tv Bloomberg Markets Bloomberg February 3, 2016 2:00pm-3:01pm EST
good afternoon. appeared morea volatility slamming the stock market as stocks recover from the earlier losses as oil climbed and the dollar weakened. wells fargo, bank of america and citigroup all getting hit. concerns about the global economy and oil weakness needs a tough outlook for financial giants. betting on jebs cuts and possible asset sales to turn around the company. -- a job cuts. first come let's head to the markets desk where julie hyman has the latest. seen all this bouncing around in today's session. that is continuing right now. all three major averages now lower. the dow was higher not that long ago.
the nasdaq has been leading losses. just as it has been all year. you can see the bouncing around that has occurred. stocks fell to the lows of the session just after the inventories report. then had been bouncing around ever since then. in terms of the individual , heavily tilted toward tech here. microsoft mouth about, amazon, all of them declining. amazon,soft, alphabet, all of them declining. wells fargo representing the banks here, which are also selling off as we continue to see the yield curve narrow. >> what is the effect on the oil prices? julie: the exact opposite effect of what you would expect.
we saw it build and inventories that was double what was expected by analysts. yet, oil prices after initially dropping then surged higher, now 6%. there was an interesting story this morning pointing out there is still a lot of optimism out there about whether oil prices will end the year. we have the oil price map here in white. .ere are the stockpiles numbers the stockpiles going higher and yet, there is this perception out there that those are going to be worked down by the end of the year. shall production will continue to cut back -- shale production will continue to cut back. on thesensus forecast median basis for the end of the year is $46 a barrel for wti. if you look at the oil stocks today, their leading the gains.
gaining.exxon mobil the other commodities also doing welker gold prices are rising today. copper prices rising today as well. -- the other commodities are also doing well. a services report this morning came in below estimates. saw thewhen we first in stocks. the euro gaining against the dollar. the dollar falling against the japanese yen. the dollar weakness seems to be providing that is for commodities. mark crumpton has the first word news. mark: the latest news out of theresyria peace talks, is an announced temporary pause in the negotiations in geneva. the process will resume later this month. the announcement comes just two days after the first talks in two years got underway.
president obama has paid his first visit to a mosque in the united states. communityn with activists, chaplains and public health professionals at the islamic society of baltimore to discuss religious tolerance. it was a deliberate rebuke to republican presidential candidates who they say have stoked islam a phobia. hillary clinton's move last year to lock in fund-raising alliances with 33 democratic party's is paying off and handsomely. she has already added nearly $27 million to the mountain of hard money she has raised so far. has inked one such deal, netting a total of just $1000. cnn reporting that rick santorum is dropping out of the republican presidential race. rand paul also suspended his
campaign earlier today. gets, the better the mosquitoes carrying the zika virus are at transmitting the disease. in the past come the weather has played a key role, as have economics, travel and the mosquito control and the weather pattern known as el niño also has a role. scientists say you cannot just blame one thing. they caution it is too early to link this one to climate change. global news 20 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. as anxiety about global growth resurfaces, when legendary investor is keeping calm. bill miller said "the u.s. economy remains strong with a low likelihood of recession unless stocks fall so far, there is a lapse in the wealth
effect." theme ask you about session. a lot of people talking about it. i think we would be in the same camp as bill miller. recession inty of the united states is very low. the possibility of global recession is very low. there's a lot of fear out there that slower growth in china, lower oil prices, suddenly the u.s. economy will stop growing. there is a lot of good going on in the u.s. economy as well. investors have to be not as fearful about the environment. david: are there signs in the credit market? >> people are not talking about they say we are very close to recession. we have seen a significant climb in equity prices and oil. it's in their think is going on in the credit markets where you are seeing significant amount of
spread widening or decline in prices on bonds. particularly high-yield companies where you are seeing high-level defaults. the areas showing the greatest signs of recession are in the energy sector. the question for bond investors like myself, is that going to follow through to the rest of the market? investors have just ran from credit investments because they are concerned about recession and the fault and we think that is an opportunity. david: i want to ask about oil. how are you making sense -- what is your outlook for oil? >> it is very hard to have a view of any market and not have a view on oil. typically, you would find that bond investors most concerned about oil prices going up, now we have to say lower oil prices,
is that bad for risk assets? of time wheneriod we still have a significant imbalance between supply and demand. we had to besks concerned about, but it is a near-term risk. we look at the second half of the year, the energy market is going to balance. when you look at what that means to investing, that means if you think you will see balance at some point, you don't have to be concerned that lower oil prices today will lead to recession. david: let me ask you about the fed. back in december, potter rate hikes in 2016. a lot of people are second guessing that. -- for rate hikes in 2016. our rate hikes in 2016. >> the fed is watching the markets. financial conditions are
incredibly important that the decision. -- to the fed decision. the central bank of japan has done the fed's job for itself. the outlook for increases in 2016 is meaningfully lower than the for increases that were predicted a couple months ago. four increases. you mentioned the bank of japan going to negative rates. what is the follow-up from that going to be? is a challengees for all investors and also individuals to figure out how to cope. i believe is that negative rates as an attempt to fix a significant problem where there is a low level of growth in
low levelsjapan and of inflation. if we go to negative rates, that will force money out of those markets, cause currencies to devalue and hopefully spark some interest in the overall economy. that is a good short-term solution. in the end, it creates a war. everyone is moving toward who can go lower faster. we think lower rates is not good policy. you think about investing, what do you do when there are negative rates? like negativen't rates. they did not like zero or low. they will not like negative. what do you think will happen in the markets? the u.s. market is likely to be a safe haven. ,e are growing strongly enough 2% growth, we have positive rates and credit markets that are offering a lot of yield to investors. we will see a decent amount of capital flowing out of europe and asia.
the credit markets are extremely attractive for investors to move towards. david: coming up, if that that does not hagan just interest-rate again this year, what does that do for banks? bank of america, goldman sachs and citigroup have been selling off. we look at their chances for a rebound. olive garden back in style as fast casual chains like to berlin noodles and company -- like chipotle and noodles and company face competition. ♪
david: welcome back to bloomberg markets. time for the bloomberg business flash. halliburton is preparing a proposed package of asset sales and hopes to ease eu competition concerns. halliburton says it will offer remedies soon after the you pushed back the deadline for reviewing the deals 20 working days. health has a new location, opening a pharmacy in a target store in charlotte, north carolina. toyota is killing the scion brand. the vehicles will be rebadged as toyota. scion was known for its funky
designs like the xb. let's head back to the markets desk where julie hyman has a check on company movers. looking at the financials, one of the biggest drags on the major averages today. the s&p 500 down about 1.4% at the moment. when you look at what is in the financials, the big banks are fargo down, bank of america, jp morgan, citigroup also been today. it is not limited to the big banks. regional is also feeling some pain today. suntrust lower as well. they have been lower for this year. there's been a lot of concern about what is happening in the yield curve come in the rates market. i've mapped the bank index against the yield curve. i chose the 10 year and two-year
here. what we have been seeing is a narrowing of the yield curve, the banks going down at the same time. a reflection of net interest margin, one way you can map out that interest margin. the difference between what rates they borrow and what rate they lend out. one of the things that has been seeing some -- putting some pressure on these banks. david: financial stocks have fallen twice as much as the overall s&p 500 index this year. what is behind the selloff? laura, let me start with you. let's start with what economic -- in that having a tangible effect here? laura: we've seen this route a couple days now. anything today is exacerbating what has already been happening this week. about we were talking
what the heads of these banks are saying when it came to the worries about energy. that a real concern for a lot of these banks? >> he thinks a lot of the market fears are way overblown. it is a part of the puzzle. youets are saying to banks, are guilty until proven innocent. the energy concerns, that is one big part of it. are we going to a recession? the banks are being valued as though we are already in a recession. we are going to be in one. investors are saying i will not wait for that. david: what does this say about the market in general? this underpins a lot of other companies. what does it say about the whole market? >> you see in investing class which does not have any
tolerance for risk. they don't want to even be around that. david: let me ask you about the role of the fed in all of this. i was talking to my last guest about his outlook. this is something bank's are very concerned with. laura: they've been saying for years that we will be better as rates rise. ,f they are not going to rise that is going to be an overhang on these stocks. different analysts have said people were overweight these stocks. once this new thinking is coming showd -- some predictions one rate rise in december. baby things change throughout the year.
-- maybe things change that the appeared that is not a lot of rate rises. -- maybe things change throughout the year. that is not a lot of rate rises. >> they will be much more profitable. they can make loans, their lending will be at a higher rate and their deposits will be at lower rates, so their margins will rise. that will not happen this year. when does it happen? the oil market is going to rebound later on in the year. it is possible we have a very painful couple of months and we see a rebound at some point. there's too much fear right now. me ask you about one element we focused on during earnings season. there have been cuts. yet, there was a sense that that cannot proceed going forward. the cuts were made, but the story does not end there. if you are looking at expense
cuts, you can only cut so far to make up for last returns elsewhere. -- lost returns elsewhere. where will we see areas of growth? i don't think anyone has answered that question right now. ahead, while to bully may have caused some investors to lose their appetite, all of garden is bringing it back. chipotle may have caused some investors to lose olive appetite, all o garden is bringing it back. ♪
the red for most of the afternoon -- and s&p happen in the red for most of the afternoon. .5%.&p down we saw the dollar down the most in seven years today. analyze looking to washington tomorrow with the jobs report. what that might look like. we're seeing the dow up .1%. trying to recover from its crisis, investors are trying to rediscover their taste for olive garden. garden surpassing its peers -- darden surpassing its peers. investors trading in their greed burritoreadsticks -- for breadsticks? this company has had a bit of a
turnaround. >> olive garden is back. it's almost surprising. when darden was going through oft period of rough quarters people were worried it was a sold redand -- they lobster. that was dragging it down. since star board got involved, they overthrew the board, they replaced the ceo. it is doing pretty well. it's only been three quarters come as we don't know how sustainable is going to be good to say darden is outperforming most of the restaurant industry 's down as much as it is it shows how much things can change and how much activism can impact things. david: you mentioned the leadership change we've seen at darden. were big changes made to the menu? what tangibly changed about the dining experience?
>> its has like they did change the menu. the dishes that were not authentic italian were asked. -- axed. making it more profitable, what investors want to say. cutting costs. they have longhorn steakhouse, capital grille. they are improving at this point across the board. analysts last week put its rating at underperform. it seems they are just on the brink of coming back. i think it can be sustainable. at new york city, we don't go to these types of restaurants. .y family likes olive garden i can see it being sustainable if they can stick to what they are doing and not get off track again and really focus on making sure it is the experience customers want.
keep the same customers coming back and not worry about everything else. david: what can chipotle learn? with this food illness outbreak, you don't want companies so worried about cutting costs to cut the wrong costs. darden assured me that is not a concern. david: thank you so much. on the find more bloomberg. oil is rallying today. down significantly on the appeared at the commodities close is coming up next. -- down significantly on the year. the commodities close is coming up next. ♪
mark: the president discussed religious tolerance when talking to university chaplains. president obama: you're worried about the threat of terrorism. you also have another concern, ist is your entire community targeted for the violent acts of the very few. mark: aids, they say, have stoked islamophobia. the civil aviation authority has found no evidence of a criminal act in an explosion on board an
airliner. the blast which the eyelids that he thought was caused by a bomb ripped a hole in the sight of the jetliner. the flame was able to make an emergency landing. the flint, michigan, water crisis has created finger-pointing. >> why would they be paying for water they can't even use that is poisoning them? american. this is not a third world country. >> everyone deserves safe drinking water. and that is the expectation.
mark: they said it was a failure at every level of government. proposed using $30 million to give residents a credit for the portion of their water and sewer bill that is for drinking, cooking, and bathing. who will sing the national anthem? y gaga. journalistsur around the world. i'm mark crumpton. let's check on the major indexes again. in the s&p 500 also in the gray now up about .2%.
gold climbs to a three-month highs investor scale back expectations for more u.s. rate increases. to 7% today. two is about 500 million barrels. the short group says it is the first time since babe ruth was hitting home runs in the bronx. wti closing at $32 a barrel. joining us from houston, let me ask you about all the hurt we have seen in the energy sector. >> the fastest and most damaged sector is hitting first. it has been pretty much everywhere.
when you look ahead, where are you seeing the most potential opportunities? m&at will be a terrific year because of the breadth and depth. consolidation, distress, integration, and portfolio deals. that is where companies are buying across segments powered by natural gas. there is more interest, so it should be a very exciting year. david: when you look at natural gas, you alluded to utilities. this is a section that has been hit fairly hard because of the warm weather.
>> the so many different ways it can be used, we are exporting natural gas for the first time. the petrochemical complex obviously drives the gas powered fleet in this country. and ultimately can grow to a transportation field. to be part is going of a lot of m&a activity this year. are traditionally oil companies waking up to that? >> absolutely. we know from our client base where companies are traditionally oil-based or even of the of that part complex.
david: i can let an interview go by without talking about the fed. >> you see it talked about the joke. everybody is, but when they talked about raising, that's when you saw the additional acceleration of the decline. base valuations are still discussed. the forecast 10's to take precedent over the fed talking and the fed watching. david: what do you make when you look at outlooks? really rolling those back and scaling those back.
>> it is why there are some forecasters going for higher oil prices down the road because there is such a cutback in the upstream development budgets. keep in mind that some of these companies have tremendous cast reserves -- cash reserves. there are $500 billion available capital in the energy complex itself that can be used to make consolidate merger deals, integration deals, and add to portfolios. it is the same money used differently. david: coming up, just six days to go to the new hampshire primary and donald trump is turning up the rhetoric saying that rival ted cruz one by committing fraud. mayer, is it too late to
marco rubio came in better than expected monday night. >> marco rubio is definitely on the upswing here. the bloomberg breakfast event, he will be dropping out if he got smoked in new hampshire and doesn't want to be begging, like he said. rubio is hoping to claim victory and has been fundraising a lot off of the third -- the
third-place that he got. and greenberg might move for his support from jeb bush over to rubio. >> let's hear a bit of what he had to say. >> to put your money and support behind rubio? >> probably. probably. >> when would that become a certainty? >> probably in the next one or two states. will it continue to new hampshire or probably after the primary? had rand paul drop out this morning and rick santorum has indicated he's going to be dropping out tonight. the pressure is really high for john kasich and chris christie. they have been endorsed by some of the more moderate voters. ,nd especially for jeb bush
he's had so much money in this race. it's going to be tough going forward. trump i watched donald after the speech and it was a bit conciliatory. and hasking back concerns about how the caucus was conducted. does he have a point or is it sour grapes? it thatcritics has said the mailer that the cruise camp sent out, it has been controversial. but he did make a remarkably uncharacteristic and not quite gracious concession speech but he has rearmed his much is no. hillary sanders --
hillary and bernie sanders going back and forth on progressivism. said if theas just selection were just about issues, she would win in a landslide but this is a majority white state and very progressive . he's very much expected to win here. clinton implying that maybe he will win in great part because they are so close to vermont. you certainly see that tension playing out here. david: the miss mark halperin and john heilemann later with the bloomberg breakfast briefing. campaigns, itn starts at 5:00. let's head to the desk. you're looking at earnings,
winners, losers and we're seeing some green here on the board. >> things keep flipping around today. you are trying to explain the price action today, good luck. he said it much more witty than that. it might beat estimates and cut 10% of its jobs as it is consolidating, moving the business to the cloud. life science is the medical devices maker coming out and raising its 2016 earnings forecast. replacementant belts. come out with numbers that also beat analyst estimates. in the losing column today, we , missingonal oil well
on the revenue line. the strength of the job. but see what the earnings scorecard is. the typical breakdown, if you will. about half and half on the sales aside. it is more overwhelmingly that companies are beating overall sales. and earnings falling 5.1%. it's never as bad as estimated. with of it has to do forward estimates as well. david: unrelated, we have been
and in the face of a lot of legacy, we have built 's of revenue. last year totaled $1.6 billion, about one third of our total revenue. he made this entirely new and can carry us to the future. all four of those areas are projected to keep going for the for seeable future. we've gotten ourselves a piece of that. we built a great products that can take us far in terms of mobile and user base. we have more ideas of where we would like to go in the future. we really set ourselves up for future growth. >> if your tenure at yahoo! was a football game and think that yahoo! has no future as a standalone company, where are we in the game? is this your hail mary pass with five seconds left?
it is a real way to maximize value. we pursued it last year and have now paused and are now working on a reverse spin. it does well with our strategic plan and building the most value , recognizing the most we possibly can. >> let's talk about strategic alternatives. you are pursuing three different plans at the same time. how far along our discussions selling the core business? >> we view all three of the areas of being very confident. we are focused on being the best version of yahoo!. we recognize the value that we for thethe assets different transactional pieces.
those are things that are definitely aimed at maximizing value. they can be pursued in parallel. they are complementary. yesterday, the board will be engaging on strategic proposals. they will be commenting further on that process. >> there have been offers for the company. >> those communications would stay private.
from bloomberg world headquarters in new york, good afternoon. i'm betty liu. markets are moving right now with all three major averages flirting with positive territory after opening down this morning. the dow leading the way thanks to energy and materials. bearing the brunt of a negative stint in the market, the financial firm in the s&p down 12% so far this year. hank greenberg says the markets don't make any sense to him right now and it feels like they are rolling the dice. the former chairman and ceo of aig. are about an hour away from the close of trade and it has been a wild day so far. the bulls have the markets.