>> from bloomberg world headquarters in new york, i'm mark crumpton and this is "bottom line" -- the intersection of economics. we begin with the fed's latest snapshot of the economy -- the fed's beige book. peter cook joins us with the details. >> the beige book, reviewing economic activity from mid-november to late december across the country paints the

picture of a u.s. economy still broadly expanding but not in overdrive will stop the retail sales number will be interesting, given what we saw earlier today. anecdotal evidence suggests overall, national economic activity continued to expand during the reporter -- reporting time from november through december with most districts reporting a moderate growth. dallas reported that growth slowed slightly. many are talking about the effects lower oil prices could have going forward. consumer spending increased with most districts having modest gains in year-over-year sales stop that's not consistent with what we saw this morning in the actual numbers. slight to modest gains reported in austin dallas and philadelphia. -- boston, dallas and philadelphia. moderate to strong growth travel and tourism picked up

broadway was a bright spot for new york, up 10% in terms of ticket sales. manufacturing activity expanded most sectors but real estate sales and construction were largely flat across the districts. commercial real estate expanded. demand for nonfinancial services varied widely but growth was moderate. demand for business and consumer credit expanded. as for labor market conditions, labor and inflation, all important factors right now, payrolls in a variety of sectors expanded moderately. significant wage pressures were limited to workers with specialized technical's gills -- technical skills. jobs increasing, no real wage or inflation pressure reflected in the beige book. that is what janet yellen and her colleagues have been looking

at. >> anything in the beige book that might move the fed's liftoff date? >> nothing i can see it here that will surprise them or alter their outlook as they continue to watch what is happening with the data and inflation expectations and of course what is happening with wages. the numbers we got this morning on retail sales were a disappointment. the anecdotal evidence suggests something else is happening out there. my guess is they will put more stock in the actual numbers they got this morning. >> what about investor anticipation of what could come? scarlet fu is at the breaking news desk with the fallout in the financial market. >> good afternoon. even before the beige book, we had the selloff in what he as investors anticipate what is to come. remember -- let's show you

what's going on here. this is the dow, the hype watermark came at about 10:15 a.m. since then, it has been downhill. supporting losses of at least 1%. for the s&p 500, this is a one-month low. for the dow, 28 out of 30 members lower. the worst performers are jpmorgan and goldman sachs which has yet to report earnings. we looked at what's going on in the commodity complex. one big disappointment was the drop in oil prices and gas prices has not translated into increased spending. nevertheless, we see oil prices recovered just a bit here. copper has taken the baton from oil as the commodity in focus, down more than 5% as investors

fret over a weakness we might be seeing in china this year. the world bank reduced its gdp forecast for china this year. we also see a recovery in gold up about 4% this year. and we have to mention bonds will stop there is a rally taking place with yields hitting a record low today. yields for government bonds in u.k., france and canada all hitting record lows. >> scarlet, thank you. the fixed income strategist at janney montgomery scott in philadelphia joins us today. welcome back. good to see you again. the beige book notes most districts reported a modest to moderate paced -- pace of growth. what does that mean for sustained momentum going forward in light of today's week retail sales numbers or december? >> i don't have a count in front

of me of all the time the fed has described headline growth as modest or moderate, but that's the only phrase i can or member them using throughout the last couple of years of this economic cycle. by the qualitative measures the fed uses, it seems economic growth is trodden -- is chugging along relatively stable he. that seems like a contrast with what we saw in the retail sales numbers. we expected the wall capacity to open up from lower gas prices to go into gifts for the holiday season data indicates it did not. >> manufacturing activity expanded most districts. will that translate into higher wages for middle-class employees who make up the oak of the manufacturing workforce? >> keep in mind manufacturing here in the u.s. is less than 15% of all employment. in truth, even if wages do rise

it only represents a portion of wage increases. it's not going to hit a large swath of the consumer economy. at some point, you are just running out of workers to hire so that requires wages to be able to improve for consumer spending to rise. that's the question right now -- we don't know workers are generating enough productivity for a one or two or five year horizon. >> the beige book report demand for business and consumer credit grew and overall low demand saw a slight increase in a richmond kansas city, and dallas districts. will the employment numbers we are seeing me more americans will be able to access credit >> this is one of the great ironies of the poster session era -- policymakers were criticizing banks for not opening up credit

spigots, but what we have seen is consumers and businesses have not been demanding credit to the same degree they did in the prerecession era. perhaps it was the first time borrowing came back to bite them. the banking industry remains slow to moderate but there are some bright spots, for example auto sales. 39 consecutive months of increased borrowing under the federal reserve's credit index for auto loans. that's a strong bright spot in the short-term. >> let's circle back to december's retail sales numbers. they missed by a wide margin. were you surprised the weakness was evidenced across a wide range of meaningful categories? >> that is quite surprising. categories like building materials don't usually fall into the holiday gift category. who gives their mother lumber for christmas?

non-store retailers and online retailers also negative numbers. the broad-based nature of that weakness is troubling. that said, it's only one month's a to point. we talk about consumers wallets opening the cousin of lower prices, but it only happens with $10 or $20 over a fill up. i'm still hopeful consumers will see some increased spending as gas prices remain low. >> i would be remiss if we did not take a turn overseas. are the headwinds in europe is facing, particularly as the discussion among mario draghi and the ecb is -- is that going to make its way to the united states? will that headwind causes trouble? >> our base expectation is that the ecb underwhelm's will stop in order to get quantitative

easing push through, mario draghi has to sacrifice to the point where it's no longer effective will stop -- no longer effective. what the dollar is doing right now, rallying versus major currencies, that's creating a headwind from these international slowdowns as we import deflation back here into the u.s.. >> -- back here into the u.s. >> thank you so much for your time. we appreciate it. >> have a great afternoon. >> still ahead, the u.s. house of representatives moves on changes to the dodd-frank law. and still to come, retail sales did not see a santa claus bump. we will tell you why when "bottom line" on bloomberg television continues in just a moment. ♪

x is president obama and the republicans are going to get

anything done this year, one man who can help us tom donahue. as the ceo of the u.s. chamber of commerce, he may be the most powerful lobbyist in washington. in a speech today, he spelled out the chamber's priorities were 2015 and afterwards, he sat down for an interview with our chief washington correspondent, peter cook. >> -- >> we are having a technical issue. we will get to open -- we will get to peter cook in just a minute. "bottom line" continues in just a moment. ♪

>> as i mentioned before the break, we had a technical problem. heater cook sitting down earlier today with tom donahoe, the ceo of the u.s. chamber of commerce. he outlined in his speech today

the chamber's priorities for 2015. >> there is a lot of talk about what can get accomplished with divided government in washington. is this going to be a wasted year or can you get something done? >> historically, divided government has been able to be productive. look at the election that just happened -- a fun little change was driven by the fact that the american people wanted competent government and people who would work together to solve their problems. if you look at what 2016 looks like especially in the house if they fail to do that, it would be a not very satisfactory election. i believe the house and senate will work together with the speaker and majority leader in a way that will cause more things to happen. that doesn't mean we are going to do huge things but they will get stuff done that will show

progress. >> so much talk about business tax reform, the areas of agreement, this white house and congressional leaders -- is this too heavy a lift? >> i don't think with the presidential race on top of this, with the lack of experience among those in the congress before we can do to -- before we get into a presidential election, there's no way we are going to get it done. you can do a lot like change the tax on medical devices and do things to prepare to do this in 2017, but remember, the business community is blitz on tax reform. >> are you going to be a haute or hundreds here? >> we are going to be a help. there's a fundamental difference between the business community and white house.

the white house have articulated the view they want a tax reform deal that gives them a trillion dollars in tax greek -- in tax income. this is an area where you can bring to bear to help this president. is he going to get trade authority? absolutely. he's already arranged to send the cabinet around to talk to people. they are the biggest problem, it's his own party and the labor issues have blinders on and this could create massive jobs for them, but he will get it and the trade rep is doing a great job. i think we are really close to having an agreement on the pacific deal and we've got in short order, a couple of years we've got to get the atlantic thing because the european economy is in the can and they are our largest broad-based

partner and we have to help bring them up. >> what is your take on the highway funding bill? will we see a bill that can pass the senate and house? particularly an increase in the gas tax? >> you're going to have some sort of bill because if you don't fund the highway trust fund in one way or another, you are going to put a lot of people out of work and you are going to cause more accidents and congestion and we have a real problem here. it is an opportune time because the average gallon of gas is down to a dollar 45 or a dollar 50. a time or two dimes there, if you index it to inflation, -- >> do you think there is the political will for that?

x all that is needed is a little courage. we haven't done it in 20 something years and it's a two day story. the truckers, the aaa, the business community local communities, they all want this done because 50% of building a road's federal funds and the other 50% is divided between the state and local community and they are going to put their money in the bank if we don't show up with hours. >> you talk about economic populism in this country. how big a threat is that? more specifically, how are you with elizabeth warren and the popularity she's enjoying right now? >> elizabeth warren is a nice person. she has a fundamental view we this agree with. fortunately most americans don't agree with her. she thinks the government should own and manage the country.

that's a simple way of talking about populism. i want us to be aware of that and deal with it and i want us to put forward the system that has worked to build the greatest economy in the history of the world, and that's an enterprise system with an appropriate engagement of government. >> it seems like the 2016 campaign has begun in earnest. is that going to impose a problem for getting stuff done here? the campaign started early. >> it won't make it easier but it won't take away the reality that 24 republican senators are up for election in 2016 and only nine democrats. it won't take away the reality that americans send people to the house and senate this year with a very clear mandate -- do something to work together to fix the problems or we will put somebody else here. >> thanks for the time.

>> our chief washington correspondent, peter cook, joins us from washington. mr. donahue talking about engagement and government. is he optimistic about the year ahead? >> he sounded optimistic today both at his speech and in his comments to me. there will be some big disagreements but the few areas of potential cooperation between this president and congress are areas where the chamber is on the same page. getting trade promotion authority for president obama, that's something the white house wants to see. other issues out there, and other big push could get done and they could be a bridge elder. he could be a critical player in washington. >> also in the nation's capital, house of representatives has

passed a bill to soften dodd-frank, the landmark law raining in wall street. the measure now goes to the u.s. senate where it will face strong opposition from liberal democrats like senator elizabeth warren. phil mattingly tells us that president obama is sharpening his veto pen. >> sharpening his right -- that's a number of veto threats we've seen in the first two weeks of the 114th congress. the president has vetoed a total of two bills in his six years so far. what we have seen is an array of bills coming out of the republican led congress including things like the keystone pipeline. today's bill -- was a big vote in favor but it's missing two thirds of the house. that's what it would take to override any veto. as of now, does look like this bill, even though it moves in

the senate, will find any type of law. >> has the white house influenced any vote taking on the floor? >> there is no denying that when you talk to white house officials behind closed doors that elizabeth warren has helped elevate this issue. for a long time since the law was enacted, wall street reform was not the primary focus of anybody in town. elizabeth warren has changed that was powerful floor speeches in making this a major issue right now. the white house is not only forced to listen to her but take action based on what she wants. >> coming up, retail sales in the united states slumped in december. we will take a look at last month's broad-based retreat and get an outlook for the retail industry in 2015. stay with us. "bottom line" continues in just a moment. ♪

>> welcome back to the second half-hour of bloomberg "bottom line." let's get you an update on the equity markets. seeing an uptick this afternoon -- the dow jones industrial average is off the session lows, down about 1.25% -- a 220 point drop for the dow. the s&p is lower and the nasdaq down nearly three quarters of a percent. time now for the commodities report with my -- with su

keenan. >> we are seeing as what can only be described as insane losing energy. what one veteran trader called insane. oil is up 5% after being up 2%. let's start with natural gas. you see a double-digit climb. chicago is the heart of the cold weather market. only three degrees earlier in the month. i called steve swartz who said what we are looking at is a short-term imbalance. a light of private urologists saying colder weather is ahead not just at the end of the month, but in february. you have a lot of traders shorting gas betting it would go lower and now they are turning around on the wrong side of the market and buying big time. now it's go to the other energy market because you see a similar

pattern play out. oil actually down, right at the $45 mark. so was the rest of this market happening right as we head to close without any major headlines. they say had gone down to far too fast. those who were short betting meal complex would go lower are buying back in a big way. let's go to metals because you see major moves there with copper leading the way down. it hit a six year low with lower energy costs combined with negative economic data in china is driving the move. commodities had sunk to the lowest level in more than 12 years. that may have been a contrarian signal for many to buy now. >> where do we go from here? >> it's difficult to say.

goldman's top analyst was talking about undershooting to the downside. goldman said $39 is where they might go, now they are amending that. >> opec has lost market power in one of the key reasons is the supply curve for shale is incredibly flat. it's like producing paperclips. opec took oil off the market, production would go up. >> a lot of questions on where the direction is right now but it's going to take a while to settle. a big, big day. >> thank you. retail sales fell in december by the most in almost a year. why the national retail federation says overall holiday spending rose 4%, the december report raises questions about how much lower gas prices can boost the u.s. economy.

julie hyman has been talking to economists and they have some explaining to do. >> they do because they really got this wrong. if you look at the number including the effect on gas stations, it's down .4%, but the surprises when you back the numbers out. you still get a decline of about .3%, where analysts and economists have been looking for an increase. a lot of economists have said the decrease in the price at the pumps would help consumers but the realized savings and then spending from the gas price falling is delayed. that people don't realize it's happening right away. it takes a while to take effect. another thing one of the in house economist pointed out is that if you are a consumer filling up your tank every week, you are looking at your week to week change, not necessarily spending i -- not necessarily saying i am spending a less than

year ago and the week to week change is smaller. another thing that could have affected this number is a lot of the sales were pulled into november. so overall, the season was relatively strong. various retailers have a lot of sales to draw people in and the november numbers were relatively good. the new site drop off in december. these are some of the explanations we are looking at. >> where did we see the strength? >> in furniture, interestingly enough. it rose .8%. and in restaurants -- they weren't necessarily buying stuff, but they were going out to eat, perhaps with the extra money. so that is the good. what about the bad? building materials which is not holiday sales, so you can put that aside for a moment. electronics is interesting because we saw deep discounts. then there's another 1 --

general merchandise. department stores come we saw a drop of .2%. walmart of the world, where you would think there would be a benefit from the gas prices falling. and if we are doing the good, the bad, and the ugly, the ugly would be the gas stations which saw a decline of more than 6%. economists remain optimistic that wage growth is going to come and we will see a pickup in consumer spending but we did not see it in december. asked for more on december's retail sales report, i'm joined by kent perkins, the founder and president of retail metrics, an independent research firm. welcome back. pleasure to see you again. the u.s. seeing the best job gain since 19 -- since 1999. gas prices or -- gas prices are low.

why were the retail numbers so week? does the data confirm the weakness? >> it has been a bit of a had scratcher. we've seen the trends unfold with unemployment falling, gas prices declining, one would have expected stronger sales throughout the year. they've been ok but they did not materialize in a strong way. when you look at the actual eta from the 36 retailers that have come out with holiday sales results in the last week ahead of the conference and same-store sales, a lot of them have been positive. that's a profound change from what we've seen in the previous quarter's. it looks like retailers may be doing better than these are showing. >> are the numbers skewed because the christmas shopping season begins so early? >> that is a great point.

retailers came out of the gates strong trying to drive traffic forward into november and it was much more spread out this year. with the advent of more mobile and online shopping, we don't see as much traffic around black friday, so that has had an impact as well. >> we saw times when consumers were more confident and shrugged off the caution they display during the recession. are consumers going back to being practical with their money or is it psychological? >> i think there's a higher level of practicality. we've seen spurts with a have listened the purse strings, but it looks like they are paying down debt and trying to add to savings, spending more frivolously and looking for deals. one of the things we have seen

is the level and depth and prolonged discounts that took place throughout the season. >> what are they telling you? what are you hearing from the folks on the ground about the consumer psychology when they go to the store? >> it seems like the consumer psychology is ok. i think we're heading in with better momentum for the retailers with unemployment falling and moving toward that magical number of roughly 5% the one thing retailers and consumers alike are waiting for is wage gains. the nonfarm payroll numbers were down and this is the one fly in the ointment. >> economists and analysts who have appeared on bloomberg television have discussed what is needed to sustain growth momentum in the united states. will the downward revisions we

saw have a significant impact on overall forecasts this year? >> i think it will have a modest impact for the fourth quarter. maybe some slight downward revisions, but i'm skeptical about the impact of the number. retailers have been saying it's a stronger picture than the number portrayed this morning. >> he's the founder of retail metrics joining us from boston. always a pleasure to have you on the broadcast. up next, a latin american report for this wednesday, and later, is there a seven-year curse for u.s. equities? we'll explore that and more went "bottom line" continues. ♪

>> at the breaking news desk with a look at the roller coaster ride in u.s. equities -- we are off the lows of the

session. when mark began speaking, we were at the lows but we are clawing our way back. posting losses of at least .9% -- a triple digit point decline for the dow industrials but nowhere near as volatile as it was yesterday. this shows you the swing move from peak to trough a 344 point move today compared with almost 425 point yesterday. it gives you a sense of the volatility easing a little bit when it comes to moves within the dow industrials. we're looking at goldman sachs and jpmorgan as the worst performers. that marked the big mess because of legal expenses and sets that tone for the bank and their earnings reports. goldman sachs is another one in focus because of its volatility in trading that could result in. i also want to point out the move higher for oil -- a gain of more than two dollars a barrel to $47.93.

there had been some disconnect between rising oil prices but stocks are coming off their lows, perhaps that is equalizing a little bit. >> scarlet, thank you. it's time now to -- time now for today's latin america report. result possibly to sales rose more than all economists estimated. the numbers were sparked by black friday promotions at the central bank. sales jumped .9% after a revised 1.3% increase in october. the president is struggling to revive consumer confidence after the cost of living in brazil surged last year and benchmark borrowing costs rose to the highest level since 2011. that is your latin america report for this wednesday. coming up medtronic which was founded in a minneapolis garage once to turn irish. a miami fast food chain, burger king, wanted to be canadian. we will look at these tax fixes

by u.s. companies, next. ♪

>> pfizer has been a u.s. company since its founder opened a redbrick laboratory and 1849, but this year, it wanted to become a british firm. the reason? to get a tax break. this practice referred to as tax and version, could cost the u.s. treasury more than $33 billion in lost revenue over the next decade. trish regan joins me now with more. republicans say the answers cut

the corporate tax rate. >> i think it's pretty simple. i don't know why you don't want to incentivize people to start businesses here and keep them here. right now, you are incentivized to do an inversion deal. if you can get 12% in ireland logically as a business you will be looking to incorporate in ireland. >> what about the pushback they are seeing from the white house? you get the benefits of eating in the u.s. but then you want to cheat the tax base. >> you will have a lot of businesses looking to start up that will say maybe i better starting my company in ireland. why should i start my company in the u.s.? business owners are smart and they are going to think this through. if you are going to be saddled with a significant tax burden just because you started in the u.s., you might think about not starting in the u.s..

how much are you losing in the way of jobs? if you had a lower tax structure, you incentivize customers to be here that should translate into more jobs. >> there was the argument during the bush years when they wanted to have the tax holiday. >> that would be temporary. i think that's the distinction here. if businesses don't do anything if they have something temporary on the books, it does not incentivize people and their behaviors in the same way as when you have the clarity and you know there's going to be a distinction and will have a lower tax rate for the foreseeable future. >> you are speaking to terrel owens. >> not about tax inversions.

he had some challenges financially after leaving the nfl, so we may talk about that and his thoughts in general on the challenges players face. i would like to get his thoughts on the ncaa. that's a system where everybody is making money except these players. i'm curious to get his thoughts on that. and you know who was voted off the apprentice last night? he was. we will talk about that and roger goodell. >> he has some thoughts on commissioner nadal no doubt. >> maybe he will show me some football tips. i've got a football in the newsroom. >> you are at least going to get it signed. >> "street smart" is at the top of the hour. stay with us. scarlet fu will join us with a special off the charts report when we continue in just a moment. ♪

>> they almost got to the whole alphabet there. jeffrey dunlop unveiled his 2015 outlook during his latest webcast.

he says this year we will see lower treasury yields, increased volatility and a fed rate increase. but that's not what caught the eye of our chief market's correspondent, scarlet fu. she joins me from the breaking news desk. >> the fact that the bond cane -- don king not named will, he's looking for treasury yields to go to 1% compared to the consensus of 2.9 percent. but with the selloff extending to a fourth day, his chart on equities is a really good one. let's pull it up. what it shows is the number of consecutive years of positive returns in the s&p 500 going all the way back to 1871. we got this chart from robert shiller. as measured by the s&p 500, u.s. stocks and never climb for seven straight years. we closed six years of gains last year and it seems to be the line of resistance. the last year the s&p 500

recorded six years of gains was 1803. given one of the themes is volatility, expect more days like today and more reversals before we get to the end of the year. >> the consensus on wall street is stocks will record another year of gains, but what are they hinting that bullish case on? >> bloomberg news surveyed 19 equity strategist across the big wall street firms and not one of them expected the s&p 500 to fall this year. the average target is 22.25, marking a gain since last year. -- 20 225, marking a gain since last year. and the reason is lower oil prices. that supposed to be a tailwind for u.s. companies. maybe people are pinning too

much on that given the retail sales number we got earlier this morning. also improving earnings and expanding margins, even though profit margins are at record highs. the fly in the ointment there is the big s&p 500 companies rely on overseas markets and a stronger dollar may get in the way of that. we heard noises from companies pre-announcing results. jeff dunlop says the bull case here for the u.s. economy rests on the labor market and how the economy is growing jobs. that is with the bulls are holding onto right now. >> scarlet fu, thank you so much. get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and on bloomberg.com. that does it for this edition of "autumn line." -- "bottom line." "street smart" is next.

>> welcome. we have minutes to go until the close. oil prices reverse losses, and the federal reserve said the u.s. economy continued to expand last month. i am going to cover every angle of the market. plus this year's heisman trophy winner just declared for the nfl draft. we get reaction from terrel owens. "street smart" starts now. i want to get back to the markets, where we have stocks