tv Bloomberg Markets Bloomberg August 12, 2016 3:00pm-4:01pm EDT
we're live from bloomberg world headquarters in new york. covering stories in los angeles, chicago, and japan. u.s. stocks retreat from their record highs. are they coming back to earth or just taking a breather? shery: a deluge of u.s. data out today. retail sales and ppi both seeing their biggest miss. julie: oil posts it's biggest weekly advance in saudi arabia signaled it is good to discuss stabilizing markets when opec meets next month. we get some perspective. hour from the close of trade in the u.s. let's check on markets. we see some red across the screen. , if any of theq
three averages posts any gain it will be a fresh record close. yesterday, all three closed at a record for the first time since new year's eve, 19 99. if you look at the weekly activity, even though we hit that record, all three major averages on a weekly basis are mixed. the s&p very little down. and the nasdaq is up. not much change of which is typical of what we have seen recently. the s&p 500 having it's the fourth straight session. -- it's a fourth straight session. without a move by at least 1%. we are seeing oil prices rally arabia.talk from saudi about $44 a barrel helping to support many of the energy stocks in the s&p 500. we have seen some strength that if consumer discretionary today and this week as well.
out with coming numbers that beat estimates on the strength of the rack. shares of a percent. jc parent -- jcpenney narrowing in loss and rising, coming line with what analysts had anticipated. this week has been strong for department stores probably. all the companies have been reporting. we have a weekly chart of the movement in the stocks. we have jcpenney and nordstrom and all of them saying this lift. mostly in the latter part of the week as the stocks were falling on pessimism about the reports going into the report. it has been a positive surprise for investors. taking a look at what has been going on in the treasury market. we have been seeing this decline in yields on the back of retail sales, wholesale inflation, and consumer confidence. a trio of economic reports missing estimates and that is a push back. earlier a touch below 1.5%. on theet a check
headlines. mark crumpton has the headlines from the newsroom. mark: hillary clinton is widening her lead over donald trump in three battleground states. the new hole from the wall -- poll finds secretary clinton with a bigger lead in colorado and north carolina while maintaining her advantage in florida. here's look at the numbers. mrs. clinton has 46% to mr. trumps 32%. in virginia, clinton leads 46-33%. and in north carolina, clinton, 40%, trump 39%. the campaign said she and her husband made $10.6 million in toys 15. they paid a federal tax rate of 34.2%. they donated 9.8% of their income to charity last year. clinton has tried to undercut the trustworthiness of drought -- of donald trump. he says he will not release his returns until the iris completes audits. completes audits.
clinton has disclosed returns for every year since 1977. a new era at 27th -- 20th century fox. is a copresident. the move fills the leadership void created when roger ailes stepped down in the wake of a sexual-harassment scandal. on ann police anti-terrorism case of arrested three people for questioning. no weapons or explosives were found. a judge will decide how long they will be kept in custody. global powers are calling for calm in the latest confrontation between russia and ukraine over crimea. the european union said there is no confirmation that ukrainian troops killed to russian servicemen. president flatware put in said those deaths would bring a very serious response. the u.s. is calling on both sides to ease tensions. russia annexed crimea in 2014.
dayal news 24 hours a powered by more than 20 -- 2600 journalists and analysts in more than 120 countries. i am mark compton. this is bloomberg. shery: let's take a look at treasury yields. tumbling with the yield on the 10 year falling the most in six weeks. currently at 151. the yield on the two-year also falling. traders think retail sales and inflation data may force the fed to hold off on a rate hike. theier bloomberg spoke with pimco cio about opportunities in the market. are buying of these treasuries. it could be a currency play. also the fact is look at what the alternatives are. -1010 year rate in japan is basis points. the 10 year rate in germany is -10 basis points. rates have come down
significantly. u.k. rates have come down 100 basis points. 10 year sterling government bonds are 50 basis points. on aof the u.s. looks good relative basis to what is out there. therter: i am looking at return holdings and related debt and they are at 50% of total assets. if you make the case that we have had these weaker options then maybe there is other places to be like emerging markets. is this the wrong call for pimco? call fore big picture us as we want to deemphasize interest-rate risk in developed markets at these levels. we want to tilt our portfolios to taking slightly more credit risks. we have seen significant opportunity in credit markets, u.s. credit markets can still offer 3% to 6% yields for investors. we like emerging markets. we think emerging market wants six, 7%. five percent,
in a relative world credit in emerging markets looks very attractive. think -- doesou that mean that you are changing allocation coming out of those? been: we have deemphasizing rates. our view is the fed will likely move higher than what is priced in. the first 25 basis point rate hike is not projected for another year and a half. we think that is too pessimistic that the fed ultimately will lift rates because -- we do not want to take as much interest rate risk particularly at the front and of the u.s. curve. we are seeing very good yields and opportunities in nonagency mortgages, incorporate wants tied to the consumer and recently we have increased our emerging market exposure. withter: we caught up goldman sachs asset management. take a look at what he had to say. >> to borrow a phrase from a couple of great singers in history, feeling a little level the creditous in
market. this will last and work until it does not work anymore. like we saw pre-financial crisis that usually does not end very well. the conversation we had is you cannot take of you on treasuries without taking the ve -- same view on credit. classes within fixed income seems to be the same. what is your view? guest: that is true because the beta is there with rates to spread. what we would say if you look around the world, corporate bonds are the richest in the now youause basically, have a central bank said to buy corporate bonds and subsidize the market. corporate bonds are rich in europe where they have started to buy corporate bonds. they are buying $8 billion per month, the ecb. the fed is not buying corporate bonds. if you look at the basis between credit default swaps and corporate bond spreads, they are
richest in europe and the u.k. and they are still cheap in the u.s.. if you want credit risk, the u.s. market and emerging markets are going to be the most attractive place to get that it risked today. speaking earlier on bloomberg oh. now to the bloomberg news exclusive report that george soros is on the hunt for a new chief investment officer for $25 billion family office. ted berdych is stepping down. a said to be looking for candidate with experience in investing. he was there for eight months. it seems like this has been a pattern. no one has held that job for very long. what is the deal? reporter: it is a pattern. every time an organization gets a cio there is a ripple effect
for you do have a new identity. this is something we have seen off and on now. have scott [indiscernible] a macro guy. he provided a counterbalance internally to george soros' view. distressed who is a credit guy. he does not have a macro view. what happens internally? the assetle is about allocator, do they need someone in there who decides where they want to put on risk and does not have their own portfolio, or do you want -- go back to its roots as being a macro shop like the helped toruckenmiller build. it has gone from one to the other to the other and so on. series ofthis
personnel changes indicative of how the fund management is doing had bigthey have bearish bets. is is hisorter: the question of thel portfolio inside fund taking different views than the fund across or because they have not had a macro guy at the all one and the same? that is something to look more into. as we are reporting this out. that is right. he has had the bearish bets. he said that brexit would be akin to the financial crisis. our understanding is the fund internally is up. will have to see how these beds play out and if they have changed since he spoke
outwardly. shery: thanks for joining us. coming up in the next three minutes, since the oil crash in mid-2014, more than $100 billion has been raised by funds to scoop of energy assets on the cheap, private equity firms are finally snapping up deals on distressed debts. shery: there was a deluge of u.s. did it. consumer sentiment -- we will break down the numbers and highlight the most telling charts. this is bloomberg. ♪
business flash. have a provednts a labor contract for the first time since the airlines moved -- merged in 2010. top pay rates for the 25,000 members will rise as much as 31%. be combined.ill employees in the past were separated into a premerger united camp, a premerger continental camp, and a small group of continental micronesia workers. a new development in the antitrust case over anthem. a justice department lawyer has told the judge that the government is willing to hear settlement offers from the health insurers. there are no guarantees that one can be reached. the justice department sued to block the deal last month on grounds it would stifle competition. the trial is expected to begin in november and both stocks are trading higher. shares of h&r block on the move after unconfirmed speculation that companies for sale. h&rzero hedge article said
block is getting ready to sell with management targeting $35 a share. that is your business flash update. julie: deals and distressed debt are picking up. more than $100 billion has been raised by funds to scoop of energy assets on the cheap from lakhs down, apollo and others jump into by assets at distressed prices. this is something we have been waiting for and these firms have been waiting for for a long time. what was finally the tipping point, what changed? saying the confluence of all these things. what you had before was all these companies in trouble with the oil prices falling and had
hedging programs in place. banks were willing to extend credit. what you saw is the oil price kept going down and it was this intensification of the cash crunch and you saw the ranks coming back from -- pulling back credit lines three and and so much more happening at the rate is intensifying. all these things happening and it is like all of these assets have been shaken loose and they are up for grabs. shery: why are these equity firms so interested in these not so great assets? reporter: these are distressed asset layers and this is what they do. these are firms whether it is an actual where hedge funds are coming in. they wait around for prices to fall. -- maybettle bit of things will go back up and they are looking for assets, whether it is debt in the secondary markets or they will take loans off of may looks as well or even
buying assets outright from the company. they are looking for these. julie: has so much happened so quickly that we jumped ahead? reporter: people are looking at it as somewhere near a beginning. billion.re than $100 that is just on the sidelines and there is a little bit more they had before as well. that is waiting to come in. the one caveat you have is is it enough of the assets for the money to be put to work? thisave all this money and big amount of cash, is or anything i want to buy? maybe we will not see all of that but it is there. any bargainsere left? reporter: you have to look around. there are things happen looking
for, we happen looking at these different plays in these asset areas and some as we like, some things we will never like. you saw chesapeake earlier this week, they gave the area they had away for free. that is an area that has been a little bit played out. each acreages little -- is a little bit different. it takes a lot of looking through the details. was he holding onto the cash or is it being redeployed from other areas now into energy? oath.er: a little bit of most of them are not just focused on energy. there are some that way. they had an idea they want to focus in this area but they are open to other areas. you have this money but obviously it has to be invested for it to make any money. under pressure to find some area where it can be invested.
julie: welcome back. joining me from chicago, the chief market strategist at bull's-eye option. great to see you. happy friday. week, it has been an interesting one. we have seen this drift sideways at the same time the major averages made new highs. we have oil rising once again. we have the vix falling. what has stood out among the
many things to choose from this week? crude oil stabilize. we followed through this week. we're up $2.50. the highest level in three weeks. that will stop this dreck we have seen. the stock market -- even with this crude selloff i. i can accelerate crude to the upside and that stabilized the macro market and can we look for additional catalysts in the meltdown. what has got my attention is the vicks -- vix. new annual lows but it will close higher on the week. that is somewhat negative for the market but this is only the middle of august. you cannot take that much stock in the technicals when you get this kind of volume. julie: you are a technical guy. what are you looking to for direction now when there is such low-volume, what kind of tea leaves do you read in the absence of that?
>> the price action has been nothing but positive. we traded sideways and we continue to break out and make new highs. you have to respect that on the upside. 2200 and the first target. that400 is if you take 2100 previous top and at on the 300 point selloff, that is the next technical target and that is the path of least resistance but how do we get there, do we have any pullbacks in the meantime? julie: i want to get to your trade for today which is on fort, are going pretty far on this one. why don't you describe the trade for me? limit thisnt to impact of time on the option play. the june option has 300 days until expiration so you're looking at 10 months. ford has been a distressed stock trading between 12 and 14, it had that big fall down a present
on that one day. it is trading at the bottom end of the range so from a risk reward level for it has a lot of opportunity. --it can fill in the gap and we can look at a break of 14 sending it to 16. there is a lot of upside potential 30% higher and from a risk reward play i like a long-term option, a $10 call for june of 2017. that cost to 75 and the stock is at 1235 so that breaking on that is 35 or $.40 above area not asking for a big move from a modest move, this option will do very well. julie: what about the profitability and sales side? do you think that we will be seeing some better numbers coming out of ford in these ensuing 10 months? guest: what we have that's we have had fantastic numbers. there was this appointment on their guidance. i usually talk nothing but technicals what i had to write this down for you. you can see that year to date
delivery is up 7% in suvs and 11% in trucks. that is where they make their money. ford made $2 billion last quarter but they missed on their earnings per share. that has been a market does limit. they sold 18 million vehicles last year and made $2 billion of profit last quarter so the fundamentals are solid. it is a psychological be down. julie: thank you. ford and his about view that maybe it can recover a little bit. shery: thank you so much. oil posting the biggest weekly gain. saudi arabia signals it is here to discuss arc it's when it informally meets next month. ♪
headlines. first word news this afternoon with mark crumpton. zika puerto rico updating numbers, more than 1900 new cases of the past week. that brings the total to 10,690. statistics released today after the surgeon general visited the island and said that he expects a quarter of the people to be infected by the end of the year. donald trump giving up on new jersey after saying that his campaign would be competitive there, they have vacated the headquarters in that state and have not paid some of the staffers. the filings show that the campaign last made a rent payment in may for the new jersey property. airstrikes in areas of the aleppo province hit a village today. at least 18 people killed, including children and to
hospital staffers. they have sealed up the main route into the area, and trapping 300,000 residents. inspired one of his closest allies, replacing his chief of staff at his request, because he had been in the job too long. the foreign defense minister was once considered a likely successor to vladimir putin. global news, 24 hours a day, powered by more than 2600 journalists and analysts. this is bloomberg. close in less land 30 minutes. it we will bring you a check of the action as we speak. you can see that the dow is down about 50 points. it is ready for a quarter-point move. the nasdaq is barely in the green. taking you to the nasdaq where abigail doolittle is standing
by. abigail: based on your discussion, it sounds uneventful. the index has been fluctuating between small gains. but it has been a big week for the nasdaq, putting in a record closing high and an intraday high. we have the nasdaq on pace for a new record closing if it does finish higher, and a bigger point to be made, right now it is on pace to finish higher on the week for the seventh weekly gain in a row. of the longest since march, 2012. 52 .21 above that. and if in the next few minutes of trading, below that if we have the six-week winning streak snapped. 9% yahoo! shares higher bag -- by 9% much writing at their highest level since june 3, last year. and yet who tracking the strong
performance of -- yahoo! is tracking a strong performance of alibaba. they do have a stake in alibaba. and when the verizon deal closes next year, the alibaba stake will represent 80% of what is left. it is understandable that investors are interested and excited by the fact that alibaba put up a strong quarter, helping yahoo! trade higher. it appears to be a down to the wire situation is whether the nasdaq will finish up or down on the wii, talk about what is holding us back. abigail: one thing that stands out my norwegian cruise lines. -- stands out, norwegian cruise lines. sinceweakest performance last year. according to bloomberg intelligence, this has a lot to do with weak travel in europe after the string of terrorist attacks.
as for what is ahead, the next big catalyst for the company is held in the booking season. about will not be going into the beginning of next year. so the cruise line's stock could be stuck in a holding period. erik: thank you. that is abigail doolittle with us from the nasdaq. joe: check out that the retailers were shorter left month, the slowdown following what this august quarters in years. and it could cold in the third quarter. there isn august, but an that there could be uncertainty. here to break down the numbers carl, a u.s. economy is mountain of data this month, what did you see that stood out? carl: retail sales where the main focal point.
we also had some other economic releases on inventories and wholesale inflation. the real story here is, after the last couple of years, we have seen the retail sales performing very well in the second quarter. in 2014, 2050, each year for casters got excited that forecasters got excited that they were having a breakout for the economy, that the sluggish growth was going to give way to an above trend expansion. but in each of the years, momentum faded at the back half of the year, so that is the concern now. joe: this is the chart we are looking at, the wholesale sales, personal consumption, tell us what we are seeing. tremendous correlation between retail sales, often we focus on retail control, because that goes into gdp, but the
headline sales are correlated with the overall consumer spending. ,his is a small portion of that but nevertheless, the correlation is significant and you can see that it took a nosedive in the first month of the quarter and it tells us that consumers probably are not performing up to the metric or standard necessary for growth to really revive. erik; i was stunned to see the bond market move like it did this morning on the back of the retail sales numbers. it typically does not trade that hard on ppi. can we really jump to the conclusion that it is time to give up on the retail sales on the strength of a single piece of data, especially after the job numbers we have seen? carl: we cannot give up just yet. erik: but you -- carl: there was a repricing.
we are at a point now where really the only engine firing in the economy is the consumers, so you to get disappointed retail results. it brings in the question on whether consumers have what it takes. and then this morning, you get the consumer sentiment numbers and it shows that they are not feeling of being. erik: how much noise as gasoline adding to the numbers? it fell sharply in july. that was a drag on the result. if we look at the need both of the factors -- look beneath both of the factors, still a very disappointing outcome. , on that note,es you have another chart comparing that index to the aggregate income proxy come as a at the hourly average earnings. why is this important? carl: the chart tells us, it
makes the point that one disappointing retail sales report is not enough to call it quits for the quarter. , ifact, supporting that is we look at the chart, we can see the income creation is still quite robust. joe: it looks steady. chart,look at this basically since the beginning of 2012, it has been steady. carl: these are year and year trends. joe: and a want to go back to the one report. in may, we had the weak jobs report. it looked like they were not going to include -- carl: including the fed. strongd then we had two jobs reports. are we in the situation where any signs of weakness, including just noise here and there, can derail all of the fed's plans.
? the second border, they were really engaged in the communications campaign to get the markets to embrace the idea that they would be raking -- ratesg height -- raising twice this year. this is nowhere to the degree that the jobs report resulted in. and as we highlight, over the next two months, the job numbers did really engaged and came back. it is possible that the consumers could perform in the backup of the year. that we are not off to a good start. erik: is it surprising to see the futures pointing to a rate hike not until march? and even earlier in the day, it was further in the future. surprise mes not because the market has been calling the bluff of the fed and looking for a much weaker performance in the economy. , frome fed has been there
the hawks to the does my saying doves, saying- that that is too complacent. inone have clarity september. not in november, because it is before the election. but by december, with the jobs holding up and the unemployment rate going lower, we will have the wage inflation that will be generating consumer spending and that will give the fed confidence to move and postelection, we could have to melissa that will add further umph to the economy. that could lead to rate increases next year. erik: the fed coming next week with the minutes. joe: and the following week. a critical event. erik: carl, chief economist for
efficiencies and reducing costs. earlier he spoke with alix steel. guest: there is about to do $40 billion in upstream properties around the world, some of them in the united states, but definitely a huge exchange of assets going on. and the majors, getting rid of things they say are not material anymore, so there is a big opposite -- of properties going on. >> is it just looking at debt load? >> the thing is not howdy be more efficient, what is -- the thing is, how to be more efficient, what is productive? it is that combination. and what is out there, we put the numbers together, and all a lot of investment will be coming from financial players. about a third of it will come from financial players in terms of acquiring the assets. alix: how much is out there?
guest: 80,000,000,000-100,000,000,000 dollars and you also have hedge funds. the financial over the last six years, the players have invested $245 billion in upstream properties. alix: i feel like i hear that we have had this for a long time, so is there something that happened in the last month that has changed the dynamic and will force the company to sell the assets? an: exactly, i remember hearing a year ago that it was going to happen and it did not. because of the cap between buyers -- gap between buyers and sellers. some of that has closed. and with the persistence of low prices, the pressure is on people. you do have seen the budget cuts by companies that have expenditures, so they need to focus. alix: wilbanks holdback -- will banks hold back the lending to
the companies? in the spring, people looking at collateral and you hear about auditors from the government coming and putting pressure on the banks, and then they put pressure on the companies. some recommendations, they say that chesapeake should not be functioning anymore, looking at the negative cash flow, but the equity swaps that they do, to get out of the highflying contracts keeps them alive. do you feel that these companies should not be working anymore? brand do not want to anybody is zombie company, but to say that there is a lot of different ways to do this, people looking at the portfolio differently than they have before. in terms, you can see it in terms of job numbers, people working in the industry.
people really reacted. we saw it last winter with some of the large independents, they have cut budgets. so the survival instinct is very strong in the oil and gas industry. alix: does that prolong the rebalancing? dan: rebalancing is going on and it go a while to see the production come down, but it is down now. alix: no one really knows when the u.s. oil production will come back? is ai think around $50 signal. and again, people will say, as they start to have the line of sight on $60, that $50 is probably the stabilization price. anthony's say that in that range they can make -- companies say that in that range they can make money. so a lot of matters where you are and people are a lot more efficient. alix: going for, there is a lot
of steep declines in deep water. where does the supply come from? dan: that is the crucial question. if you look out over the next five years, we will need another 5 million barrels to make up for the decline. so you said, where will it come from? and you had in the larger projects that take 5-7 years committee have been postponed -- years, they have been postponed or delayed. so where will it come from? it will come from the g5. and we were just redoing the numbers and we think that russia could add about 500,000 barrels a day by 2020, which nobody expects right now. but the cost to structure there has dramatically changed. alix: what price do they need to make that happen? about $50, with
those golf companies. that is the price that they are competitive at: because they have low-cost oil. and nobody's more competitive and saudi arabia. joe: that was dan yergin. erik: time for the business flash, a look at the business stories making news. jcpenney is making progress in the multiyear turnaround effort. they posted a small quarterly loss a year earlier. and sales rising in line with the estimates. >> we feel good about the state of the consumer. we think we are going to read -- rely on the retailer to give them a reason to shop. we had an you that a couple of weeks back and it was significantly successful for us. we know when we have the right message and the right product, the consumers will show up. erik: there is progress, but they have a ways to go.
and anglo-americans attempt to sell a nickel mine in brazil, it has stalled because nobody wants to pay for it. this is according to people familiar with the situation, they have not formally ended the sales progress -- process. they say that they are not running a fire sale and will rebuff offers that do not meet the expectations. and heineken giving out advice to the national olympic committee. less is more. they say that too many brands and attach themselves to the ioc olympic rings and it is making the landscape cluttered. 12 sponsors at about 60 sponsors paid to be in the lithic cycle. that is the bloomberg business flash update. erik: coming up, a positive earnings season, so why are the analysts still -- on the forecast.
♪ erik: this is "bloomberg markets." erik: i am erik schatzker. joe: and i am i am joe weisenthal. that was a very hot looking day in new york. erik: positive earnings surprises in the latest season, but nevertheless, that has not stopped analysts from downgrading the estimates for profit. they predict no profit growth for 2016. at the same time, the s&p 500 is trading close to a record high. here is a chart that tells you everything you need to know. analysts keep cutting the profit estimates. now, as we know, for the index to remain at higher levels while
the companies earn less, the multiple will need to expand. people will need to be prepared to pay ever more for every dollar of earnings. explains why there is focus on the multiple right now, because that is the only thing holding this up. we have heard for some time, we will really need to see the growth for stocks to hold up. but it has not been necessary yet. -- and the excuse was driven by the collapse, but that is starting to fade. we will see of the multiples expand or if the earnings pick up. erik: sales growth and earnings growth in energy was terrible. but we also had sales and earnings growth, negative growth in materials, and i.t., and negative sales growth for utilities. it is broad. joe: not just energy.
i am looking at currencies because of the loser of the year, still the british pound. here is the performance of the best and worst of the expanded it major currencies and down 12.3% against the dollar is the british pound. worse than the argentinian peso. mexican peso also a big loser, some people that you're being that to donald trump -- attributing that to donald trump anxiety. if you are worried about trade dimension with mexico -- diminishing with mexico. and the bidders pound doing -- british pound doing badly. they did reprice the pound. , prettythings are up remarkably. and there is less volatility than people guest, but it is -- guessed, but it is still down. erik: taking a look with where
the financial markets stand before the end of trading. here is where the stocks stand. dow industrials have recovered about five basis points. and the nasdaq does look as though it will be ending in the green, but still do not draw any conclusions yet. joe: anything could happen. erik: anything on a friday afternoon in sweltering new york city. joe: it is consistent with how quiet things have been this week. erik: that is all for "bloomberg markets." the market close is coming up. joe: this is bloomberg. ♪
>> nasdaq hits another record high, oil has the best week since april. joe: the question is "what'd you miss?" . does this rally still have room to run? salesisappointing retail numbers cast doubt on a fed rate hike this year. how economics is playing into this year's election cycle. americans may be planning to vote against their own self-interest. we begin with our market minutes. the nasdaq has closed at a record high. u.s. stocks closed next.