tv Bloomberg Markets Bloomberg May 6, 2016 2:00pm-3:01pm EDT
matt: from bloomberg world headquarters in new york, i'm matt miller. stocks are bouncing around after the april jobs report is the weakest in seven months. oil is rising, gaining for a third straight day. will the lackluster jobs report take a june interest rate hike off the table completely? john taylor joins us to discuss fed strategy. -- posted for fed presidents at a conference. making a deal with donald trump. republican leaders demanding the presumptive gop nominee demonstrate some conservative principles before giving him their endorsement. markets close in just two hours from now and stocks are now gaining across the board. the gains are slight.
confusedvestors seem today by the jobs report. around inuncing stocks and bonds and the dollar. does it indeed push the likelihood of a rate hike further out? i want to zoom in on the dow in particular, leading the gains, up .25%. positive four or five times throughout the first half of the day. before finally more definitively heading there about one hour ago. points at one point, now up about 53. dowtill have a lot of big yet to reportve
their numbers. , weekoft and intel technology has been one of the themes. we have yet to hear from a lot of these companies in the dow when it comes to earnings. disney, home depot, cisco and walmart. all these companies will be reporting their numbers between may 10 and may 18. all these companies are trading higher in today's session. i did not realize so many of these large caps off not come out with numbers yet. gold looking at nice gains. julie: catching a bid here today come up by about 1.6%. you see the big again it had after the jobs report on this outlook. it has also bounced around but
has remained positive, unlike the other assets we've talked about. take a look at the bloomberg. this is one of our top charts here. there is a morgan stanley index of implied rate hikes. as goldone lower futures continue to gain. you are seeing that inverse relationship has worked out pretty well for gold bugs. miners also gaining in today's session. oil has also been on the rise today. matt: some moves in commodities. julie hyman with our market check. we will check now on the first word news. rami: president obama says donald trump has a long record that needs to be examined and suggested the present of this --sumptive presidential
suggested the presumptive republican presidential nominee -- >> this is really serious. .his is not entertainment this is not a reality show. a contest for the presidency of the united states. what that means is that every nominee --ome every every candidate, every nominee needs to be subject to the same standards and genuine scrutiny. >> president obama said he will not make an endorsement until the primary process plays out. the republican party chairman says he supports donald trump. breaking with house speaker paul ryan who says he is not ready to back trump.
the chairman's has a meeting next week will help the party starts unify behind the likely nominee. to peoplemaryland say are dead and two others injured in separate shootings at a mall and shopping center in the suburbs of washington, d.c. one of those victims has died. an hour later, a woman was shot at a grocery store. police say they are looking at a person of interest. general hasy established a u.s. trust fund to -- some haveirus said an unprecedented rise in cases. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. matt: let's get more insight on
today's jobs report and how that might affect the interest rate decision . joining us is economist john taylor, creator of the taylor rule. he organized and moderated a conference last night that featured four federal reserve regional bank presidents at the hoover institution. thank you for joining us. let me first ask you about to ay's jobs report. i had a conversation this morning with alan krueger. although the headline number looks weak a first come on you dig into the report, it looks building isjob going on. at aggregatelook
hours, they are not as disappointing as the total jobs number. don't see any reason why it should make a delay from what the fed would otherwise be doing. on the other hand, the market seems to think a rate hike is completely off the table. showing implied probability as far as the market is concerned. it is now 6%. why'd you think the market takes this off the table? john: it is a question of how much it has come down just today. the likelihood was pretty low already. in terms of the numbers, it looks a little disappointing, but hours are up. it is consistent with getting off that bad first quarter and not great growth anyway, but at least better than we had in the first quarter.
they should start trying to normalize. people want to normalize, they are looking for the opportunity to do that. that does mean raising rates. was: if the probability only 10% yesterday, it has only come down 4%. , if iing to taylor rule look at this calculator, the fed it should have started raising rates back in october of 2011. we should be more like 3.3%. the you think that is the case or do i need to change my variables around here? john: that is a little high given where we come since then. 1.5-2 percent is within the
realm of what these calculations are showing. the fed itself admits it is purposely below what that rate is. they want to get back to it. a lot of discussion at this conference about let's try to find a way to normalize. fed presidents from all over the country discussing the importance of normalizing. they don't want to do it too fast and disrupt the markets, but they want to get back in that direction as soon as they can. matt: where do you think i should have my variables here? i'm not sure what i should put for neutral real rate. what would you put for the neutral real rate? john: i would put two. there is huge discussion about that. one of the biggest topics yesterday by the presidents of the regional banks. they think it should be lower than two. that brings that rate down below
what you thought that's what you you've plotw what there. is probably something that will fit into the markets soon. a lot of market people at our conference were interested in what our central bank is thinking about that. matt: regardless of whether i have two or zero, there is a long period where the taylor rule suggests rates should have been negative. negative rates are not a very good idea. what do you think about setting rates at zero or in negative territory? john: the rules always suggested a negative for that short span of time right after the crisis. my suggestion at that point,
when you have to think about other measures to keep growth , stay clear on when you will go above zero. future, there's more discussion about these negative rates. so far, they have been pretty disappointing. japan seems to have gone the wrong direction. matt: what would be a better solution? with these low yields, there are problems caused all over the place. is there another way to deal with this? so many of the problems we have our economic policy outside of the fed scope. tax reform, regulatory reform, budget reform. all those things are helping keep the economy slow. we have to do other things.
in the meantime, if monetary policy could reform and get back --the rules-based loc that's -- thissed policy conference was on international economics. we could get to a situation where there is a lot more volatility come exchange rate capital flows and less central banks return to a rules-based policy. matt: what is your optimism for reform? is it likely to happen or is this a pipe dream? john: we have seen reforms in the past. we've seen policy going from bad and the 1970's to good in the 1980's and 1990's. you do have the changes. once people begin to see there is a problem with the current policy, there will be a change.
same with all these other policies. are we going to get those reforms? it depends on the politics, it depends on who is in charge. in the past, policy has changed there is a sense that current policy is not working and people are coming to see that right now. matt: thank you so much for joining us. i appreciate your time today. you have a great weekend. famous twoost minutes in u.s. sports, the kentucky derby is tomorrow. will there be a letdown and excitement after we got a triple crown winner last year? utility stocks getting hit hard today. is there trouble in the power business? our guest is stephen young. a look at the sectors that are moving today.
matt: this is "bloomberg markets ." julie hyman has a check on some movers and analyst changes. there is one i saw this morning that woke me up immediately. a tectonic shift from a very high profile analyst. julie: adam jonas. general motors is what we are talking about. it was raised to equal weight
from underweight. that is a big change from someone like adam jonas. shares are benefiting today. he talked about a potential transformation at gm. we could see a difference in these core businesss. some new kind of sharing economy auto business. you want to add anything? matt: it is an amazing story. i've been talking to mark royce about this for months and months. a number of executives at general motors. they are looking to the future, looking to build partnerships, looking into technology. they are doing great with cadillac, doing great with a number of their other brands. it is an incredible story. julie: john is also talk about
strategic alternatives. spin off.hemism for stock,to look at another another couple of stocks. teva and allergan. whether are questioning they might be overpaying. on a monday conference call, the teva executives should be getting questions on this. this has to do with generic drug pricing, which is in this orange color here. to decline,tarted even as branded drug pricing has held up. that is what is at issue here. are they overpaying in an environment where generic drug pricing is falling?
a couple of retailers being affected by analyst calls as well. jcpenney moving on in your post report that the company might be looking to slash costs. -- on a new york post report. there is a buildup of excess winter and seasonal inventory at costco. the late additional hard mark downs of up to six months. delayed additional hard mark downs. costco's price target being cut to 135 at piper jaffray's. comfortableing sales estimates for sanonic. those shares down by nearly 4%. one hour 40 minutes until
matt: this is "bloomberg markets ." tomorrow, 20 of the best thoroughbreds in america will compete in the 142nd running of the kentucky derby. we are joined by david, our resident horseracing expert. this is the kickoff of the triple crown. frame this for people who don't know much about horse racing. how key is this race? david: this is the marquee event
in america. this is a race of just three-year-old horses. race, you gets the 2 million-dollar purse and you are a pretty much guaranteed stallion where the real money is. multiple of millions of dollars. matt: amazing when you have that once in a lifetime horse. the kentucky derby is the most famous of all three races, by far. david: by far. the preakness is the middle leg. it is a big deal in maryland. horseman always say they can win all the races they want in new york and california and florida, but when they say, have you ever won the kentucky derby? that is the only question they get asked.
have thedo you have to best horse, you need to have racing luck. there are 20 horses on the racetrack. about double what you have any typical race in america. it creates chaotic events come a lot of bumping, a lot of horses get blocked off. a lot of random things happen. matt: how does this compare to the grand national? whirl ascot -- royal ascot, the pageantry of that is on another level. this is 50,000 people packed into this place. sometimes people try to say that the breeders' cup in the fall is the horse racing super bowl. this is the super bowl. matt: who is going to win? david: the most likely winner is the favorite, nyquist. matt: sounds like a sleeping
medicine. david: similar. he will be three to one. in a race that can sometimes be chaotic and random. the horse has a lot of upside. town been talking about mo in the 21 range. there was a. when bettingtime on the long shot time after time was a good bet. and 70e a 50 to one shot 21-shot coming in second. that speaks to how crazy this race is. to one shot.
message for the media on donald trump's presumptive status. this is entertainment, not a reality show. he urged voters to vet him thoroughly. mr. obama said he will not make an endorsement until the primary process plays out. he expects both candidates to work to unify the democratic party for the general election. ad senator-- lindsey graham to the list who say they will not support donald trump for candidate. he says he does not think donald trump is a reliable republican conservative nor has he displayed the judgment and temperament to serve as commander-in-chief. house speaker paul ryan will meet with trump on thursday morning with other house leaders. westernldfires in canada may become the most expense of catastrophe in that country's history. the fire is now covering area -- buyers no cover an area bigger the new york city. more than 80,000 fled mcmurray
and 8000 people had to be airlifted out. insurance losses may go over $7 billion. elon musk has done it again with spacex. for the second time in a month, his company has landed a rocket on an ocean platform. the first stage booster touched down on a barge in the atlantic ocean after launching a japanese creations satellite. news 24 hours a day powered by our 2400 journalists in more than 150th news bureaus around the world. matt: commodity markets closing in new york. let's look at today's biggest movers. crude oil pairing a weekly loss after the jobs data today. up. settling down about .3% u.s. inventories rose to the highest since 1929 while production dropped the most in eight months. keep that in mind. production dropping but inventories way up.
gold gaining the most in a week after the payrolls number came in weaker than anticipated. it could weaken the case for the fed to raise interest rates. the idea of a move in june is off the table as far as markets are concerned. at 12.90.5% today detroit pounds. natural gas higher today closing up almost 1% after a dip this morning. reportedanies first-quarter earnings this week. earnings per share at duke came in at 113 in line with estimates of 114, in part because of a milder winter. that is why it is a little lower than expected. they got good tax treatment because of foreign ownership of a unit that duke intends to sell. i will talk to the chief financial officer and ask him to give us some of the top-secret information about who will buy it and how much they will get for it. stephen young joins us.
i notice we did not get that information from your boss. i'm wondering if you could tell us what price range we are thinking for the foreign unit. and when can we see some action? >> we are not at a point right now where we can talk violation -- valuation. not even to you. it is tough but i can't go there now. we are still early in the process. there is a lot of interest in the businesses. we are gathering data. we are talking with interested buyers and will be moving forward over the next several months to work with them and continue the process of exiting our international business. beneficialot some tax treatment from holding that. you only got $1 billion revenue overseas last year. $22 billion worth of revenue here. are you focusing on your core american business? >> absolutely. our broad strategy is to focus on our core businesses.
that is regulated energy infrastructure, oh electric and gas. the international businesses have performed very well, but they are not consistent with our core strategy so it is time to exit those. matt: he reaffirmed your 2016 financials for the full year. analysts thought you would have about a 33% tax rate. you're saying it is a little better at 31%. it still seems so high. doesn't it feel like you are paying a lot in texas? >> i do feel like we pay a lot in taxes. that is the rate we are going to changehat percentage downward is in part due to our international operations and ability to take advantage of optimization in our tax area. that will help us a great deal. matt: it is obviously a highly regulated business. can you expect to see increases? south carolina is on the table with a possible rate rise in the next year. north carolina in the next five years. are those the places you will see the most movement?
>> we will be looking at the carolinas. we do have intent to make a filing for notice of intent to raise rates in south carolina, i think in north carolina it will be later in our five-your plan we will be doing that. matt: it has to help when the price of natural gas or coal falls. can you lock-in contracts for that for longer terms? >> it does help us. we typically pass our cost through to our customer. the lower those commodity prices are, the lower the bills to our customers so that is always a good thing. we do some hedging on our natural gas pricing to lock in prices over three or four years. we will do fixed price coal contracts for several years. and that will help lock in declining percentages of prices as we go forward. we have good low price stability in our rates. matt: you are still heavily regulated and pass on savings
from lower commodity prices to customers. how do you make more money? scaling up? >> a couple of different ways we make money here. certainly just by capturing growth, organic growth of consumption of electronic - -- electricity. that has been modest the past several years. we pursue contracts with municipalities surrounding our jurisdictions. additionally, we make investments in the grid, in new power plants. matt: and acquisitions. >> and acquisitions as well. we have had successful acquisitions that have been profitable as well. matt: is now a good time to buy? if you have access to cash, we have a function here. i can see your debt, $36 billion, relatively spread out. this big green stripe means you have a lot available. you are pretty well-financed. >> we have a solid balance sheet, no question.
right now, our focus is on closing acquisition of the piedmont natural gas business which we think is a terrific franchise for us. and then on exiting our international business. that is where our focus will be. matt: are you happy don't have to refinance debt? how difficult is it in this market? >> right now, we have a low-cost debt structure. we have taken advantage of persistent low rates as we build infrastructure. we have taken advantage of most of our refinancing capabilities and are in pretty good shape. matt: i wanted to ask, as far as shares go, utilities in general are coming down today. influentiald hedge fund investors saying they want to short utilities going forward. how do you think the sector is positioned as far as equity markets? >> we are in a very strong position. there is no question we are interest-rate sensitive. valuations have come up.
i always think about utilities as a long-term play. we have been in business at duke for over 100 years. i think we have terrific franchises, terrific growth investment opportunities long-term. matt: buy and hold? >> absolutely. matt: stephen, chief financial officer of duke energy. ken donald trump and paul ryan make nice? we are learning the presumptive republican nominee and house speaker will meet next week. we will tell you how we think that will end up, next. ♪
business flash. more bad news for puerto rico, which is already facing crushing debt and concerns about the zika virus. the island planning board is anticipating a fifth straight year of economic decline, including a 1.2% contraction in the current fiscal year and another 2% fall in 2017. meanwhile, treasury secretary jack lew visits puerto rico next week to highlight the impact of that debt crisis. prosecutors in geneva are expanding their investigation into credit suisse and one of its former well managers according to people familiar with the matter. prosecutors have identified three more employees as suspects. cash pilehathaway's will probably back above $50 billion by june. that will give chairman warren buffett a bigger budget for purchases. billion after
completion of the january deal that will likely jump in june when he is allowed to deem shares held by berkshire. that is the bloomberg business flash. donald trump is the presumptive republican presidential nominee. many party leaders are withholding their endorsements, at least for now. that includes house speaker paul ryan who says the billionaire needs to demonstrate he shares conservative values. trump firing back saying i am not ready to support speaker ryan's agenda. perhaps in the future we can work together and come to an agreement about what is best for the mark and people. they have been treated so badly for so long it is time for politicians to put them first. this hour real the two plan to meet. paul ryan says donald trump will meet him another house leaders. thanks so much for joining us. how long is this theater going to play out? obviously at the end of the day,
republicans in the house will support their candidate running for president, right? >> it is likely they will ultimately get behind trump. this happened suddenly. ted cruz inxpect john kasich to drop out within 24 hours of each other. i think paul ryan is being a vessel for the misgivings as skepticism many republicans in congress have for donald trump. he did not lay out specific demands. he did not put out specific all tomatoes -- specific ultimatums because he does not have a lot of leverage. he is trying to give voice to this the satisfaction in the hope donald trump will make an effort to unite the party and bring them along. it is on the nominee to get the party behind them. what paul ryan did is he made a extraordinary statement, in that never in modern history of presidential primaries has a
major party leader not gotten behind the presumptive nominee. it is remarkable in that light. matt: hillary clinton probably does a great job uniting the republican party even without donald trump's help. what do you think he has to do to close it with paul ryan? what is paul ryan have to do to come closer to donald trump? >> that is the million-dollar question. donald trump is not ready yet. he was notterday ready to embrace paul ryan's agenda. they disagree on fundamental things, two big things about donald trump's campaign that catapulted him to start a. calling for an immigration crackdown and really against free-trade deals. paul ryan is on a different page on both issues. won oversaying i millions of voters campaigning on these issues and the party has to move toward him. that will be the tug-of-war as to where they meet in the
middle, if donald trump is going to move and to what extent republican leaders and members of congress are going to move. another criticism of trump coming from susan collins is he needs to stop insulting people. you are here in a variety of different things. they are all trying to influence trump in any way they can. matt: we are seeing a cnn reporter tweeting dick cheney is getting behind donald trump. what do you think that means? if there is an old republican guard, he is part of it. right? >> it is a good bet the vast majority of republicans will ultimately get on board because we live in a country where it is a binary choice, it is donald trump or hillary clinton. if you are a republican, it is difficult not to get behind the republican nominee if the alternative is hillary clinton. yesterday, rick perry endorsed donald trump. rick perry was the first to
torch donald trump last year. he gave an entire speech calling him a cancer on conservative saying a trump nomination means the republic and party goes into the graveyard. there are a number of republicans who have gotten on board. you are seeing a yes camp of republicans who will support trump. you are seeing a maybe cap. paul ryan is in that. it remains to see how big the no cap will be. matt: i'm seeing a lot of republican tweets saying they will not vote this year. i have not seen many republicans say they will vote for hillary clinton. >> that is correct. there have been whispers around heard from some republican operatives they will vote for hillary clinton. some say they will vote for gary johnson. on a biggerpicture, picture, it is a very small group of people who say they are not going to vote for donald
trump at this point. they have a sizable voice because a lot of them are prominent figures who work for the rome he campaign -- who worked for the mommy campaign in 2012. it is a significant portion. across the country, it remains to be seen if it will reach a sizable number two significantly hurt. matt: thanks so much for your work. let's head over to the markets desk where julie hyman has the latest on what is going on with equities. taking a look at other stocks moving on earnings today. julie: the 3-d printing company came out with numbers. in particular, revenue fell by 5%. a bigger drop than estimated. shares down about 3%. the company has been trying to shift its strategy. it is trying to cater more to corporate clients. it has been trying to execute this turnaround for quite some time. shares are up more than 50% year to date.
there is relatively high short interest, although it has come down. look at short interest. you have the stock price and short interest ratio. as the stock has climbed this year, we have seen some shorts get squeezed out. of sharesbout 24% floated are sold short which is a relatively elevated level. another company we are watching is activision's blizzard. first quarter profits almost double what analysts were projecting because of the acquisition of king digital. benefiting from online sales in particular. the forecast for the second quarter also above estimates. those shares up nearly 8%. the serial company blowing away analyst estimates. $.87 per share in earnings. $.41 is what analysts had been anticipating. the company bought mom brands, its latest acquisition.
binge been on a buying trying to diversify away from being just a cereal company. that is one of the elements that appears to be paying off her post. matt: activision blizzard just came out with a new addition to the "call of duty" series. a new map pack. you can play a bunch of new maps. if you come over this weekend, i will show you how to do that. coming up, shares are trading in the 52-week low, falling 14% yesterday even as the company met estimates. the c.e.o. is going to join us in an exclusive interview and explain, next. ♪
we turn to earnings this week. bondage first quarter sales rose 3% year over year to $27 million driven by a 76% revenue increase in its business division. it made one of its biggest acquisitions to date acquiring nextmo. for some reason, wall street was not feeling the love. yesterday, it tumbled 14%. recovering slightly today. i'm joined by alan masarek, c.e.o. advantage holdings -- of vonage holdings. i'm guessing wall street does not understand the acquisition. >> we had a great quarter. matt: let's talk about earnings. first-quarter sales have fallen 3%. your sales are up 3%. you are not looking at the earnings slump we are seeing with the rest. bidta.had 42% of eve
the business component was up 76% basis. all things pointing in the right direction. what we announced yesterday was an a concession -- acquisition. it is a strategic deal for us. over the last two years, we have moved from residential routes to being a large player in the unified commute rations service space. mo is in the communications platform space. we see the convergence. they are the two segments of cloud to mutations. one of thexmo, largest in the world and cloud communications. for viewers who are not as familiar with your company in that space, everyone knows what vonage does from a residential perspective. you are looking to move towards more business in the cloud man residential customers by next year.
>> that is correct. in 2017, we expect business in total will exceed the residential revenues in total. we have jumped into what we now call the business space, we refer to as unified medications. we just announced the signing yesterday of nexmo. the unified communications space where we have been recently and now the platform space that nexmo does creates the broader cloud communications. r. all hail an uber ca when you want to communicate with the driver and say i am on the corner, you are not leaving the uber app and dialing. you don't have that phone number. you are sending a text message or a voice call in the app. that is happening through an api to a communications solution. that is the communication platform solution. today, the communication platform is about how you connect with the customer while
the unified communications space has been around how the business can mix with employees -- connects with employees. traditionally, your phone system was on premise. that has moved to the cloud. that is what we have done the last several years. now we are adding connectivity to customers through this acquisition. matt: how come wall street does not get this? what was a $10 stock, why the disconnect when it comes to wall street understanding? >> i think this acquisition is like a fine wine. it is going to increase in value over time in a significant way. i think it is going to be viewed as a very smart deal. it is undeniable in my sense that the cloud communications market, all things are going to the cloud, will be represented by two segments. how you work with the company and employees, where we have been. and how you work with the company and customers. that is what the nexmo
acquisition does for us. what the start market does, i don't know. we are up clearly from a year ago nicely. we think our future is extremely bright as recognized by the numbers we posted at the quarter. matt: you are up from the beginning of 2015. he were down at about $3. you rose to about $7. now you are about $4.09. it may be a good time to buy the stock. thank you, alan masarek, c.e.o. of vonage holdings. vonnie quinn will follow today's markets as we head to the close. ♪
good afternoon. i am vonnie quinn. here is what we are watching. as the jobs report comes in, traders need to take a step back and analyze the situation. internalslook at the of this employment report, it is mixed. to conclude that quickly that june is completely out of the question and we are unlikely to get a hike in 2016 is going too far. vonnie: u.s. stocks are headed for a down week, but the s&p 500 crossing into negative territory for the year before returning to the green. and it is billed as a market like no other.