tv Bloomberg Markets Bloomberg May 19, 2016 3:00pm-4:01pm EDT
betty: from bloomberg world headquarters in new york, good afternoon. i'm betty liu. authorities are on the hunt for debris from an egyptair jetliner that vanished on an overnight flight from paris to cairo, 66 people on board. the aviation minister says terrorism is a possibility. the vice president of global operations, hugo barra, will be joining us to tell us how he expects the box to beat apple tv. and insider trading takes down the former chairman of dean foods. champion golfer phil mickelson agrees to repay the money he made on trading tips from las vegas gambler. we are about an hour away from the close of trade and i want to head to the markets desk, where ramy inocencio has the latest making sense of the markets.
ramy: we are just off of session lows but i have to say that on fears of what is happening over at the fed, traders are concerned about the rising potential of an interest rate hike as early as june, and even here today, all the major indices are down for the year. we are down .7%, similar to the s&p. pop into the bloomberg with me and i want to show you the sector health. seven of the 10 sectors are in the red. industrials are down the most, down by 1%, as it has been for most of the day, followed closely by financials. utilities are the highest, but with consumer staples the second-highest, half a percent here. going back to industrials, they are down in large part because of what is happening with the airlines.
this is down by about 2.5%, in large part because of temper airrs, because of egypt flight being lost between paris and cairo. officials saying terrorism cannot be ruled out. let's take a look at what is happening even deeper in the airline board with specific stocks. across the board, all 11 members of the u.s. airline index are down. ual down the most by 3.3%. across the board, on the order .5%, also falling because of fears of flight cancellations. we have got a flag about positive things happening with the biggest gainers on the s&p. retail, we have been talking about this the entire day. more than 9%, the biggest jump since 2008, after its first quarter consort sales rose 1% versus an estimated half
a percent. earnings-per-share, $.98 per share there. cisco jumping the most in three months. quarterly sales and profits beat estimates, and the sales force is also adding more than 4 -- almost 4%. 10 to the s&ping with just these three. betty: thank you, ramy inocencio there. mark crumpton has more from our newsroom. greek air safety official tells the associated press that debris found so far does not belong to an aircraft. officials are searching for an egyptair flight that went down en route from paris to cairo this morning with 66 people on board. egypt's aviation minister says it may have been a terrorist attack, but the white house says it is too early to say exactly what has happened. news'bring in bloomberg
caret el-tablawy. what more can you tell us? : right now it has been a story of statements and subsequent denials for questions . as you said, the officials here have really been very cautious about classifying it as anything other than a missing plane. they don't want to speculate on potential causes as to why it disappeared. the aviation minister said it is too early to decide on anything, whether an accident or terrorist attack. we have seen repeated statements be issued and be denied, the latest of which apparently is that the wreckage has been located. probably that is also being disputed. betty: -- , what can you tell us about reports that the pilot of the plane make sharp turns before the plane plunged into the sea? is that the impetus for one egyptian officials are saying, that it could have in fact been terrorism? tarek: again, i think it is hard
to judge. couple onow is that a turns before it went down and lost radar contact. another egyptair went down in the 1990's and the consensus appeared to be that it was pilot suicide. i was speaking to a security expert who said it also has something to do with windshear or catastrophic failure on the plane that could result in those kinds of gyrations. it is hard to say anything with any measure of certainty as to what exactly was going on. mark: we have about a minute left. i want to ask you what we might know about the safety record of the plane involved, which was in her bus a320.
-- airbus a320. tarek: we have not seen any reports that there was any problems with it. no one has indicated that there were earlier mechanical issues of concern. the airbus a320 itself, in some justents in the past, not egyptair, but just more generally speaking. betty bloomberg -- mark: bloomberg news' tarek el-tablawy on the phone from cairo. we are hearing conflicting reports about whether plastics or location devices according to egyptian authorities have been found the greek authorities say it is not visible that type of debris which would have been from the plane. we will continue to follow this story and bring you more developments as warranted. betty, back over to. betty: mark, thank you so much for that update. i want to hit you mountain view, california.
my colleague emily chang is sitting down with xiaomi global vice president hugo barra. emily: hey there, betty, thank you so much. we are likely at google headquarters, where hugo barra has unveiled a new set-top box for the u.s. market. you have already gotten your line of tvs. how does the box fit into the bigger vision? here so is right everybody sees it. it is a tv streaming device. we have been making tv devices for a while now in china could we make big tv sets, up to 70 inches now, but we also make these boxes. these are incredibly popular because they are a way to get content easily over the internet. awayorld has been moving from the near g-v so these are more important than a cable set-top box. buy thesewhy should i
over the google or amazon set-top box, apple tv? hugo: we are using a chip is commonly used in mobile phones, for games, for example. we are introducing theater capabilities that a pretty unique also. -- video capabilities that are pretty unique also. format that the likes of netflix are introducing new content for. with android tv comes essentially all of google's innovation, services, google play, youtube, and so on. it is a pretty amazing package. emily: when will it be available and how much will it cost? hugo: we are previewing it here and it is a great opportunity. we are launching it in collaboration with google. we will be launching it in a few months hit it will certainly happen within this year. it is amazing, as you would
expect from us. also announced that he will make a daydream-ready phone. daydream is google's new mobile platform for virtual reality. how quickly do you think these phones will take off and what will they be able to do? hugo: first of all, i think it is a massive initiative for industry, because what google is doing us saying let's focus on the thing that matters, the mobile platform. let's make sure that it is really good. meaning, from a quality perspective, we don't get a headache and so on. we had been tracking this closely figuring out what it takes to build a good vr experience. this takes a huge amount of engineering work also from us, which is why being part of this program, we will make what is called a daydream-ready phone. it is a bit guilty because the bar is very high -- it is a big deal because the bar is very high. mostly it is the difference
between, for example, your head moving and the screen updating, more than 20 milliseconds. your brain notices it. to make phones that can update the screen this quickly requires a lot of engineering. emily: what is the timeframe for this? near-term? it sounds so futuristic. hugo: google is saying it will come out later this year. 2017 thing from the point of view of the chips that are required and the screens that are required and so on and so forth. emily: so years will be out in 2017? finalizedave not which one i can win but later this year and sometime early next year is what we're thinking, roughly. emily: on the issue of smartphones, xiaomi missed its target last year. you said you would sell 80 million funds. you sold 70 million. what happened? hugo: we don't have set targets. that is a number that became a target somehow.
first of all, very competitive industry. secondly, we really are focused on user acquisition. we are focused on acquiring internet users. also, supply-chain. we obviously make phones as quickly as we possibly can. the demand is much higher than what we have supplied so far. we are still ramping up, constantly ramping up. but the key point here is we don't measure ourselves on how many phones we sell. we measure ourselves on how many in that uses require that how many internet users we acquire -- a measure ourselves on how many internet users require and how much revenue per user we generate. we'll talk about these things openly but these are the numbers we look at most internally. emily: the global smartphone market is saturated and unsaturated in china. how do you overcome that? hugo: it is certainly a saturating market. atimate china will top out
half a billion phones year, huge number. there is growth opportunity in ,hina, particularly online which continues to grow as a percentage of retail. huge room for us to grow in china still good we are going for growth as well and expansion in other markets. india is the market that we have chosen as our second market in the world. that is where i spend a lot of my time. and we continue to hit sales records in india. emily: any update on when you will be selling phones in the u.s.? have to ask you every time. hugo: we are obviously getting closer. we are starting to the preparation work to launch in the west. but it is further out than what i can easily predict. we are not talking about launching phones in the u.s. this year, to be clear. but it is something we're working on. it is going to take a while, obviously, paring phones for the wireless spectrum in the u.s.
come having all of our operations up and running, knowing how to do marketing here. one of the reasons why we are -- launching, it is a product made for the u.s. market. emily: drones, when are they coming? there was a hint yesterday online, showing a picture of a potential xiaomi drone. is that happening? hugo: we are excited about consumer electronics in general. we have made a huge investment into a number of companies. from our scooter all the way to home appliances. we have very interested in cool electronics which are connected, especially things to do with photography and video and so forth. it would not be a terrible guess that i cannot say more at this point. emily: not a terrible guess, i will have to live with that. , vice president of xiaomi, good to have you. betty: much more ahead on
through the july meeting, looks about 60% if you look at the federal funds futures market. betty: our next guest says that the fed sees a tough choice and sees the odds of a hike as 50-50. is a liveieve it meeting in june? >> i definitely believe it is a live meeting. they have fulfilled all the requirements they are sent out. now all they need to do is pull the trigger. betty: they say they need to continue to see data. do you think i have enough evidence? -- they have enough evidence? brad: since the last meeting we have checked every one of those boxes. we have seen retail sales, we have seen jobs continue to grow. everything that has happened has been in line with what they wanted to see, so yeah, i think we have. about all these concerns that they weren't going to go in june because they do
not want to influence or tie what they were doing with bre xit? brad: i think that is the reason not to go. there is 2 reasons. is certainly one of them. the other is the may unemployment data. there is reason to believe that will be week. if a part of the fed is looked at this they may say no, we need to wait another month. that is a reason for not moving. betty: how do you think the markets are going to respond? brad: i think the markets are already having the reaction right now. at this point there is an expectation they very well might. if they don't, we might get a bit of early. the reality is, if it is not jim, it is coming soon. we are having a bit of a reaction right now. betty: begin to the downside come in the red. what is giving support to the equity markets? brad: historically when the fed starts to raise rates we see a downwardds reaction.
what the fed raising rates means is that the economy is getting better. in the next six months or so the markets to better. what do we need now? we need revenue, we need people spending, we need the economy to be doing well. that is what the fed says we will start to see. betty: apparently so. so far have been supported by share buybacks, right. companies buying back their shares. we have a story out today that byre buybacks have dipped the most since 2009. the copies are not really putting that cash to work like that anymore. is that going to be another weight on the market? brad: it certainly will be ahead win. we don't have revenue growth is of the companies are not competent and are not generating cash flow. investors are not competent. we are seeing outflows from equity mutual funds, for example. we have seen earnings do well
but right now we're hitting the end of the line for financially generated earnings. we need revenue growth. that is what our growing economy can mean. ok, we absolutely need that. where do we put money to maximize that? brad: right now consumer discretionary is the best bet. you are betting on the consumer, you are betting on wage growth, you are betting on people being willing and able to spend. starting to be willing, that is a recipe for more growth in that sector. much, bradk you so mcmillan, commonwealth financial network chief investment officer. still ahead, freeport-mcmoran has been selling assets recently to reduce its debt, but it's ious are still onerous. force-out?ake it buy
i am betty liu. time for our options insight with ramy inocencio. ramy: joining me for the options inside is the lead options strategist at delta derivatives, joining me from chicago. six-week lowther and a lot of traders are concerned about the rising probability of a june fed rate hike, but do you think they are warranted? talk to me about that. >> in fact, this morning there was a heck of a lot of fear in the market when we broke that 20-40 support level on the s&p. we saw a lot of rolling of positions. but now that we are back above and kind of heading right around that support level it will be interesting to see -- i think this is more of a recalibration, that we maywboning be raising rates, rather than the beginning of something sinister. right, talking about
recalibration, do you think it is similar for the vix as well? it is now about 17.6, last i saw. what are your thoughts on that? tim: yeah, absolutely. the vix is back to that level it probably should be. 16 to 18 should be the regime of volatility through earnings season, again, fourth quarter in a row we had the earnings recession. basis,mparative insurance should be pricey. plus you have copper, which is normally a harbinger of economic activity, three-month lows here. that is diverging from the market as well. ramy: i was going to go into that. talk to me about why we should care about top and why you are .ooking at freeport tim: copper is a great indication not only of u.s. but worldwide economic power,
certainly coming out of china especially. with cover trading at the lows we are seeing here, it points to the fact that maybe not all is as good as seems year, and certainly freeport-mcmoran, they have been divesting assets left and right to bring down that onerous debt level. they are at recent highs with proper and recent lows and that divergence has to realign. normally when he gets this extended, good time to take a short position in freeport-mcmoran. today,ou freeport-mcmoran is up by 65%. -- year to date, freeport-mcmoran is up by 65%. talk to me about your trade. tim: i'm guardedly bearish here. looking at the old highs that we saw a little over a month ago. selling the regular june monthly call. breaking in about 35 to $.40.
21% return on risk there and about 14% upside cushion. with the vix about these levels, i like selling options to take them bearish stance versus a little over a month ago. i like buying puts to take the similar bearish stance. ramy: we will leave it at that. always good to speak with you. betty come over to. betty: still ahead on "bloomberg markets" a little retail release after two weeks of negative earnings from retailers. walmart shares surging. we will break down those numbers next. ♪ . .
our newsroom. mark: a senior greek air safety official tells the associated press that debris found so far in the mediterranean seed does not belong to aircraft. the jetliner was bound from paris to cairo with 66 people aboard. it reportedly crashed after what an extreme call series of abrupt turns. no immediate signs of survivors. it was an airbus a320 carrying 56 passengers and 10 crew. it went down halfway between the greek island of crete and egypt's northern coastline after taking off from charles de gaulle airport in paris. the aviation agency said floating material including life jackets plastic items were found a greek island. the egyptian aviation ministry said it may have in a terrorist attack, but the white house says it is too early to say exactly what happened. donald clinton says
trump is not qualified to be president of the united states. sheng an interview today, criticized mr. trump, questioning his ability to handle complex foreign-policy challenges and his "irresponsible, reckless, dangerous comments." looking ahead to the general election, she asserted she will be the nominee for the party. colorado has ruled cinemark holdings is not liable for shootings in 2012 that left 12 people dead. victims said the theater should have had more security measures in place. cinemark responded it could not ave predicted an attack from gunman as heavily armed as james holmes. 60 minutes correspondent morley safer has died. himjust said goodbye to last sunday with a special tribute program for his retirement. he had been a fixture on the
show for all lows but two of its 48 years on the air. morley safer, dead at the age of 84. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you. betty: let's get to one stand out in the market today. same store sales, a key metric for the health of retailers came in better than expectations. is all well for the world's biggest retailer? shannon pettypiece covers retail for bloomberg news. what happened here? shannon: expectations for walmart has been so low. there's been a lot of bad news about this company, so analyst expectations were really low.
boostas enough to give a to think may be the company is on the right track and maybe we are not in a retail route, which is what a lot of people think knowing into the earnings after disappointing numbers from target and macy's. where are consumer savings? apparently they are spending at walmart. reallyis one report going to turn people's sentiments around? shannon: we are really only at where the stock price used to be a year ago. there has been a lot up-and-down since then but it's not like everyone has turned around and things will be all right at walmart. the companies online operations group 7% which sounds good that is a deceleration from where things were last quarter. the ceo called this out and said he is not happy with this. the company is trying, it's not
easy and he has to do better in this area. part of the turnaround seems to be working? shannon: it seems that store traffic is up and the head of operations has focused on making the store cleaner, quicker checkout lines and have added service, like if you buy your groceries online. but the quality of the stores have improved and that has equal coming back to the store and peaking at a few more items because it is organized and well stocked. canadad pretty good in and mexico, so international business is looking all right as well. has this helped to lift sentiment among other retailers? are all boats rising on this? shannon: a little bit. there was so much demand gloom yesterday.
while --note that target still grew a bit more it went downthat because of this expectations game. i think people were really negative on what was going to happen to walmart thomas so the fact they beat expectations and it was not a bath was enough to say let's go to walmart if we want to play in the retail sector. you very markets are closing in about 30 minutes. abigail doolittle has more at the nasdaq. abigail: we have the nasdaq trading down. the index has been trading down, but well off the lows. the nasdaq was down 1% and dragged on by biotech. even though the index has recovered to some extent, the
nasdaq did put in a lower low. weakenings buyers are , supporting nasdaq stocks at increasingly lower levels. there could be bearish action ahead. one of the drags all day was paypal. -- the analystd commentary was somewhat mixed, saying there was increased confidence and he has an outperform rating. another analyst says he has concerned -- has concerns about economic growth. at the paypal chart from last summer, we see the difference in opinion from buyers and sellers, a volatile, sideways trading range. right now, the stock dropping down into the range and appears the bears have it in paypal. betty: tell us what else is
going on. : the big story today is cisco systems. it offered a better than outlook,sales including software-based network and the ceo said the long-term investments the company has been making is really starting to pay off. not surprisingly, the street is we look at the chart of cisco systems, it does not show up all that much. the stock stuck in another , sellers are more in control, so unless they step up and break out of that range, we could see a battle between buyers and sellers at cisco systems. soul cycle has put its
ipo in a holding pattern, citing volatility in the market. that theaid yesterday company is focused on growth and expansion. so scratch them off the list. saying echoes is what i'm hearing across the companies with other files or considering ipos. they say it has been to volatile. we are going to put things on continue to show that kind of growth investors are going to want to see when they do hit the exit button here. back inone they filed july. this was right after lannett fitness. it have a lot of momentum at the time but a month later, the market crashes out on them and
things just were not happening. so it is on the back burner now. some activity from these sponsor-backed companies but these high growth companies with a similar financial profile are probably taking a similar approach year. betty: aren't they also having problems with competition? abigail: flywheel is also in the space. they are a lot more competition driven. if you look at soul cycle, it is interesting because they almost preach things like we aspire to inspire. so they are pitching this he says. they call themselves a lifestyle company and not a fitness company. drivene more technology and you also have a bike that sells for a couple of thousand
dollars and is in the home and you buy a subscription in the home. there are other people moving into this space and they need to continue growing to show that growth rate. the way they said they would do that is exactly what they said -- more stores and upping the brand appeal in the areas they are in. , they look in new york are close to one another but they are hoping for these repeat customers hoping to shell out $35 a class and have an emotional fitness experience. much more ahead on bloomberg markets. a block esther insider trading the head of dean foods and phil mickelson. we will bring you all the details of this fascinating case. we will be back. ♪
betty: this is bloomberg markets. i'm betty liu. coming off of our lows of the session, kind of climbing down a little bit. the s&p lower high .3%. erased the gains for the year. time for the bloomberg business lash and a look at the biggest business stories in the news right now. saudi arabia said to sell its first bonds and the international capital markets, looking for foreign financing to like it was it -- to plug it budget deficit. they are said to have said invitations to tanks to arrange a sale and expect an issue of a
significant amount. banks are expected to respond next week. it will probably take place after the muslim month of ramadan. union credit is considering a sale in its stake of financial bank and reviewing its holdings in turkey. unicredit is looking at measures including selling as much as 50% of one company. they are looking to replace the ceo who has repeatedly ruled out a share sale. espn is reporting the national football league will return $723,000 to the u.s. government. it all stems from the pentagon displaying adriatic space between 2012 and 2015. it was designed to promote the armed services. senators criticize roger goodell for letting the teams take the money. that is your bloomberg business flash of eight.
let's get to this om shell trading case which has come to light today originating from trade to the foods chairs. are some of the details from news conference earlier today. artistic patient in this critical scheme, tom davis has already plug guilty and is cooperating with the government investigation and case. was arrested yesterday in las vegas. allegations.ely he has the presumption of innocence and a very capable lawyer. the case will play out in federal court like every case we bring. what happens now in this case? walters'm sure that will put up a fight. his lawyer has come out and said we are looking for to our day in
court. but there's a big mystery at the heart of this case, which is pro golfer phil mickelson. there were a number of press leaks suggesting mickelson and walters were both under investigation and they both denied it at the time. now, two years later, we have the charges and phil mickelson was practically absent. a number of reporters asked this of the u.s. attorney today and he's only mentioned as a relief defendant in the civil charges. that means he's being identified as someone who made ill-gotten profits unknowingly. he got money he shouldn't have as a result of illegal activity and add -- and it was likely walters. there are a number of questions as to why and interesting complex answers. in essence, if you didn't
know you were making money off of insider tips, why should you be responsible? guest: a lot of defense lawyers have said this needs to be clarified and there have been a number of appeals of insider trading law and the courts have made it harder for prosecutors to prove insider trading. they need to show more elements of knowledge on the part of the person doing the trading. if you read between the lines, it's the just they did not have quite the amount of information and mr. barrted are a would not confirm that today. that is what legal experts are interpreting. xtty: what happens to the dean foods chairman. he has pled guilty? guilty and ispled
cooperating. i'm sure at some point his lawyer advised him this would be the best outcome for you. at the complaints filed today, the government is alleging he had some problems including gambling debt. that might have motivated him to enter into this relationship with only walters, this gambler who was essentially giving him money, loans of six figures. trying to entice him into different business arrangements. it could be because he needed money and there's more to learn about that but it sounds like he was suffering and it has made him vulnerable and made him do reckless things. betty: thank you. much more ahead. the close of trade less than 15 minutes away. here are how the major averages are trading. ♪
is bloomberg markets. markets are closing in about 10 minutes. ramy inocencio has more on a topsy-turvy day. ramy: we were down around session lows this morning but we are pulling back to almost where we started. we can see that year today, the dow is positive. the s&p is still negative on the year. this is what has been happening in the last two minutes of the trading day. the s&p is down by about .3%. pop in to the bloomberg with me and i want to show you what's happening with the imap function here. for s&p sectors are in the green. we are seeing a little pullback from the losses.
six are still in negative territory. industrials down the most. i have say that with industrials, and large part it is down because of what is happening with the airlines and the lost -- loss of egypt air flight, airline stocks down by as much as 3%. consumer staples are the biggest leader. what islk about happening with some of the s&p costs most notable laggards. down by about 1.4%. potentially because of what's happening with air egypt, a lot of people not looking to priceline to book flights. overps some concern
capital here. they talked about develop the a competitor for apple's race time. there is possibly some fallout here in connection to a scandal in asia. are that said, there leaders i want to talk to you about. walmart is up, the biggest jump since 2008. the estimate was about .5% there. 2%.ch and white up yesterday talking about how it was engaged in m&a talks. church & dwight has said it is denying that. ,n currencies and commodities in reaction to a potential rise in fed funds, we are seeing gold falling to a three-week low.
day, butfor a second off the session lows. betty: thank you very much. let's turn to those big tech companies sitting on the sidelines. you heard earlier about soul cycle saying there a holding pattern in the ipo market. it sounds like what some of these tech companies are saying. same issuesthese are compounded. you have these markets that people like soul cycle are looking at and then in tech, these are extra speculative. on top of that, some recent ipos have not done well in the aggregate. you can look at companies like fitbit and gopro. upset thatinvestors they are unable to cash out?
guest: it is kind of a problem. if you are a venture capitalist and you have money tied up in some of these companies, you eventually want to get your money back. heard anyone say definitively that they are getting antsy about their money getting stuck. betty: what about fred wilson? guest: fred wilson was very vocal and what he said publicly in response to uber staying private as long as possible. -- he usedchicken some choice language which we will not repeat. but basically i want my money back at some point. don't be scared, go public. betty: he said it uber should be a public company. at over $60 billion, should it be a public company? guest: we are in uncharted waters here where you have five $60ompanies valued at
billion plus and we don't know what to do. some of those people who invest in uber early on want out eventually. , there have been enough investors willing to buy shares privately, but at some point, the volume becomes so large and you run out of people to sell uber shares on the private market. betty: that is it for bloomberg markets. the market close and "what'd you miss?" our next. ♪
scarlet: the s&p loses its gain for 2016. the dollar is at a seven-week high. joe: the question is what'd you miss? scarlet: the jetliner that ballot -- managed has been found of the coast of a greek island. and the possibility the rates by nextaise month. june is on the table but not yet a done deal. alix: 187 carat diamond will hit the auction block. alix: we begin with our market minutes. when you look at how it is faring the s&p has turned negative. this has climbed as well. when you look at the sector