they were tightening in december. betty: right. they knew. vincent: everybody understood what the consequences of the tightening would be. different it is
directions of policy. the second part is, how effective is the policy? also, all of the money is going off the balance sheet and where is the inflation? vincent: so part of the federal reserve's concern and every central bankers concern is that it was supposed to be easy to generate inflation. it is way harder than you thought. and they hope that inflation expectations will remain anchored even if they can't deliver. so every speaker from here on out is just going to repeat that they are watching and hoping that inflation expectations remain. say with a, we will talk to something -- we will talk about something related. oil prices. when it rains, it pours. reporting its biggest
betty: welcome back to bloomberg markets. i am betty liu. it has been a tumultuous year for oil. how much of an effect does that price have on the fed? we are back with vincent reinhart. so there is all this talk about the fed that they are dismissing the attack on oil prices. really, how much longer can they say this? once you say it for a long time it starts to feel oil -- it starts to feel old. it is tough on the central bank because it pushes your goals in the opposite direction. it lowers decline and
inflation. what do you do? if you look at the models that they look at, the net effect of shows it is not very big. there might be a time sequence when consumers cut back on the consumption. as long as inflation expectations are anchored, any impact on the relative price of oil is going to be transported. betty: shouldn't they be changing their economic models? is this a new europe with oil? vincent: if they change the model every time someone said it was a new era then you are in trouble. news, whichbig probably is a reason to be skeptical of the model is that it is a much bigger producer compared to models estimated
starting from the 1970's onward. that is a big piece of news. what happens to aggregate demand? bity: is everyone being a too optimistic thinking that oil will rebound by the second half of this year? vincent: the models drive a lot of people thinking. the most important thing in modeling is meaner version. maybe the u.s. is a much bigger producer and maybe opec hasn't had any discipline in the past 25 years. if you are predicting where certainly go: it is not the mean of the relative price of 1973-2011. betty: and who knows?
to stick theies price of oil, something comes in and surprise of them. so the fed has a huge balance sheet. what are they going to do with that? vincent: if they had any intention to running off assets -- because that is a secret margin of policies, they can continue to tighten policy. it the bond rate level is like and the press conference meetings -- there has been a lot of tightening. the balance sheet will stay big. betty: thank you so much for joining us. ♪
vonnie: and international agency says north korea has declared plans to launch an international .bservation site from a rocket this has caused international outrage. china's president has made the biggest overhaul of the military in decades. a singlee under command structure for the first time. troops will be organized in battle zones. allow them to protect forces beyond the borders. has been put in place to curb the spread of the zika virus. they focus on educating communities in brazil on how to avoid being bitten by skied does. the readingipe out sites. u.s. airstrikes destroyed and islamic state radio station in
afghanistan. attack also killed islamic state reporters. is back in a courtroom today. his attorneys want the only criminal case filed against him take annoyed. he was told in 2005 at he wouldn't be charged if you testify freely. dayal news 24 hours a powered by our 2400 journalists. back to you. betty: let's get to the markets desk with julie hyman. so, i'm going to start with who is going up -- google. it is a big part of the story today even if it isn't affecting the overall trade. alphabet shares moving higher in the better than estimated
earnings report. apple is moving lower. take a look at my bloomberg terminal. this in real time. here is the $500 billion line. shares are falling today. what's interesting is that apple sales are still more than three times the size of alphabet sales. but as we know, the market looks at future growth and that is why it values companies be way it does. isinteresting that apple still so much larger. let's take a look at the oil related shares. we have a earnings for bp and exxon mobil. profit fell 91%. exxon is down as well. chevron is also feeling the pain.
and another situation where a single company appears to be falling -- ubs has brought profits down by 47%. so it shares are down 9%. earlier we looked at financials and it showed that financials are one of the biggest drives on the s&p 500 today. theyou can see that and decline that we are seeing for those stocks. between the energy and the financial shares, that is a big impact on stocks today. betty: it is. it is letting the air out of the gains that we saw on friday. that was julie hyman with the market check. it looks like the holiday season delivered for ups. earnings topped estimates. they're forecasting a strong outlook for 2016. joining us now is david abney, the ceo of ups.
tell us about the peak holiday season? or was a time in 2015 when you had trouble getting packages delivered. what did you do right? david: we had a very successful peak season this year. and i attribute it to collaborating with customers on , better than i have ever seen is due before. that really worked out. secondly, we controlled our net worth. we controlled the peak costs and at the same time provided excellent coverage. and third was the commitment of our ups workers around the world. they are so dedicated and they were willing to do whatever we had to do, wherever we needed them. and at all hours of the night. so it was a very good story of execution. betty: what does the volume tell you about the state of the consumer? david: the volume in
fourth-quarter showed an increase in air business, you stay air was up 10%. and our deferred air was up almost 14%. butthe ground volume was up not quite as much as we got. overall, you have to remember that we process more volume than we ever have before this season and we were very successful. betty: the fact that the ground wasn't up, what does that tell you? david: you have to remember that some of the ground would have been escalated into the air business and also, if you look , -- goingack to years back two years. 2014 we noticed a big increase in ground volume and go back to
2013, you will see the ground business has grown 7.6% in two years. so it doesn't tell me anything that we need to be concerned about. just that we want to focus on a picture of growth. and maintaining our heels. betty: are you concerned about growth in the two guns in the u.s.? we expect to have a good year in 2016. the economy is as positive as we would like it to be, it is a mixed picture out there and it is driven by the consumer. and consumer confidence is high so that is a good thing. industrial production is not quite as high as we would like. the last three months it has been disappointing so we have to keep our eye on that. imports into the u.s. has increased and exports out of the u.s. as well, so it is a mixed
picture. ist is important for us focusing on our strategies and execution. another good show of returns. we are confident. betty: i know you are looking at various delivery options that are now available in urban markets. you have you heard delivering, amazon delivering and even same day delivery. how much do you use those companies as competition? look ate take a good that maybe in a particular part of our space even in a very small way. our focus is a global integrated network. we have a structure that no one else can provide as the technology that we continue to offer includes bo ryan which is
our optimizing spot in texas. no one matches our value proposition. betty: before we go, look at the emerging markets in asia and latin america. our you forecasting slower growth there? asia and the emerging markets we certainly see a greater challenge this year. china is in the middle of that. china is still growing but it is a growing to the extent we would like. we do feel good about china and the potential for other emerging markets. the size of the markets in china is larger than the u.s. population so we do set a lot of .otential in asia
agricultural products and specialty materials. dow chemical posted earnings that beat estimates. margins increased thanks to lower oil costs. automakers surprised analysts today. they thought blizzards would hurt sales. but all reported increases. big east coast snowstorm kept a number of dealer lots closed for several days. that is your bloomberg business flash. for a look at how u.s. markets are trading right now as we hover near the lows of the session, we go to abigail doolittle at the nasdaq. is leading theet bearish trend, trading at a record high after they put up a great fourth quarter. there are two analyst titles out says it ise first
the most valuable company in the world. this captures the idea that alphabet has suppressed apple in market cap. and berkeley is saying that the company beat estimates. was the first ever segmented report. it offered more transparency. foras the core business google and a lot of clicks that let that. it declare above the three-month trading range. and was a very difficult trading environment. you may wonder, how long will it last. betty: thank you so much, that was abigail doolittle. is eric sheridan. he is an analyst and he raises -- what didup to
yesterday's earnings report? what did you like? eric: there were two things. one of them was the advertising business. this is on the back of mobile search and youtube. these trends continue to drive out the revenue. and also the transparency. we now have a better sense of how google all that is allocating capital between its core business and what they call other debt. it is important to understand how profitable this is. versus where alphabet will allow investors to put a higher amount of the google profit. they closed 3.8 $6 billion spent on projects like self driving cars? is that a concern? eric: they were going to be ambitious. they will not lose the entrepreneurial spirit.
what they will look at is where they can find other revenue for the next five or 10 years. nest,o biggest would be that is home security electronics. five or. things like internet infrastructure, health and sciences. betty: the search ad market, it clearly is a maturing area and that is a big part of the business. do they have the right plan to make sure they are set the maturity? eric: it is two things. the search business is maturing and that is a low growth component. multi-search we have seen are more andat more of to searching on mobile phones.
phones go up, conversion rates go up and the dollar is moving into mobile search. the other key thing here is youtube. it is the number one property and branch dollars are finding their way to you too. ,etty: you mentioned youtube facebook earnings last week they talked about mobile video growth and how they want to be the destination for brands. going to compete? eric: seeing the facebook news feed, you may see a brands like nike or starbucks use it for one thing. but watching the media with longer for content on youtube is another form of rant advertising. so we don't talk to a lot of there were aecause
lot of off-line ad dollars that could move to online from this growth for both companies. betty: thank you so much. that was eric sheridan, an equity analyst at ubs. yahoo! will report their earnings after the bell today. marissa mayer's will talk to outline her strategy again to turn around the slumping internet media company. she is promising to cut costs that will let be enough? giants like google are just growing bigger and bigger. we turn now to brian womack who covers yahoo! for us. what are investors looking for today? brian: it is an unusual quarter. usually it is about the numbers. the bigger focus today will be on the plan. she basically signaled in october that they would have an wouldcement by today that
be a fresh set of objectives to drive growth. we are looking for cuts and trimming but part of that will be employee layoffs and closures. so we will see how that plays out. that is one scenario that we are hearing. where with the cuts be? exactly? we don't know the details yet. it is a company of more than 10,000 people at the end of last quarter. so there could be some cuts but they have cut employees over the past couple of years. actually, but this is more cuts coming. investors are curious about this because yahoo! as we talked about with google, it is a limited company on a principal
basis. right, clearly there are investors and shareholders who are looking to reduce the bloat that what about the announcement on selling the business units or a web business? what about being acquired? is any of that clarity going to come out? brian: that is something that people would love to hear more about. that yahoo!rted could be moving more in that direction. but at the end of the day, investors would like to just see says,n-minded yahoo! that you are a company that had a nice run, you are under a lot of pressure. and your value is not coming from your core operations. most of your value comes from a stake in alibaba out of china. so how are you going to separate
yourself from that in a way? things investors are asking for is a sale. is this their last chance? brian: it is getting a little thin. it hasn't gotten any better. investors are wondering why and i think a lot of other people will be. betty: there will be a lot of people on that call. that was bryan womack in our san francisco bureau. next, we have cory johnson speaking to the ceo of oracle. you don't want to miss that interview. ♪
he wasn't the only people raising prices. prices more than doubled for 60 drugs in 2015. we bring in our health care editor, drew armstrong. who us a sense exactly of raised prices and by how much? who are the big contenders? drew: everyone. of the things that we discovered and you can read more about this on the terminal right now, two of our reporters spend a ton of time going through a massive database that we have of 6000 drugs, looking at what happened over the last year. ,hese types of price increases where drugs go up by 50% or they they are routine and extremely common across the industry. valeant, we have talked a lot about that. and there are documents out of this rally and that we are that show right now
their strategy behind this. there is some stuff with a markup and it is a common industry practice. they do routinely raise prices and it is part of the model. betty: is it justified? drew: they certainly think so. they say, listen. we have to negotiate with health insurance and pharmacy managers every year. we have to make a return so we increase prices as part of the process of getting back our investment and paying for their costs. that is their argument and there are a lot of costs out there that can be paid for at a high rate. and a lot of times we talk to folks in the industry and they don't have a problem with that. the problem is when older drugs get price increases. betty: like what martin shkreli it by 5000%.ng
he will be testifying in front of congress on thursday. what is expected? drew: he will plead the fifth and not say anything whatsoever the entire time. he was out this morning on an interview on a television show saying, this is a show. commerce is trying to embarrass me. he has promised he will not say anything. however, he often has a couple of things to say. he also has a new lawyer. betty: ok. maybe that might help. the poster boy for drug price hikes and the industry itself, what are they doing to combat this image? a good point. he said, hey. this isn't just me. maybe i did it to a more extreme be the first would to admit that.
the markett what will bear. he says maybe he is the bad guy that heas pointed out has held up a mirror to the industry and said, take a look at yourself. betty: all right, thank you so much. he always has another career in music. [laughter] that was drew armstrong, our health care editor. let's take a look at how markets are trading. enter 50 points now. nine out of the 10 down sectors are in the red. all the s&p sectors are lower. energy and financials are leading the decline. ♪
next hour live from london and it is day two of the selloff. european stocks falling for a second day. to the chief executives of both companies, the european close starts right now. ♪ betty: we will take you from new york to london in the next hour and mark, kicked things off as we look like we are settling near the low. the third biggest declines of 2016 for the stoxx 2600 earnings. as well as these declining oil prices. let's get straight to those earnings because a couple of the big companies in europe. reported disappointing earnings bp is the big recliner in london.