Transcripts For BLOOMBERG Bloomberg Markets 20160603

Off oure coming back lows. This is pretty perplexing but interesting to see what the causes are. The dow is down only. 01 of 1 . A have been down as much as 150 points. We are down by money five points. The s p 500 is down point two and the nasdaq is down the most by point five of 1 . This is coming after the fallout from the jobs report that we saw earlier today. Monthly jobs was the worst in september of 2010 and we see that impact here. Were still on track to break that. We will take a look at what is happening with the s p sectors. The 10 sectors right here. We can see the come back with the green versus the red. At one point we had seen utilities and materials in the green. Utilities are up id nearly 2 ,. 7 percent. Financials still the biggest laggards, down by 1. 3 followed by consumer discretionary. Lets take a look at where those stand. The aspect for interestrates going higher later on is having impact on bank stocks. Bank of america coming downloader at 3 . Citigroup similarly. Down fargo and jpmorgan 1. 7 . At the lowest levels they had been down the most since february. Take a look. A 2 n see it is probability for a hike come the june fed meeting. This had been as high as 30 but that falling there and for july this had in as high as 50 . This is at 27 27 point 5 . Lets take a look at some currencies and commodities in terms of how they have been impacted. Downloomberg dollars but at session lows, 1. 4 . This is the worst day since february 3 and its worst fall on a job stay in over a year. Lets take a look at treasuries. More reactiveeing than the 10 year. Also near session lows mud down by 11 basis points, down below the. 8 yield. Whatlets take a look at is happening with the 10 year yield. Also falling, also seeing its lowest since february. That is down by nine basis points, 1. 71 . Lets get a check on the news. Mark crumpton has more. Mark donald trump says a federal judge presiding over a lawsuit says he has an absolute oflict because he is mexican heritage. He has a conflict because trump is building a wall. House Speaker Paul Ryan had this to say. The comment about the judge the other day was out of left file field to my mind. It is i disagree with the thinking behind that. He clearly says and does things i do not agree with and i have and i willk up continue to do that if that is necessary. I hope it is not. Mark speaker ryan said he will vote for trump in november. The cities is launching an online portal where the video and other evidence is available to the public. The mayor said the online portal is one piece of the much larger effort to restore trust and repair relationships between lawenforcement and our communities. The second Tropical Storm in a week may be threatening florida by monday. The u. S. National Hurricane Center said an area of rain and thunderstorms drifting toward the yucatan peninsula has a 60 chance of becoming a tropical system in the next five days. If it reaches winds of 39 Miles Per Hour it would be named c olin. Said the payments appear to break swiss law and evidence will be even to american and swiss prosecutors who are investing corruption allegations. The details were revealed after swiss police raided fee for fifa to seize evidence. I am mark crumpton. Back to you. Lets turn back to the disappointing jobs data. That i asked some services came in lower than estimated as well. David lets bring in rosenberg. Joining us from toronto. If the fed raises rates this year are they about to make a policy mistake . That hikingnk Interest Rates in an environment where growth is still pretty tepid i think would classify as a policy mistake. Historians will ultimately have to judge that. I was saying that even before the Employment Data that came out today. That when you take a look at the underlying trend in growth right to 2 , we have a 2 output gap, there is no big. Nflation demand to fight maybe some select parts of credit. There is no big double for the fed to fight. We only see where the growth home is. Maybe it is about Living Office of zero as quickly as possible but if that is really the case the economy is going to end up slowing down from anemic rates of growth. I think it was a policy mistake to begin with. Ofn without the benefit seeing todays lousy job number. Betty what do you think happened . Almost nobody predicted such a bad jobs report. What happened here . Wide there is a fairly error term in each one of these reports and they are going to get revised. I think one of the big question marks in the last few months is why was the job Market Holding in so well . We got a 59,000 negative two month revision so employment was not as strong as people thought. Here is the rub and i was writing about this several months ago. We had a negative quarter for productivity as it is measured with all the imperfections. Negative productivity in the fourth quarter, negative productivity in the first quarter, it is in a recession. The coming nation of that is basically from october to march we had this bizarre situation where total hours worked was up annual rate but business output growth was barely up 1 . We had a pretty sizable gap between what the business sector was producing and the labor input going into that and i was saying all along this gap is going to get resolved one way or the other with employment growth catching down to business growth. We got the answer to a. It is not the first time this is happen. Youre not going to can continue to get negative productivity numbers so what is the business sector doing to respond . They are rationalizing labor. At least it is not decelerate in but it is not accelerating. The way that i read that wage numbers as this. Two years ago janet yellen told us publicly that the fed would not feel comfortable with a sustainable inflation review or they would get to their holy grail of 2 inflation until range. Ot into a 3. 524 we have not had that in seven years. You have to go back a decade and here we are stuck at 2. 5 , nowhere near the range would be to start to generate sustainable inflation. Period not the volcker where we want to kill inflation. That is the most efficient way to reflate our way out of this debt morass. The name of the game is to generate accelerating nominal income growth. Betty is their fiscal support for the economy during this time of fed tightening . David i just got a beep in my ear so i missed three words of your question. It in is there enough of of fed tightening . David quite the opposite. Adjusted deficit to gdp ratio was around 5 . Today it is. 5 . We have gone through and a lot of this was courtesy of those radical tax increases that were passed in 2012 and the sequestering and all this is the gift that keeps on giving if you are a big fiscal hawk. Fiscal policy is tightening and i would say 100 and we blaze that trail. Did the same. Well have to see more of that policy, thetary laws of diminishing returns is the first and we are seeing that in Monetary Policy. Betty i wanted to read for you there editorial that basically case for maintaining stimulus is strong but the case for doing it with Monetary Policy is not. The fed needs to avoid the idea that it is dithering. Is that good enough . David i think the way that i see it is that everyone else in or world is either on hold using Monetary Policy. Runs a diversion Monetary Policy what happens is you get ongoing strength in u. S. Dollar. What does that do . That creates a disinflation or inflationary environment. Move furtherould off of zero. Is an extrasay what quarterpoint going to do . It is the tightening impact will come through the u. S. Dollar. We have seen that already. And that is one of the reasons why one of the weak links in the employment report was manufacturing. Back toconnect the dots the strong u. S. Dollar. If we could have Sustainable Growth 2. 5 plus, they could raise rates in that environment but we are not there. There is no science here that we are seeing anything close to escape velocity. We raise Interest Rates . Betty thanks for joining us. James corden hosts the shareholder meetings. W we will look at a strategy for pumping up sales. Traders are rethinking their predictions on the feds next move. Muhammad ali arian believes a rate hike this summer remains on the table. He will tell us what else may convince the fed to make a move. Betty walmart held its annual meeting. The ceo wrapped up a press conference just a few minutes ago. The outlookat is based on what you just heard . Reporter no one here is claiming victory but theyre pleased with the progress they have made. They have been refocusing the company. We spoke to the ceo and you can hear what he had to say. We believe in supercenters, neighborhood markets, sam and. Ams club and we need to focus we cannot do everything. In the case of delivering value we believe that the neighborhood markets and ecommerce can help us do that. Reporter there was a big emphasis on technology. Ship announced a partner with uber and lyft. Dronesowed off some they are using in their warehouses to make things more efficient. Kind of returning to the fundamentals. Turnis how they hope to things around. They are getting to where they want to be. The message from the executives . Reporter the thing they are talking about is how do they drive growth moving forward and one area i want to mention is sams club. Store. A tour of the test we are here at headquarters and they are trying to lori and a higher and customer, a 100 thousand dollar year customer. They are doing things that andthey 200,000 necklace salmon flown in, a lot of technology. It is trying to lure in a Bigger Customer and use every aspect of business online. Shery the company was put back with questions about wages. Mcmillan and how he defended the wages paid by walmart. Shannon they are quite proud of what they have done. They have increased their minimum wage to give a raise to their employees. There are some employees and movements across the country pushing for that 15 an hour minimum wage. There is a group here that let them know they want to see a 15 an hour minimum wage. They were a few little protests along in bentonville. The labor market if it is tightening that will give the more leverage on wages. Things have gotten competitive with the low end of the weight scale with trying to find workers. If we see more and employment they will be [indiscernible] and supply and demand. Still ahead. Shares of Weight Watchers are down. Investors may be renewing their appetite for the stock. We will tell you why. That is next. Welcome back. Inside. Options trying me today is mark ebastian, during may from the gas joining me from the cboe. Why is you feeling and it happening . I am shocked. I thought the wheels had a chance of falling apart. At least for today the market is rate hike ise june off the table. Is that going to last . Typically these kneejerk reactions that the market gives us tend to be wrong. I think there is a real chance that we come in monday and the market has had a chance to reevaluate what it is looking at and saying maybe the economy is not that good, maybe there are problems with corporate earnings and we could see some selling pressure. That does not mean that july is the table which should this brexit vote is more important and it is not getting priced in the American Market at all. That is a piece i am going to be watching next week. At 1340,ith the vix insurance premiums, protection is probably a little too cheap and i would be looking to put some odd if i was long the equity portfolio. Just today Weight Watchers is down. It is 33 . Why are you interested in the stock . Opraa huge opera fan h fan. Options got really cheap as the stock was starting to move. Has a huge it and it negative borrow rate. It costs 20 a year to be short the stock and it has been climbing. The stock itself has been climbing. It is building up some big Short Interest and it is setting up for a short squeeze. That is when people that are short a stock are forced to buy the stock act and it could cause a stock to move up very quickly. Wenk of some of the action saw on gopro a couple of years back or some of the hot names, wayway they will pop higher. Weight watchers is setting up for one of those and it could on no nice move higher fundamentals between now and july so i like buying the calls for about 70 cents. If i am right on the squeeze these could do really well over the next month. Interesting, Weight Watchers. You have a little bit of time left. I saw in your note earlier that you think of june rate hike might be on the table. Our you not believing the function . Usually rightis but it is on the table. If we get some hot data next week because we all know that ae nonfarm payroll is not reliable economic number. If we start seeing some good numbers next week then who knows, it could be back on the table because the fed wants to raise. They want to do it. They may do it regardless of what the economic stats tell us. We will have to leave it there. Thanks for a much. You have been watching bloomberg news. We will have more. Do not go away. From bloombergs world headquarters, youre watching Bloomberg Markets. Shery ahn. And im betty liu. Lets start with a check on the headlines. More from our newsroom. Mark . Shery, betty, Hillary Clinton up the democratic nomination. Mrs. Clinton told supporters, quote, if all goes well, i would ofe the great honor as tuesday to be the democratic nominee for president , end quote. According to the associated press, mrs. Clinton is just 70 delegates away from clinching nomination. She and rival Bernie Sanders are both campaigning aggressively in california, which votes on tuesday. With the political conventions just weeks away, organizers in clevelandia and in are working to hit fundraising million each. 60 republican organizers say theyve raised 56 million of their 64 million goal. Democrats were about 9 million of topping 60 million. Belgian Officials Say a judge next week whether to abriney touhammad franch. Theas admitted to being socalled man in the hat, walking alongside two suicide bombers, minutes before the attack on brussels airport. Reported to be in fair condition at a phoenix area hospital. But the associated press, citing familiar with the matter, reports his condition may be more serious than his previous hospital stays. The 74yearold boxing legend is said to be fighting respiratory that are complicated by the parksons disease diagnosed 1980s. The global news, 24 hours a day, by our 2400 journalists in more than 150 news bureaus world. Ound the shery, betty, back to you. Now, markets are closing in 30 minutes. Abigail has more, live on the crazy fridaypretty here. Youre right about that. It has certainly been a volatile down. Aking the index this follows several days of rainbattered trading and seven updates. Ve this did come to an end, todays weak economic data. Earlier the nascar had been down the nasdaq had been down 1 . Than now with the reversal, down just percent, we now have the nasdaq higher on the week by about a hair. Pacewill put the nasdaq on for a threeweek winning streak, if these if the current level losses can be held into the close. Aw, creating that tension for basically unchanged week are microsoft as the biggest drags. On the boosting side, helping and broad, are amazon com. As for some extreme movers, betty, on the bear side, were at biotech. Shares are down more than 25 in this holiday shortened week. Jeffery said that the companys disease drug was unlikely to receive accelerated approval from the f. D. A. He sees a tremendous downside for these shares, betty. 0r more than 60 on top of huge losses for the last year. Now, abigail, what stocks for this holidaystartened week . One that really stands out, today, is, of course, the action camera chip maker. Aey reported betterthanexpected first quarter, beating estimates 24 . Ngs by when we look at the numbers on a year over year basis, earnings actually down 20 excuse year revenues were down over year. Earnings down 91 year over year. Again, did beat, but, down huge on a year over year basis with the c. E. O. Saying the results were hit by nearterm head winds. But they do expect a return to growth. Thank you so much, abigail, at the nasdaq. Story out of the u. S. Jobs report was the reaction out of the market. The dollar, after job growth forecasts, lessening the likelihood of the fed raising Interest Rates this month. Feds action,the global currencies stuck in a rut. Well, we are joined now. Lets talk first about the thisr, which is, you know, correction higher than wed seen in the last few months. Report . Er, given this well, i think its the dollar generally speaking is a bit of a directionallist market right now. Ever since we entered the year, this common realization that the dollar cant continue strengthen in perpetuity. Certainly we saw that heading the shanghai meeting, where there were conspiracy theories, if you will, regarding some sort an accord. What has happened today is this sort of does make one thing, or at least give you reason for pause in terms of where the is going. The dollar so might it be a pause that refreshes, so a pause where continue to see support in the dollar later on this year . I think broadly speaking, some modest support. I think that is supported by the fact that we still expect the to normalize rates later this year. September. Tion is in we are never in the camp that june was on the table to begin with. Those expectations have been paired back. July, i think were still less 50 . But i think by september, were looking at a situation where well have a better accounting the domestic growth situation in the u. S. And certainly some factors withary respect to the event risks in europe and the u. K. The dollar just weakening, giving us a big boost the yen. Is this a new trend for the yen Going Forward . Operating under the assumption that that 105. 55 the bottom ofk the bearish move that weve seen this year. We do break below that, we do think you should take look at the dollar yen with a neutral footing. But i think overall, with the expectation that ill put it this way. The balance of risk i think still tips higher, not so, but if you think about the fed being back in terms of hiking rates by is moderatelyt supported for the dollar. Its just going to take time for that to unravel. With theink also, delay in the sales tax, that is the initial step in terms of domestically. Ment what was interesting to see was the dollar just plunging the well. Gainst the euro as but then when we had the e. C. B. Meeting yesterday, the euro just barely budging. What are traders looking at right now . I think for some clarity, particularly from the fed, i think weve had this rally in lows. Llar since the may 3 i think theres been a little of of skepticism in terms their prospective rate hike down deliver, for them to hikes, as is implied. But whats the dollar pricing if now . They pricing in one rate hike . Is that basically it . Its hard to say, but i would more than that. I think after today, its looking at something later this year, at least one hike. I think that is a reasonable assumption to be making at this point. But i think even with all that hawkish, that speakers over the last several course with the fed minutes as well, i think theres just a little bit more convincing in terms of whether or not they would be able to as is implied. Es i mean, just a little bit generaljust from the perspective that, you know, investors have been badly year, and i think. Onviction levels are low thank you so much for joining us. Us. Ior currencies. Y with bloomberg columnist and chief advisor, explaining earlier. Its a nightmare for the bank of japan. Negative on Interest Rates and theyre getting the wrong market reactions in their view. Like the yen a lot weaker. Instead, the yen is too strong for that economy. Total nightmare. The euro is no better, by the way. I dont think the e. C. B. Is as toto be very happy what happened with the euro today, nor will they be happy as to the fact that the u. S. Has down the yields in the eurozone. I think all this speaks to a much bigger issue, which is we policyvery unbalanced mix in the world, with way too much reliance on central banks. Right. Thats something they warned about earlier this week as well. What does this do to japans efforts to stimulate its economy, whether its through monetary stimulus or fiscal . It complicates it. It makes the bank of japan less not ineffective. On the fiscal side, there isnt as much scope. To move on the arrow on Structural Reforms. Youurope and in the u. S. , have more scope for fiscal has toon but that also come with serious Structural Reforms to enhance productivity. Seeingarea youre unabashed optimism is in markets, stocks and currencies all shot up after the disappointing jobs report. Rational is that it delays a fed hike. It does delay, if a fed hike, how is that a positive for emerging markets a robust u. S. To absorb their exports . Stockssame reason why have come back and the fallen stocks isnt that notable is sometimes bad news is the good news, if youre worried liquidity. L the argument is, this will make less likely. Ke therefore, we should worry less and thereforey stocks could do better. But im with you. Its about fundamentals. Also add an interpretation to this report. About weak its demand and the fed is not going to hike. No, no,nd one is no, this has to do with the supply side. We may be in a situation where we are at full employment. Thats completely different for the fed in terms of policy implications. The third interpretation is its simply too early. Be careful out there. There are three different intreptions. Intreptions different directions. The scale of the move is something i would be careful about. And you point to the different interpretations. Force look at the Labor Participation rate. The fact that it started to recover in the middle of last lot ofs good news to a folks, who were seeing the off. Loyment rate steady yet weve turned the corner once again. What is it about the labor that we cant get back to the previous levels of before the financial crisis . Yeah. Thats the most worrisome number the employment report, much more worrisome than the 38,000 job creation, which was below consensus of 160. We are now back to historic very near historic lows on Labor Participation. Thepeaks to people leaving labor force. In this case, it was the Older Workers who have left. Reallyts really, problematic, because it means that there are fewer people working to support the economy as a whole. I think part of that has to do with structural issues. Do with of that has to cyclical issues. So at this point, is the fed not toooking for reason raise rates rather than pointing to evidence to justify a rate increase . I think what happened today, along with concern about the means that a june rate hike is less likely. I think its too early to rule july out. Okay . Lets see what the data is. So june, a lot less likely today. July, still on the table. Now, as bloomberg columnist advisor, ononomic Bloomberg Markets earlier today. Coming up next on bloomberg the fedswhere goes from here . Joe will give us his thoughts as well. Coming up next. This is Bloomberg Markets. Im shery ahn. And im betty liu. Lets get back to those disappointing job numbers and what todays report means for policy meeting later this month. What did you think, joe . Know, normallyu in these reports, even when theyre bad on the headline, something thatnd says, oh, this is still a good trend. This one you really couldnt find anything. The only hope is that wage growth. Thats what weve been say. As expected,in 2. 5 . We didnt get an acceleration, came in, in line. I mean, i guess you could make an argument that the employment 4. 7 is not bad news. Yes, the Labor Force Participation rate declined. 4. 7 unemployment would but doesnt that mean theres going into thele market to look for jobs . Thats the thing underlying. Any goodt wasnt trends. And the Labor Force Participation rate, which i know, the interview is pointing out that looked like it had been going in the right direction. That was one reason why, even though the Unemployment Rate has flat since last october, people werent worried, because labor force up. Icipation rate was going but if that reverses, suddenly its not good anymore. Speaking inyellen philadelphia. How is this going to affect that . Well, its so funny, because talking a lot lately. And it seemed like, if we had thenn a good number, everything was all set for a hike this summer. So i dont know what hes going to say. Look, she has a tendency to always sort of be right about these things. Shes been cautious. She hasnt gotten freaked out inflation. Shes had a pretty solid track record on this. So i cant imagine her wildly changing her position, because of one report. But, you know, the market is clear. Looked like a very likely summer hike is looking now. Likely theres a question of how much did the fed officials know there would be a bad report like this, right . Because they were, up until i believe yesterday, saying, you doing well. Rket is the job market is tightening, you know. Our economy is on its way to recovery. Yeah. No. Im sure they were pretty blindsided by this. And the disappointing thick today thing today, in addition to the bad jobs report, nonmanufacturing ism was theppointing on both headline and the employment fund. Ex thats been red hot, the Service Sector of the u. S. Economy, one been nicelyad holding up. That going into contraction too, thats the kind of number that slowdown ass opposed to mitigates it. Complicated, joe. Thank you so much you. Ank missed. Of what you the close of trade is moments away. Stocks are lower, as you can see. But theyre pretty much at their session, right . Much lower earlier this morning after the jobs report. This is Bloomberg Markets. Im shery ahn. And im betty liu. Markets are closing now in about minutes. What a way to end the week today we have more in our market check. Yeah. Markets have decided that they want to end as close to session without hitting the positive territory, i think, right now. Lets take a look at this snapshot of where we stand, with minutes to the close. Aw down only a 10th of percent. Down by about a quarter of a percent there. Were seeingis red is happening because of the fallout that happened from the we sawort from may that earlier this morning. The s p 500 is heading to its the lastekly loss in six weeks. The nasdaq had closed higher for the past seven days. Is now on track to close and to break that winning streak. Bloomberg. I want to show you a final look in terms ofctors, the imap function. Sectors,of the 10 were split 50 50. Utilities are up, as they have 1. 7 . Ll day, materials and telecommunications, consumer staples, all gaining. Financials continuing to be the 1. 25 there. Y lets take a look at the major banks and seeing where they day. , as we close out the bangkobank of america and citig, both falling in tandem. Wells fargo and jpmorgan also falling. Today, they are seeing their fourst drops in the past months or so, ever since february. But also as were seeing in the paring some of those losses. Lets take a look at currencies commodities. Taking a look at the dollar, we would see these and expect these to happen. Seeing its worse day since february 3. Gold futures are rising. Biggest jump since march 17. Treasuries. Look at traders different rallying into treasuries, pushing the yield on the10year as well as twoyear down by the most since february. Reactive to Interest Rates then the 10year, but the down by 10 basis points there. Still, in the red. It looks like, yes, were still the red. All right. Thank you so much. Now to wrap up the is our day and the week guest. Take us through the Market Action today. A very dataheavy friday. The labor report, obviously before the open and then at ism report. So we opened lower and hit the a little after that report came out. Then about 10 20, we started climbing higher. And we may end in the green. I mean, were not that far off now. Its been an interesting day to see, you know, how much the after has come back, being down almost 1 . So what did you make of the groups, like these financials getting hit but hitting an alltime high . The financials, a lot of people just were not prepared for these losses today. Utilities and some of the other gained quite a bit. Utilities may hit another alltime high today. The fourth time this year. Ofre really seeing that sort bifurcation in the market. Constantly come to this, these highs, we cant seem to get past that. Whats the prospect for this now down . Tocks are coming right. I mean, you know, you just need more bullish sentiment. Of this probability of the timing of a rate hike, that may a new high. To one measure of the s p, which takes into account dividends, that has achieved some new highs this year. I think six now. So we are seeing some strength. We just havent seen it in the s p. Than 2 off that high. So the big things to watch for next week . Severalwere still weeks out from this fed meeting. Right. We still have time before that. Yellen speaks on monday. People will obviously be paying attention to that a lot, just last week. Just seeing if there is anything the tone. Right. And see what the probability for the rate hike, how that moves around, because today, really a matter ofwithin minutes, people just completely changed their expectations for and the rest of the month. I know. Just plunging there. 20 to 4 . In a matter of minutes. Thank you so much for joining us. Anna louise talking about the week. F the what a way to end the week. That is it for Bloomberg Markets. Whatd you miss . Is next. Here are the major averages. Less than four minutes away until the close. Yes, we could possibly still make it to green close. The a few minutes left on that. But right now, the s p down quarter of a percentage point. Were moments away from the closing bell. U. S. Hiring in may, the lowest in almost six years. U. S. Stocks, closing down. Is, whatduestion you miss . Todays perils report all but odds of a. The jobseat spot from report, emerging markets headed to their highest close, in hopes will delay a rate hike. Love them or hate them. Newest way to the beat volatility. We begin with our market minutes. The s p 500 just closing below 2100. Well see if we can inch over that. And we cant get there. But we pretty much have grinded thatay higher following disappointing jobs report. The dow was down as much as 149 points at one point. Cut its