tv Bloomberg Markets Bloomberg March 14, 2016 3:00pm-4:01pm EDT
from bloomberg world headquarters in new york, i'm vonnie quinn. as investorsate wait for the result of a huge week of central bank meetings, including the fed decision on wednesday. peaking of the fed, what will tomorrow's retail sales reports say about the state of the consumer? economists are predicting a lackluster picture. and there's been a recovery for momentum stocks. the wild swings in tech stocks and are they still overvalued? we are about one hour from the close of trading in stocks have been fluctuating with the s&p the laggard. the smp is higher very slightly today as we have seen. gaining and the dow and
gaining -- a relative term there because we haven't seen much in the way of gains. materials and energy financials have been the trio weighing on the s&p, particularly consumer discretionary. if you look within that group, we've got a potential deal spoiler making a competing bid for starwood. it has now peaked above it. starwood had agreed to and acquisition and trip advisor, there is some speculation there. international getting an i should mention that
one caveat for the gains we are seeing across the board is that it is on very low volume. .ere are the groups on the s&p you can see a drop in volume on telecom, energy and industrials below there than 25% average. so we are not seeing as much action today. oil capping the gains today? >> we are seeing a selloff in oil today -- let's take a look at oil prices. a decrease up off the lows a little bit but a report saying iran is not ready to freeze reduction. damper ontting a things in recent weeks.
now a look at the bloomberg we've got the uti in yellow in the s&p 500 and white and we've got this bounce for both over the past leaks and now a little stabilization, particularly for oil prices after that big lift. let's talk about rates and the safety trade. and these in gold today 10 year yield going down going into the fed meeting this week. towardld see rates low years and then we are not going to get many rate increases this year. maybe one by december that will keep rates low. vonnie: thank you so much. time now to get a check on the headlines with the bloomberg first word news with mark crumpton. mark: the oklahoma city police
department held a news conference to discuss the release of the aubrey mcclendon accident report. he's a former ceo of chesapeake energy. police say he was going 88 miles an hour when his car slammed into a bridge embankment. >> he had a total of three wheels that left the roadway. it went left before hitting let offnd he completely the break or didn't touch the break about 31 feet prior to impacting the wall. the partlendon was owner of the oklahoma city thunder. his death came one day after he was charged with rigging bids for prices. his defense with and foreign ministers, president clinton said the pull out of
syria should begin tomorrow. resume today in geneva. they were described as positive and constructive. donald trump leads marco rubio in florida in a new poll. just before the undertake all vote, the survey has trump 24% to 7%. john kasich is fourth with 9%. aside, rubio says pulls he is going to shock the country by winning florida's winner take all primary tomorrow. todd hasin's husband been seriously hurt in a snowmobile accident. sarah palin just appeared at a rally for donald trump in florida. the chairman of the house benghazi committee is promising a report before the summer. the timing is likely to cause trouble for hillary clinton's
presidential campaign. she was secretary of state during the attacks that killed a u.s. ambassador there, christopher stevens. trey gowdy says considerable progress has been made in the investigation but some, kratz are skeptical about the motives and latest deadlines. i'm mark crumpton. vonnie: thank you so much. all eyes on the federal reserve assurancess wait for of continued growth. pimco's economic advisor was thinking at the challenges facing policymakers. >> central banks are constantly learning and trying new things all the time. they are the only game in town and fiscal policy is not helping, so they have to try new things. they have discovered it is probably not the holy grail.
this is why the impetus -- the emphasis is shifting. vonnie: joining me now is the equity manager for funds management. it seems to always prop up equity markets. guest: i like it when stocks go up and that's not the point. the point is to help the economy. i think that is where the help comes from. julie was talking about the call for an interest rate increases year. how would you rate that? probably backed off from where we thought before. it's like taking an airplane trip. you don't get off the airplane early if you don't arrive on time. we have been getting high-frequency data that hasn't been terrible. didn't have yields dragged down by other economies into negative territory.
with the fed be able to go in march? they might be able to. i can make all sorts of hypotheticals up. means they probably keep rates low. is it one or two? it will be determined. the first rate hike will be preceded by a better market where you are just not going to see it until then. this year, there's been a disparity. france is much better off than if you had been invested in germany. guest: it is what have you done for me lately in the stock market. the european central bank showed us last week that they get it. they know what happened in 2008 and don't want to repeat the problems. they are going to be fairly aggressive to try to combat it.
guest: i think it's got to be germany. germany got to go through some weak patches and things they have to absorb into the economy but at some point, their exports to pick up. shape. italy is in good the value seems to be there and france is doing fine. i'm a little bit of a momentum player there. do you buy the indices or do you buy specific stocks and mark -- specific stocks? guest: i'm a funds guy. u.s.?: what about the has the u.s. seen all the gains you think we're going to have? guest: i think it's still good for the u.s. and may be getting better in europe. i think the u.s. has the potential to do well.
mole markets usually don't and until you get the high valuations, so i'm hanging around for the last bit. vonnie: do you think we can be in the final throes? guest: it depends. vonnie: the other story on the bloomberg today is how it is the last buyer on the market. american investors, individual investors have not been participating. i think there is still room for them to come in now. any other places you are looking at? maybe the oil patch? guest: i think oil is good right now. they have tremendous yield enteritis cash was. in the oil area but they put the oil area on sale. i think they've done to bad a damage to health care.
i think health care is a good story. i think there's still demographics and i think the federal government will be involved for a while. vonnie: [indiscernible] guest: i'm still focused on pharmaceuticals. when the market gets excited, i think it's going to be biotech. no one likes them anymore. vonnie: you got a strong stomach. thank you so much. chief equity strategist for wells fargo fund management. pushesup, goldman sachs deeper into money management. why goldman isto making this purchase. at the bottom of the hour, what is driving volatility in tech stocks? is it simply a case of being overvalued or are there fundamental problems? here's a look at the trade on the nasdaq.
vonnie: let's check on where the markets are right now with a look at the s&p 500 -- very fractionally higher, barely in the green. the intraday trade on the dow sweeping higher. up finally, the nasdaq fractionally, less than .2%. time for our latest bloomberg business flash -- a disappearing medical implant -- we are getting a closer look from the fda this week. the fda meets to review a first of a kind heart stent from abbott laboratories. it dissolves into the body after
clearing fat clogged arteries but regulators are questioning the safety of the experimental device. new allegations against books when in today could put a dent in the carmakers already battered reputation. the company obstructed justice for three days after the epa accused the company of cheating on an emissions test. that's part of a lawsuit filed in a whistleblower case. ubs is selling the riskiest type of tank that, marketing $1.5 million of correlated bonds. the debt wiped out last year's returns in the first six weeks but they have recovered all of their losses since. that is your bloomberg business flash. it's not quite the matchup you might expect. [indiscernible]
the deal is the latest foray into technology, but why is the gold standard of wall street so eager to manage money for main street. why is this a syntax company? divide their services online and mobile apps. they are bringing data from their clients into the web and making it very easy to sign up and making their mobile app very shiny and easy to use. that's how they are delivering their service. there fundamental business is offering retirement services to workers without access to employee-based plans. as goldman buying this for the retirement part of the business were just because they are good at mobile? guest: the former is certainly.
they have a big asset management arm. that's part of their investment management division. they manage $1.2 trillion in assets. one area they've been looking to grow is the retirement business. is 401kthink of that defined contributions. small purchase for them but it is part of that expansion. they said in their statement today 45 million people don't have access to employer-sponsored retirement plans. that is 45 million people they think they can reach through this product that maybe they wouldn't otherwise. according to your reporting, the ninth acquisition for goldman sachs brought in more than $6 billion.
are there many like this? guest: there are not many like this. i don't have a complete the cure, but from what i understand, this is an area this company is very good at servicing these types of clients. firms or not too many startup looking at this. it's an excuse to talk about acquisitions and investment houses getting better. guest: and they are backing this former hairs turns mortgage bond trader going after the peer-to-peer loan industry. thislked about that on program before. he looks at the data each of these platforms like lending
club are giving out and they are scrubbing it to make sure it is clean and standardizing it. able tos are better invest and understand the risks. vonnie: these companies being firm and ins that this case it is honest dollar. they consider this an exit? guest: they do. this is just seed funding for them. honest dollar got seed funding a year or so ago from among others, vikram pendant, the former ceo of citigroup. the goldman sachs purchases and a set for them. we didn't hear about the terms today. i think they initially put in $3
rally, the volatility has come into some degree. this futureshing curve of volatility. are we expecting that to calm down a little bit? has.: it this high volatility regime began last august and we have had two shocks since then. one that saw the vix peak on october 24 aboard the 40 and that was the trigger to move into this new high volatility environment. the second peak was february 11 and since then, we've said be patient. come in.ntire curve we still expect there to be a hard floor under implied volatility around 15 and get back to the point where we have curve andoard sloping to get about a five point spread between spot and the six-month future. we are getting real close to that. in a market like this when you have elevated volatility, across
asset classes, across geographies, stability like we are seeing now doesn't last long. julie: in other words, that spread is concerning because it means another uptick in volatility? guest: we are very close. we think we could have a few more weeks of this. the long-term average. historically, we have seen that upwards of four or five weeks, sometimes more rare, little longer. we still want to remain long u.s. equities but just the mindful that once this stability is over, we are likely right back into the next shock. one of the areas we have seen consistent strength this year has been in gold. this is an area that is the etf that tracks holding you got -- i'm going to ask you to explain
the trade first because it is a butterfly which is a complicated trade. usually we stick with straightforward structures. here, you have an inverted skew. that means call implied volatility is implied in to put volatility. it is more rare and individual stocks. one of the ways we can get long gold and exploit the call skew is something like a butterfly. it could be a call spread but in the butterfly, you go out to june, by a 120 strike call and sell to of the 140 strike calls. you pay about a dollar 75 for this and go to sleep. thatost you can lose is $1.75. ld wrote to theg
130 strike and die right there. with that, we have a payoff. aroundright now we are 117, so you see a rally in gold. you don't think it's going to flame out? much toe didn't have say about gold for a number of years, but now that the correlation with volatility is in the we are seeing midst of these shock and equity markets gold catch a bid. now it's in place. has almostst in gld doubled 4 million and near multi-year highs. you.: thank we will be right back with more bloomberg markets. ♪
word news. crumpton. mark: hillary clinton leading rival bernie sanders in ohio and florida. donald trump is leading marco rubio in florida. according to the latest pontiac university poll, clinton leads sanders in ohio. done onepublican side trump leads marco rubio 22%. -- marco rubio 6-22%. other polls have case it leading trump. leadingjohn kasich trump. sarah palin appeared at a trump campaign event in florida this afternoon. husband -- thank you guys for your prayers for my husband, who is recovering right after a little wreck on a
snow machine, so thank you. mark: she will head back to her home state to be with her husband. in south carolina a white former state trooper is behind bars as he awaits sentencing for the shooting of an unarmed black man. he pleaded guilty in the shooting of lavar jones, that occurred seconds after a traffic stop. it was captured on dash cam video. than 18 months behind bars and iran, washington post met withjason rezaian president obama today. he was released with three other americans as part of a prisoner exchange between the u.s. and iran. news 24 hours per day powered by our 2400 journalists and more than 100 50 news
bureaus around the world, i am mark crumpton. stocks are mixed today, abigail doolittle is live at the map -- live at the nasdaq. abigail: the index is slightly higher this time, reversing a small loss from earlier, all this on top of a four week winning streak. their marketear tumbled. a lot of volatility here. even so the nasdaq is down 5% year-to-date. the reason for that underperformance of tech and biotech names, while waiting for those names such as amazon, microsoft, and apple, the top is facebook. today shares of facebook are moderately higher with the firm saying that first quarter is incrementally positive beauty spending treads are positive, ad formats of you'd be helping facebook. facebook is up 4% on the year.
the big internet names outperforming those stocks and the nasdaq itself, ironically the worst point boost, point drag i should say is amazon, down 15%. a tale of two cities among those names. some bio see there are techs soaring today. abigail: we are not talking about penny stocks. gw pharma has doubled a $2 billion market cap on the companies key marijuana drug, met a primary endpoint for late stage study. a biotech company apparently has a similar marijuana drug, gwding up, soaring more than at this point on the close. so much,hank you
abigail doolittle at the nasdaq. speaking of tech stocks, they have rallied by the end of the year. more importantly, volatility remains high in the tech sector. -- wegs made colleagues asked him what was behind it all. is across volatility all these investments, really juvenile by the fact you have about 100 companies trading at astronomical valuations. the remaining are not at those high valuations. what something like a linkedin or tableau has it happened, varitek reports across everywhere. >> how many stocks are waiting to reach regular levels? i don't know when they will reach regular levels. most of the market is not that valued on the tech side. >> as an investor, you see this volatility in the tech side. opportunity?at
how do you get the best of the theatility and leave rest behind? them of the only way we invest is by a three time horizon. that is particularly true for small and it cap stocks. impossible,s almost or if you do it it will be very expensive. through deep fundamental research, development of the stocks can be 100% upside stocks , and then use volatility as a buying opportunity, that's what we think makes money in the small-cap tech. >> can you stomach that kind of volatility, can you stomach the loss of 50% over one year and turnaround to investors and say we have a three-year horizon? is the startt part
of the capital when people know this is a strategy. that is where our focus has and other more oriented investors that understand that these are the dynamics of tech stocks. only with that capital base can one prudently approach a three-year investment horizon. >> do you see a difference in volatility between -- >> not particularly. i think volatility is driven in the mid-cap space, especially where no one is buying on risk -- it doesn't matter what kind of company you are. asdom factors takeover opposed to anything fundamental to do with the company. and you really need to do that with a buying opportunity. is this a a group -- growth company anymore? is this evaluation play?
apple is one of those committees. how do you differentiate between the two at this point yet so few can clearly have poor opposites. how do you pick the two? >> we look for countries that dashed versus high free cash flow yield. 50% of free cash flow yields, we are able to find those. lossecond factor is 20% sustained growth, and we are fine those. critically we are able to find those at an average valuation of under two times underpriced at six, when treating times revenue plus, some of these other companies have some seven times revenue plus. fighting free cash flow yield companies is what we value at two times underpriced revenue. still ahead on bloomberg markets, job growth and low gas prices have helped boost retail sales in recent months. look ahead to the february
retail sales report. fedfor more thoughts on the , take a listen to -- >> if she talks this hawkish leave this wednesday, then i think you are risking further currency depreciation in china and other tightening of financial conditions. that is when i think the fed will probably say risks to the outlook are nearly balanced. they will indicate they will probably -- indicate there will probably be another one or two rate hikes later this year. ♪ vonnie: a quick check on the
markets and here is a look at where the indices and most of stocks of the day are at right now. you have the dow up one third of 1%, the nasdaq up to tens of 1%, the s&p up fractionally, just up one point. you can see bank of america has turned around and it is down. again, some of the drug companies, pfizer down 1%. tougher the business flash come a look at the biggest business stories in the news right now. the future of virtual reality could be clear this week with the game's conference underway. to gdp will play host to the virtual reality developers --ference, a spinoff to the the gdc will play host to the virtual reality developers conference.
high-end pcs are required to power their devices. sony streaming tv services is going nationwide. a station view -- playstation v ue has been available in new york and san francisco. sony hopes to cash in on a trend. choppingave been traditional tv services to sign up with on my tv service providers. the u.s. labor market was resilient in early 2016. labor department says florida led the event with more than 32,000 jobs, followed by texas. biggest gain,e nearly 1%. -- vermont showed the biggest gain, nearly 1%. the plaintiffs are reportedly -- plaintiffs are reportedly seeking -- volkswagen did not confirm it received the lawsuit yet. bloomberg business
flash. the federal reserve meetings -- on wednesday the decision beginning tomorrow. onthursday we get updates retail sales and inflation. for more tha on what we can expect to hear -- that is what it is all about, high-frequency data. think there is any data on the landscape that is going to change their opinion tween what we will see tomorrow morning and wednesday. vonnie: matt between now and wednesday, but we will see some important data that will help sort out what was good about the first quarter and what was not so good. >> i believe the u.s. consumer will prove resilient, but that will not be as evident in the february retail sales data. prices fell a lot, but
that actually hurts the retail sales number. motor vehicle sales were flat to down in the month. insumers are treading water february. as we look at the income metrics from the jobs report, that is also not encouraging. i think we are going to have a bit of a soft spell here. givenam confident that the robust job gains that has been prevailing over the last several months. we will get that a growth even in the first half of this year. that will be enough to put the fed back into play probably at the june meeting. you say this week's data will not have much impact on the federal reserve meeting, but there are some inflation-dictators in there, and it will give the dogs and emission if we don't see to robust retail sales. killt you to listen what kimball said earlier today on bloomberg television regarding inflation.
>> inflation could be a lot higher than it is now and i'm not going to say they are going to exceed the 2% target, but we could see inflation come back confidently, and we are out of that deflation scare range. investors will start to think it is possible the fed will start hike a little bit. some members of the fat are expecting to see this. >> we will see this even as we headed to the second quarter of the year. i don't think we will have to wait until the second half. on the inflation landscape you have a lot of pressure is concentrated into's shelter costs. finally we are starting in. we have seen inflation pressures spreading outside of the sector. there is a broadening out of price pressures which will give a lot more confidence that we are moving away from potential deflationary risk. the fed will respond to that and the fed doesn't want to be caught offguard, because they
have rates essentially at zero. if you are looking at a ad economy later this year, where the unemployment rate is pushing towards possibly 4%, that is an economy that has absolutely normalized and needs much more normalized monetary policy as a result. it is falling more than forecast is hoped for. but wage growth is not what the feds would like to see and most of america. not only that, but you say inflation pressure is seeping into other things. a seeping is the word. this is very gradual at point, but if we start to get wage pressures, which we should if we push closer to 4%, as we get those wage pressures i think most costs are did hated by human capital.
human wage pressure goes a long way in the service of providing inflation. we should see core inflation exceeding 2%. but i think you will see the toe the feeder moving close 2% year end, than the headline will be a tug-of-war between energy prices and a strong dollar. does that mean to rate increases? if we are going to be close to 2%, is that one more increase? two more increases? therey will dial back increases on was day. i don't think -- they will dial back there increases on wednesday. i think they will take one back later on this year. they don't want to send this overly negative signal, suddenly the fed has scaled back. the big question is the balance of risks, what will they say about that? >> i hope there will be a
balance of risks in the statement, because it was very obviously over the last oral statement. i think that goes back in, i think they will signal risks are either balanced or if they want to be extra call it -- extra cautious it will be really balanced. this is important for policymakers, all that uncertainty they were feeling of a january meeting, which was financial market turmoil and also international offense, they are stepping back and they have a sense that the worst of that has faded and the economy should perform decently in the aftermath of those it -- aftermath of those developments. they will be back in play in the second quarter. much, chiefk you so u.s. economist at bloomberg television's -- at bloomberg intelligence. at 2ed decision comes out yellen's then janet
vonnie: markets close in less than 10 minutes but stocks are fluctuating, somewhere near the session highs. julie hyman has your market check. a quarter point, the dow and the nasdaq have been leading such as the lead is throughout the day. 500, youok at the s&p will see some fluctuating going on. it is a relatively tight range but it looks like we will close
near the highs for today. is a very small gain at the moment for the s&p 500. we have seen relatively low trading below the 100 they average. take a look at the groups on the move. energy materials have been the team -- been the two big drags. consumer discretionary has been a consistent lead and we have had a turnaround in information technology, so large-cap tech at the beginning of the session was wayne the s&p down. now it is helping to some degree. see it is not large-cap gains, but it is contributing to the overall gains. commodities, we are seeing the oil selloff throughout the session. up off the lows of the day. still lower after reports that iran is not increasing production at this time. gold has also been lowered today, down by 2%. we have seen morgan stanley coming out saying we should see
rates remain lower until perhaps a federal reserve interest-rate increase, not coming until december. you can see right now 1.79%. relatively close to 2%. -- 1.97%. relatively close to 2%. to be an increase this week. it is a matter what they will say about the rest of the year, rather. there we do have expectations rising, at least expressed on interest rate futures that there will be one or more interest rate increase throughout the rest of the year. , it couldscreen change considerably after the fed meeting. vonnie: i can only imagine it will. julie, thank you so much. it is cheap stocks and finally starting to rebound. chart -- three .8%
last week. here to explain this chart and more is our chart or rue at bloomberg, david wilson. take you for joining. days like this we see a tight range and equities. you tend to go further and look. you found the difference in growth value is widening. was over the past several weeks. it was the lowest in more than 15 years or the race between value and growth. shares of companies are relatively cheap when you look at earnings, when you look at asset values. they have been out of favor for several years. and that is showing up relative to the growth stocks, the ones that did relatively well when you look at sales in terms of their face -- their pace of growth. put his into
perspective. it doesn't look like much of a huge difference, but if you look at the charge. that look at the charts. david: -- if you look at the charts. a few things are going to persist. one is stocks rebounding from a correction. the indexes of up more than 10% since then. the second thing is you have an easing of volatility. you look at the vic's index over the same period, it is down 40%. and the third thing is the potential for earnings recovery. weyou look at the numbers compile for the s&p 500 from analyst estimates, this quarter may be the bottom. and then the second quarter you start to see some growth, third quarter much more than that. those are the three things that suggest that. when you see the value stocks -- it is going to persist. very quickly, central
banks not generating much or generating within range? david: absolutely, you saw the ranges for the industry that julie hyman was showing. half a percent does not move much overall in the market. you have the deal's about starwood, the fresh market, not a whole lot in terms of broad themes. vonnie: we know what is good happen that we still have to see a play out in think you so much, you can see all these charts online. here are the major averages, less than four minutes until the close.
>> and i am alix steel. >> ux -- u.s. stocks -- oil followed 3%. >> the question is "what'd you miss?" turn to a trump style of politics. we take a look at what is at stake for angela merkel after this weekend's election. >> and oracle has its head in the clouds. we break down the numbers on the head of earning on tuesday. >> let's begin with our market the s&p 500 setting its highest level with the stocks closing even with an absence of any kind of economic data. there wasn't any big catalyst push things up area joe bank