Taking a leg lower. Abigail a sleepy day for stocks earlier. Averages slipping between small gains and losses. At declines. King the worst decline since march when he first, more than three weeks, and we have the three major averages on pace for the weekly decline, the second weekly decline in a row. A bearish turn here. We have tmobile popping higher amid the news that comcast and dish are in the airwaves and we see tmobile trading up half of 1 . At jpmorganng group, bank of america and wells fargo. Jpmorgan group earlier, both of earlier today. Wells fargo had actually missed legnues but we see this lower for banks, the second worst drag on the s p 500, helping to produce that decline. This may reflect action in the 10 year yield. We look at the haven assets, the 10 year yield had been higher earlier, a tailwind for the bank passes earlier pluses bullish reports per now we have the 10 year yield trading a little bit lower while some of the other haven assets including gold and yen are basically fluctuating. The vix is also fluctuating around even. Higher for the fifth day in a row. We are having a bit of a haven bid here, pretty interesting. On the 10 year yield, lets hop in the bloomberg and take a look at jihad back bb. In rates. Big backup a lot of uncertainty as the bulls and the bears duked it out. Yesterday on President Trumps preference for a strong dollar rising lower rates, the 10 year yield dropping out of this range. Yesterday, we were told on what did you miss that scott thinks it will be maybe lower than 2 . Thanks so much. Another piece of breaking news here on the stock market, a look at shares of after you on muska tweeted out that the companys truck unveil is set for september. The truck is seriously next level. Shares up about 180 basis points. Janus capitals bill gross is out, his latest investment out , priced at unrealistic levels. Michael mckee joins us now with more. Michael we will ask mr. Gross what he means by that. It sounds like what you are saying is the new normal is still the case, that whatever hopes for growth the markets were depending on, fiscal policy and donald trump are not going to be realized. I think so. It is hard to measure exactly what the stock market is pricing in in terms of real growth but it is certainly 3 and perhaps Market Makers and investors are looking in those terms. All i am suggesting is growth, a function of Labor Force Growth and productivity growth, that is basically turning out to be closer to 1 as opposed to 3 productivity has been half of 1 for the last five years. Janet yellen a few days ago in a question and answer session said basically that she does not know why that is the case but she hopes the productivity will be higher. A lot of institutions and authorities suggest there are reasons why productivity will not return at a 2 2 to 3 rate. I caution investors to think in those terms. If we dont get 3 growth, what does that mean for corporate profits, what does that mean for risk assets moving forward . It means they might be a little pricey. Michael i wonder if they will get there some other way to justify the valuation. Over the last seven years, we have only had an average of about 2 growth. You had trump talking about wanting lower Interest Rates and a weaker dollar. Can you get it without boosting growth from other means . In corporate profits gain . Those are positive factors. Deregulation and the Corporate Tax deduction possibility are are lets notors forget that lower Interest Rates are part of that equation. It is not just a onesided type of affair. I think growth in terms of risk thats is a dominant force will either propel stocks keep themom here or flat or even down over the next six months. If we dont get 3 growth and corporate profits dont grow by 10 , they need at least 2 gdp growth in order to really go up. One reason stocks have done so well in that type of environment like you suggest is that corporations have used their cash flow to buy back their own shares as opposed to invest in the economy. Ultimately, if they dont invest in the real economy, productivity growth stagnates and that is what we are seeing for the past three years. You quote in your outlook and imf study which suggests we have seen a misallocation of capital and that is one reason productivity is not rising. If the fed is raising Interest Rates, will that change the allocation, is that the way to cure it . I have been suggesting that for several years. It is counterintuitive and just the reverse of what Central Banks have been doing for a long time. Ofhink the Interest Rates zero or 1 in the case of 10 year treasuries of two and a torter, it is a disservice Pension Funds and Insurance Companies and ultimately, it is a distortion of the capitalistic model, which should favor and and savers into investing. The other thing arising out of what you just , do, if we got tax reform Companies Invest that productively or do they buy back stocks . The example from the early part of this century perhaps 15 years ago when they did it the last time was that they did not. They did not invest in the real economy. They invested in their own shares. That is what they have been doing for the past years. You cannot force corporations to spend money the way you want them to. They cannot sincerely be forced to invest in the real economy and the real economy suffers , one ofveral scenarios them being, in an aging population in which consumer demand is lessened relative to what it was before, the imf also suggest the financial crisis itself in terms of fear and the allocation away from real Economic Growth was a factor which probably will not go away. A subjective type of assessment Going Forward. I can see why Central Banks and janet yellen are stumped. It seems the market itself is priced for perfection and i dont think we are going to get there. Michael do you think if we get tax reform, that we will see the benefit of corporate earnings that justifies some of the buying that we have seen . You would get higher multiples if that happened. Bill i think so. Examine both sides. Lower Corporate Taxes improve bottom line corporate earnings and lead to ultimately a higher dividend. , as wasonly caution done this morning, that lower Corporate Taxes in the republican orthodoxy have to be paid for in some form of fashion and it is difficult to know where exactly that comes from and if were talking about a significant reduction in orporate taxes of 10 or 15 20 , which the administration is republicans may block that type of number simple because it produces deficits that are beyond their orthodoxy. Yellen, theet president have some kind words yesterday. Does it make a difference to you as an investor whether she is reappointed . Bill well, yes. Janet yellen has been very dovish in terms of Interest Rates, suggesting they need to renormalize, but typically, a very dovish chairperson and i would think if she were reappointed that would be favorable for bond markets, especially shortterm bond markets. To appointhe ability at least three and maybe five governors and president s as well as reappointed any of one if he so chooses. Basically the complexion of the Federal Reserve over the next five or 10 years, i would expect dovish in terms of im it was carter sorry . Michael we lost you for just a minute. From the fed,pect what do you want to hear from them in terms of the Balance Sheet . Of the Balance Sheet, i have said this for several years. I dont think they can reduce their Balance Sheet because the trillionheet of 4. 5 represents a reserve in terms of the total amount of credit in the markets. That takes five to 10 minutes of explanation so i will not go there. I dont think theyre going to do that. I think they are suggesting perhaps they will and it is favorable in terms of curve status and curve players. I think ultimately, the fed is limited to maybe 50 to 75 basis points. That is what the markets are pricing in. Given your outlook, what is your buyin these days . If everything is overvalued, are you in cash . Is the ultimate conservative choice but does not yield much. I think an investment manager or individual has to move somewhere between risk and somewhere between the cash alternative. What were doing is basically derisking but at the same time rejecting returns of four or 5 as opposed to five and 10 , and that suggests a lower amount of high yield, lower amounts of duration because treasuries at two and a quarter percent are increasingly risky in terms of the price movement. We are derisking, lowering risk assets and accepting the fact that returns may be 4 to 5 as opposed to 5 to 10 . Michael thank you for joining us today. Oliver thank you very much for that interview with bill gross. Lets check in with mark crumpton. U. S. The pentagon says forces have dropped the largest nonnuclear bomb in its arsenal in eastern afghanistan. White House Press Secretary sean spicer says the target of what is known as the mother of all bombs was a network of underground Islamic State caves. Sean spicer we targeted a system of tunnels and caves that isis fighters used to move around freely, making it easier for them to target u. S. Military advisers and Afghan Forces in the area. The United States takes the fight against isis very seriously and in order to defeat the group, we must deny them operational space, which we did. Unleashes 11 tons of explosives. Is optimisticp china will pressure north korea to back off its Nuclear Weapons development. The president s we did this morning, i have great confidence china will properly deal with north korea. If they are not able to do so,. E u. S. And its allies will the United NationsSecurity Council has voted unanimously to wrap up the peacekeeping mission in haiti by midoctober after more than one more than 20 years. The move is in recognition of steps haiti has made toward stabilization following recent elections. The Council Voted today to extend the mandate for a final six months during which the 2300 military personnel will gradually leave. Its worst slumps since the financial crisis, according to the Royal Institution its price index for the city has dropped to the lowest level since february 2009. The report says buyers in london are being kept out of the market because of high prices. Aboutthere is nervousness exit and the future of the u. K. Economy. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton. Julie we will tell you which banks hit and missed in the First Quarter results. This is bloomberg. This is Bloomberg Markets. I am abigail doolittle. Oliver i am oliver renick. Julie i am julie hyman. We saw better than estimated trading results out of jpmorgan and city. City generated the most revenue for fixed income in three years, outpacing jpmorgans gain. Wells fargo reported revenue missed. For more, lets bring in laura keller. I want to start with wells fargo, because that is what you follow most closely. It is amazing here that the pace of the costs continuing related to the wells fargo scandal, you have some numbers on that. What exactly is behind that . Really harming everything, everywhere they want to go. A revision in how much the bank expects Going Forward to spend each and every quarter on this. It is 50 million and 60 million what they had before, and now it will be 20 million higher each quarter. That they are spending for lawyers and consultants, all these different professionals helping to get them through this scandal. Obviously not being well received by the market today, they are the worst performer in the banking index. How long does this go on for . Is it an ongoing lawsuit now being presented by former clients, is it regulators coming down hard . What exactly will keep the costs coming . Laura you are asking the question all analysts want to know when will this end . They have ongoing things they have got to do from these consultants in connection with the 185 million settlement. A very long time, a year, a year and a half. No one really knows. As you mentioned, these lawsuits, they did finalize with them. The judge said yes, this is ok, were going to block this . There are so many, it is hard to keep them all straight. From the ex customers, that one is settled at this point essentially. Still going on from the perspective of exemployees and perhaps shareholders, plus all the regulators coming around and knock it. All kinds of things and the costs just add up. Did see the banking index for the s p 500 trade down sharp the in the month of march, the first since the brexit. We are starting to see 10 year yield rake into key levels. In white, the 10year dropping. What do you think here . Do you think despite the fact that we had a Strong Performance out of jpmorgan citigroup, do you think the 10 year yield could laura yes, they have a lot of these kinds of assets. Any time there is that in rates, they are also connected to that. The 10year will continue dropping and who can say, really. That would impact the banks. At the same time on the jpmorgan call, they said we are agnostic to some degree on what happened with the yield curve. An interesting thing to say. I want to bring it back to jpmorgan. It initially looks like the results were great, but the shares were down. Was there anything in those results investors were looking at . Laura the only thing i recall that said maybe we have to pause allttle bit here would the banks. When youre talking about credit cards, theyre going to say, look, we not going to get the full benefit until later on, that is always disappointing to hear. That is something they had been touting at this point. They did not have a lot of good things to say on that. There is no positive perspective jamie dimon likes to give her you didnt hear that. If your concern as investors is, where will this be coming from, is it going to materialize, that is concerning. We will keep an eye on it. Coming up later, you can catch an interview with the cfo of wells fargo. John shrewsberry. 4 00 p. M. This is bloomberg. This is Bloomberg Markets. Abigail time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now it european banks may have to plug a capital shortfall of 128 billion if new regulations by the Basel Committee on banking supervision come into force. That is according to mckinsey and company, which says the committee is has stricter standards. A new round of regulations, and it is blocking and endoftheyear deadline. Now gobbled up over 1 billion of the wind and solar assets here since filing the largest tank up see of 2016, sun edison has sold breaking deals to everywhere from southern california, to chile, to india. It enabled creditors to enter into new markets. Fast retailing recorded a surgeon secondquarter profit as the largest chain continued its overseas expansion. The operators chairman spoke today about keeping up momentum. We are now number three in terms of sales among the Global Retail industry. We already have a strong footing in the, with billions population in the region becoming middleclass, our potential is enormous. We are confident our Growth Movement to remain strong globally in the coming years. Fast retailing operated most recent quarter. That is your business flash update. This is bloomberg. From bloomberg World Headquarters in midtown manhattan, this is Bloomberg Markets. Im abigail doolittle. Lets take a look at some of todays big movers, starting off with soft commodities, lower for a Third Straight week, significant games games in production. Hitting ar game, fivemonth high, President Trump passes, set the dollar is too strong is helping some of those gains. Moving on to oil, it has been a choppy trading session for nymex crude, right around 53 per barrel as trailers added 11 rates this week, explores extended their longest stretch of u. S. Shale expansion in more than five years. Lets hop into the bloomberg and check out this chart. It shows when crude and the Energy Sector etf diverge back in june of last year, we see in white boiled emerging from the energy etf. We saw the same dynamic back around the election. Forher creative volatility the assets here, for oil and the stock etf diverging here, just a little bit. It is interesting to see that happening. Steel spoke to the former ceo of royal dutch shell, cochair World Economic forum future of energy panel. From Columbia Global Energy conference in new york and alix started by asking whether opec needed to extend production cuts. The think frankly with recent production of opec, i dont think, if you look at the it is always a bit more competition. You cant say the stocks are really going up. Market, the ceo of the markets ought to say that is opec would stop cutting now people, try to read the tea leaves and then how will they cooperate with the russians to lengthen the present production counts. Is your view . My view, i worked for show for this situation. If you perform in that situation, abigail alix the idea that they did not materialize does go to show the change in that oil world that we are in in part because of the u. S. Shale. U. S. Shale plays a major role. The product it is si