i'm alix steel. alix: you have the dow, snapping us -- snapping winning streak, finishing in negative territory, the s&p falling for a second day. a new record high before pulling back, the nasdaq seems to be eking out a win on the fifth day of bouncing between gains and losses. no supplies, telecom is one of the sectors leading the s&p higher today. for more on the market let's go david. and guys, welcome. michael called today dull. that's choosing between doing a little in doing nothing. that is exactly what the market

thought? david: if you look at the minutes it looks like the fed is compounded by the weakness in the economy. they expected to be more robust and it hasn't happened. they basically said that june is off the table and now we wait for september, maybe? >> sure, and maybe a little bit more. they've the size to the transitory nature of the weakness in the meeting minutes and since then we have seen weakness in a number of other economic reports, retail sales. aside from this mixed economic data if we dig deeper behind the earnings report, things are not that bad, even if lowe's had different -- disappointing numbers, some of the commentary from a call was positive, the ceo saying he was encouraged by the consumer survey where they continue to see views around personal finances and home values improved, shifting more spending

to home improvement and highlighting lower fuel prices. carl: but not good enough. big fear ofs the people that i speak with, that the fed will miss the boat on when they can high grades, inflation will get away from them and they will have to hike more rapidly and cause a temper tantrum that they raise concern was veryich i thought interesting. they are concerned that the people who have plowed money into these 30 year bonds are going to get a pretty scary shock when rate start to rise and rise suddenly and they have to move much more quickly because they have not moved early enough. alix: that looks good. [laughter] asa: inflation is a -- carl: long as we are seeing slow growth in the economy we are going to see a slow mild inflation. look at consumer spending in the first quarter, personal consumption was way below the long-term average.

retail sales negative in the first quarter, flat in april through march. good activityng but it is not extending to the full range of consumer spending. a just seems scarred by the financial crisis still. alix: another area that the fed pays attention to his oil. we have seen oil prices continue to rise around that $60 level. are we putting disinflation completely off the table with inflation indicators? i think that oil is responding to the dollar, weakening sharply but stabilizing in the last few days and if the dollar weakness is behind us now with the ecb accelerating through quantitative easing, maybe the strengthen oil is also coming to an end and the fear of that is causing headline deflation to dissipate as well. i think we need to look me on the oil price story and the

strong dollar will continue to weigh on import prices and i suspect we could see the risk of a washout this friday as we finally resolve this west coast port dispute with a lot of cheap imports just recently reentering the economy and arriving on store shelves, meaning that little bit of improvement that we saw in the inflation numbers over the past three to four months, which the fed acknowledged in the minutes, could get washed out as well and we are back to where we were in january with core inflation running at the lowest levels since the end of the great recession. the confidence to move in june or july and we have to look deeper in the back half of the year. i'm watching oil very closely. the correlation to in oil prices and bonds are pretty strong. people are looking to oil prices as an indicator of long-term inflation because it's very difficult given the incredible amount of stimulus around the

world to get an accurate gauge of anything. oil prices are as good a gauge is anything. we have numbers crossing right now. julie? julie: the first can be put in the plus column. comparable sales are up 5%. also rose byales 5% and it looks like those are in line with what analysts had estimated. the company is also raising its forecast for the full year and it would not the report without the excuse to show a victoria's secret video. the company now predicting that will be 350 to 370. bringing that up by five cents. analysts are looking for more than that. 370 four, we will see how these shares react. a quick check, actually, shares

are lower, so it looks like even if the company is raising its forecast that may not be enough to satisfy what analysts were projecting. cory johnson, our editor at large, has the numbers. i have not put anything into my model yet, but let me give you the headline numbers. rather than $1.51 billion, a 23% increase on a year-over-year hass, i'm sure the company beat analyst estimates, but i will tell you what the slowest year-over-year growth is the we have seen in recent memory, a sale of what about they predicted just outside our guidance. deferred revenues, an important number for them, it tells them what's important and what they have collected on, that was at 31% year-over-year. they are talking about currency effects and the dollar hurting them by about 4% again.

your revenue increase, had it not been 20%, but of course currency helps them. it 23% call year-over-year to $1.51 billion, booking deferred revenue, as you will, at a faster pace. zipping down to the income statement what we see is a business that, no shock as i look at it, lost money. the operating results of net income -- i take it back, the company made $4 million in the quarter. $1.5 billion in revenue. rarely profitable for a huge marketing expense, not a lot of huge surprises there. i will continue to dig through and look for some nuggets. salesforce always has a few. alix: definitely. and takeover speculation has been rampant in the last few weeks. thank you. something that i read today that

i found interesting was an op-ed in bloomberg news talking about the dynamics of companies that spend a lot of money through r&d and how their market cap actually grows. he points out that the companies that increase in value by an average of 251% market cap between 2012 and 2015, when they increase their r&d, 10.25% of net sales are r&d and it was a very different story for those who did not want to invest. from where you sit our buybacks in dividends the wrong way to go? david: in the long run, yes. opportunities to invest in the long run will serve you well, you -- you will create products that will be in demand down the road. to some extent buybacks are an admission that you have nothing better to do with the money and if that is the case maybe you ought to seek some sort of

strategic partnership or something like that, but r&d? looking at the warren buffett model, that's a long-term hold on good companies. johnson & johnson were coming up with about 10 new products, they were hoping to get about $1 billion each out of them with target investing in online initiatives -- not across the board, but in general. american mean that companies have run out of ideas? is that what it means? going forward, is that a negative? it depends on the economic circumstance. if you have a new product to invest in, certainly you should, that often if there is capacity or slack in a certain industry or sector it may make sense to just fortify your balance sheet in the interim and wait until business conditions are stronger. carl: it may also reflect on the fact that the average holding or common stock is less than one

year and it used to be several years or more. in essence investors aren't renting stocks, no longer buying them, and they want a return on buybacks,stment for dividends, focusing on short run earnings expectations. julie hyman sees those down erratically in after-hours. julie: yes, indeed. the company came out with an earnings per share of $.65. the projections look even worse. the company forecasting first-quarter earnings per share of $.20 to $.25, analysts had been predicting $.59. at most the company says they will be looking at $.25 and it is no mystery why the shares are down. absolutely not. where is the sector that you still feel confident in the economy? the financial sector is

starting to do a little bit better. some of the big banks are especially starting to break to the upside. if that is sustained it would suggest that there is some momentum in the economy and even though the second quarter is off to a sluggish start economically , maybe it is just that that is about to pick up some speed. that is what i am watching most carefully. david, you are sticking with me. karl, thank you for joining us as well. thank you, lisa. we will be right back. ♪

♪ welcome back to "bloomberg market day. quote -- date." -- day."

first quarter economic slowdown was can -- was predicted to be unlikely compared to the fomc session released today, they also confirmed a statement in april that they expected the u.s. economy to return to a moderate pace of growth with officials weighing the timing since 2006, meeting again in mid-june. crack down on five of the world's biggest banks, the justice department obtaining banky pleas from the royal of scotland after accusing them of rigging the foreign exchange market. leading guilty to manipulating interest rates, the doj, fed, and other regulators for a total of five billion dollars. >> actions deflated profits while harming consumers, investors, and institutions around the globe. including the banks own customers, who place their faith in the market and relied on it to produce a competitive

exchange rate. alix: the sec has given the to keep those businesses running without impediment. the investment firm that manages the money of steve cohen is bringing aboard a new chief operating officer. .72 has hired timothy shaughnessy as part of the movement towards quantitative investing. at liberty global thinks that vodafone could make an ideal partner. john malone says that merging his cable empire would be a great fit, but he would not say if the companies are in talks. vodafone is valued at $93 billion, slightly more than the liberty global valuation. a european company expanding into the u.s. cable market, they have agreed to purchase cable ismunications, altice androlled by patrick drawdy

this is his first venture into the u.s. cable market. those are your top stories. to the closing bell, cory johnson is here with me on set with bloomberg intelligence joy.st, david you have put some numbers into your model. what stood out to you? cory: so many things were interesting. deposit in sann francisco on fremont street. from operations was strong, they said that in the press release, but they recognize a lot more deferred revenue than they have in the past, which was a big boost their. the thing that really gets me with this release here is that it starts to answer may be most important question about salesforce, which is -- why do they have to spend so much money on marketing? one year ago in this fiscal

first-quarter they spent 52% of revenue on marketing. think of it as the gas pedal to drive revenues. if they jam the pedal to the metal at 52%, they can get boosted revenues and the machine goes fast forward. of the equity holders or anyone who wants to buy the company is that -- maybe if you spend not so much on marketing you could have a profitable business. well, they stepped off the pedal just a little bit this quarter. spent onvenues marketing. they took the pedal off the metal just a little bit, revenue growth dramatically slowed down. one year ago it was about 33%, i think. 37%. this quarter? just 23%. just a little bit of lightning in the marketing spend and sales growth really slowed down. not a positive sign for an employer or someone who owns the stock. alix: you make a good point, but andstock is up on the news

of course we have been looking at who will buy salesforce. what do you make of that point? who would buy this with so much to grow? >> the reason would be in terms of applications for what they do on the cloud. mathematically it is difficult legacy software companies are extremely profitable, though they don't grow as much. dramatically reducing your margins is something that it is very hard for any large company to digest. david, looking at the general landscape, what will be the driver of m&a? do you expect these kinds of huge deals to get done? i do. those top stories were all takeover stories. in the pharmaceutical space the isecommunications, this going to continue, people looking for market share, expanding their product line.

with valuation suggesting that they can pay with stock that is historically pretty high in terms of their purchasing power, i think it's going to continue. the stock is trading at 78 times even. 78 times. if this business were to be in a solid state of about where it is right now, bigger than it's ever would takewing, it 78 years of these profits to pay for an acquisition at this price . it's hard to imagine some strategic acquirer swallowing that. alix: we have got to go there. salesforce has no comment on m&a. thanks, guys, we will be right back. ♪

we want to go right to julie hyman in the newsroom.

flex companies cutting 500 jobs, they said, this is not necessarily a huge company to begin with. it looks like it is not so employeesost 13,000 is what they recorded as of the last filing on the 25th. nonetheless, 500 employees is not insignificant and they have from eightr dividend cents per share to 16.5 cents per share with the forecast particularly below estimates, below $.25 where analysts were looking for $.59 and the company's revenue in the risk of first-quarter as they project is also going to be below what they anticipated. on the face of it the numbers look pretty good, the net sales and comparable sales are both up 5%, this is the parent of victorino secret and a bath and

body works. this is better than what we are seeing with other retailers. they are raising their forecast for a full year but even that raised forecast is still below what analysts have projected, so that is perhaps what is behind the decline in the shares. you mentioned salesforce, you were just talking about them, and we did it -- we did get some commentary from the president of the company, he said no comment on all of this m&a speculation we're hearing about in recent weeks. alix: they're billing growth was over 20%, beating the estimate, a possible reason for the stock being higher. thank you so much, julie hyman. another moving the markets andy, treasuries gaining

showing that officials are in no hurry to raise interest rates. for more perspective we are back with david joy, the chief market strategist at america prize financial. where is the action that you see it? david: to me the most interesting thing is what's going on in the eurozone on the equity side. you are starting to see the economy their pickup. little bit of weakness in some spots. we just had the sentiment index come out softer than expected, but they are gaining some traction. in addition to that the ecb is in the middle of a massive quantitative easing program and just announced this week that they are accelerating it over the next couple of months. alix: that is whenever thing is supposed to go down with greece, is that why they are doing it? is that a risk for the market short-term? they may be also doing it

because of the strength of the -- strength of the dollar, slowing down, i think that they will push back if they don't want the euro to week and a goode bit, but that is a point, we will find out within the next couple of what's going on with greece. this is going to come to a head very soon. let's say that there is some sort of risk with greece, would you be a buyer on that? david: yes, i would be a buyer on weakness. i own eurozone stocks now. we have an allocation to them, a toest overweighting compared the benchmark. i suspect that what we will get in greece is some sort of extension that leaves a lot of these issues related to pension reform and labor market reform unresolved. alix: good. [laughter] david: it buys a little bit of time, maybe you get a little bit of a relief rally but it does not was all much. alix: the biggest thing you are

scared of that keeps you up at night? david: that it doesn't happen. you get this close to a default event, lots of things can happen. that's something that worries me. the other thing that worries me is you raise the issue earlier in the show about the issue of potential spikes in interest rates in the u.s., that raises concerns about the potential for liquidity in the bond market, mons,ularly corporate bank loans, a lot of assets piling into those markets and if they try to get to the exits at the same time it could cause a logjam. you for yourthank perspective. such a pleasure, david joy. thank you for watching "the bloomberg market day" everyone. have a good night. ♪

salesforce, raising its forecast. we will tell you what we are learning about potential takeover talks. ♪ i'm emily chang, this is "bloomberg west." coming up, jeff bezos has a new top advisor. for the first time, it's a woman. we will tell you what it means for the future of the e-commerce giant. spotify, adding podcasts and videos, will it be enough to take on google and fend off apple? keep an eye on your robotics u engineers, especially ifber -- if uber