tv Bloomberg Markets Bloomberg March 23, 2016 3:00pm-4:01pm EDT
welcome to "bloomberg markets." from bloomberg world headquarters here in new york, good afternoon. markets are getting today and stocks are suffering -- are dipping today, and stocks are suffering their biggest losses in two weeks. fels says weim need to keep close watch on the three c's, commodities, china, and the central banks. luxury suvs, trucks, and small cars -- we will hit the road with some new cars. we have matt miller and the ceo of jaguar north america. matt miller, our special guest? --n i read that, i was like
julie: i'm not sure what he was doing in that car. he is a tall guy. squeezee were trying to something out of the markets. julie: losses are accelerating as we head toward the close. accelerating commodities selloff . all three major averages are trading lower now. the nasdaq losses have accelerated, down nearly 1%. same goes for the s&p and dow. energy shares are doing the worst today. energy shares as a group are down 2%, followed closely by material financials. at the same time, we have seen more selling in stocks, we're seeing more buying in bonds. rates are going lower today, 1.87%, despite the fact that we heard from the federal reserve's
james bullard today that he thinks it is more likelier than not that we will see a sooner increase in rates, but that is not pushing a great in the treasury market today -- p ushing up rates in the treasury markets today. we are seeing a steep decline in oil. leg down coinciding with the leg down in stocks, breaking below $40 per barrel for wti. earlier today, we got a weekly inventories report that came in with a higher than estimated bill. gold is also moving down today. that is a split from what we've seen recently. recently, when we have seen selling in stocks, there has been some flow into gold as a hedge against that as people are feeling nervous about the global economy. not the case today as gold pulled back 2%.
this is a long-standing relationship. take a look. here is the bloomberg commodity index in blue versus the index of the dollar in white. this goes back about a year. a pretty clear inverse relationship. once again, that's what we are seeing. as we get the bounce on the dollar, we are getting a little bit of a leg downward on commodities, at least for the moment. betty: let's get a quick check of the headlines on bloomberg "first word news." president obama says fighting on islamic state is, in his words, "my number one priority." during a press conference with argentine president mauricio macri, president obama said the issue is how do we do it in an intelligent way. he criticized republican candidate ted cruz, who has called for surveillance of muslim neighborhoods.
the president called the idea conjured productive and contrary to american values -- the idea counterproductive and contrary to american values. in the united states, the department of homeland security said there were no specific threats. law enforcement personnel have been assigned to airports, train stations, and -- former cretary of state hillary clinton is giving a speech on terrorism and cyber security. parties in yemen have agreed to a cease-fire starting april 10. these talks are set to begin in kuwait one week later. each side have accused -- has accused the other of violating terms. pennsylvania republican senator pat toomey has agreed to meet with un's supreme -- u.s. supreme court nominee merrick garland.
he says the seat should remain vacant till next year, but he agreed to meet judge garland, quote, "out of courtesy and respect for both the president and the judge." other republican senators facing tight reelection races have said they are open to meeting garland. a-rod willorting step away from the game when his contract expires. of three otherup players who have hit a home run before they turned 20 and after they turned 40 just last year. local news -- global news powered by our 2400 journalists in more than 140 news bureaus around the world. betty: a new report coming out from pimco, reducing their outlook for growth in 2016. simplified measures are becoming
increasingly ineffective. earlier, we talked exclusively with james miller, who says there is only so much central banks can do -- james bullard, who says there is only so much central banks can do. james: there is a business cycle. monetaryn a good policy, there is a business cycle, but it is not as big. it is driven by factors like technology, human capital. what the u.s. needs is a better medium-term growth strategy. we need everyone to get on board with that growth strategy. betty: ok. felsll compels -- joachim cowrote today's report on global growth. he might have a difference of opinion. now fromus exclusively newport beach, california, where they are headquartered. before we get your growth prospects around the world and the three c's you are talking about, what do you think about what jim bullard just said?
you downgraded your forecast for how many rate increases we are going to see this year, right? joachim f.: that's right. we downgraded our growth outlook somewhat. we still think there is no recession around the corner. we think that this economic expansion, which has been a triple-b economic expansion, where growth is bumpy and brittle, we think it will get a little more triple-b this year. we have plenty of headwinds. markets are downing -- doubting the effectiveness of monetary policy. there is uncertainty about china. the third c, commodities. lower oil prices were seen more as hurting than helping the global economy. betty: he looks at that and says , however, it would be a mistake -- and he is a voting member of the fed -- to delay any further rate increase.
he seems to be proposing one for next month, joachim. at the same time, he was very concerned earlier this year about the sharp decline in inflation expectations. i can understand he is a little bit less concerned now, because we have seen quite a nice rebound in inflation expectations in the market. my worry is, if the fed jumps on these first signs of rising inflation and hikes interest rates, everything might go in reverse. this is why our view is that the fed is likely to be relatively cautious, very gradual, only one to two hikes this year rather thatthe two or more bullard and others are proposing. that's why we think the fed is willing to let inflation run a little bit hot. bullard said that he expects inflation to overshoot next year. we agree with that. betty: let's talk about the rest of this year. aboutlk about, sees --
calmer seas ahead -- about c's, thes ahead, letter, not the ocean seas. commodities, central banks, and china. joachim c.: thank you for clarifying what that stands for. it is easy to see on paper, but not when you speak about it. we have china, commodities, and central banks, which have been waiting on the outlooks because of china's ethics policy, because of the very sharp drop in oil prices, which has had nonlinear effects. below are you went, the more negative it was seen. and we have more doubts about central banks, when they start to push interest rates very negative. these are the main swing factors in the economic outlook for this year. here is the good news, betty. there are some signs that on each of those three c's, we will
see calmer c's ahead. we think there is a good chance china keeps the currency stable in the near term. we see only a gradual and orderly depreciation this year, because they want to be good citizens, being a member of the -- secondly, on commodities, oil seems to have stabilized. we actually see oil prices rising slightly further this year, to about $50. and thirdly, central banks, i think it is good news that the ecb and the bank of japan are putting less emphasis on pushing rates more negative, and the ecb is putting a lot more emphasis on domestic credit easing, helping the banks, buying corporate bonds. we think that is good news, and it means that monetary policy can still be supportive, even though there are diminishing returns to further monetary easing.
betty: but you also see central banks going in a different direction? we have japan and negative interest rates. you don't see that being even more exaggerated? you actually see central banks figuring out different ways to stimulate the markets and the economy? .: i think what central banks learned over the past year is that there are limits to monetary policy divergence. the fed had the idea of hiking rates may be four times this year -- maybe four times this year. no longer. they are telling us it is more two.y to be central banks elsewhere, in japan, europe, elsewhere in the world, are still easing. i think there is some kind of understanding, some kind of agreement among central banks. i think they hammered this out in shanghai at the 20 meeting, which i call the "shanghai co-op." the agreement is directly stabilize the dollar.
this will allow china to treat cautiously on depreciating the cny versus the dollar. i think this will help to stabilize markets. betty: in terms of the cny, the yenese, you say the chinese falls 7%. that's the biggest risk to your outlook? f.: that is our baseline view, that we will see about a 7% depreciation over the next 12 months, but in a gradual and orderly fashion. the worst case is much worse, something like a 10% to 15% disruptive depreciation or devaluation of the currency. that's not our base case. it is a tale -- tail risk. it is a very small probability. given the high damage it could cause, it is still worth considering. betty: certainly something to keep in the back of your mind. before we go, you mentioned early on that we are not going
to be in a recession. that's not the scenario at all. what changed? what changed for you to be able to make that statement? f.: we never thought that a recession was around the corner. you had a tightening of financial conditions that meant that the probability of a recession had increased, but only to around 20% in our models . now it is much lower because markets have rebounded. the main reason i think there is no recession around the corner is that we do not see the typical imbalances in the economy that have, in the past, led to recessions. we are not seeing overconsumption. we are not seeing overinvestment. there is no overheating in the economy, even though wages and inflation are starting to move higher. importantly, there won't be overkill from the fed. we think the fed will only go one or two times. they are willing to let inflation run a little bit hot,
to let unemployment fall below of natural rate unemployment. that's why we think there is no recession around the corner. betty: thank you so much for joining us. a bloomberg, exclusive on his note just out today. much more ahead in the next 20 minutes of "bloomberg markets." shares of pinnacle foods getting crushed today. what the departure of -- could mean. we will head to the new york an interview with the head of jaguar land rover north america. as we had to break, a look at some of these automakers. ♪
betty: you are watching "bloomberg markets." i'm betty liu. the pinnacle ceo is off the mountain. the new ceo of terra green mountain -- of keurig green mountain. happy withs not too this departure, falling 5% on the news. we will get some analysis for us -- from michael halen, who covers the company for us. gort is a big hole with gam leaving. why? chael: they may have trouble replacing him. he is aggressively sought -- he has aggressively sought under managed brands and has a good track record of turning them around. guys like this don't grow on
trees. betty: what did he turn around at pinnacle? michael: birdseye was a brand everyone knew, but it was really struggling. when pinnacle bought it, they innovated around the brand. they added protein to some of the blends. they emphasized the fact that is fresh and healthy food, trying to show people that frozen can be healthy. it has really boosted sales. they have done the same thing with a number of other brands in their portfolio. betty: boulder is their most recent acquisition. is that still tbd in terms of the turnaround? ishael: that's where there the consternation. the stock was down more than double-digit before a few sell-siders came in and defended it. they acquired wishbone about a year ago and just recently acquired boulder. there is -- the question is, can pinnacle turnaround these brands without mr. gamgort's
stewardship? betty: why is he leaving? michael: it looks like he got a better deal. keurig green mountain has had some trouble. k-cups haspace for been shrinking. but coffee is growing mid-single digits in the u.s. and around the globe. greenmountain -- keurig mountain is a bigger company. i'm sure they enticed him with a bigger package. also a private company. he can run that without the pressure from investors. he can run that company for the long-term, without having to answer to investors on a quarterly basis. betty: that is big for ceo's.where does this leave pinnacle? they are going to have a hard time replacing gamgort. do they become an acquisition target? michael: that has been some of ,he top, that it -- the talk
that it could be a target. they will move as quickly as possible to get a good replacement. like i said, that could be difficult. if you have trouble, it could be a target. the cfo has been there a long time. they have some talent. there are worries that some of the members of management could leave to go to keurig. betty: thank you so much for that, michael halen. still ahead, options inside. the laggards -- insight. in the dow today. nike, chevron, caterpillar, among those losing ground today. ♪
how the options market is trading. julie: joining me is scott bauer, senior markets strategist at trading advantage. joining me from the sea of yellow we got the cboe out in chicago -- joining me from the cboe out in chicago. when you look at the lack of action we have had this week, is there anything that stands out you? are there any pockets of activity that are unusual in what has been a light trading period scott: it has been very selective. you have seen heavy option volume. you've seen stocks in the news for earning, like nike, which i will talk about in a moment, option volume. it's been light across the board, and that's not sincerely a bad thing after the semi-extreme volatility we saw for such a long period of time. things are settling in. we have a long holiday weekend. i expect things to pick up next week. julie: what do you think will
drive us next week? what are some of the coming catalysts? scott: it's almost going to be the start of earnings season again, first week of april, middle of that first week of april. we will be right back into it. in terms of what we are seeing, things have been pretty good. we don't have much news coming out tomorrow or early next week. moving forward, i think the continued oil trade, which, if oil stays around this $40 number, i think that is going to sustain somewhat in this marketplace and hopefully drive some of that volume. people are going to start getting right back into it. julie: there is one company that already came out with earnings, and it is trading on that today, and that is nike. shares are down after the company forecast disappointed some investors. one of our reporters was talking earlier today about analysts got
really used to this company and investors got really used to this company performing at a high level for a long time. something like this hits as if it -- as a big disappointment, but you are hanging on when it comes to nike, right? scott: i sure am. nike is not a company that has ever sandbagged their earnings reports. they are not going to lower any estimates. when you break this down, it was not a bad record. guidance, in fact, even though it was slightly lower than some estimates, their full guidance for the year is still right in line. any of the currency risk they have, the foreign currency risk, seems to be abating a little bit. any pullback you see in nike, and this was one of them, with the stock down 4%, 5% after earnings, you half to get into this stock for the long haul -- you have to get into this stock
for the long haul. i'm going to play may options, may 65/70 call spread. that trades for about one dollar. that's the most i could ever lose on this stock. to the upside, if we go to 70 by may expiration, this could expand to five dollars. 4-to-1.d for risk is i think nike will have the opportunity to break out to new highs. we are looking at a stock that is 125, 130. even though kanye west left nike, went to adidas, i love the stock. julie: thank you so much. more "bloomberg markets" and jaguar, coming up. ♪
news with mark crumpton at the news desk. mark: an official from the turkish president's office says one of the attackers was caught in turkey in june and deported to the netherlands. belgium and the netherlands that he was a foreign terrorist fighter. dutch authorities allowed him to go three because belgium authorities could not establish any ties to terrorism. u.s. officials a small amount of state department personnel are unaccounted for. morere waiting for information on those killed were hospitalized in tuesday's attacks. the state department said about a dozen american citizens were known to have been injured. secretary of state john carey is scheduled to travel to brussels on friday. donald trump says voters have more confidence in him than hillary clinton when it comes to a crisis like tuesday's attacks in brussels. he made his comments during an interview with mark halperin and
john heilemann. a. trump: every time we have problem in the world, i do better. whenever we have a dig problem, i go up because people actually think i feel i'm much more confident. mark: you can see that interview in its entirety beginning at five :00 p.m. here in new york. a task force investigating the flint, michigan water crisis calls it a story of government really are. the panel appointed by governor rick snyder released its final report today, blaming every level of government for the lead contamination of the city's water supply. dayal news 24 hours a powered by our 2400 journalists in more than 150 news euros around the world. i'm mark crumpton. inty: markets are closing
about 30 minutes. the nasdaq on track to snap its five-day winning streak, as are the other averages. abigail doolittle is live at the nasdaq with the latest. abigail: we have a big selloff here at the nasdaq and the selling accelerating all day. that winning streak will be snapped unless there is a monster rally in the next few minutes. biotech, driven by gilead sciences, the the stock is down over a patent for a hepatitis c drug. merck says gilead owes 10% of its sales in the form of a royalty on this drug. thegilead is appealing decision and says it will only have a 5% effect on the stock. percentage standpoint, seagate technology is the worst as ubs has lowered numbers citing numbers in the desktop
and commercial business segment. one analyst has reduced his price target to $24 a share and is reiterating his selling with the stock down and some investors are clearly taking it seriously. betty: what about other tech companies and play today? watchingwe have been google as they announced the platform cloud event. the street really wants to know how serious google is about its move into the cloud. whoached out to an analyst seems more impressed than i thought he would have been, saying google seems more ambitious and committed to this than he thought. the strategy is more about using the technology and leverage and stealing amazon or microsoft customers. over the medium-term, he thinks it could have a nice impact on google's revenue. york auto show is
underway on the west side of manhattan. suvs are a big theme. >> 43% of our business is suvs. over time, i see it becoming 50%, but you cannot lose sight of the fact that that segment is the single largest segment in luxury. of the business and we like to get a piece of that 25%. splashalso making a big is jaguar. matt miller just spoke to the president and ceo of jaguar and land rover north america. >> the market has been crossover for the segment and even though it's nala comes to mind immediately when you think of a jaguar, we took a step back and said maybe ae time is right to put
jaguar definition on the suv segment and that is what we have done. tolooks fantastic and has perform like a sports car but has the practicality we all need in our everyday life. you can call it a practical sports car. matt: does the segment overtake the sedan? the x j six -- >> we will see. last year was a great year for the industry as a whole. the luxury part of the market has outpaced the general market, so there's a positive for luxury cars. the are a big portion of luxury market but you see suvs coming in as well. both to compete in the luxury market.
on the sports sedan and then koppelman that with cars like this one. sports the first compact sedan. we think it is an alternative to these established competitors whether they are from germany or asia. complement on power trains. buys and comes in and xe?- the brand awareness has always been there and been strong, but we were missing some important features like an all-wheel drive engine and body style. now we have a full complementary lineup, plus we have the most aggressive pricing in our
history. have the best leading customer care package, five-year, 50,000 mile warranty and free maintenance throughout the entire time. there's no reason not to consider it these days. exceptionalve an deal network -- dealer network. >> without the physical presence and presence of our dealer partners in the local communities, it would be difficult to make that customer connection and not possible to take care of our customer. so an integral part to everything we do. going forward, we are trying to bring land rover and jaguar together into one facility because that way, we can represent the best the company has to offer. having two brands is a competitive advantage.
we don't have to be everything to all people. land rover focuses on the off-road capability and then we have jaguar, which is designed, performance, and value. matt: you don't worry about cannibalization? if i were to shop for this car, i might think about a discovery or range rover sport. how do you differentiate those? >> that is something we look at closely, but even when land the evoke alongside and says our jew talking to the same customer? we found out they are different customers. invoke and the sport which is more functional oriented. i think it's yet another
dimension, one of performance that we did not have. evidence from the sales perspective, when discovery sport launched, evoked state at the same level and discovery sport was purely incremental. still ahead, virgin america shares flying high as the company is set to weigh a potential sale. who could buy the airline owned by none other than sir richard ranson? here is richard branson speaking to bloomberg last week from an airplane. sir richard: for the last nine years we have been voted best airline in the states. our team has done a great job and therefore, we attract ledger who wantd tech people
betty: this is bloomberg markets. i'm betty liu. shares of virgin america are soaring today. sources tell bloomberg news the carrier has reached out to potential buyers after receiving takeover interest. virgin america would not comment on this, but let's turn to our senior airline analyst who joins us from princeton. ist is this about? what virgin america looking to do? george: we are not sure. we don't know for sure what this is about. what it appears to be is that
times are about as good as they are going to get for u.s. airlines and are some big bone about ae who combined 50% of the company. this might be the beginning of an exit strategy for those investors. : anything significant about the timing? airlines have enjoyed some great profitability over the last year and some quarters. betty: is that due to lower oil prices? george: it is. the challenge is that it is fading a little bit because fares are starting to come down. labore starting to see ask for more and more tocessions, so market start get squeezed. if you are an investor, you may think it is the right time to go. if these reports play
out, who could be potential buyers here? george: we could have existing players in the market. someone like delta could find it interesting. you could have slots at reagan, laguardia, jfk. delta does not have a lot of exposure at newark or san francisco, another big hub for version. alaska could be another. alaska is looking for spots at newark. this could provide another hub for them. alaska and delta come to mind highest given their structure and what virgin would do. sounds like further consolidation. is this going to fly with regulators?
george: virgin is not that big that i think regulators would get too worried about folding it into another carrier. been focused on airlines not just because of the story but because of what happened in brussels and the terror attacks there. hotels. airlines and are we going to see that have a lasting impact or will this become a perpetual discount for george: we are hoping that this is the end of the events that started in paris. we think the effects will probably fade over the next couple of quarters. start to makees preparations for what they want to do for some of vacation. forould take the top off some of vacation season but i think we will move past it in a
couple of quarters. it comes right at the peak season for the airlines and transatlantic is at risk for u.s. airlines given they may be thinking differently about the situation. betty: is there some sort of discount heist into these stocks? george: whenever you buy an -- you stock value by buy a fair amount of geopolitical risk. they are discounted to the rest of the market, i think it is a reminder that it exists for a reason. were reminded of that yesterday. much more ahead on bloomberg markets. the close of trade moments away. here are where the major averages stand. ♪
betty: this is bloomberg markets. before we get the market check, a bit of politics. we had primaries yesterday. we heard earlier from donald trump off of his arizona win. cruzepublican senator ted fresh off his win in the utah caucus. here is a preview on "of all the respect." room --u are now the the candidate of mitt romney and jeb bush. senator cruz: in the last 10 days, we have been endorsed by mike lee and mark litan. it's about as wrought a spectrum in the republican party as you can imagine. it is the entire ideological spectrum and i think the reason is simple. percent to 70%65 of republicans recognize donald trump is not the best nominee to go head to head against hillary
clinton. donald loses to hillary and i beat hillary. what we are seeing every day is republicans coming together to unite against our campaign and that's what it's going to take to beat hillary in november. john: some people see you as a vehicle to stop donald trump. is that fair to say? the object here is to win and turn the country around. betty: don't miss "with all due respect was quote tonight. they will have interviews with donald trump and ted cruz here at 5 p.m. on bloomberg television. markets are closing in 10 minutes. stocks are off a bit from their lows of the session. julie hyman has more at the markets desk. julie: we are still seeing a decline of 1% for the nasdaq. i'm checking volume as we head toward the close. about 20% below the 100 day average volume for the s&p 500.
lightestt be the trading day, but certainly one of them. all the averages heading lower. andvarious merger acquisition stories -- let me start with what will be the largest utility in the country. that go selling itself to exon for $6.8 billion. this deal has been two years in approval from got the district of columbia public service commission. it was not expected that it would get his approval since it and this regular -- regulator have been going back and forth. exxon shares, for their part, not seeing as large of a reaction, heading lower by about two thirds of a percent. aboute just talking virgin america and bloomberg news it is potentially in discussions with buyers. yum! brands, according to the
"wall street journal" is considering selling a stake in chinese operations, so the thatst and's about how spinoff would work. one option is selling a stake in its chinese operations. in other news, a developing situation with a company getting a new bid from a group of former executives to a company that has formed called origin technology, raising the all-cash offer for the company and an existing offer from thermo scientific. now there is debate about whether they will come in and raised it again. and finally mccormick, the spice company, if possible offer for premier foods in the u.k.. you can see the u.k. shares surging -- this is the adr
surging. cormac shares up a little more than 2%. there was a mccormick factory near where i grew up and you could smell the spices as i drove by. betty: that sounds good, but every day? julie: it was distinctive. betty: the markets are selling off a bit. let's talk about some of the safety place like utilities. may be thetocks worst choice for the income seeking investor. had the lowest yield last year among the 10 primary industry groups. guru bring in our charts here at bloomberg news. explain this to me. what wee have to define mean by yield first. when you look at utilities, you tend to focus on dividends. the industry groups in the s&p 500 with the two highest payouts happen to be the two best performers this year.
this thing is, if you think about how companies return money to shareholders, dividends are just one route to do that. the other is stock buybacks. count them in the equation, things look quite a bit different. they came out yesterday with a quarterly report on buybacks and the second chart shows what is called the combined yield. look at the combined payments and the amount spent on buybacks and on the per-share basis is a percentage of the price. betty: let's bring up that second chart. buybacks.ng up the explain this one. david: the utilities are on the bottom and they only yield about 4%. the s&p 500 is about 5.5%. industrial companies, the highest is 6.7%. this is for last year, so you
are looking at money spent on buybacks in 2015 along with the dividend checks sent out that year. just abovecompanies 6%. it makes sense because industrial companies and utilities, technology companies had the highest buyback yield. in theare an investor stocks, you gain a whole a lot of income from repurchases. if you are a utility stock investor, you may get a dividend, but what you are not getting is money rolling in from buybacks. betty: but you are getting the safety. safety.t is all about companies have a lot more latitude when it comes to repurchases than with dividends. they can be cut, they can be eliminated, look at what is going on with the energy companies. that said, when you are an investor, you are concerned about the checks coming in. what about buybacks and
the impact on earning per share? david: running the numbers, something like one out of every five companies on the s&p 500 reduced its share count by about 4% last year. int means a 4% increase earnings per share. that's what analysts are forecasting. we see those earnings go up, you have to ask is the company earning more money or is that money being spread over fewer shares? betty: thank you. that is it for bloomberg markets. averages.he major less than four minutes away from the close of trade. ♪
[closing bell ringing] s&p turning negative for the year and the dollar exiting its longest winning streak for a month. we ask rick reader how to invest in a world of negative rates. scarlet: and the st. louis fed president questions the wisdom of following the dove plot. tracy: and the three charts that could tell you if oil has finally bottomed. with ourwe begin market minutes. not a lot of economic data to give us much reaction, so drifted lower. the s&p 500 turning negative for the year. it was the worst day for the dow jones industrial average in two weeks. eight out of 10 groups down with energy and materials leading the way. tracy: it was a