Transcripts For BLOOMBERG Bloomberg Go 20160427

One full percentage point. Ugly for apple, not great for twitter. Come outperformance on the dax. Switch up the board just very quickly and get the other asset classes. The bti at 45 a barrel for the First Time Since november. Wti at 45 a barrel. The aussie dollar down by 1. 83 . Rba might cut rates again. There are the big moves in the wider market. Julie ton of earnings out today ton of earnings out today. Adjusted eps at . 45. Weve been talking about this story that comcast is in talks to buy dreamworks, according to the wall street journal. Glaxosmithkline in london ofting as well with core eps those two stories are very different from what we are seeing across the tech sector. Let me start with apple. Obviously come apple missed by a longshot. Even though we did expect apple revenue to fall. It fell for the first time in a decade. Smartphone sales were down. Analysts knew that was going to happen. A disappointing outlook for the current quarter. Apple tends to do that. They did not beat outlook in this quarter. Apple down 7. 5 in the premarket. The worst performer in the dow. The apple is the worst performer in the dow since it entered. From anook it out number of indexes, they would have performed better in the past year. Dow, apple hashe lost almost a fifth of its value. Company. Ll a massive revenue was 50. 6 billion. Bigger than the revenue of 90 of the other companies. Forecast Second Quarter revenue that will fall far short of analyst estimates. Even as it added more active users than analysts were looking for. 5 million monthly active users in the First Quarter. Analysts were only looking for 14 in theis down premarket. My first order sales trailed analyst estimates chipotle also, firstquarter sales trailed analyst estimates. Samestore sales dropped for the second straight quarter. Analysts were looking for a 20 nacho stock, nacho problem. David apple is still a very robust company. It has become a Value Company rather than a growth stock. Numbersyou took those out yesterday and had no basis for comparison, you would say that is the nominal a phenomenal company. It is no longer a growth stock. It is a value play. Gina that is what we see for the large tech sector. This is happening across the Technology Sector in general. Generallyes are producing reasonable Earnings Growth, but the market has such High Expectations because there is no Earnings Growth anywhere else. They are still growing, but not as fast as they used to and not producing the value orientation in their broader evaluation. David the tech sector has been driving a lot of the growth in the market. If they are not going to do it, who is . Gina coming to this earnings season, it was seven of the the only growth in the index is coming from the Consumer Sectors and health care at this point. Gina Tech Companies are lower. Billion off the market cap of apple. An interview with larry fink. He has been speaking out against negative Interest Rates. The rethink joins Erik Schatzker now. Larry fink joins Erik Schatzker now. Erik i found an obvious place for us to begin. What do you hope to hear from the central bank . Larry it will be very similar to the last statement in january. Conditions have deteriorated since september. They are worried about corporate earnings. We are seeing a slowdown with u. S. Companies. You still have a global uncertainty, uncertainties of brexit. They will wait and see what happens in the world and how our economy plays out. I think corporate earnings have shown a pronounced weakness. I dont think it should be a surprise, we had a huge slowdown the first two months of the year. We have an election in this country where there is more fear mongering then talking about hope and a renewed future. I think consumers will hold back it is allvident playing out that the economy is not growing as fast as we expected. As fast as the fed expected. They will be on pause until they seen elevated increase in the economy. Elevated increase in corporate earnings. Plot tells us the fomc still plans to raise rates by 50 basis points this year. The market tells us we will only hike. E. 5 basis point jamie dimon says he is worried the fed will have to raise rates to quickly to catch up with inflation. The market tells us we will only see one 25 basis point hike. Around that, there is very little inflation. We have seen increases in Energy Prices from those very deep lows. I dont see any evidence at this moment for inflation. I can paint the scenario why inflation will pick up in 2017. I dont think that is an issue for 2016. They have essentially another seven months to determine that path. I would be in the camp of 25 at best this year. Erik at best, and possibly flat . Happensets see what with the spanish elections in june, the brexit elections in june, how the u. S. Economy performs in the Second Quarter. Mood intoe consumers the primaries and after the primaries . There will be plenty of time for the fed to act. It is appropriate for them to be on pause. Erik is the inflationary scenario the odds on scenario . The biggest private equity firms, blackstone, kkr, carlisle are predicting a recession within the next two years. A recession does not usually come with inflation. Larry there are two very binary outcomes. I dont know what path that will be. I have been saying this quite a bit worldwide recently. I believe what is happening in spain with the lack of inernment since the election november, they will push the new elections in june, there is not really any real government there. You have the fear of brexit in the u. K. , the phenomenon of new in the United States with donald trump and bernie sanders. This is an issue around how many people in these democracies feel like they have been left behind and are worried about their childrens future. Elements,all of these this political instability is going to force whoever is the leader of spain, of the u. K. And the u. S. , we will see greater emphasis towards fiscal policy. I think this will be key. Increase in a major fiscal policy and i do believe the candidates in the u. S. Are trump and clinton come i think both candidates will be talking stimulus in policy the form of infrastructure. People of the larry if you spent in infrastructure, that will be frontloaded expense on the back end, it does produce positive gdp. You are creating better jobs, more efficient grid, better, more efficient airports. I do believe that is what we need in this country and i believe every politician is going to have to address this uncertainty, this Political Uncertainty of we have to ask ourselves, why are we seeing these phenomenons and some many countries . That will be the narrative after the primaries. Erik i want to take that view to the marketst and investing. We are speaking to larry fink, the chairman and ceo of blackrock. Erik this is bloomberg. Im Erik Schatzker and im speaking to black rock chairman and ceo larry fink. You see the economy evolving and it is not a pretty picture. If the economy is growing at 2 , how constructive can you be in the stock market . Larry if we see a path towards more fiscal policy and more investing in infrastructure see theto 2017, we can second legs of the rally inequities. In equities. We can see Monetary Policy changing rapidly. You will see rising rates, faster than the forecast. We would have industries that underperformed come out performed. Bank stocks doing well in that scenario. Many of the Commodity Companies themhave done poorly especially for manufacturing and infrastructure investment, you will see those industries doing much better. Erik what if it doesnt happen . Larry if we continue to have a dependency on Monetary Policy, it is very grim. Erik what is grim . We are harming savers worldwide with negative Interest Rates. We have forgotten why people safe. For rainy days, they save up for events. They save for retirement. When you have low or negative Interest Rates, it forces you to save more to get to that necessary pool of assets you needed for retirement. Monetary policy was meant to be a two to threeyear gap to bridge the economies. To be sonments dependent on Monetary Policy as the sole means to stimulate the economy and rebuild the economy, especially at a time when technology is advancing more rapidly, it is destroying jobs very rapidly in our country, we are using the mantra that it is global trade. It is more technology than just global trade. Erik what is the bear case . If we dont get this fiscal injection come if we dont get this infrastructure spending, what happens to the stock market . What happens to treasuries and credit spreads . Larry we will have a very anemic to declining equity market. Erik will we have a recession . May if we see more pure, more hoarding of cash. Central banks talk about hoarding of cash. I call it saving because they need to save more because of slow and negative interest rate. Understand that the and weogy of retirees have an aging population, the psychology of people near retirement is fear. Fear they are not earning enough to meet the needs of their lifestyle they so desire. Erik you believe this fiscal injection is coming. When you mention bank stocks coming is that where you see the greatest value in the market . , go across stocks iorld and select them think if we had that type of stimulus im talking about, we would have the Central Banks take their foot off the pedal and moderately raise rates at a more accelerated rate and that would be good for savers, good for Financial Institutionss earnings, good for Insurance Companies to offer annuities again. Erik that is not happening right now. Does thewhat on earth bank of japan do . Last time they double down, the yen strengthened. Larry that was an outright mistake. That was one of my points of information that gave me this change of use related to fiscal policy. Monetary policy has run out of runway. Erik when he tells the government we could still go to. 5 negative . Larry autonomic has not even begun. Autonomic has not even begun. We talk about the free arrows in japan, ilabe has not even the third arrow most of the savings are in bonds. As a result of that, the sabres are now saving more, they are consumption has not met all the forecasts in japan. Rs are now saving more. They are buying food and other items and still, japan looks ane it is going to be economy with zero gdp. Erik what about china, then . Japan may be benefiting from that. Putting theirs foot on the pedal as fast as any economy right now. I have been in china twice so far this year. The chineseas leaders have done a better job in trying to reboot its economy than most leaders of the world. Of thein the fourth gear 10 year plan. Moving the economy away from an export manufacturing economy to a Domestic Service oriented economy. That takes tens of years and it is not without a many hiccups. There was very bad communication. They restabilized. Believe what they are doing now is doing very aggressive Monetary Policy in china right now. The banks are lending at any rate they have not done before. In 2016, china will look well beyond what we thought it would look like in 2016. It may mean the bubble is bigger for 2017 and 2018. The chinese are the host of the g20 in september. They will want to make sure their economy is a beacon of strength, not a beacon of this erik the bigger the bubble, the bigger the burst. Larry the economy is still growing. You can navigate out of this problem if the next phase of growth is not by a ballooning Balance Sheet. Erik if not, you get the bubble bursting. , the lossesd happen in the chinese Financial System what they were for u. S. Banks during the subprime crisis. The you believe that that should do you believe that do you believe that . Larry i said that is not going in mypen in 2016 worried about the manner in which they are accelerating their economy . Yes. Doesnt mean there is more potential for a bubble and a burst . Yes. Erik what do you think the odds are . Larry 20 . Erik 80 that china makes it. Larry yeah, but i dont like the 20 . In 2016, we will look back and say i wish i was in china. I think the equity market will do fine. Im not telling you it is a great longterm trade. Erik we talked about political extremism and how it is driving leaders in canada to take certain positions. It has been a tradition in this the next president to reappoint the chairman. Going to happen if there is a republican in the white house . Will janet yellen get kicked out . Larry i havent thought about that. Erik would that be bad for the economy . Larry it may be bad. Degree on the erik its about stability. That is why it was done before. Larry it would probably be thought of as bad. The transition from greenspan to bernanke was considered a frightening moment and then from llen if you get a qualified chairperson, you will be fine. Janet yellen has been a fantastic erik given the climate, can any president right now pick a treasury secretary from wall street . Larry i would hope whoever is the president would pick the most qualified person, whether it is finance, manufacturing or somebody with a long career in government. We need leadership more than ever to guide our nation forward. Fink is the chairman and ceo of black rock, the Worlds Largest asset manager. David a fascinating discussion. Coming up next, iphone sales. They took a big blow and it hurt apples income this quarter. What lies ahead for the tech giant . ai jon good day to you. The miners leading the losses this morning. Up by about seven points. Nasdaq futures getting hammered, down by 1. 25 . Ahead of the fed, the weaker dollar story. Bit lower,a little down by two basis points. The big one in the commodity of 45 ati breach barrel earlier in the session for the First Time Since november. It warm welcome back to bloomberg. Joining us today is Gina Martin Adams, making us sound a lot smarter today. David and because of larry fink. Larry fink was really interesting. He really went after the bank of japan. They have gone as far as they can go. It isroadly, he is saying the end of the effectiveness of Monetary Policy. Theres a lot of parallels, a lot of consistency between the bank of japan and the u. S. , Monetary Policy becoming too integrated and the need for fiscal policy to step it up. David the luck with that. Good luck with that. The whole process of what japan was trying to do was restimulated the economy through aggressive Monetary Policy, but the second phase erik what option do you have right now . Larry he has to talk to the Prime Minister and say i ran out of runway. Smart,u are getting very mainstream leaders of Financial Institutions saying low rates might be the problem. Does that resonate at all with anyone at the Federal Reserve . Gina it doesnt seem to so far. Maybe we need a bigger movement. The fed does seem particularly worried about the negative impact they will have about increasing rates, not thinking about the negative impact they may be having about keeping rates lower. David when all you have is a hammer, every problem is a nail. Jon the talk about the lending program, that is just to offset the problem on the other side. Maybe they will double down. Are we really going to see that . Gina when they did double down the first time, it was a very negative market response. They do seem between a rock and a hard place. They are in no place to tighten policy. Maybe they come up with something new. ,hey keep trying something new so why not . Jon the fed up first later this afternoon. For us, lets get across to vonnie quinn. Nnie a big night in the northeast for donald trump and Hillary Clinton. The republican frontrunner won all five primaries. Trump is closing in on the number of nominees he needs to win the nomination. I am me. I hear that, he will be president ial, he will be not president ial it is easy to be president ial. Im not playing a part. It started off at 17. It is down now its over. These guys cannot win. So, why would i change . Vonnie Hillary Clinton won four of the five states. Clinton has all but locked up the democratic nomination now. Clinton underneath all these worries, together, we are going to come together and we are going to Vonnie Sanders says he will continue his fight all the way to the convention in july. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. David after the bell yesterday, apple announced earnings. We expect them to be down, but they were down more than people expected. We have an analyst here now who has a buy on it. Brian white. He has a 185 target on the stock. It was pretty dismal and the stock is down in premarket trading, particularly on iphone. What do you see on the horizon . Brian in the very late stages of the iphone 6 series when they upgraded in september of 2014, i remember going to china and i go ask my contacts at they will upgrade and 70 said they would. Came out come i dont think there was a single person. You had a massive upgrade cycle , and now you are up against very negative,. Comp. Y negative there is volatility and weakness. David does that put it all on the shoulders of the iphone 7 . Ryan you have massive volatility around the world. You also have a Smartphone Market that is maturing. The incrementals people did not know the impact of the iphone 6s, but7 is around the corner. Iphone units yearoveryear bottom this quarter. The yearoveryear changes the worst point. Is the worst point. , there is a chance they could be cannibalizing brian overseas, it is when they cannot quite reach for the 6 or 6s. It will lower the afp moving forward. David it seems you may be more optimistic than apples. They gave up Forward Guidance saying we will be somewhat below what we are talking about, too. Lower were a lot brian we were a lot lower, but still cut our numbers. Inventory they said that the environment is tough. We dont know what will happen at the end of this cycle. We will work on inventories. That is why the stock is down. Point, we had the disappointment in sales, we had the disappointment in earnings, but we had a beat in actual unit sales of iphones. This is a chart over the last 10 years of iphone sales. Jagged as the new releases get more important. 51. 2 million iphone sales in units. We were only expecting 50. 7. Maybe the margins is a problem. What are you expecting out of the iphone 7 to turn this around . Buyers upgrading to iphone 7. There was a massive upgrade in china. Saw this year, they will climb 15. Comps are upgrade and easier. There will be some important new features. It will not be as big as the 6. There are some features that people will be interested in. David you been pointing to the larger context of the tech sector in general. Gina this is really important. What is tech doing for the Balance Sheet . This sector has the most cash in the entire s p 500. There was a lot of Balance Sheet chatter. What is happening with m a . Brian apple has done 15 acquisitions over the past year. They have never been a company to make massive acquisitions. General in tech in general, Earnings Growth has been week. Is a case to be made for more acquisitions, for sure. Gina do you think they would be more software and Services Based . Ryan definitely. We were in china discussing looking at software acquisitions. This is a hardware company. I think that is where the mojo is. Jon it is like china saying they will pivot away from the old engines of growth to new engines of growth but all investors care about is gdp. I have not heard much from you to justify how we get from where we are now to the target price. Is it a higher multiple, growth that is not being priced in right now . End of there at the journey, you have the bottom of the cycle, everyone is negative. It is very cheap. Times x cash. Historically, apple has grown. They will return to growth in fiscal 17. S p trades at 16 times. Im not saying apple will grow 39 , but can you make the case that they will grow 10 to 12 . You can. People say i would rather own is so mobile internet ubiquitous and never once life, maybe there is stable growth. So ubiquitous in everyones life. The ea function can do so much. We reported 198 2 5 of the companies are out. Streetmpanies beat the because the street is always lowballing, right . Tech is the only sector of these 10 sectors that has missed the streets estimates. If you take a look at growth, energy has been a huge weak spot for earnings. That was not unexpected. Energy earnings have fallen by 57 compared to the same quarter one year ago. Tech earnings are also pretty bad commi. If you dig into what is going on in technology, you can see that earnings forecast forward, you dont see a recovery from profits until the Fourth Quarter. It is pretty gloomy. Comp unfortunately, that in Fourth Quarter is pretty easy, too. Fourth quarter one year ago was so bad, you kind of wonder, how are we going to produce some growth in tech . That comes iphone 7 out and makes the gains for technology . Can you talk about what qualities you are expecting in that iphone 7 to drive the growth factor . Brian people upgrading from the 6. It will be thinner. You will have a thinner form factor. About. 2 millimeters. They will get rid of the headphone jack. You will have a different antenna, different aesthetics on the back of it. There are articles out there that say this might be waterproof. There are some things you cannot now, see thatht is going to be in the iphone 7. Upgradebe nice and you will say i want to own it. Jon the stock down 7. 5 . We take it to the u. K. , next. Barclays come a lot of banks struggling over the last month. Matt this is bloomberg. Ceong up, Glaxosmithkline Andrew witty. Jon European Bank earnings season underway. Barclays reported that revenue fell, worse than expected. Barclays earlier this year announced the sale of barclays africa. For more, lets bring in Stephen Morris from london. It seems to be the Investment Bank and trading u. S. Banks on wall street hammered. , they areo barclays not as bad. Explaining the 4 spike just as the results came out. , it you look at the results was driven largely by credit trading. This looks like it could be a one off, but investors do like the fact that barclays performed much better than it was expected to. What does jeff daly have to do next . Stephen that was the first question on everyones mind this morning. He refused to comment on rumors. Thatlly expressed interest he wants his business back. That is on the top of his to do list. Assets. Has billions of it is going to be a busy year. At the moment, it is looking like a good start for the new ceo. Jon the big question to citi right now, what is bob diamond know about the africa unit . David he loves africa. It is a passion for him. Jon the man comes back to get what he wants. Fomc will release its decision today. Or, probably a nondecision. You are predicting not only will they not raise, but they will be very cautious in what they say about future races as well. That is consistent with what weve heard from janet yellen over the course of the last couple weeks. The partk caution on of yeldon leads us down this path of thinking that maybe even two hikes might be on the high side of this year. At this meeting, it is going to come and go with very limited change. David every time they make a more hawkish noise, the markets dont like it. Are they backing themselves into a corner . Are the outsourcing Monetary Policy to the markets . Tom in fairness to the fed, i dont think that is necessarily at the top of their priority list. Do think janet yellen has some genuine concern about how the global risk might wash up on our shores. That is clearly not a view shared by everyone within the fomc. Rhetoric round of since the last fomc meeting, there are a lot of folks out there who do think the u. S. Economy can certainly withstand multiple hikes this year. We thought that that would give us four hikes this year, all on the back of a modestly rising inflation profile. Here we are talking about one hike instead of four hikes. It is all the result of Janet Yellens more negative view on the backdrop. David we are joined by Gina Martin Adams from wells fargo. My question for you is really surrounding that Global Growth commentary. Recovereds have substantially since the fed started talking about Global Growth as a concern. Upl the fed note that em is and the dollar is down and global risks have eased substantially . In so many ways, you are preaching to the choir. I agree with everything you said. Financial conditions blowing out, look at highyield edx. You are back to where they were when they were hiking rates in december. There are these uncertainties that are lingering out on the global landscape. Weve heard a number of fed officials highlighting brexit is something that is a real concern for the fed. Weekrexit vote occurs one after the june fomc meeting. Is a real concern, how will they be able to raise rates in june . These are just the known things, right . It is the fear of the unknown that spooks the fed. Think about when china devalued back in august. The fed had a holy cow moment. That is why the hike in december was derailed. Always the ones to watch out for. That was tom porcelli. Dont miss our fed decision special. Matt time for off the charts. Gina martin adams is here to break down some data before the fed decision. First off, i want to talk about the probability of a hike. It,he futures market sees no chance of a hike, but 2 chance of a cut. What is up with that . Gina it shows you the deflationary concerns that are pervasive. Everybody has written off the prospect of the fed hiking until june. Even then, only 21 . You dont get above 50 until november. The market is very complacent with respect to the fed. Any language that suggests they will consider something this summer could create volatility. Matt wouldnt you see a chance . We have the dollar down 6 . The chance of the ecb raising is not happening for years. Gina the dollar being down uses the probability eases the probability. Some case to start moving now. Core. Rouble at apples the stock plunges 8 in the premarket. David the fed to decide. Markets will watch closely as the fed wraps its meetings up. Jon crude rising, touching a fivemonth high while Standard Poors strips exxon mobil of its aaa Credit Rating. David welcome to the second hour of bloomberg. Cohosting with us today is Gina Martin Adams, managing director and equity strategist at wells fargo securities. We are so happy you are here. Gina thank you for having me. Jon second hour of bloomberg ahead. We will be talking to one of the two analysts that has a cesell n apple. First of all, lets get to those markets for you. Underperformance in the u. S. Dow futures off by 38 points, five. 0 futures negative oil just south of that level it weaker dollar story through much of the session. 11298. Llar at matt apple out yesterday with a story that does not get old because not only is it the first time revenue has fallen in a decade, but they missed the analyst estimates and missed on profits as well. Their outlook also missed with the street was looking for. Apple is down 8 come a huge move up for a 600 billion stock. Thatis the first time apple has missed earnings estimates since 2012. Apple is also the worst performer in the dow. Down 19 since it was put in the dow in march of 2015. Underperforming even Goldman Sachs this quarter. Twitter forecast second what a revenue that will fall far short of analyst estimates as well. Monthlythey added more active users in the First Quarter than analysts were looking for. For 308. Were looking the shares are down 14 . Chipotle posted firstquarter sales that missed even the dour analyst estimates. The first loss as a public company. Samestore sales dropped for a second straight quarter. There are concerns about the safety of that food and those concerns in the consumers minds. Ersist chipotle down 5 . Comcast top estimates, so would actually be after adding its biggest First Quarter increase in video subscribers in nine years. Comcast is in talks to acquire dreamworks for 3 billion. Boeing is out with a miss. Boeing had earnings per share of one dollar 74. 1. 74. Ig miss on cost overruns shares down 1. 6 in the premarket. David we want to talk about one of the potential causes for the downturn at apple, china. China fell 27 in the region last order. Joining us now is Peter Lindberg , live from sweden. A sell in apple. That makes him a rare creature. We also want to bring in tom giles. Why is it that you feel more vindicated today than yesterday . Youve had a cell on a stock for quite a while. Peter i dont know whether i feel more a vindicated today. I look for the longer run and i understand the disproportionate share of apples profits emanate iphone, excessive growth operating margins. That is the key. Whether that is vindicated in a Second Quarter or from down the line, that does not matter to me. What do you see there that has really taken the bloom off the rose as it were . In china, they are down 26 . Peter there are couple of things. First and foremost, there is stiff competition from chinese makers now commit indigenous xiaomi. Like the other is apples selfinflicted dilemma. Innovate. Led to it is a cosmetic upgrade. In the meantime come apple is now heavily discounting its iphones by launching the special edition se, half the price of the 6s plus. One third of the gross profit of the 6s plus. There is heavy discounting on the part of apple. Apple has destabilized byationships with operators being overly aggressive on the commercial terms it has struck. Jon lets look at it on an annual basis. Number of years now, youve been wrong for a long time. Whyd you think you will be right now . Peter i dont know if i have been writing or wrong wrong , thatht in the past affects future projections. People will see the market share and the iphone will more or less emulate the trajectory we have seen from the ipad. Remember in 2011 or so that many ple leave this believed many people believed there was only one tablet to consider, the ipad. Contrast that with iphone. Generatingis still Something Like a stunning six to 5 growth margin. For anythingrd of with the volumes apple has delivered in the past. Gina what would change your mind . We looking for a certain valuation target or a new product cycle . Toer if apple were diversify into a different field. If apple were to transform itself positively into a with highervice agent theiers to entry and limit disproportionate exposure it has to the iphone. Then, i would definitely obliged to reevaluate my investment case. David Peter Lindberg, thank you for joining us. I want to bring tom giles and now. Timal growth areas cook yesterday mentioned india. He said india was the next china for the. Is that realistic . Erik india is a huge market for them. Is a huge market for them. Its important that they avoid making the mistakes theyve made in the past. In china, they went so far on the highend, you have these competitors coming in and being able to undercut them. The other problem they are facing, globally, there is a saturation in the Smartphone Market. If you wanted a smart phone, you have already bought it. Your next upgrade needs to be more than iterative. It has to be revolutionary. They are putting more and more emphasis on the software you download onto your phone. The problem i see for apple, the lack of big Game Changing products right on the horizon. They are interested in cars. We know they are interested in vr, the possibilities with chat. Ot and what to do with siri are any of those translating into a Game Changing product that you can point to come alike youipod, like the ipad can point to, like the ipod, like the ipad . Technologyok himself india is where china was seven to 10 years ago. The Capital Return Program but whether we start saying that is productive what can they do with that cash pile . Can you really go out and buy something really big . A lot of people have talked going out and buying a tesla. You they have missed the same quarter a year ago by 15 , so this market is applauding this huge drop. Up, if ive rounded round up the earnings season so far, profits down, expectations but do you see things right now, it seems to me, were already trading at a which one is it . It has to be something stimulates the appetite and something has to be earning. We have gone so far to bid up the prices on the multiple side. Multiples have risen fourfold on just fed policy alone, easy policy driving stocks higher, now it is up to earnings to drive the stock higher and what we are seeing is not justifying that case. Looking forward, analysts are expecting a robust recovery into the second half of the year. We talked about the optics on 10. Into 2017, we have to start to stand on our own two feet. Im not seeing anything in earnings. Where areenergy, we on consumer . Consumer is very strong growth right now. It is far and away the best for armor in the s p 500. That is not necessarily reflected in share prices. Financials benefiting from this terrible Earnings Growth and are met, there is a lot more going alone, but thes, consumer is performing very well. 13 growth is consumer discretionary. Below bar seems to be the theme. David to put it another way, the market is saying we already knew that. What matters for me in earnings season is what our companies saying about the next four quarters . It has been getting worse and worse, this cycle in particular. Yall is how this inevitable beat and you have a lot of share price volatility in the shortterm but what you want to see is that earnings trajectory improves over the next or quarters and that is important. What we have seen is the earnings estimate of the s p 500 has inched up by a hall . 30 buy a whole . 30. Jonathan thank you. Coming up, oil is sitting on a fivemonth high, 50 a barrel. That is next in futures in focus. Matt crude oil near session highs, extending its today gain of nearly 6 . Prices touching nearly 50 a barrel for the First Time Since november. Joining me now to discuss their the move loving mustache. Let me on gas ask you about Oil Inventories falling and estimates from a number of different ngos rising for the price. Is this where you expected it to go . Right now, we are seeing , lose moneylein policy from Central Banks, so it is all help a so it has all helped the market. If we continue to close above 45, it will gravitate or the eight dollars. I dont think it will stay there , and we will see a lot of of the last couple of weeks, they are looking for 53 in order to really start bleeding cash flow. This is important and as were looking at the mid 40s, low 40s as the new 60 and we should start seeing more production pickup in the United States. Below 9 Million Barrels a day in production a week ago and this will show a further dip but at the same time, at some point, we will see that pick back up. To buy it now, but for the longer term, oil is on to pick up as expected not going to pick up as expected. It will have to fall back quite a bit. Right now, the trend is higher and you dont want to be really writing the trend. The path of least resistance will remain higher. Matt we really appreciate it. Client h jonathan we speak with the ceo, next on bloomberg go. Ahead of the open, futures negative in the u. S. Earnings disappoint, nasdaq futures down by over one full percentage point. Show me movies with romance. Show me more like this. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Show show me more like this. S. Show me previously watched. Whats recommended for me. X1 makes it easy to find what blows you away. Call or go online and switch to x1. Only with xfinity. John we are an hour away from the opening bell, counting you down in new york. David with us at the desk is Gina Martin Adams, delighted to have her as our coanchor. She is upping the average iq of this table. [laughter] check. Et a market dow futures up by 36 . Is where thes underperformance is with deked with tech disappointing. A weaker dollar story. The headline in the commodity barrel for at 45 a the First Time Since november. Central banks in focus, earlier this morning, we sat down with blackrock ceo larry sink who has been speaking out against negative rates. Here is what he had to say about nerve ner. We are harming savers worldwide with low or negative interest rate. I think we have forgotten why people save. They save it for the rainy day, they save for events like buying a house or advanced education. They save for events like retirement. When you have low or negative Interest Rates, it forces you to save more to get to that necessary pool of assets you need. The whole process of what japan was trying to do was recently the economy through aggressive Monetary Policy, but the second phase if you are corona, what option do you have . Jim martin adams, as we listen, we hear him saying Gina Martin Adams, as we listen, we hear him say without it was going to be a shortterm thing, now it seems to be going on forever. What are the longterm consequences in changing peoples behavior . Gina the most important single component of retirement is saving, it is not the investments, and to have savers punished is damaging the prospect of longterm retirement in this country, so there is quite a paradox and the challenge that the fed has to face. In what environment is the fed finally comfortable . We always talk about all these risks to the outlook and there was no perfect environment and there is never any perfect time. When is the perfect time . You always have to take the risk, do assess the balance of risk and take that next step and i think that our fed is very skittish with respect to taking that next step. John she will be with us all morning, so look out for that. The crossover to london. Firstquarter profit increase since 2013, shares climbing on the news, up by over 2. 5 . We are live in london with a gsh the gst ceo with the k gsk ceo. Lets get the view from the top. Thank you. The market likes it and i think the stock is up 2 , but lets go over the details. We were expecting stability, expecting maybe some growth, we did not get that. What is going on, what is the guidance looking like . As we go through the year, what we will see is a shift in balance. All tookcts, in crude, very well during the quarter but you had more well start to see that shift out a little bit but also see the impact of generics in europe change as we go through, so we expect to grow for the full year. Volume is going to be good. The price is going to pick up . Price pressure will diminish as new products pick up the slack. Up around 600 in q4, so you can see it is pretty strong. What is the projection for 20 margins . Off last year when we first put the company together, and today we reported 17 . Not every quarter is going to be the same, but what this quarter shows you is the new High Water Mark that we have hit, aiming for 20 plus. It looks like we may get there a bit early. Not a lot of synergy between that division and the rest of the business. Why keep it in business . Have you been having discussions with anybody about the possibility of spinning it out . It is interesting to note and i can only think of one zero Health Care Company of scale which is not owned by a pharmaceutical company. I cannot think of any that are part of diversified companies to my knowledge, there is no single floating Health Care Company which only does Consumer Health care. That is because these are big, capitalintensive business that require product flow that comes from the arma owners pharma owners. I think there are a lot of synergies around pipeline. There is huge synergy around manufacturing. The Regulatory Oversight is moving more and more to pharma. Careful andbe very many people can get caught out if you dont adjust that, correctly. We collaborate very strongly to maxima supply maximize the benefit to the organization. Lets talk a little about one of the other areas. When will you have an oncology product that people will go wow . We have 11 in the middevelopment cycle and observers of the industry are beginning to say what is going on in there . We have 55 ex in a lead area for five products in a lead area for gsk. I think oncology is going to be an area for us. We made a big decision to sell the old generation products, last year. We think we made the right choice there and now we have the option to reopen floors on breakthroughs on oncology. A hillaryuld presidency or donald presidency do . Convinced that this is about the top politics. Clearly that creates a noise around drug price. Drugs are 10 of Health Care Cost and it is about affordability of health care. What we are seeing in the United States is very rapid evolution of the marketplace. What you are seeing is fewer independent doctors, bigger corporate activity, more hospitals in control of physicians and integration of Insurance Companies, much more information leverage and system leverage, completely changing the procurement i met dynamic. It will be all about can you deliver value for money and can you deliver it and if you can, it will be a great market. , we have had more products approved than any other company in the u. S. In the last productscts those were all launched into the u. S. At or below the prices of the previous generations of technology that we are now competing with. We are trying to establish our portfolio there and much in step with where we think the u. S. Market is going. Politics, the grexit question is one that will be unsurprising for you. When you look at it from an operational point of view, what would a brexit mean . It would not have a huge impact on a company like this. We do or percent of our sales in the u. K. , Everything Else is x u. K. Exu. K. Left, we would presumably have to operate under newly formed u. K. Regulations and that is something that we dont understand the need for and the uncertainty that would be created going through that. Secondly, we are governed by the European Union european agency, we are not keen on seeing that unravel or made uncertain, and we also been working along with many other people like the patent system in europe. It has been 20 years of effort to create this approach to embark on five years of changing all that is not obvious to what the economic benefits of that change i could see what other people have a different view, from our view, we dont see the upside of all of that uncertainty. Right now, effects are a tailwind for us. Up, close to a session high, up by 2. 7 on the session. David return to emerging markets. 2015 was not a good year for emerging markets but in the beginning of 2016, they had a nice bump. We are joined by someone who has some doubts. Morgan stanleys global head of emerging markets fixed income strategy. Thisus your prognosis, is an fx issue or is there a larger fundamental resurgence . The reason why we have rallied so hard, you mentioned that it is off to a good start and you today is actually 60 percent for local currency bonds in u. S. Dollar terms. If we were ending the year tomorrow, that would be a fantastic performance compared to the last three years to investors really come out of the woodwork and for the first time in three or four years, they have seen some positive return. A lot of the things we mentioned this morning, the fed, the ecb, those are the key Drivers Behind it and we have an absence of bad news from china, does not mean good news, but it is good enough for the market. Gina maybe if could talk a little bit about china. China is a big part, this major turnaround in chinese perception and the probability that china would implode is to be going up very quickly, and now that is not even a topic of conversation. Where do you see china . Is this a recovery mechanisms are for a longterm . Recovery that can play for the longterm . Think that the function of the fiscal stimulus can last a little bit longer, but we also think that we will of its about the rating again and the longerterm issues such as the buildup of righthat we have in the part of asia, china is no exception, those of the issues that could come to the four and trigger a problem again. I just wonder, what kind of fx risk is being taken . These guys want to get in, get and then get back out. Gordian for now, the fx risk is being taken. The level of conviction, i talked to a lot of investors and it is relatively low in this rally. A lot of them have not participated all the way and those that have are very fortunate. Everybody shares our concerns about the emerging markets. For me, it is a question of time for when you go back to those currency hatches. Where aree david the opportunities as you see them . Gordian we think it is about making the right picks, room for value, extracting carry and one that we use is to look at countries where you have not of thee huge collapse premium, that means places where yield curves are still very steep. David such as . Gordian mexico. They have underperformed in the recent rally in the currency against the dollar is the only currency that is down on the year. A country that has strong fundamentals, that is very telling. David thank you very much, good to have you with us. John still ahead, crude riding high, reaching 45 a barrel. Is it a good indicator . Stay with bloomberg for full coverage starting at 1 00 p. M. Eastern time. David this is bloomberg go. Day, we will have full coverage on bloomberg television. The fed will start at 1 00 p. M. Eastern time. Matt we have breaking news, mark bell technology, the company and not the superheroes, mark bell is in talks with Marvin L Marvell has agreed to expand its board to add five new independent directors. Thatoks like the action star board has had is now paying off in the investors favor. We do not see a lot of movement in those shares, but they are saying they will put up a point five new independent directors and look or a new ceo. John i usually complain about the holdings of some of these they werenvestors but just glares disclosing about 6 of the spending, so much more on that story ahead of the open, but in the commodity market, the First Time Since november, crude up to 45 a barrel. Amid signs the global surplus will ease as u. S. Production declines. For more, our resident crude Energy Expert is joining us from the city of london. The thing that strikes me about the cute crude market is we go higher and what is the fundamental reason that crude seems to be in so much of an uptrend . A technical reason for sure, and investors are getting into the market, they feel that rings are turning around. Nobody wants to be the last one to invest, so there is a flow of money going into the market. It is still quite oversupplied, but aims are beginning to look a lot better. The biggest driver right now in the fundamentals is gasoline consumption, particularly in the u. S. , china and india. People are driving, driving everywhere and driving larger vehicles and that is providing this push into the oil market. John a ringing endorsement for the costajor, management in focus, 50 seems to be the magic number. The Cost Management has been impressive. A very similar story, refining and trading doing very well. Lets not forget the petrochemical, the business that is on the market but now times are hard, the chemical business, the integrated companies are doing well. Bp at 100 million to the bottom line and that is coming in handy right now in costcutting all across and everything is a megaproject that is welcome back to for big oil to do well and continue costcutting, and investing less, the ones who are going to pay the price of that is going to be the service companies. John i want to cross over to matt miller because as Companies Get a grip on Cost Management, the credit agencies try to catch up with what happened 18 months ago. Matt this is a company lost its aaa Credit Rating for the First Time Since 1930. Debt toook at this evident debt to have to ebitda. Four times is the amount of times the debt pile has grown in four years. Really this is want a lost its aaa Credit Rating because it was one of three companies in the country that had a aaa Credit Rating. Do other Oil Companies look like this as well . Do they have a soaring ratio . You look at the expiration for some companies, they have massive loads of debt that they are building through these current cycles of low prices and the major Oil Companies, exxon, bp, they have all taken on debt because at the moment, they still need to take more to pay for the investment and the dividends. When oilnly be recovers to the 50 range that these companies can begin to take on some of that debt. Bp in the past was aiming for that leverage ratio of about 20 , now saying they will manage their debt with a leverage ratio between the percent and 30 . I would not be surprised if that number for bp is very close to 70 by the end of next year. John thank you for joining us. David up next, battle of the charts. We talk about apple and how they will open in less than an hour. David a global battle of the charts with mark barton taking on matt miller. Only one question in town, which assets fared the best since december 16 when the fed lost raise rates. It has risen by 7 in the 14 ,ncy space, it is up by down of the 93 currencies we track at bloomberg. Lean hogs with a return of 32 and in the number one, the bestperforming asset, the s p peru general index gained 33 . Stick your money in peru, that is what you should of done since december 16. Matt im so glad mark finally have the courage to come on here and battle me on bloomberg go. The matter how useless his chart may be no matter how useless his chart may be. You can see the flags marking earnings surprises on apple. We are not had a negative surprised since 2012. Down here is the earnings related implied move, the options trade. Right before the market closed, it was indicating a move up 3. 3 in the free market and we see a 6 move. David most important move, gina . Matt gets my vote for creativity. David im with miller because he left out the luster betting ticket. John thank you very much for joining us. David apple down 3 3 after a disappointing quarter. A big fed day with no change in policy expected. Investors looking for a clue for a possible move in june. David oil rising to its highest level since november. We are now 30 minutes away from the opening bell in new york. This is bloomberg go. I am here with Jonathan Ferro and Gina Martin Adams. John lets get you up to speed. With the Global Financial markets scorecard. Futures in the u. S. , negative on the s p 500, nasdaq is where you see the under ormans, off by 47 with early misses at apple and twitter. The rally in europe continues. Almost half of 1 on the decks as well. On the dax. Yields coming down to the little bit, down by three basis points to 1. 9 on the u. S. And year and the headline in the commodity market, wti for the First Time Since november, up by one and a half percent, near 45. A lot to break down, matt miller. Matt let me kick it off with apple. That miss was huge for the market as we just showed, it is down a lot more than the Options Market expected. And i just break in, do you see this red sticky headline . Yahoo reaches a pact with starboard. They are on fire, today. If we can get yahoo up behind me and we can pull it up 11 members after this meeting, lee scott and sue james are the two incumbents who will not jeff for reelection, but smith is going to join the Strategic Review committee. The other new directors include from hardin stein, hill and smith. Im reading the headlines and hopefully david and john have a chance to go through this relief, but you can see in the price action, yahoo of 1 in the free market. In the free market. We just had morel technologies marble technologies marvel technologies you had this activist investor although as john has pointed out many times, star board does not have a huge stake. Its like 0. 75 . They have a very small stake in yahoo me. , i never fail to amaze [laughter] the board at a time when he is selling the company, how public itd is that . David they have to be connected. Theyre going through the process of reviewing the bids and deciding who to pursue and it must the connected. Starboard was trying to replace all the directors. It must be that they will participate actively in these bidders. Gina yahoo has had so many news points over the last you months, this comes as the latest, just a slew of different aims impacting yahoo . I think for the stocks specifically, it is just an incredibly Competitive Landscape right now. The other headline crossing the bloomberg, yahoo reaching a pact with starboard, adding four independent directors. Starboard punching above its weight. Matt i was just keying in on what Gina Martin Adams said. You can pull up yahoo and click into events and type click on news points and you can see the points where news spikes have happened. This is the past six months, so you can see the yahoo stock chart littered with news of spikes. Everybody on the terminal gravitating towards that. Earnings is one of the things that we have been focused on. Twitter is one of those companies that came out with a little bit better than expected news in the First Quarter. They added live million monthly active users and the market was only looking for it to add 3 million, but the stock is still down 15 because those users are not getting in more at revenue and the company had a dismal secondquarter forecast. Twitter, apple, microsoft, google, all of these big Tech Companies that have disappointed this quarter and the disappointment continues. Apple is set to lose a couple of twitters at the open. [laughter] down,g us to break it kristina hooper, u. S. Investment applegist the menu card, weighing on stocks, crude very much in focus and the fed, but to kick it off with number one, the company we have been talking about all morning, a terrible quarter for apple. They are forecasting another declined in the current quarter. Beyond apple and the wider sector at the moment, the market has been dead right . The numbers underneath the earnings we just got, they tell me china was not great. Do you expect to see much more of that . Christina we have to watch china carefully because there are a lot of question marks. There is still rumors in china that the consumer is more solid but also more picky. Wilson you to focus on with the, not just for this company, but in general is the impact of currency. That is a theme we have seen a lot of any earnings reports. In the earnings reports. David what are your numbers telling you about consumer demand as they tried to make this transition from manufacturing to services . Kristina we are seeing solid consumer demand. We certainly worry about private debt levels, which are very significant. There is an enormous focus on developed countries, high public debt levels, but countries like china have very high private debt levels. We worry about the chance for bubbles forming but right now, the consumer looks very solid. Tellingere are you clients to put money with all these moving parts, with the fed considering a move, there just seems to be quite a lot of turmoil in the markets, today. Kristina we have been talking about the idea that we have to take some risk is the overarching environment, we are still very financially repressive, globally, it means we have to take some level of risk and have to find some income, but we need to be selective. An environment like last year with qe pushing stocks up. You have to be a lot more discerning. Sometimes that means being a tactical asset allocator because opportunities present themselves that may only last a short while it for Something Else before they become fully valued or have some higher risk and you need to move to other areas. Being ines that mean the market fairly short term that of longterm . Kristina it is more about overweighting and under waiting. There are times when the Technology Sector may merit overweighting and sometimes it may now look as good. There is time when gold make sense and overweighting gold make sense and other times, it is more prudent to underweight gold. The numbers turn to two story, and that is the fed. At 2 00 eastern time, the Federal Reserve will announce its latest Monetary Policy decision with no press conference and no change expected by anyone, all eyes will be on the statement for clues of a possible Rate Movement in june. I think there are pockets of inflation, especially in the hightech wage area. Around that, there is very little inflation. Evidence at this moment for inflation, but i could paint a scenario of why inflation will pick up in 2017. I dont think that is an issue for 2016. They have another seven months to determine that path. I would be in the camp of 25 at best. David there is the prediction at the end. Stay tuned for our special coverage beginning at 1 00 eastern time. Lets talk about what you think the fed is likely to do and particularly, how can we not change anything in terms of rates . Kristina were looking for signs, and it makes sense for them to give us some indication of what they could potentially do in june. We think they are likely to leave the door open to a rate hike in june. The language is hawkish, harkening back to statements we saw in october and december, then we should expect a greater likelihood of a rate hike in june. Right now, based on the president , expectations are low for a june rate hike. Expect the potential for some despite disruption in the market if we get that hockeys language. John the federals Federal Reserve does not like to shock the market. Andard from Bloomberg Radio they said to me to make a communication that i dont know how they make the communication in a subtle enough way they can get the market two inch towards it without causing a shot in the market. The emphasis could be something on the balance of risk and finetuning that language to suggest there is a likelihood of june. Not necessarily a high probability, but a likelihood. John we can cross over to Erik Schatzker with news on starboard. It is a day of breaking news. Yahoo at range and name four directors to with ward, nominated by starboard. To its board, nominated by starboard. As you know, starboard was in the process of waging a proxy fight in an effort or sweep out all of you whose directors and having had some success with that strategy in the past, that represented a very accidental risk to yahoos board and as a result, yahoo has agreed to name jeff smith and three additional nominees to its board after the annual meeting which is coming up and a couple of months. Starboard will have quite sure of the 11 directors on yahoos board and smith now joins the Strategic Review committee that is looking at selling yahoos core business and we have heard that we may get an announcement on that in any number of days, it could be sold to verizon, or any number of other potential bidders. I think the best way to phrase this is capitulation. The alternative would be saying that continuing to say no to starboard and its suggestions. It is hard to see it as anything other than a victory for the activists. And want the assets sold this just brings starboard that much closer to seeing that through. David that makes perfect sense. Looking from the boards point of view, they had two big initiatives in front of them, one was selling the company and the other is dealing with this proxy fight. It might be a prudent action to say with lets take care of one of these and get it off the table. Take care of that battle, bring them in the tent, and we can rochus on the important thing which is getting the best possible sale of all or part of the company. The only point i would make is that yahoos board never wanted to sell the core business in the first place. Yahoo achieved an initial tory by forcing yahoo starboard in a deposition. Into that position. It is a pointing out a majority, but giving starboard significant representation on yahoos board. A is not a total victory, total victory would have been starboard taking over yahoos toward the way it did at darden. The challenge is figuring out what to do with the whole company. At the very least, it is more of a collaborative process. David thank you very much. Up next, more on apple. We are speaking to one analyst who is reiterating the vibrating despite disappointing earnings. Apple shares are low about 8 . David this is bloomberg go. Apple has had a rough start to the year. They saw their First Quarterly downturn in revenue in over a decade. Investors are beginning to get wary and are selling off the stock, down by about 7. 6 . Joining us now is abby lambda. She is recommending a five for the company with a 120 price apologies for butchering your name. Tell us where your thoughts come from. Abby we are a zika were they have really tough is really tough, but in the longer term, they are philly we are not thinking that this company can grow high Single Digits or anything, but they can get into low Single Digits for growth. [indiscernible] david you talk about how they can maintain their installed base and get some money coming in, but that does not sound like a growth business. Retain butn given the maturity of the Smartphone Market, they can get too high single digit growth cant get too high single digit growth anymore, they will have to be content with low singledigit growth. Stocks are not calling for growth at all. A 120 price tag is not calling how th, look at [indiscernible] gina speaking about the longerterm prospects for growth, investors are concerned about a slowing growth rate in china. Other areas in the world that apple is investing in future Growth Prospects . Where can we count on for the next five or 10 years of growth . Abhey they are going with three prongs, looking at as the next big source. Atond is, they are looking [indiscernible] john they have 215 billion in cash, they could buy stuff with. That we have a cool function on the bloomberg terminal. This shows the buyer intent profile. It is still pretty cool with apple, but you dont see large bubbles, the bigger the bubble, the bigger the by. 3 million bubble for beats who do you see them buying and is the bubble going to be bigger . Abhey you are right, historically, they have not done big acquisitions and it does not call for them to do a large dna, and large acquisitions have a greater risk of failure. I think they will be very diligent about going into an area that they have not been into, before. At the same time, we expect them to keep buying technologies and doing acquisitions that they can try to monetize within their installed base. To goefinitely have a lot into different areas that they want to. Kristina they mentioned the earnings calls that the watch was fairly popular. What do you see is the future for this product . Could this be the next sales generator . Abhey the thing with watches, it currently does not do anything that your iphone cannot. Do. They really need to come up with some features which can make people want to go and get the watch. Most of the people that we have spoken to that have the watch, they are not excited about whether. They are not that excited about the left about the product. We will see what the next generation of watch brings. For now, it has not done as well as we initially thought. David we follow up on breaking news out earlier, yahoo has reached a pact with starboard and they are adding four independent directors to its. Board bloombergs global deals manager director joins us from the hill of that from the telephone. While,ave wondered for a we assume for a long time that they would eventually get some sort of settlement with starboard. Starboard gets four people on the board at 11 and our thought for a while was that this sales process would end up getting interrupted or halted because starboard has been skeptical of the process. They are past the first round of bids. The question is whether jeff smith is going to stop this process or let it run out and see what comes in. John where do you think it is headed . I thought for a while that verizon would end up owning this. Whether it is in this process or another process that begins with jeff smith on board in starboard and a little more oversight, i think verizon wants to own this and perion who up with aol, which it ought three years ago which it bought own this and pair it up with aol, which it bought three years ago. The other issue is whats going to happen with theyve got dem armstrong who could run it, as he has experience with aol. That marissassume is trying to steer it away from verizon. David thank you so much. John we are counting you down to the market open with tech very much in focus and nasdaq teachers down by 50 points. Futures down by 50 points. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Shoshow me more like this. E. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Jonathan here is your forecast. Futures up by 63 points. So many tech stories. Yahoo story on the one side, disappointing earnings from twitter and apple. That index down over one fourth percentage points. Ahead of the fed decision, treasuries heading for gains since the eighth day. Up by three basis points to 1. 9 . Crude, wti, 45 per barrel for the First Time Since november. , 1. 82 . On the screen lets get to matt miller. Matt you mentioned investors are buying treasuries for the first time in eight days. Obviously, the equity market opens. We have a chart that shows the move of treasury and the drop of positionedgetting ahead of the fed meeting. I think it is a great chart. Gina and i were talking about tos and we did not get quite it, but you see yields coming down for the first time in eight days. Wonder wewn, i can talk about that after the equity market opens. Take a look at the major indexes here. Down across the board. Not a surprise after negative surprises we have had for so many players, including the Biggest Company in the entire universe, apple. Have the dow down about 36 points. The s p 2088. Still need nearly the 2016 highs but off of them. Here in the bloomberg terminal. You can see some sectors are winning and some are losing. It is not a day where all risk on an all risk off. Here,efensive purchases getting defensive as i. T. And financials head down. Obviously, apple is a huge part of that. A 600 billion company, or it was yesterday. It is more like 530. Can you pull of apple and see how much it is worth . Jonathan 43. 79 billion at the open. Yes, so let me go ahead and pull up twitter and see what it is. We were talking about it earlier. Lets look at the twitter stock as well. That is four twitters. Four twitters that apple has lost today. Twitter is down 15 because it came out with earnings that disappointed analysts in this quarter, well below analyst expectations. More customers, what 5 million monthly active users, bringing it to a took that to a total of 310. Three tweets to the wind is what jamie cause call this one. To pull away, probably my favorite title of the day, avocadont . Down 23 . Analysts were dour on this stock and had not gone there for burritos, but they managed to disappoint even the dour outlook , and also a big loss here, Second Quarter in a row. People are not coming back to aaa, except me, but i wish i could go there earlier. Onee is one word recommendation i can make, open up for breakfast. Jonathan apple, down by seven full percentage points, way before he billion dollars off the market cap in a matter of seconds after earnings disappoint. I want to bring in a team around the table. Jim and of course critique christina still very much with us. This was set to be the worst since the financial crisis. I wonder whether apple is just an apple store because they kept saying the macro environment. From this economy to the wider economy . For those companies dependent on revenue outside the United States, it is a story we will hear over and over again. Heart of it is currency and part of it is weaker demand. Across in the other direction, a topdown and a bottomup. Earlier, apple had lost her apple did not lose anything. The shareholders of apple did. That has repercussions in the real economy. It is a really good point you make because you are seeing a transition in the consumer portion of the economy where the High Net Worth and high income Consumer Base is showing a degree of slowdown in the growth based where the lower and middle income benefits from lower gas prices and is starting to gather a bit of momentum p lot of moving parts are in the economy right now and that it showing up in the earnings stream. The u. S. Domestically Centric Companies are generally doing better. What they benefit from the tail end of the broadening consumption power of the lower and middleclass. Companies that have exposure overseas and exposure to the highend consumer, companies with exposure to currencies, those are suffering the most. A broadpainting it with brush. As you mentioned, it is an ugly earnings season and there is no way around it. Jonathan the First Quarter, i heard so many countries say a complain about the dollar. Have not really factored in a weaker dollar either. What is it . We do not know how much longer a weaker dollar will continue and in fact, we have tried to figure out exactly where the dollar will go from here. We are trying to look at some of the factors that would give us a sense of where the dollar is. Oing, inflation differentials none of them explain the recent weakness we have seen in the past few months to what we found that its planes it is a strong correlation with hedge fund futures. Is if you seetion a slightly more hawkish tone into as announcement, that could reset fed funds futures. David i wonder if the fed has ease,ered a new way to everyone reacts with such relief that it is a form of easing. Absolutely. Are in an environment of Monetary Policy exhaustion. Talking is just one of the few tools left at the Central Banks proposal. Disposal. Better than Interest Rates. The thing that crossed my mind is, what Company Wants to acknowledge their prospects are built on a lower dollar . That is the other problem. When the dollar rises, you can use that as a reason for torrent for turmoil in the shortterm, but when talking about the quarter, youre not likely to say the dollar fell and that is the reason for our success or the dollar will fall Going Forward and that should benefit us tremendously. You want to show organic growth prospect. That is what shareholders pay for. David this is a powerful point. I have seen earnings releases, if the dollar had not been a strong, we would not have made this much money. I have never seen them say we would have made less money. That is the nature of what are you buying when you buy shares of a company . You are buying earnings, organic Earnings Growth, ultimately. Currency only place a small part. Avid we will turn to different subject, valeant, where a Senate Special committee on aging today will hold a hearing in washington. They coceo bill ackman, valeant ceo and valeant board member howard to testify on drug pricing practices. The testimony is reported to include an apology for the aggressiveness of valeants rice increases. Is Jim Armstrong and my reaction is, isnt this old news . There was a story about how they would jack up prices dramatically and Hillary Clinton made statements about it and things like that but the story has moved well past that at this point. It has but i think this is part of the ritual process we go through. What will happen in washington just later today, this is like a blockbuster lineup for an oversight hearing. I have nevers quite seen Something Like this. But there is a process of hauling the Company Executives and Board Members down, shaming them in front of the public and spending a few hours yelling at them. Do they swear them in . Yes. Torson was subpoenaed appear. They plan to hold him in contempt of congress if he did not show up. The company is still fighting back and forth with the committee on the house side which ran a parallel investigation a few months ago over some documents. I would expect this to be an adversarial hearing. They want to make them raise their hand and swear and have that photo. The photo is worth everything. There will be a lot of optics and theater going on during this. We will probably see from pearson and ackman around 1 30. Then go into these guys. But i expect fireworks. We talk about how it is going to be focused on pricing. That is what Congress Cares about and what politicians care about. It is what a lot of the public cares about outside of the investment community. In valeants defense, pearson said in his statement that he , thatubmit to the senate this is a small part of our business and it does not reflect what we do. If you look at the results from last year, the things the senators were referring to were number one and number for drugs. It is not a significant part of what valeant does. They look it up there and say, this is not us and they will say, this is where you make a lot of your money and valeant is out there saying, this is not the strategy now. It will be a lot of questions about what kind of company, im sure bill ackman will be there defending the company and trying to explain to the senate exactly how this works. You have the drama of the fact that two of the people doresenting valeant simply not work at the company. One of the former cfos, who serve as interim cfo, and then the board is trying to push this guy out, for the earnings statements and the problems theyre having, pearson has essentially been pushed out of the company as well by the board, which is pretty much being run by folks like ackman right now. I do not think it will necessarily be the case that the three folks are all on the same page as well. Will be a fascinating dynamic. It is theater. I am not sure legislation will come out of this. That likely weights until another administration. Thank you, drew armstrong. Let me get you an update on the markets. Around 25 points lower. Apple down by 7. 5 . Guess what apple is shaving off the nasdaq, just over. 5 points. That is the impact it is having on that. Textbook tech stocks under pressure. We will break it down next. Matt the fed decision at 3 00 p. M. Eastern. Vonnie the manager barnes noble is stepping down. He will leave at the end of the meeting in september. This is according to the wall street journal. Nobless largest individual stockholder, he acquired the company back in 1971, and consisted of a single store. Holdings did not appreciate as quickly as they did a year ago. The value of the private Equity Investment rose 1 in the quarter. That is 1 8 of what theyre doing during the same time in 2015. And, raising the fullyear forecast to the second time in three months. Shares up for a record high. The d this is expect to get a boost for the summer olympics and a soccer championship. I am sure you will be watching them. Of course inathan will. Lets get to matt miller with stocks to watch. Started off with yahoo . Breaking news in this hour, yahoo reached a settlement, to name four new independent directors to the board, including jets met, that avoids the proxy war and as. Said, it could be seen as capitulation by yahoo . Is totally the stock unchanged. Comcast is the largest u. S. Cable provider and topped estimates after adding its biggest firstquarter increase and biggest subscribers in nine years. The big news, wall street journal is reporting comcast is in talks to acquire the maker of shrek and kung fu panda, dreamworks, only 3 billion. I would have thought it was more. To close at wings flows level since 2013 after cutting its fullyear earnings forecast with sales falling way short of estimates as well. The company cited the rising cost of chicken wings and some pricing sales fails on recent promotions. Named , the horribly beat earnings projections as ceo. , 3 billion costcutting Program Begins to pay dividends. The oil oreo cookie maker is looking to cut expenses as a strong dollar eases into foreign sales. Up ashares are taking moves to spur traffic to the marketplace and easier to search catalog brought in more revenue. They has struggled against amazon and google since spinning off paypal last summer. Users to quickly show something amazing, something really awesome. In,the equity that you type you can type in grateful dead after it, just the letters. Of the an amazing wrapup technicals for trading that stock, including relative performance, including the venue for the volume is traded. This is apple. 29 million shares of apple have already traded less than 20 minutes into the session. Almost all of it or at least half of it is going dark pools. All this training is dark. Gd. That is terrific, standing for grateful dead. Something else terrific is abigail doolittle, live at the nasdaq. Off to a rough start today. Abigail thank you. Apple shares are plenty today is the company pushed its first revenue drop in more than a decade. Apple is having his third worst to client since the beginning of the bull market back in 2009. What has investors really concerned is june quarter guidance well below consensus, suggesting that the slump in iphone sales may just continue. Apple is driving on all of the major averages but the effect here is the most profound, waiting about 7 of the nasdaq. Through yesterday, on a fourday losing streak, it looks like today it could be number five unless things turn around. Let by the tech heavy nasdaq and the apple results. David thank you. Jonathan if you strip out apple from the nasdaq, a pretty flat session on the board. The s p and the dow as well. David that is a big if. Jonathan up next, bloomberg market with betty liu and mark aren. What a view that coming up . Mark a big interview, top of the 10 00 a. M. New york times, you know the nasdaq chief executive, earnings came out today ahead of estimates. A lot going on in the industry. Today, interested, looking forward to that one. Michael from holland and holland, the founder of that company, he is an apple investor knows 1. 4 million shares. What does he think of the 7 slump today. Cofounder, asuit, bit of a star, i gather, because he is in a film which tracked the arduous task of passing the master exam. Exam, e master i think jon has already done that to her jonathan i have done that. Mark those were the days. Jonathan thank you. We speak to the former chairman of the council of advisors under president george bush. That is next. Id it is to 00 p. M. Is eastern time. Billys Monetary Policy decision. The fed has been widely excited to keep rates on hold. Lets turn to glenn hubbard, the dean of Columbia Business School and he served as the former chair of the council of economic advisers under president george w. Bush. Welcome back to the program. Gina was especially eager to talk to you. Thank you for joining us. A quick question about a couple of things. First on the fed. We have a very big meeting today. The market is anticipating no change, maybe change to the language. Fed toll it take for the actually start increasing Interest Rates again . It is a good question. I do not expect the fed to make the change today but payroll numbers are good. If the economy stays on track, the fed should be adjusting, even if the economy were to falter, Monetary Policy at this point is not the answer. Fiscal policy is. I am not sure what the fed is waiting for. Its beast to credibility issues emerging from the fed. You talk about growth being generally fairly stable. Inflation actually above the feds target rate. Maybe you could talk about credibility and specific on the inflation standpoint, what is the fed facing here . Targeting roughly 2 inflation on the pce measure. The measure is rising. It is not quite in the zone the fed wants. The real issue for inflation is inflationary expectations. I think if we keep an ultra a comment if Monetary Policy too long, we run the risk of that not being anchored. More importantly, we are running the risk of miss allocating credit and we have better tools called fiscal policy. On that fiscal policy, we had results last night from the campaign trail. On have written extensively the trump economic plan as well as the clinton economic plan. The about what you see as differences between the two and maybe the challenges the two will face. Neither of the front runners is offering a program of planned for the United States or even discussing issues that would frame a program of discussion. We need to confront growth and distribution p really we are not hearing that from either candidate. Thank you so much for joining us today. To come back to our table. Gina and christina, great to have you here p what are your thoughts about what the fed is doing and should do . Shadow fedollow the funds rate, you see that the fed has actually tightened very significantly, doubt 350 basis points. Makes the case for greater gradualism, which is what we have heard cherry chair yellen mentioned a few times. Is you willon probably only see 12 rate hikes this year, that they will go slow even though many are wondering why they are not putting the foot on the accelerator. That is fair enough. I think when the fed stopped expanding the Balance Sheet, we saw a lot of transitioning occur. We have seen financial conditions tighten considerably over the last two years. I think trouble that the fed faces now is they give us these targets. They gave us a target on the unemployment rate, we fell below that. They gave us a target on cpi and we have gone above that aired what is next . It seems they are transitioning to Global Growth. Do you see them following Financial Market as a target for Global Growth . Short answer . It necessitates a longer answer but let me say, i think theyre trying to be thoughtful and they are very data dependent. David there you go. We will find out later. Thank you for being here. Gina martin adams will be with us. Jonathan stay tuned for full coverage right here on bloomberg tv and Bloomberg Radio. It is 10 00 a. M. In new york. I am betty liu. Mark and i am mark barton in london. This is Bloomberg Markets on bloomberg television. Betty we will take you from new york to london to San Francisco in the next hour. Here is what we are watching. It is decision day for the fed. A rate hike is not expected at all. Investors will be closely watched for any signals on the future. Falling afterres 51 consecutive quarters of sales sales growth comes to an end. Betty yahoo reaching a deal with activist investor Starboard Value to put for new independent reference on the board. That of earth a proxy war. Shares of you who are fluctuating on the news. Lets head to the market desk where julie hyman has the te