1 . The nasdaq is gaining, up by two points. Lets check in with julie hyman to give us the scene. As we a very tight rein bounced around between gains and losses. That was true of a couple of other days during the week before the latest session breakout. That is not happening today, at least not yet. The s p and the dow more deeply in the red as we head into the afternoon. We have the Economic Data that came in largely better than estimates, it shows signs of inflation in the Fourth Quarter in the month in january credit that has brought forward expectations for a potential rate increase, which has had a mixed effect on stuff. Speaking of a mixed effect malaise look at the sectors on the move here. We have materials that are trading higher, Energy Shares trading higher, and financials are trading higher. Then we have utilities, consumer staples, Technology Shares counterbalancing the gains that we are seeing. I should also mention, and scarlet as i have been talking about this recently, all you remains below the 20 Day Moving Average. Here you have a sector by sector. We seey two groups are above volume is utilities and energy. All of the other groups are staying declined. Scarlet thank you for the setup. We will turn to the bond market a little bit later on to give you more context. In the meantime we want to get a check of the headlines on bloomberg first were news is afternoon. Mark crumpton has that from our news desk. Mark thank you. New Jersey Governor Chris Christie is endorsing donald trump for president. Governor christie says that donald trump is the only man in the race qualified to be president. The two are campaigning in texas today. That stakeholders primary on tuesday. Trump also shared his views on rival marco rubio. If it did not work out for me, chris would understand this. I would go back into what i do. By doing this because were going to make America Great again demand politicians are not going to do that. These politicians, they are not going to do it. In a lightweight. He does not have the talent he does not have the temperament, he can never make us great. Governor christie ended his bid for the president after a poor showing earlier this month. And it appears Marco Rubio Ted cruz are trailing donald trump. Seven Southern States up for grabs show that trump is by 37 of likely voters. Senator marco rubio and senator ted cruz are tied at 20 . The gut infections in nine pregnant women in the united states, they all got the mosquitoborne virus overseas. The cdc says it is investigating 10 more reports of pregnant travelers with the cap. President obama is in jacksonville, florida where he talked about the benefits of the massive spending bill he signed shortly after taking office seven years ago. 700 60 billion was added into a slumping national economy. The president hollande a factory a the president visited factory that makes hightech batteries. Governor rick snyder is authorizing spending a four the water bills of flint, michigan. The plan will pay for 65 of the portion of the bills. That is for one that was used intermune, cooking, and bathing. The residents will still have to foot the sunni portion of their bills. Global news 24 hours a day, powered by our 2400 journalists and more than more 100 and news bureaus around the world. I am mark crumpton. Scarlet thank you. We turn our focus to the phone market. Treasuries heading lower. Yields are higher at her date on Economic Growth and inflation exceeded wall street estimates. Now with more is the head of fixedincome at raymond james, and our debt columnist from the gadfly. Let me set the scene. If you come into my bloomberg spread, whathe 210 you would see is we continued to find the gap is now 96 basis points. It has been a steady move. Kevin, what does this tell you . It used to be a recession indicator. If that still want this is still is this still . At some point the market and the fed have had a disconnect, and a lot of that has to do with the drop in oil prices. As inflation falls and looking at global rate, investors flocked into the long end of the curve. The fed has remained flat, but right now were understand dell. Scarlet that is connected something you have written about, lisa. Worn traders that they have underestimated the fed. Of fed is saying that markets are not always right. People have been looking at the bond market, saying that they are incredibly pessimistic. Look at longterm treasuries right now. It has been the best rally to start a year for 15 plus years. Since 1986. Is overly pessimistic, is the market wrong . Me to take theor versus the economist market, or even the fed versus the market. The market will dictate the supply demand and react to it. What we are reacting to on a 35 isis point drop in yield that we do not believe there is anything more than moderate growth. We think of inflation right around the corner, all the some numbers may argue that today. There is no better place to put your money as we ride this out. The fact that money is flowing out there on those premises, theyre just not buying the music that they are singing. Become on the fact that they do not want to put their money anywhere else. Is 9 trillion of corporate debt coming due through 2020, including 2. 3 trillion in speculative grade coming due in those years. You thatrned are because investors do not want to invest in these companies anymore, this can be a much more parallels wall . Us there are better conditions for roads. They are a little bit wider and highyield, and they make it even wider. That may make it more attractive for investors. Certainly start to find yields in the marketplace, which was they cannot do is rush to it and give a credit quality in the process. If youn be a problem jump out into highyield at the end of the cycle. Scarlet there are signs that there are cracks in the corporate debt market. 3. 8 billion market cap, but it had trouble generating interest for a takeover, and cannot do very well in terms of borrowing. It is now harder for these Leveraged Companies to borrow. . Back at most of the highyield corporate debt, it is all energyrelated it is hard to find investors when you are taking 20 or 30 a barrel off of oil, and youre not sure where the bottom is or if it will go back out. They are tentatively looking at deals, but not at these spreads. Oill we get utilization in and we do why did out another hundred basis points, it will be a little bit of here and maybe i will not. How much are we seeing in the , due toe that markets the difficulties of people have trading right now. Scarlet liquidity concerns. Liquidity concerns, exactly. The people i talked to said it is incredibly difficult to get anything done. Has that been your experience . It absolutely has. We have not participated in a regulatory market like we have right now in a fixed income space. This happened many years ago. You dont put up a lot more n you used to. Provide liquidity, Balance Sheets have to be segregated. The margins have shrunk due to transparency. If you have to make liquidity every day, they are getting higher among them fewer players are going to remain. Scarlet on the whole, what are your clients starting to do . Appetiteave more risk after this week tomorrow they on the defensive side . In the institutional space in particular, they have been putting more money to work as they struggle to find better quality loans. They are getting more comfortable that they are not going to get priced out from inflation. For usst five months have been a very productive five month, trying to work with Balance Sheets. Individuals are still talking shots at highquality corporate. Mostly, stay intermediate, stay and wait for the next move, because we have done this for eight years. Scarlet thank you so much. You can find this on the bloomberg terminal. Coming up in the next 20 minutes on Bloomberg Markets, Warren Buffett releases his annual letter to shareholders. Tidbits,is investing will Warren Buffett say anything about their lacking performance . At the bottom of the hour, monetary policies will affected. What central bank across the globe should and should not do. Break,ead to the walmart, cocacola, and microsoft. Two of the Biggest Holdings for mr. Buffett. Scarlet this is Bloomberg Markets. Lets check on where the markets are right now with about 45 minutes to go in the trading day. First a look at the s p 500. Little changed right now. The heaters include all the cyclical materials, financial, you can seenergy how the investors are playing this report. As for the dow industrials it is down about a quarter of 1 , off by 46 points. Has been a pretty steady recovery since that february 11 low. The nasdaq is the only index for far in the red so far in the red for the week. On the day it is the performer, gaining 12 points. Time for the Bloomberg Business flash for some of the biggest business stories in the news right now. Next weekend be he will replace advertising on some of its programs with content. For by American Express. On shows have spots like the voice, blends both, and late night with some buyers with seth meyers. More difficult quarters ahead. The auctioneer today reported a fourthquarter loss of lauren and 11 million more than 11 million. Y are undergoing a management shakeup. And a credit suisse, the bank has begun to sell distressed Debt Holdings that triggered losses last year. This is part of the overhaul by the new ceo. That is according to people with knowledge of the matter. The bank has been marketing small wha blocks. That is your business flash update. It is a must read for your weekend. Warren buffett will be releasing his annual letter to Berkshire Hathaway shareholders, it is not likely to bring much cheer. Berkshire hathaway has lagged behind the market by the most since 2009. They have like behind the s p 500 and the last several years. There to talk about how he will ouress this weakness is senior analyst. Hearingll interested in what he has to say about his own plans are the coming year, including the prospect of m a. But first lets get what you think he will say about the national environment. In terms of the poor environments i think Warren Buffett is typically upbeat on the longterm prospects of the u. S. Economy. A fact that to be no different in this letter. We are interested to see if Warren Buffett thanks thinks an eventual pick up an Economic Activity how quickly that will come, and let the benefits will be to Berkshire Hathaway s operation. He is the ultimate value investor. He has a much different time horizon than most people in the market. I was thinking five years, 10 years, 20 years . To say. Is fair Warren Buffett tends to look into generational opportunities within the u. S. Economy. That is why he owns major operations like burlington, northern rail, as well as significant volatility utilities regulated utilities. Scarlet lets start about what the plunge in oil prices that weve seen so far this year, what that will mean for his specific businesses. Shown rail operations had slower topline growth and slower Earnings Growth as a result of a industry, wehe should see these in earnings in the next few years. Decades, muchg more traffic will be on rails, and that is ultimately going to benefit Berkshire Hathaway. Scarlet we talked about how shares have lagged behind the broader market, there is a sense that berkshire shares are undervalued, a level of 1. 2 times book value. What does that mean for the Companies Plan to buy back shares . Warren buffett has said that berkshire will only repurchase stock if the valuation of berkshire is at or below 1. 2 times. Currently the stock is run three times four, which makes me think there is not a lot of downtime in the shares. We think that they could buy back billions of dollars of stock, but were not sure it will. At the same time, berkshire is going to benefit from big, creative acquisitions. Our sense is that they are still on the hunt for other large deals. Of course, you have the ongoing of major acquisitions which was justz, enclosed within the past year. Scarlet what do you think he would say about an underperformer like American Express . Stockholding, major Stock Holdings and American Express have knowledge of dollars of gains from berkshire. Warren buffett still has a positive, longterm outlook on the company. Then of course, you have ibm be a laggard since it was acquired in the portfolio. The same time, the company is raising dividends. That increases the value as well. Over the long term, we think American Express, the other Major Holdings like cocacola and wells fargo, this will be longterm holdings for Berkshire Hathaway. Scarlet i have to ask the inevitable question, what will we learn about succession plans for mr. Warren buffett . It is paramount, given his age. The succession Planning Initiative i do not excite to hear anything new in the annual letter. There was coverage to some extent in the 50th anniversary shareholder letter that came out last year. I do not ask for you to hear anything new. Wasen buffett has said he to run Berkshire Hathaway for the next decade, and we hope that is the case. Scarlet thank you. Still ahead, insight on todays options activity. A quick check on how the various sectors have performed this week. Materials, consumer discretionary, industrials, and health care are the top performers. Julie you are watching Bloomberg Markets. Lets get to todays options inside. Capital is and recon joining me now. He can do some of the talking as well. We are looking at the markets where the fix has come in substantially. Some strategists are looking at the volatility and saying things are down, and maybe they will stay home for a little bit. Never the vix has never closed below 19. It is significant higher from last year but still on the lows for this year. What is nice to know is that it never closed above 30. It never breached the 30 level. When you get there it is showing indications of the global economy. That people are very nervous. The Options Market was not indicating that at all. A lot of credit people go into the vix as well as the Options Market to put on hedges for themselves as well. It is indicative of what credit and equities are thinking. Weve seen on both the up and the downside, the leadership frequently has been andarge cap technology, largecap banks. We are looking at large cap tech in the google or apple that to be success of all of it to be specific. I got even more bullish this week. One of the reasons why is we landed a big contract with spotify, the music streaming service. They took that contract away from amazon and the clouds. What is nice to know about google is they are drawn the meeting in mobile with android. Theyre doing well with streaming and youtube, now theyre getting more aggressive in the cloud space. Operators are getting higher multiples. Can gain traction throughout the rest of the permit is going to do very well for the stock. That is why i looked at a strategy that benefits from that. What you do is you sell the 640 put in january of 2016. Premium to buy the 760 call on the stock to have the unlimited upside. Put in a car space lower than where it was. Julie it is interesting that youre going after january of 2017, because this is the stock that has not been moving on the fundamentals. It is moving more in tandem with its peers. Predict thelt to future, but how much of a risk are you taking that it is just going to move with the market and not on this fundamental strength that you are seeing . That has a great point, because tech as well as financials are the sectors of the s p 500 that is the s p 500s going to move you need his leadership to take it with it. What you are doing here is you get a cheap way to play this brady cost less than 5 of the stock. If you do not want to go in and spent the entire amount, you are going to have the unlimited upside with it. It is a great way, if youre bullish and using proceeds to make it cheaper. Julie we will see what happens with stocks overall. Thank you. We will have more Bloomberg Markets coming up next as we approach the closing bell on this friday. Scarlet life from bloomberg World Headquarters in midtown manhattan, im scarlet fu. Mark crumpton has her first word news. Jersey governor Chris Christie endorsed donald trump for president. Christies campaigning today was trump in texas. Meantime, South Carolina governor nikki haley said she would support donald trump if he wins the nomination. Haley has endorsed for senator marco rubio, who she says can overtake trunk. And the former transportation newetary and the former jersey governor have endorsed john casey. A new poll shows that most americans back the government and its attempts to compel apple to unlock a terrorist iphone. Shareholder meeting, not one person voice displeasure or or disagreed with tim cooks actions. Gunman entered a hotel in the capital of mogadishu. Nine civilians and five islamic extremists were killed. It was located across from the president ial palace. Claimedab responsibility for the attack. The nominee for the vacancy on the u. S. Supreme court will not be announced before tuesday. That is what obama will meet with the republican leadership. Josh earnest made the comment about air force one as the president was