we are moments away from the closing bell. this is the bloomberg "market day." i am alix steel. ♪ [bell] you have the dow snapping a four-day winning streak, and the dow and s&p both finishing a negative territory, the s&p falling for a second day, and the s&p did touch a new record high before pulling back. the nasdaq king out a win -- a day of gains,

and losses, and you have telecom leading the s&p higher today, but for more on the markets, let's bring in lisa, david, and another. hi, guys. welcome. it is said day. doing little and doing nothing, and it seems like that is exactly what the markets thought, david. david: yes, i think that is right. from the minutes, it seems the fed is kind of con founded by the weakness of the economy. they thought it would be more robust coming-out of the winter, and that has not happened,. alix: is that it? bye-bye, june? >> they emphasize the transitory weakness in the meeting minutes, and since then, we have seen weakness in a number of other reports, industrial production, retail sales. you bring up a good point.

deeper, things are not that bad. even the lows had disappointing numbers, but some of the commentary was positive. take a look at this. the ceo said he was encouraged by the consumer sentiment survey, where we continue to see homeowner views around personal and home values improve, and he went on to say highlighting some things. >> this is actually the big fear of people i speak with, which is that maybe the fed is going to miss the boat on when they can hike rates. inflation will get away from them, and they will have to hike more, and the latest meeting minutes i thought were very interesting. they were concerned that all of the people who plowed money into these 30-year bond i'm going to get a shot, a pretty, pretty scary shock when inflation rises

suddenly, and they have to move suddenly. alix: carl? a laggingation is indicator of economic activity, and as long as we are seeing low growth in the economy, we are to see a slow, mild upturn. david: personal consumption, 1.9%, way below the long-term average, retail sales negative in the first quarter, flat in april. es is seeing some good activity, but it is not eggs ending the full range. they are still reluctant to spend. they are still reluctant. inflationone area of we are talking about is oil, and we have seen oil prices continue to rise around that $60 level part. are we putting this inflation completely off the table, and what inflation indicator is oil? responding.k oil is

it has weakened pretty sharply, but it has stabilized in the last few days, and if the dollar weakness is behind us now with the ecb accelerating quantitative easing, then maybe the strength in oil is also coming to an end, and the fear of that causing some headline inflation may be disappointing, as well. carl: i think we have to look beyond the oil price story, and the strong dollar will continue to weigh on import prices, and i suspect we will continue to see a risk in a washout in the cpi this friday. dispute,the west coast and that meant a lot of cheap imports just arrived on store shelves, and that means a little bit of improvement that we saw in the inflation numbers. and that could get washed out as well, and we could get back to where we were in january, with core inflation running basically at it lowers level since the great depression -- at its

lowest level since the great depression. we also have to look deeper into the back half of the year, and that does not mean it will happen in june or july. lisa: oil prices and particularly 30-year bonds, the longer-dated bonds, they have been strong. an indicator for longer-term inflation, it is very difficult, given the incredible amount of stimulus around the world to get any accurate gauge of anything. about consumer, we now, anders right julie hyman is looking at those. julie? julie: it looks like you can put, at least at first flesh, a company in the plus column, at $.61, a petty above analyst sales,es, and overall net sales also rising for l brands, and the company is also

raising their forecast. to show a victoria's secret video, and the company is now predicting it will be 350 to 370, so bringing that up by five cents, and analysts are looking for more than that, so 374, and let me just do a quick check. we are seeing them move lower. even if the company is raising its forecast, maybe that is not enough, based on what analysts have been projecting, alix. you, all right, thank julie, and we have numbers with cory johnson. these in my not put model yet, but revenue of $1.51 billion, a 23% increase in the year over year basis for salesforce. beat thenote that that

analysts' estimates. it was about what they predicted, just a little bit outside of their guidance, and this is an important number for salesforce, because it tells what people have ordered but have not collected on. at 41% on a year-over-year basis. and the effect of the dollar hurting them, about four percentage points again, so year-over-year revenue, had it not been a currency was flat, it would've been 27%, and the currency helps them. ,e will call it 23% europe year demo one point -- year over year. as i sit down to the income down to the- zip income statement, their operating results, the net income -- i take it back.

on company made $4 million $1.4 billion in revenue, $1.5 billion in revenue, so barely profitable, a huge marketing expense, not a lot of big surprises there. i will continue to look for some nuggets, because salesforce always has a few. and we also want to look at any takeover speculation that has been rampant in the past few weeks. thanks, cory. in bloomberged news, talking about the dynamic of companies that spend a lot of money in r&d and how their market cap actually grows, and he points out that the company increases in value by an average cap between 2012 and 2015 when they increase their r&d, about 10.25% of net sales and r&d. it was a very different story for those who did not want to invest in their r&d. we always seem to hear companies not wanting to invest in their

r&d. david, from where you sit, our buybacks the wrong way to go? david: i think in the long run, yes. if you have opportunities to invest in your own business, in the long run, that will serve you well. you will be more innovative. you'll create products that will be in demand down the road. are an extent, buybacks admission that you have got 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, yes, r&d, you look at the warren buffett model, that is really and r&d model. and johnson & johnson coming up with about 10 new products, and they are hoping to get about $1 billion out of each of them, and you look at target investing, not across the board, but in general. does that mean american companies have run out of ideas? is that with that means, and what does that mean going forward.

carl: if you have a new product to invest in, certainly, you should pursue that, but if there is a lot of capacity in your sector, maybe it makes sense to just fortify your balance sheet in the interim and wait until business conditions are stronger. david: it used to be several years or more, so, yes, in essence, investors are renting stocks. they are no longer buying them, and they want a return on their investment. buybacks, dividends, and some short run earnings expectations. looking at hyman is those, seeing the stock down dramatically in after-hours. julie: yes, indeed. a data management solution, the company coming out with earnings of $.65, the analysts estimates $.72, and the company is

--ecasting first-quarter analysts had been predicting $.59, so at most, the company says we are going to make 20 five cents, and analysts were looking for 59 cents, and it is no surprise that those shares are down, alix. where do you still feel confident in the economy? big bankse of the especially are starting to break out to the upside. if that sustains, that would suggest there is some momentum in the economy, and even though it is a second quarter, off to a -- pretty sluggish start, maybe that is a suggestion it is about to pick up some speed. all right, david, you are sticking with us. lots to talk about. we will be right back. ♪

♪ alix: welcome back to the bloomberg "market day." i am alix steel. here is a look at some top stories. the fed did not expect to raise rates in june, and though they said the economic slowdown is unlikely, and that is according to the minutes of the april of a web see session released today, and they also say they expect the u.s. economy to return to a moderate pace of growth. in thels are weighing first increase since 2000 six, and they meet again in mid-june. a historic crackdown on five big ranks, the justice department fromng guilty pleas

several banks after accusing them of rigging before and exchange market. ups pled guilty to manipulating interest rates. of $5.8 billion. >> their actions inflated bank profits while harming countless consumers, investors, and institutions around the globe, from pension funds to major corporations, and including their own customers, who placed their faith in the market and relied on it to produce a competitive exchange rate. the banks caught a break from regulators read they happen given a waiver to keep their businesses running without impediments. and bring aboard a new chief operating officer, hiring a who is partxecutive of a movement towards quantitative investing. and the chairman of liberty global thinks vodafone could make an ideal partner. john malone says merging his cable empire with vodafone with the a great fit, but he would

not say whether the companies were in talks. vodafone is valued at slightly more than double the global valuation. and a european company is expanding into the u.s. cable market, agreeing to buy a company in a deal that values the company at more than $9 billion. customers in more than a dozen states. head has this as his first venture into the cable market. and earnings after the closing bell. editor at large cory johnson is with us on set, and are bloomberg intelligence analyst along with david joy with ameriprise. david, what stood out to you? david: -- cory: they put down a deposit on

a building they are building, and the cash flow for operations was strong. they recognize a lot of deferred revenue, substantially more than they have in the past, and that was a big boost to their, but the thing that gets me with this release is it starts to answer maybe the most important question about salesforce, which is why do they have to spend so much money in marketing? a year ago, they spent 52% of revenues on marketing. thek about that as being gas pedal. if they jam the pedal to the metal, 52%, then they get a boost in -- get a boost in revenue. it goes forward. the dreams of anyone who wants to buy the couple, hey, maybe if you could stop spending so much on marketing, you could have a profitable business, and they stepped off of the guests just a little bit, 49% of revenues spent on marketing, so they took the pedal off the metal just a and revenue

dramatically slowed down. it grew about 33%, i think. last year, 33%. revenue was just 23%, so just a little bit of lightning, and slows down. that is not a good sign for an acquirer or some but he owns stock. good point.ke a what do you think of his point? why would anyone want to buy this if it costs so much to grow? anurag: mathematically, it is difficult to acquire someone like this, because all legacy companies are extremely profitable, although they do not grow that fast. rate,is the revenue run to dramatically reduce your margins, that is something that is very hard for any company to digest.

data, looking at some of the general landscape of stocks, what is going to be the driver of m&a? do you expect these huge deals to get done? david: i do. it is interesting. you look at the top stories you just read through, they are all takeover stories. in the arm a single space, telecommunications space, technology space, so, yes, this is going to continue. -- in the pharmaceutical space, telecommunications space, technology space. is pretty hight in terms of their purchasing power, but it is going to continue. alix: and salesforce -- timesit is trading at 78 ebitda. .igger than it has ever been growth slowing. it would take 78 years at these profits to pay for acquisition

at this price. it is hard to imagine some strategic acquirer swallowing that. alix: all right, we have to leave it there, salesforce saying no comment on m&a. we will be right back. ♪

alix: welcome back to the bloomberg "market day." we will go straight to julie hyman. julie: in addition to the headlines, also cutting 500 jobs, afterhours, and this is not necessarily a huge company to begin with. actually, not so mall, 1300 employees as of its last filing as of april 25, but nonetheless, 500 employees is not insignificant. this also as they come out with

earnings that miss estimates and a forecast that is below estimates. analysts had been looking for $.59. the company revenue in the first quarter, fiscal first quarter, as it projects is also going to beenlow what analysts had anticipating, and now, as for l brands, it looks pretty good, up 5%. this is the parent of victoria secret as well as bath and body works. the company is also raising its forecast for adjusted earnings per share for the full year, but even that forecast is still below what analysts had been projecting, so that perhaps is what is behind decline in shares, and then you mentioned salesforce, and you were just talking about salesforce, so we were getting commentary from the president of the company. ent" on all ofmm this m&a activity we haven't talking about.

and they were saying what this report says, any future m&a could depend on the financial health of salesforce. they did beat the estimate, a possible reason for the stock being higher. thank you so much, julie hyman. another move in the market today. treasuries gaining following said minutes released earlier, and that shows officials are in no hurry to raise interest rates, and for more perspective, we are back with a chief strategist, david joy. where is the action where you see it? david: well, for me, what is interesting is what is going on in the eurozone, and i am speaking mostly on one side. it is not robust. got a little weakness in spots. we just had a sentiment index that came out which was a little

bit softer, but they are gaining some traction, but in addition to that, the ecb is in the middle of a massive quantitative easing project, and they just announced it that they are frontloading it. alix: does that count doing a greek risk event? is that why they are doing it? is that a risk for the market short-term? david: i think they are probably doing it because the strength of the dollar recently that will slow down their economy, since it is much more heavily dependent on exports than the u.s. -- i think they are pushing back because they want the euro to weaken a little bit, but you raise a good point. we will find out what is going on with greece. this is going to come to a head very soon he and they apparently do not have the money to meet the next round of payments. with some kind of selloff, would you be a buyer in that? a buyeres, i would be

on weakness. i own eurozone stocks now. to a neutralive position on benchmark. i suspect we will get in greece some sort of an extension that leaves a lot of these issues related to pension reform and labor market reform unresolved, but it buys them a little bit of time. alix: the biggest thing you are scared of, that keeps you up at night? david: that it does not happen. close, accidents can happen, so that is something that worries me. the other thing that worries me, you raised the issue earlier on the show about the issue of potential -- a potential spike in interest rates. ,otential illiquidity potentially with high-yield bonds. assets piled into those

markets. that could cause a logjam. all right, david, thank you for your perspective. david joy. thank you for watching the bloomberg "market day." have a good day. ♪

from our studios in new york city, this is charlie rose. charlie: the founder and president of the political risk consulting firm, eurasia group. is calledok "superpower." i'm pleased to have him. aboutof people think where america goes from here. i read from you, many countries including china, russia,