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tv   Bloomberg Markets Americas  Bloomberg  June 16, 2017 2:00pm-3:31pm EDT

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7:0000 p.m. in new york, p.m. in london. i'm julia chatterley. >> welcome to bloomberg markets. julia: we are live at bloomberg world headquarters in new york over the next hour, here are the top stories we are covering on the bloomberg and around the world. in markets, amazon is adding a sending but it is shockwaves through the supermarket industry. they acquired whole foods for 30 as a-- $13.7 billion, shakeup occurs in the supermarket market. what this deal will mean for the industry? in politics, president donald trump is rolling back u.s. relationship with cuba by
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announcing a ban on jus -- deals with the cuban military. and staying with politics, the russia probe is headed for the white house. president trump lashed out at deputy attorney general rod rosenstein as he is knowledge for the first time that he is a focus of the investigation. and u.s. markets close in two hours. let's check on where stocks are not with julie hyman today, but abigail doolittle. abigail: it is a friday, and we do not have a lot happening for the major averages. that is typical for fridays in the summer. the dial is trying to beat itself and the positive -- the dow is trying to peek itself into the positive right now, but right now it is higher on the week and higher for a fourth week in a row. nasdaq and s&p 500 are both down, especially the nasdaq. let's look at a six-day intraday chart of the nasdaq.
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this is last friday's big selloff, and a continuation of it into monday. a bit of bumping us and the more -- and some more of it today. the nasdaq is down 3% over six days, the worst since before the election. investors are a bit jittery. the tech sector had been higher, technology higher by 20% into the selloff, and it is not clear what triggered it -- but it does seem to be continuing. the question is whether or not this will extend into next week. as for today, lots of the big tex giants are moving lower. once again, apple, off, advanced micro devices, and mike drawn -- apple, alphabet, advanced micro devices, and micron all going lower, technically vulnerable, below its 50 day moving average. yesterday, google received a rare downgrade, and chip stocks below 1% at this point. investors are still jittery around this tech selloff and what is ahead.
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but one breakthrough is snapped. yesterday, the tech high be over yearear -- ipo of the touched the price of $17, perhaps a sign of the time that investors are uncertain, but today at 3%. stock touching that $17 ipo price makes it much more interesting from a valuation perspective. they interestingly said that the 12.9 times sales makes it attractive. you would not normally think that, but the company is also scheduled to grow revenues by 94%. ,f we happen to the bloomberg one point be made here is that tech might be selling off but it is still higher on the year. is the nasdaq and blue, still up 18% -- in blue, still up 18%. this is down to the point it has been below the election, but the nasdaq is up for now. >> we have some breaking news on boeing. loomer is reporting that the company says to be near running
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$5 billion worth of contracts in its 737 max 10 airliner deals with various asian airlines. india spice jet as well as indonesia's airline. this could be worth about $5 billion in orders for boeing. interestingly, shares are not reacting at the moment. earlier today, bloomberg also reported that romania's blue air was in talks to buy the same plane, the 737 max. romaniangain a airline, for $1.84 billion, so boeing doing a lot of orders. >> to sign on the dotted line for that one. >> but let's get back to the big story of the day, the amazon-whole foods deal. we are joined by matt townsend, a reporter for bloomberg news. so everybody gasped. -- a eight game changer game changer. >> what are some of the
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questions we are looking to get answered? matt: we are talking to some of the big holders and the stock of whole foods, and they are a little disappointed in the $42 a share. there has been some speculation that maybe there is a rival bid coming, some companies are essentially looking at whole foods for over a year, so he might be looking at the beginning of a bidding war or someone might engage amazon and walmart,more like albertsons, kroger, a defensive play. >> you mentioned the big shareholders. what about partners and rosenstein? because they were the entity that was pushing for change at whole foods. whole foods recently reported some different directors as a defensive mood. have we heard from jama today? matt: i think they have about $300 million on their stake, so short-term holders and the stock, this is a good day, but for long-term holders, i think the stock could go better over the next three years. julia: and that is the point. if you want to see some kind of
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shift, you have the big price potentially here. but what really changes for the business itself if the ceo is not moving? matt: that is true. ,ac will stay in place obviously, if this deal goes through, will have a lot more capital to work with. it is a smaller format, these 365 stores are seen as the future of where this is going, so it is definitely a win for mackey. he has to sort of keep his empire in place, so to speak. people are acquitting this to the zap bows deal coming online. -- zap bows deal coming online -- zappos deal coming online. julia: matt, great to chat with you. and now for a rival take on the amazon-whole foods deal, we are joined by the founder and ceo of fox, j, great to have you on. >> what a time to be alive.
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i remember sorting our company four years ago and going up and down, the gates of stanford and saying you know what you're go groceries are going to change. i remember a lot of the venture it --lists send companies and companies saying you know, they want their business model back. and wereried it disrupted in 1990 8, 1999, but this is more of an indication it is happening. large amount of items, but at the end of the day we put in watch her years up our work -- four years of hard work to make that playbook, and if you think about what they should have invested in technology about her the last four years, as opposed to now, after having all of that money that they should have invested into technology, it got taken away by the market in one day of trading. back to thatught point when we said hey, this is how we were going to invest. fast-forward two years, what is
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the grocery landscape look like gamco investors are saying out. jay: it is a game changer. the one storyline they had was that you know what? amazon cannot replica the fact --t we cannot spend replicates the fact that we cannot spend $1 billion to store on every street corner. i wonder what that narrative will be going forward. >> for amazon, what gaps does the select amazon, which already -- this phil at amazon, which already had a fresh business, considering amazon's size? there is a gap and a functional component when it comes to the financial metric. on one hand, it gives them a freshman phil and towns across the u.s.. so that is great. from a financial perspective, i think if you look at the grocer's that were already under pressure, this might be the
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final death knell that puts them into a retail spin. i do not know if it is engineered like that, but if you look at the outside in from the board today, it looks like that. set up to dominate. >> if you are in a small town in america, you have your kroger, any small-town grocery, does this affect your access to fresh food? jay: i think that is the core of why. it does not affect our business as much because our business, for folks do not have the physical means, time, or patience to go to a warehouse only and those are available in about 400 different towns across america. style that country consumer, maybe not today, but that playbook that they are using that has been served by capacity to be replicated across many towns. >> what do they see in food beyond the fact that there is a revenue stream? is this about the data they get? because if they look at the kind
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that go to amazon and whole foods, and going back to the point where they are not changing the ceo, they see value beyond food. jay: absolutely. you mentioned that chris the ball we saw four years ago, it is interesting, small, but it was the biggest freaking crystal ball we could find. it is bursting the market with mobile penetration. we could look at where we felt this rate was going on, but it is will technology folks figure out retail faster than the retail stores and grocery stores? at the end of the day, both are running up pretty slow, but right now amazon took quite a shortcut. andnd there are challenges fresh food. you do not sell fresh food? >> we are doing a test in some locations, but we do not.
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what will amazon have to address if they are selling more fresh food? jay: are they going to use the that settlement centers so there is availability within a 15-20 mile radius, or will they use this as a distribution network one step behind the store, and use that logistics to power amazon fresh so they can have a bigger network? right now, building those systems and learning that playbook is really slow and you know. but julia: do think they add to the stores beyond this, or do they think this the fill that mandate? chieh: i think they will add to the stores. the last thought that i had is when it comes down to it, we built this business over four years of hard work, moving at the speed of a regular facts company. if you are a regular grocery today and looking around, you are probably calling your
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friends at bcg to figure out what you should do. who will make flightdeck -- like to present this to the ceo? and thinking they have to replica the playbook we have written over the past four years, working out their speed, we might see that in the next 5-10 years. >> we are seeing your panic in these stocks. thank you-- so much. next fort what is amazon? a big, big ripple effect. >> but let's check in with mark crumpton. >> julie, thank you. vice president pence was asked about hiring his own outside to field inquiries by special counsel robert mueller. in the little have on a neighborhood, the vice president told reporters "it is very routine." he said he would retain counsel
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and entered a statement which reads in part "the vice president is focused entirely on his duties and promoting the president's agenda, and looks forward to a swift conclusion of this matter." steve scalise remains in critical condition today after being shot in that baseball practice in virginia on wednesday morning. he has had multiple surgeries, but will need more work in the hip area. the surgeon will brief the media on his condition in about one hour, 3:00 p.m. new york time. many are praying for school lease and the other for members that were -- force police -- four steve scalise and the others who were wounded. high-riseresidential in london rose to 30 -- has risen the death toll to 30.
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some 15,000 residents of hanover, germany had to be evacuated from their homes today following the discovery of a world war ii era bomb at a construction site. it is the same area where 50,000 people had to leave town after five suspected vintage bombs were unearthed last month. this latest bomb was secured and everyone was able to return home. 24 hours a day, powered by more than 2400 journalists and analysts in over 120 countries. i am mark crumpton, this is bloomberg. julie? julie: thanks, mark. coming up, donald trump just announced a new cuba policy in miami, but attention remains on washington. this is bloomberg. ♪
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♪ julie: -- julia: this is bloomberg markets, i'm julia chatterley. julie: nats miami, florida, where president trump announced changes to obama era cuba policies. our chief political correspondent for bloomberg news is following this, but you are miami, are you, kevin? kevin: no, i am in washington dc. so -- julie: so these changes were initially called modest. what is the headline? kevin: i think the part we have to underscore here is the restrictions from u.s. businesses doing transactions with any companies that are owned or controlled by cuba's military. that includes some of the hotels that the cuban military has a
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threshold on, which directly impacts the tourism industry. critics are saying that that in the longcy will, run, help the u.s. tour is an industry, u.s. eltel companies -- hotel companies, by forcing the cuban military out of the market, but the flipside of that is in the short-term it could lead to higher prices for americans looking to go to cuba. but much of this is untouched. you can still go to cuba, there is a cigar band, there is a limit on how many cigars you can take back of the united states. and you just spoke to patrick leahy of vermont. theyou talked to him about latest in the obstruction of justice investigation. tell us what he said? been such a busy week in terms of everything happening here in washington -- the shooting, aging sessions sessions, and -- ag
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telling everyone to hold onto their documents because they think congressional committees like the one senator leahy is on could actually subpoena those documents. i asked him if there is enough evidence were obstruction of justice as a charge against the president? take a look at what he told me. i think we need to look at what is going on. i do not know what mr. mueller has looked at so far. not know what has gone on in the attorney general's office, they have not talked about it. but certainly, there is enough to give a prosecutor reason to start saying -- sending out subpoenas and trying to find out what is there. kevin: and president trump tweeting earlier today that he believes this is nothing more than a "witch hunt." he also believes he is being -- he also confirmed that he is being investigated by
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authorities for firing james comey. julia: kevin cirilli, chief washington correspondent for bloomberg news. still ahead, much more from washington on president's growing threats on capitol hill. from new york, this is bloomberg. ♪
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♪this is bloomberg markets, i'm julie hyman. julie: -- julie: this is bloomberg markets, i'm julie hyman. julia: and i'm julia chatterley. reporter next is our chris stronger. we just turn an introduction from kevin, the first time that donald trump has admitted that he hears to be under investigation. so talk to me around that and the fact that we are now looking at the bipartisan senate judiciary committee into -- probe into the james comey
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firing. where does this fit with the robert mueller investigation and the houses investigation? i am confused. >> join the club, julie. this is an instance where we are learning more and more about you investigation, and as mentioned, robert mueller is doing an investigation into the russia meddling in the election, but the investigation appears to be expanding into potential obstruction of justice by the white house and the president, who fired the director handling the russia investigation and reportedly told the fbi director and other top administration officials to lay off of the investigation into michael flynn , the national security adviser. this is incredibly confusing and the president's tweets are not helping. the president regionally tweeting he is under the fbiation for firing director by the same people who
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told him to fire the fbi director, an implicit jab at rod rosenstein, who is leading a special counsel. the president is attacking members of his own justice department, and it is apparently confusing as to why he got. -- as to why he is doing that. but the investigation is expanding and potentially looking at the white house and the oval office, whether or not obstruction of justice occurred when the president called for the firing of the fbi director. julia: you are painting a picture of everybody fighting everybody else, and i want to come to you on this to start, because i saw some comments from john cornyn as well, and he said it would be wholly inappropriate for the judiciary committee to , not thetruction here fbi, not the department of justice. we could head of harming the investigation. what are your thoughts here, chris? chris: there are two important things to remember. what is that the investigation being done by bob mueller is the
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only investigation that can bring criminal charges. and the other investigations, whether it is the senate judiciary committee or intelligence committee, they can find information and hold public hearings, but it is only mueller that can prosecute crimes. what you're seeing happening on the hill is certain members talking about the idea of not getting in the way of mueller's investigation. mueller himself is meeting with key members of congress, the leadership of the senate intelligence committee, the house intelligence committee, and i am sure he will be meeting with leaders of the senate judiciary committee to talk about how they can all do what they need to do without conflicting with each other. the congressional committees are really aimed at providing a public report of what they find, whereas mueller is aimed at doing the criminal investigation. me crazy, but this
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seems like a complete waste of time. toulouse, that is what i was going to ask as well. the president has an agenda here, and i do not even mean attention wise, just day today, on aours that you spent committee doing investigation versus doing a tax plan, for example. toulouse: that is exactly right. the congress is being consumed by this russia investigation, multiple investigations spanning multiple committees. we have the intelligence committees in the house and investigating this, as well as the judiciary committee. it is definitely expanding. julie: i will leave it there. lou and chris -- lou -- toulouse and chris, thank you.
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♪ julia: from bloomberg world headquarters in midtown manhattan, this is bloomberg markets and i am julia chatterley.
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mahdi markets are closing in new york and we start with the precious metals. gold rising today, but declining for a second straight week. this is to support another fed rate hike later this year, and you can see behind me it is down just shy of 2%. meanwhile, silver is falling today, down by more than 3% this week while the safe haven investment weekend. kened.ile -- wea energy in its biggest drop since 2016. this is offsetting production cuts by opec and russia. a break, as itch has been a holy bearish week. into the bloomberg and take a look at this chart. it shows that over the past two years, commodities have tended to lose speed whenever the fed hikes rates, not to mention that the commodities spot indexes the
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white line, and the federal funds target rate, the ayala-ayala line -- the yellow line. the question is is this time different? julie? julie: thanks, julia. to today's big news. amazon agreed to buy a whole foods for $13.7 billion. shares of both companies have been rising on the news. earlier today, erik schatzker spoke to bruce berkowitz, the invest -- chief investment retail capital management, and we asked him about what this could mean for sears? cracks -- >> it seems to me that there is a need for physical space in retailing. it needs to have tremendous location. headlines, and i view it as positive because i
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think it reinforces my thought that the physical world is not disappearing, the physical space is not disappearing from retail. malls are not disappearing and doing quite well. they are transforming, and back it ist i was saying, life. outdoor-indoor cafes, movie theaters, where you can have a social community life and get everything done in one place, see you see the transformation of malls in good location. people do not understand that the value, the realty value is not even building as much as it is in the parking lot, where if sou have a building that ha 8-12 acres of land and is in a part of the world they were -- where there is no empty what -- land like that, that is tremendously valuable. you have a basic level of industry -- infrastructure already built-in, highways, a lexical rids -- electrical grids
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, it is very valuable. and all of the acres that surround these anchor department it was like sears was the builder of many of these. so -- eric: so amazon buying will foods should help people revalue sears assets? there iswitz: tremendous value in location and four ration. -- cooperation. : that is a good point. should amazon by sears? mr. berkowitz: that would be an intelligent move. it was intelligence -- intelligent for them to buy whole foods. when you consider the infrastructure, the logistics, the systems, and the other pieces, it has a lot of pieces to the puzzle, and sears is a great gateway for new designs and companies to come into the united states to show their
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stuff, it is a great way for a logistics system that could be utilized. the competition is extremely tough. people will have to find ways to become more efficient, and do a better job and we will see it. we will have to see what the supermarkets -- you have to have these mergers and an s, and that will make sense. erik: do have any reason to believe that amazon will by sears? mr. berkowitz: -- will buy sears? mr. berkowitz: i believe it makes sense. the math makes perfect sense to me. julie: that was bruce berkowitz speaking to erik schatzker earlier today, saying he does not have any reason to believe that amazon might look at one of his holdings, sears. hope: more on the amazon
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will deal, we are now joined by brad slingerland, and this is one of the top 20 holdings. your thoughts get here. what do you make of the amazon deal? clearly a brand-new revenue stream and opportunities here, but you'd see them taking the fight to walmart? >> we are very positive on this deal, we think it makes a lot of sense for amazon shareholders. we think it is another example of technology business is taking a real leadership role as the global economy continues its digital transformation, and i yet another warning flare that a lot of the legacy businesses, particularly in retail, have been sitting on their hands while innovation has been happening at the technology amazones, and i think has been around for more than 20
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years now, and we are seeing some retailers responding to what that threat might mean for their business. julie: what does this mean to amazon's business? flyve a chart i made on the on the bloomberg that looks at amazon's margins, right? amazon has played with margins over the years. right now, the operating margin is about 2.8%, whole foods is closer to 4.5%. some of the other groceries are better, kroger's are lower. but does this help amazon lever up its margin, or does it do the opposite with the bricks and mortar location? margins are an interesting question. what i think this allows amazon to do actually is provide cover for whole foods to invest in their business. my expectation would be is that whole foods margins would come down. one thing we know about amazon and jeff bezos as well as jeff mackey, they think long-term and
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want to run business for the long term. the right thing to do for the long-term might essentially be to take margins down and allow whole foods that cover to do that as part of a bigger organization. that would allow them to right back against income grocery stars, take some market share back -- how?: how do they spend the money? is that their problem, that they have not been investing? how do they take the share back when everyone is now offering organics, for example? >> there are a couple of ways they could do it. you're bringing a membership business to a physical store, similar to costco. so now prime members, and there is a 60% overlap between prime members and whole foods customers, and you might be able to get a discount shopping at whole foods if you are a prime member, for example, they could cut margins on certain products, increased private label, which has been very important for all who --
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whole foods and amazon. that would allow you to then lower prices and other areas of the business. that would grow the overall pie for whole foods, possibly bringing in more customers and whole foods in creating a nice flywheel for the prime membership business. julie: unfortunately, we have to leave it there. read slingerland is joining us -- brad slingerland joining us on the phone from san francisco, giving us some great insight into the steel. but check the headlines with first world news this hour with mark crumpton. mark: president trump is rolling back some of the historic human policies and stated by president obama. speaking in miami today, president trump and commercial deals with -- banned cuba'sial deals with military and put new travel restrictions on americans visiting the island. pres. trump: we will not be suppressed by communist oppression any longer. you have seen the truth, spoken the truth, and the proof --
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truth has now called us, this group has called us to action. mark: the president also called the previous deal with cuba, in his words, "terrible," and asked cuba to come up with a better one. robert mueller has now expanded his probe. according to a washington post -- the washington post, robert mueller is now investigating the holdings in business dealings of jerod kushner, the presidents son-in-law and senior advisor. investedeviously being -- investigated for meetings with the russian and batters 30 julia -- russian ambassador sergey i. kislyak. and according to two eu officials, initial negotiations for brexit will negotiate the terms of britain's departure.
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a trade deal not be discussed at the same time. and a moscow court has reduced the opposition leader by five days. he was sentenced to 30 on monday for instigating an unsanctioned rally. tens of thousands took to the streets in more than 100 cities and towns across russia in some of the most widespread protests as there was a call for demonstrations against government corruption. 24 hours a, 240 day, powered by more than 2400 journalists and analysts in over 120 countries. this is bloomberg. coming up, donald trump trumpeting ready to name a new sec commissioner as a wall street regulator. what denomination means for the presidents regulatory agenda though? we will discuss that next. live from new york, this is bloomberg. ♪
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♪ julia: this is bloomberg markets, i'm julia chatterley. julie: let's get a check on consumer staples with abigail doolittle. at gill: after amazon purchased whole foods for $13.7 billion, this is putting the sector on pace for its first week since december last year, about .9% down. this is also because retailers and colors are trading as well, the competition of amazon entering into the grocery space, but whole foods having his best day since 1999. stock upimpacted their
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30% right now, well up above the deal price at $42 per share. stock was right around the deal price of $42, now gaining higher. some analysts are saying there could be a bidding war, and that shares of whole foods gaining weight. as were some of the tech stocks you are talking about, we were looking at facebook, amazon, alphabet, and netflix. apple, --ok, facebook, apple, alphabet, and netflix. the real height here, amazon up 3.5% on that deal. on paper, this is the best day thee early november, and title around this was interesting and saying the future of grocery was bright, disruptive, and amazon.
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so to the point that amazon is really going into that stable with other retail means, trading well, and piper seems to agree. as for the trade though, it is alive and well in 2017. this is a chart out of the beginning of the year in purple, we see the s&p 500 up about 8.5%. we see alphabet in orange really lagging the most, along with netflix, but in blue, that is amazon, taking higher come up pulling away from facebook and leading that same trade. that will be perhaps for the rest of the year -- but time will tell on that one. julia: let's turn to financial regulation, and bloomberg news is reporting that donald trump is getting ready to nominate another member for the securities and exchange commission to fill the republican seats. if we match her to trump's pick,
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how positive will this be for the regulator a pullback -- regulatory pullback they are hoping for? >> he was nominated once before by obama, and what we know about her is that she worked at the sec previously, she is also a former senate staffer, and a fierce critic of a lot of the rules that have been put in place since the 2008 crisis. obviously the idea is much in line with some of the things that clayton, who trump has the chairman now see that the sec has been basically hurt the ability for companies to use capital markets to raise money to make deals. member, jay clayton is a former wall street deals lawyer, and having another republican seat there isis going -- going to bolster his ability to make policy changes. we have not yet seen with those changes will look like, it is a phase of him getting to know the
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agency, figure out where he wants to go with it, but certainly another republican seat being filled at this five person convention that is now only down to three seats, one republican, one democrat commissioner, and jay clayton, who is independent but picked by donald trump, will help the trump administration figure out capital markets. julia: so what is going on with this administration as well? donald trump has talked really big about his proposals as far as regulations are concerned, or deregulation, i should take. and then we got the monster report on monday that was a huge list of things they would like to do, and the bank has already had a nice run up sense the trump arrival -- since the trump arrival, but this has barely budged, but what is the deal here? ben: if one had -- 150 pages was not enough for you -- we are hoping to get another one on banks. this might impact the sec and
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market regulators as well, and two others. we will get a lot of paper and a lot of recommendations laid out by the trump administration probably from here until the end of the year. and banks have had a pretty nice run up so far, but what we saw in this report was kind of interesting. it was not a total gutting of expected, some people based on what trump said shortly after the election. there is a lot of tweaking, fine-tuning, things that banks have wished for for a long time -- for example, easing from the annual stress test, they complain about a lot, making it once every two years. the living will requirement, where they have to explain how they would deal with some type of insolvency. those kind of requirements are getting loose and bit. of it.nt -- loosened i wonder if we will see something similar for the market rules recommendations. julia: we will see, thank you
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for your insight. coming up more from the friday amazon's, -- fest, $13.7 billion deal for whole foods. we will learn much more about that after this. from new york, this is bloomberg. ♪
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♪ this is bloomberg markets, i'm julia chatterley. julie: and i'm julie hyman earlier this week, the fed announced it was raising rates for the third time this year, and chair janet yellen dismissed inflation data that has them questioning whether the central bank will continue on its two directory -- director treat -- trajectory rate hike path. he thought ofhat yellen's comments. >> she was directed, committed,
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unwavering, and quite frankly there are some questions that were distracting. she lay down a plan, this is a plan we are sticking to it, and some of the short-term data she rightfully ignored and thought about the bigger picture. she is focused on the bigger picture and financial divisions, and since those have tightened in march, they have gotten easier. she is committed to where we are going. >> so we are talking about a fed that did not stick to their forecast and had a credibility problem, and now we are talking about one that ignores the data and is making a policy mistake. they are stuck between a rock and a hard place. on onent to walk back thing that you just said, that they are making a policy mistake. that is not clear. they are sticking to forecast dependency. they moved off of data dependency, there is a good reason for that. have cited inflation data as being temporary, so i think this makes a lot of sense and i think it is
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important that participants realize the disconnect, because the fed has moved on to forecast dependency, which is a big part of the disconnect. broadly they are data dependent, but the data dependency is not week to week, over what is the cycle we are operating in? and data dependency has to reflect where we are in terms of s, financialtion conditions. i think they are much less data dependent, but they are being very sensitive to where we are. >> what are you in the team at black rock are doing to look at inflation dynamics right now? >> i think there is a great quake -- --n with therehave to be a two, are some things weighing on
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inflation today, including technology that is crushing down. inyou talk about this today terms of what amazon did, that is taking efficiencies out of the system. there are dynamics happening like wenflation reports show here. there are some extraordinary things happening with services, inflation around services has been stable. the only reason you're trending down a bit was wireless because of the cuts, which is technology pressing down on inflation. if you are looking at goods inflation, this is where technology is pressing down. the central bank cannot lift, and this is good for servers and net disposable income. so the point about two, we showed some things around wireless and the pressure you have seen around that -- these are all good things. whether it is peril, -- whether it is apparel, food, like today, if technology is helping the consumer and lower income by pressing down on inflation. think about a fed that is going to be having to
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deal with two important different type of forces right now. verse to have the short-term inflation shocks and the fed is trying to look at what kind of engagements.lation and the date rinse -- difference between this and the more sickle -- cyclical belugas price on price. there is a high bar to change and the unwinding that they will be doing. on the other hand, they still have that hike, and we have to wonder how they are going to be -- >> your story at blackrock here his relatives what is in the market right now. five years has been rolling over for quite a while, and the ten-year treasury yield is lower than when they started this at the back end of 2016. i find this is hard to reconcile. do you? >> to take today's movement in turns of the yield curve --
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terms of the yield curve, and i have another chart that i will pull up on this -- that may not be the chart -- we have an unwind going on of expectations around fiscal policy. part of the steepening, part of the increase in rate hikes, part of the unwinding as well. you have a conflation potential here between how much of this is inflation and inflation expectations happening in the same week at go there is a big focus on that, but a lot of the trends with lower rates were proceeding that. that was unwinding some of the expectations for a much bigger impact on fiscal policy. we are pricing that out in the market. julia: that was at blackrock, this is bloomberg. ♪
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>> it's 3:00 p.m. in new york, 12:00 p.m. in san francisco, and 8:00 p.m. in london. julie: welcome to "bloomberg markets."
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♪ julie: we are lies in bloomberg world headquarters in new york over the next hour. here are the top stories we're covering -- in markets, amazon is delivering shockwaves to supermarkets. the e-commerce giant will acquire whole foods for 13.7 billion dollars, sparking a shakeup in grocery shopping. and economic news, the u.s. expansion is headed for an all-time record. we find out what economists are saying about how long it could last. we're one hour from the close of trading. let's get a check on the markets with abigail doolittle. beentory has truly dominating today. abigail: you are right about that, that amazon/whole foods deal. investors are somewhat tired after that deal talk. the fed earlier this week and the tech selloff. it is still happening to some
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degree, but at this point, heading into the close, the major averages are basically unchanged. the dow not far from perhaps putting itself on pace for a record. this segment we are seeing with the dow higher -- the dow is higher over the fourth week in a row, while the s&p and nasdaq are lower for a second week in a row. the big news as a whole foods acquisition by amazon. interesting to note that whole foods is trading above the price by more than a dollar, suggesting that some investors may think another big could come in. toclays adjusted the stock overweight, saying a bidding war could erupt. amazon also trading higher. you do not see that every day when you are the acquirer, but pacific crest says amazon at this point, that this is a
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disruptive moment in retail, similar to when walmart bought we are certainly seeing the disruption. piper jaffray talking about how thes a bright note, disruption of the grocery space. we look at other players in the grocery space and we see tons of red, all trading lower. kroger down about 30%. worst three days since 1999. they cut their full-year view. basically, investors appear to be weighing in, thinking that the complication of amazon's 800-pound gorilla could really weigh in on an already razor thin margin. right now, pretty bearish take on the part of investors. as we look at amazon and walmart , interesting thing
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happening here. in blue, market cap-wise, amazon really taking it away to walmart and white, but walmart revenues are much higher than amazon revenues in blue, telling us investors are really paying up for the growth potential. talking $1 trillion here. the u.s. economic expansion is in its eighth year and is headed to become the longest on record according to a bloomberg survey thatonomists, which found 60% think the expansion will last into at least 2019. 30% say at least until 2021 and 10% until at least 2025 or later. joining us now, the senior u.s. economist for bloomberg intelligence. do we buy this? do we agree with that?
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>> bloomberg intelligence economics was part of the survey you just mentioned, and i guess we are in that 60% who are not expecting a recession in the years. least couple of business cycles do not die because of old age. they die because the fed can kes ande pedal or the bra push the economy into recession. it is not happening right now. we are in the eighth year of the cycle, but we are still not seeing any wage growth, inflation, hiring. these are the things you usually see at the end of the business cycle. we are not there yet, so it is a very unusual cycle, which will probably last at least 10 years. julia: even with the fed tightening rates, financial conditions has been loosening. there are a few softer spots.
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housing data today actually was a bit weaker than expected. is an area where we are concerned. i know you have a chart which kind of shows that. the chart i brought shows that if you see a significant decline in durable as autos,ding, such for example, that could lead to a recession, and that was the usually am a past but not that much in recent years. that does not necessarily mean we are going into recession. you can see some slowing in the but thenoods sectors, your services spending picks up, consumerwill support spending overall. bloomberg intelligence economics we think consumer spending will continue to grow, supported
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by wage growth that will actually pick up this year. we think that that has continued to be the case and we will see more growth in the next couple of years. julie: how does the political agenda fit into all of this? have a you handicapped the chances of tax reform coming through as an economist, and if so, will it push an economic recovery to be more lengthy, or the opposite? : we downgraded our outlook with the next couple of years. we expect infrastructure spending to have a significant chances of that -- we had to downgrade our forecast for next year to 2.7 percent, which still seems like a pickup from extensive growth this year, although it is a very
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minor, moderate one, and it is predicated on wage growth to continue and support consumer spending. julie: we've got to leave it there. thank you so much. senior u.s. economist for bloomberg intelligence. just want to mention a headline crossing now on amazon related to the deal. rating -- thesser company's rating may be cut by s&p. it is taking on debt in order to make that acquisition, so not necessarily a shocking move, but that is a headline crossing as a consequence of this deal. another story that crossed a little while ago has to do with centurylink. an employee has filed suit claiming she was fired for whistleblowing on the telecom company's high-pressure sales culture that left customers, she says, playing -- paying millions of dollars for accounts they did not request.
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centurylink shares have turned lower after these headlines came out. you can see they are now down 7%, and the echo of this story -- wells fargo. accounts being opened when customers did not approve them. this is what this is echoing. that is one of the reasons shares are down so sharply. let's get a check on the headlines with mark crumpton. mark: president trump has officially reversed his campaign so-calleddeport dreamers, undocumented immigrants who came to the u.s. as children. the homeland security department says it will continue the obama -era deferred action for childhood arrivals, designed to protect them from deportation and help them find legal work. the administration also ended attempts to expand a program to include parents. the president is also getting to fill thesomeone
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open republican seat on the securities and exchange commission according to people familiar with the matter. pierce is a former sec counsel and senate da. former president obama selected her as a commissioner in 2015, but her nomination stalled in the senate. there are two vacancies on the commission. london police arrested a man outside parliament they say was carrying a knife. no one was injured in the incident is not thought to be terror-related, but the u.k. is on high alert following recent terror attacks within increased police presence all over the country. the man who led germany through reification is dead. he was chancellor of germany for 16 years, including with the in 1989.ll came down former president bill clinton what's called him -- once called him the most important european since 1982.
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julia: thanks very much. coming up, amazon is buying whole foods, but there may be a price to pay, and i'm not talking about the price tag. amazon's aa rating may be cut by s&p. more on that next. this is bloomberg. ♪
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julie: this is "bloomberg markets." julia: it's time for your bloomberg business flash, some of the biggest business stories in news right now. exxon mobil approved an offshore drilling project. the initial development could
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generate up to 15 million barrels of oil starting in 2020. a 6.5oject involves million acre underwater formation. barclays plans to plead guilty to charges it failed to make proper disclosures about multibillion-dollar capital raising in qatar back in 2008 according to a person with knowledge of the matter. the bank is expected to pay a .ine of as much as $255 million a turnaround in the art world after a year of declining global sales. market thesis sold this week in the world's top modern and contemporary art fair, which opened to select guests jim 13 and to the public yesterday. it runs through june 18.
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that is your business flash update. julie: just wanted to reiterate some of the headlines we got on amazon a moment ago from standard & poor's, which put the credit ratings of the company on watch negative. i have a aa minus corporate credit rating. amazon says -- s&p says there theiminary rating wills company will approach to .5 times but will probably stay below two times. in the newsroom when the headlines came out. it is perhaps the most surprising acquisition in the tech giant's history. we are joined by emily chang for a more in-depth look at the deal. emily: we gasped as well.
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brad, i want to start with you. what was your first reaction? brad: surprise. at reflection, you say of course. it fits so well in just days us public view.' they have been experimenting publicly with food for a long time with amazon fresh and amazon pantry. none of it has really worked. we have seen with experiments in seattle that they have acknowledged they need a physical footprint, something anathema to amazon over the last 20 years. thus, this deal. emily: you wrote a story on whole foods with the ceo saying groceries would be amazon's waterloo. what changed? brad: this is a franchise and decline.
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a victim of its own success, right? a pioneer of organic food and you can get organic food at walmart, kroger, the food truck outside your office. whole foods job by reputation, activist shareholders, and john mackey finding a kindred spirit .n just days us -- jeff bezos both very headstrong founders operators. emily: whole foods is a relatively small grocery store player. how does this disrupt the rest of the business? olivia: it has a huge impact. i have no doubt that right now, grocery chains are scratching the heads, holding emergency board meetings on how to deal with this massive threat. especially more disruptive, seener startup companies as competitive threats to amazon
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and the way they would deliver groceries. oordash and several others have onn building their business the idea they could be a miniature amazon. interestingn relationship with whole foods. bolivia: this company has positioned itself as a competitor to amazon in the space of groceries and has a five-your partnership will foods, who is actually an investor in the company. put $30 million into this startup that is now worth $3.4 billion. i imagine the it's the cart -- scratchingt ceo is their head wondering how they fit into this. they were not expecting this to
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happen. it sounds like they were blindsided for this -- blindsided by this as well. emily: if you are and amazon customer, how does this change the experience for you? if you are walking into whole foods, how does this change the experience for you? brad: this will not change everybody's life. whole foods is largely in irvine, high income areas. there is a nice overlap with prime and repeat amazon customers. i think it is the amazon prime or amazon fresh customer another option. not just home delivery, but go pick it up in the store. order a subset of your groceries online and then go into a whole foods store to sort through the fruits and vegetables. at the same time, prepackaged meals at whole foods -- 20% of its business -- you get those to your home and 10, 15 minutes delivered over the last mile via amazon. that's another option. in the super hot restaurant
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hub,s business versus grub doordash, ubereats. love it. they give amazon a lot of patience, and they will bring some of these new technologies at the point of sale in the supply chain to bear at whole foods, and we will see if they can change the economics and dynamics of that business. thank you both. julie, i will send it back to you. julie: cannot get enough of this story. thank you so much. -- julia: still ahead, looking for a prime trade? amazon stock is surging on the news that it is acquiring whole foods market.
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plenty more to come from new york. this is bloomberg. ♪
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julia: this is "bloomberg markets." julie: it is time now for options insight. kevin kelly, the chief investment officer at recon capital, joins me for today's segment. we're talking about -- what else? the big story of the day -- amazon and whole foods. you have a way to trade amazon on this. deale to ask -- what's the -- was this deal a good idea? kevin: i think it was a good idea. they are going head-to-head with walmart. into the whole grocery space, which accounts for 30% of personal consumer consumption. this is one of those things
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where they are battling everything they can get. i think it does make sense because they do have the logistics. over half of their e-commerce sales are from third-party distributors, and they are trying to get into more same day delivery as well as instant delivery, so this plays into their business model, especially on the e-commerce side. julie: he would be looking into getting into -- and you would be looking to get into amazon shares then? kevin: people are actually betting on amazon to go further from here. they have a great management team that has continuously executed from the ipo to now. they are one of the most well-run companies in the world. stockuld actually buy the . when i looked at it earlier it was about $995. out to august, the dog days of summer, collect 4%. that is a great way, a very .onservative strategy
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amazon constitutes about 14% to 17% depending on where the market goes of the consumer discretionary side, so they are a big humans. -- you ownhe stock the stock in you want to take -- if you own. and want to take -- if you own the stock and want to take off. julie: it has been selling off, which continued today despite it going up. do you think that will continue to be a risk for tech and the markets in the coming weeks? kevin: it certainly is a risk because you see people do sector rotations. people trying to get out of
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leaders and into laggards. what is interesting to note when it comes to amazon is they have been impervious to tech selloffs in the past. they have always rebounded. if you look over the last three years, they've sold off in unison but then rebound even stronger. that is an important to note because they have -- that is an .mportant thing to note the big news yesterday was they were probably going to buy/combat microsoft, and then what do they do? they shifted and pivoted all the news stories to hear on the e-commerce side. they are actually looking at the revenues and how to reinvest in those revenues. julie: do you think it ever becomes a risk that amazon is taking on too much, that the business is too diverse, that they should do something like
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?serve web services web kevin: i don't think so. everybody wants to work for amazon because they work so well on the so you want to keep it intact because people like working with like-minded people. think about on the personal consumption side, they have the new echo. they are doing so well on the product consumer side, and they rebounded on the phone -- nobody talks about that anymore, the fire phone. julie: that's true. thank you for joining us. julia: still ahead, amazon is going shopping e-commerce giant adding ready to change and challenge the grocery sector. ♪
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mark: it's time now for first word news. calling it a terrible, one-sided deal, president trump today canceled parts of president obama cost historic agreement
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with cuba. in miami, he put new travel restrictions on american citizens visiting the island. >> we challenge cuba to come to the table with a new agreement that is in the best interest of their people and our people and americans. mark: president trump made the announcement in miami's little havana neighborhood. ministryan defense says it is verifying intelligence that the head of islamic state was killed late last month in a russian airstrike near islamic state's de facto capital in syria. other senior commanders of the group are also reported to have been killed. still, the russian foreign minister says there is no 100% confirmation and white house officials caution that in the


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