[bell ringing] it is read a across everyone's. you are looking at the dow closing off by 174 points. the dow and the s&p are closing at one-month lows. the stock suffering their worst day in more than a week. plunged at its session lows. we are kind of in the same zone there. most stocks finishing lower in all of the sectors in the s&p finishing lower. and ugly, gross red day. joining me, joe weisenthal. one thing that caught my eye today, the macro picture -- they reported the low in of earnings and sales rates for the end of the year, but they did not say bad news. ok, they may be the lower end of

estimates, but no more bad news out there? is the cycle bottoming out? joe: honestly was a red day, but number stilllaims stays so low. it is not the end-all and be-all, but i never get too worried when i continually's he it surprise -- continually surprise economist to the downside. alix: and it is jobs day tomorrow -- so it may not be pac-10, but i was fascinated by the headlines. bundled that greece into a one-month psalm at the end of the month -- they are the first country to do that since the 80's and the only other country to do that in zambia. that is a big deal. joe: there was always the possibility this would happen,

but now it is official. of course, the huge shock surprise story had to do the imf, not about greece, at nine 30 a.m., the imf in a way told the fed what to do. let's share what christine lagarde at the imf had to say. lagarde: we think that there is a case per waiting to raise rates until there are more tangible signs of wage or price inflation than are currently evidence. believetherrd words, we that a rate hike would be better off in early 2016. joe: everyone was really surprised by this comment and i cannot believe the imf is telling the fed what to do. i did not find it that ridiculous. the fed has told the ecb what to do. they have told the ecb they should do qe. the fed has advised the bank of japan. they are always telling smaller countries what to do with their economies. we should get over it. they listen though?

does janet yellen say, yeah, let's talk about this? that yellent think is going to consider what christine lagarde has said it all. i do not think it will have any impact on policy, but i did not find it that ridiculous. we did wind up seeing a reaction in the bond market. year yields were up 1%. we had the 10 year up at its highest level since october and it kind of reversed. we came up from that. the yield continuing to grind lower here. there is more money into the safety from inflation space. joe: we have that crazy today move in then it faded a little bit. -- when i first saw this, i was really stunned. then i pushed over to the other side. the other point is the argument from the pew were data

perspective. for the fed to tighten too soon and that if they're going to be data dependent, wait a few more months. but they are kind of right. the fed has missed its inflation target for a long time. there is no indication inflation is about to overshoot. i kind of think the imf is right. what is the rush? why not wait until september? do have breaking news. earnings, verifone, gap. julie hyman. verifone,, looking at sales of 5% and earnings per share ahead of analyst estimates. the company ceo saying the second quarter was important. they rolled out new product and clients are taking notice of that. nevertheless, if you look at the company forecast for third-quarter earnings and sales, it looks like both are falling short of analyst

estimates and that appears to be driving down shares. you can see that down 2%. hasor the gap, that company been experiencing comparable sales decline. those do continue, but smaller than estimated. the estimate was for a decline of 2.5%. perhaps a bit of improvement there. old navy continues to be the standout. old navy up 6%. banana republic sales down 5%. the gap brand down 6%. joe? joe: all right, thank you, chilly amide. let's bring in carl riccadonna and also adam parker, chief equity strategist at morgan stanley. day tomorrow, officially the best day of the month. alix: the best day. joe: what is going to happen? what are we going to get? the consensus is

to 25 right now. i think we could see something a little closer to 240. what is going to be bigger news is the unemployment rate. given the strength and the jobless claims, think there's a very good chance that it could in down another 2%. that is a consensus view right now. case for janet yellen that we are moving to a normalized economy. basically from five to five and a quarter that is their year end target. handleuld easily have a in the third quarter of this year. i do not think that there is a huge gap in that view of the world from janet versus christine lagarde. nonetheless for them to be that specific and their advice to the

fed was taking it a step over the line. alix: you are optimistic, pessimistic? adam: i think it doesn't matter. i think the fed is going to move data dependent for the first hike and independent after the first hike and that has been clear since they change the mind which. it does not matter to me. if i give you a year, if i give you a list of statistics about the u.s. economy and ask you what the interest rate should be, it would not be 0%. it does not matter what the imf says. they will change it ultimately because they need to have some conventional policy when there is another downturn sunday. i do not know when they do it. i do not care that much. as long as you believe that earnings can grow, it's ok. i think earnings can be higher this year the next year, so i think it should evolve with equities. joe: should investors care? adam: of course not. but will they?

of course they will. i do not want to get too technical. what has always bothered me about the jobs data, we do a census every 10 years. we cannot get it right, and somehow tomorrow if it is 5000 off, there will be all caps of sadness in the fixed income market. i think the economy is likely to be better in the second half of the year for a number of reasons i can understand. i think there are key variables. there are things you can dig into and be interested in, but whether it is 200, 210, 220, i could care less. it's a different kinds of jobs report because june is not in play right now. we need to focus on how is the economy going to perform from now until september or december. that is not so much the payroll change or the average early earnings. we watch aggregate early income growth. get, hourly earnings, you aggregate income. priort is better than the

two quarters, that will tell you consumer spending is going to pick up and the economy will do just fine as janet yellen hopes. one less thing. i do not want to rain on your parade. i know you are excited about these jobless claims numbers. jobless claims measure layoffs. payroll measure hiring. as the correlation is between the two, mid to late cycle that breaks down. if you make your payroll forecast based on jobless claims numbers, you would be looking for a 300,000, 325,000. which we are unlikely to get. that is a classic example of later any cycle, turn down the dial -- joe: it matters. -- adam: it matters. i think what you have to do is buy u.s. financials. that is the focus. whether it is plus or minus --

they can't measure that accurately anyway to your earlier point. focus on the bigger picture. the data is strong enough to merit it and let's buy a stock to participate proportionately. alix: and the fixed income markets will go crazy if it goes down, so i want to bring in an interesting chart talking about the spreads. we're seeing a divergence. you see the high yield spread tightening. that means that orange line is going lower. selling investment grade and buying high yield. but at the same time, not so great cpi, not so great gdp. it's a risk on trade, baby. adam: it should be. it should be. the u.s. economy is going to improve absent the two tools we artie talked about. the u.s. market is flagged.

the probability of a recession is pretty low. carl: very low. mid-stage ofrly to the economy. the financing is low because the -- has interest rates at set at zero. look at the fundamentals. alix: all right. much more. adam is staying. we will hear much more about stocks and m&a. joe, good to see you. karl, thank you so much. -- it is back. we deal with the latest trends in the m&a way. ♪

alix: welcome back to the bloomberg market day. i am alix steel. now for a look at our top

stories this hour, greece is the first country to do for payment to the imf since the 1980's. since the zambia. they told the miami -- the imf they would delay a payment and submitted a request to bundle 1.7 billionling dollars into one lump sum due june 30. , including asd late as last night from the prime minister himself, that payment had been honored and would be honored. i think his words were "do not worry." that willonfident continue to be the case. greece has rejected the latest proposal from their international creditors and prime minister alexis tsipras will address parliament tomorrow. of the threeesults

year landmark u.s. study of the impact of fracking on water pollution. the epa says hydraulic fracturing for oil and natural gas has contaminated some drinking wells, but the impact is not widespread. it could affect drinking water. fracking is when chemicals are shocked into underground shale formations to extract natural gas or oil. so much demand for air fares as low as $49 -- the website was overwhelmed and many people could not book a trip. the sale was supposed to end at midnight, but now the airline is extending until friday. that is look at bloomberg's top stories at this hour. stocks are falling to their lowest level in a month, the today's selloff is the talk of the hour. adam is the chief strategist at morgan stanley. at two point $2

trillion of m&a so far this year. i think it will continue as long as the cost of capital is low, capital availability is high, it's hard to bet against health care or semiconductors are other industries. to play it is by small caps. where not only do you get the premium, but the surrounding securities tend to go up, or you can play the exposed brokerage firms. i think it is positive for the market overall generally. i do not think it is a sign of excess or fraud. alix: we do have some breaking news. julie hyman is looking at that for us. the epa looking at approving a female libido drug. it was rejected in 2010 and again in 2014. it is made by a privately held company.

the advisers voted 18 26 that this libido drug should indeed be approved. it looks like there were some clinical trials of the drug but did not show success, but it was rejected and past reviews. this would be one of the first such drugs on the market. this will be significant if and when it does get approved by the fda. typically when the advisory panel reviews these, it does get approved by the full fda. alix: julie hyman, thank you for the latebreaking market action there. is there one sector that has not had as much m&a that will in the future? you have seen the tender offers in the financial sector be lower than average due to government regulation. ultimately that could help -- that could change. i think that is likely probably is reasons. in health care,

in consumer. we track the offers in the cohorts in the market. i think it will continue unless the rates back up. they will maturely backup. it is a positive at this point in the market given how much these stocks are doing the acquiring are going up. alix: that's a good point. are you worried that that is why companies are spending the money? they can't find organic growth, they have to go buy it? adam: no, they have done share purchases that have outperformed. the markets are telling us companies, hey, the benefits for accretion are probably not as good as my fears about your long-term growth rate. so, they look around and say, how can we grow? so they are going to look to see if it is m&a. i do not think they will do

capex. i cannot understand how there have been prominent people out saying they should do. first of all, i do not want to own a portfolio companies with high cap x twos they'll. it is very unusual. two, i do not think companies see a lot of demand drivers out there. i think that they will be prudent. i think it is probably m&a is subjected and they are growing on the margin. adam, thank you for being your. strategist, chief for morgan stanley. think you for joining us on the bloomberg market day. we will be back in just a couple minutes. ♪

alix: welcome back to the bloomberg market day.

i am alix steel. the imf chief christine lagarde moved markets when she aired the central bank to delay its rate hike until 2016. sheiks find yourself in a news conference this morning. christine lagarde: we thentially agree with president of the fed in the must be date hike he -- data dependent. that's clearly the line that has by janet yellen over and over. we see that the team is analyzing the inflation rate is not progressing at a rate they would warrants without risk.

i can come back to that in a second. in a few months. which is why to make the points, we are saying the economy would be better off with a rate hike in early 2016. when hopefully the inflation numbers would have -- even if it is relative to the 2% under the fed's rules, because we believe in the trade-off between starting to early and and havinginflation to return to lower rates is higher than the risk of slightly above 2% inflation going forward. bond investor bill gross

is watching. he said that it may janet yellen's job little harder. bill gross: i think christine lagarde commands a presence and she speaks from a global standpoint to the extent that we just talked about. the dollar should be constrained in terms of depreciation. i think that yellen listens. i do not think she has acknowledged that, but i think she listens, and good for i am all foruse lagarde in terms of her lower gdp estimates. bill gross's former colleague mohamed el-erian was surprised by the move. he explained to pimm fox. : it is unusualn for the imf to be so specific about a policy action and it was today. it told the fed they should wait until 2016 even though the data remains very fluid. that is the first way i was surprised.

the second that people have not focused on yet -- which i think is important because it speaks to market volatility -- said of officials are going out of their way to tell the market to stop obsessing about the date of the first rate hike because this is going to be what i call the history.ightening in now suddenly with the imf comment, the question of the date is back front and center and that in itself imparts additional volatility to financial markets. what do you believe the effect would have been if christine lagarde had not come out with this specific date you mentioned, the 2016 first half? mohamed el-erian: i would have expected the imf to say something along the line that the fed should because just about the timing of its first rate hike because the u.s.

economy remains fragile, there is no inflation on the horizon, and the international situation is far from stable. that is what i would have expect it. going further and specifying a date, the 10 year in the united states moved 10 basis points. that is a huge move for a benchmark that determines pricing on so many different pricing markets. experts believe that the fed will raise rates in september but the imf will likely reopen that debate. thanks for watching the bloomberg market day on this volatile day with the dow ending down 170 points. i'm alix steel. have a wonderful rest of the day. we will see you back here tomorrow. ♪

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