washington, d c. -- 11:00 a.m. in san francisco, 2:00 a.m. in hong kong and 2:00 p.m. in washington, d.c. good afternoon from bloomberg world headquarters in new york, i mark crumpton, here with scarlet fu. scarlet: happy fed day. mark: let's go to michael mckee in washington with the fed decision. michael: there is no change in monetary policy, but the fed has upgraded its assessment of the economy, which many on wall street may take as a sign a rate move is near. the policy makers risks to the economic outlook as nearly balanced. gains ande solid job declining unemployment. a range of indicators suggest the underutilization of labor resources has diminished since

early this year. no qualifiers. economic activity has been expanded moderately in recent months. dropping a reference to slower growth earlier in the year. inflation is still below the 2% target, which they blame on transitory declines. energy prices and decreasing prices of nonenergy imports. they still see inflation rising toward the target over the medium-term. the committee anticipates that it will be appropriate to raise the target rate for the federal some rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move act -- back to the 2% target over the medium-term. feel they arethey almost there. there were no dissents, no press

conference today, they did not upgraded or economic forecast and there is no new. plot -- dot t we will have to wait for august for any further clues. this is definitely a statement towards the hawkish side. mark: michael mckee joining us from a very windy washington. thank you. scarlet: let's get straight to julie hyman for a look at how the markets are reacting. a leg up in u.s. stocks. julie: they are taking a leg up on this news even as this may be viewed as a more hawkish statement. pointing the arrow towards a rate increase. we are not there yet. we need to see some more labor market improvements. that seems to be reassuring to the stock market as we see another leg up in the s&p 500. all three major averages not up to the races, but a little

higher than they were before the statement. we've been watching the bond market. ,t has been the 2-year note more sensitive to changes in interest rates. you see them pretty straight line downward here. the perception this was not a very hawkish statement today. you take a round-trip of the other assets, let's look at the 10-year note to see how that is trading. we saw a leg downward in that 10 year yield. the upward trajectory we saw for stocks, the 10 year yield as well. we saw it move downward, bouncing up a little bit again. almost coming back to where it was before the statement came out. we took a look at the west dollar 10 minutes ago, trading near a four-month high. -- u.s. dollar 10 minutes ago. we are seeing little change in the dollar index.

it's only down .1%. a bit of a leg downward and then came back after this came out. what we tend to see after these statements come out, bit of volatility in the wake of them as people go to the game and try to interpret what exactly we can take away from the. -- from it. i will come back and 10 min's and give you an update on what stocks are doing as people digest this. scarlet: thank you so much for the latest on the markets. mark: let's bring it constance hunter, joining us in studio. and gregory peters. he joins us from his offices in new work, new jersey. thank you so much. constance, let me start with you. no surprises here. constance: no surprises. low, very common

--russia commented it ive.mmodat we have to think about the long lag between monetary policy action and its impact on the economy. #mindthelag. scarlet: lloyd blankfein was talking about with that move happens, it could be angel to the markets. -- angel to the markets. constance: there will be a jolt. it will be a short-lived jolt because she is doing it in a measured fashion. the committee will raise rates slowly and she has been clear until i reckon -- clear and telegraphing this. greg, there was a lot

of focus before the statement came out on who would dissent. out there were no dissents. why is that significant? greg: the markets were looking hawkish.act that he is they are on the same page. it seems like the quick reaction here that the statement is ,ovish -- i don't read that way but the markets are reacting in a more dovish manner than i would've expected. mark: why do you say that? what were you expecting the markets to do? margin, the statement is setting the preconditions of a rate hike. we all understand it's going to be a slow, measured hiking cycle. the first move always has some effect on the market.

the fact that the currency -- stocks are up based on that statement, it is somewhat surprising to me. scarlet: let's look inside the bloomberg terminal. it is at a two-month low of 158 basis points after yesterday's today is to your option -- two-year option. greg: i'm not sure what it tells you. what i do know is that the curve flattens when the fed starts hiking rates. the curve has statement out since the beginning of this year. those look at relationships, the curve has deepened. we think the curve will flatten, rates are attractive. the fed is looking to move rates higher. we are not convinced they should. think it's possible

to curb will continue to flatten as we see this hiking cycle. i don't think it will be a one-way trip. because the market has been so concerned about low rates for so long, there is a very strong economic argument that low rates beget those justifications for low rates because you don't see business activity that you would normally see because rates are so low. we are passing the types of lending. higher rates could bring about more normal economic activity. causing the economy to have less distortions. that would be better for growth. we also have the international factors holding down u.s. rates at the long end of the curve. because of that, once we start getting a bit of hiking, we may see the long and go up a little bit before it begins to flatten. scarlet: that's why so many remain convinced that the fed

will move. the federal reserve will have known that second-quarter gdp -- what does their statement today tell you about what likely happened with the economy in the second quarter? constance: i don't know if they get advanced data. everybody does track now. you contract based on the real-time data. we are looking at something like 2.5-2 .7% for the second quarter. less of a drag from exports. a fairly strong consumer. this will help continue to drive that labor market improvement that janet yellen and the committee are looking for. mark: the slowdown we are seeing in china, it has had an effect on the global economy. could it also weaken the case for interest rate increases? greg: absolutely. look at what's happening with financial conditions probably, what's happening to commodity

prices broadly. conditions are tightening. the tightest they have been in a number of years. the whole commodity complex has been hit dramatically. global growth is coming down. that does have an effect on u.s. growth. it has a real effect on the u.s. dollar, which acts as a dampening for growth. it does the typing for the fed already. that is the important part. -- tightening for the fed already. they are tighter than where they were you last year -- where they were last year. scarlet: in june, the fed had inflation -- the commodity index has collapsed to a 13 year low. mike mckee was telling us that the language was transitory decline.

that doesn't sound like that that is too worried about the commodity selloff. constance: it doesn't mean it is not transitory. we got to a low last year of about 43. we are heading back in that direction. as oilced off that prices went up, we're seeing them pull back. when you look at a year-over-year level, that will still be flat. it is from a mathematical perspective still transitory until we get further falls in oil prices. mark: are you still expecting an increase in september? greg: at this point, we do think it is a coin flip. the challenge we have is december, given all the changes with to a seven funds, the fed raising rates at your end might be a problem. we think it is somewhat of a coin flip. the truth is, we are not sure

they should. constance: august has often brought turbulence in the financial markets, less liquidity, senior people on vacations. august,any craziness in i'm still going with september. scarlet: if we get through august unscathed, we are set for a september rate increase. still ahead, we'll hear from robert schiller and get his outlook for u.s. houses. that is next. ♪

mark: welcome back to bloomberg market day. i am mark crumpton, here with scarlet fu. scarlet: let's get to julie hyman with a look at the markets after the fed says the labor market is improving and moving towards a rate increase eventually. julie: eventually. twitter, ifed on the fed wanted to be as vague as it possibly could while signaling rates would go up, it achieved in this statement. we saw a leg up in stocks that have come back to where they were, if not lower than before. initially, there was this rush upward, rate is not going up. moreed was waiting for signs the labor market was improving. now, things are coming back down because it seems as though the fed is on a similar trajectory

with plans to raise rates once if not more this year. we will see how things shake out by the end of trading. we have a lot of earnings to look at. i want to come back to twitter, which we have been watching all day long. 14%, and its lowest in more than a year. not bad is the performance after its last earnings report, but the worst we have seen since then. the earnings look decent. a commentary during the conference call shop the stock downward. -- shot the stock downward. shortly after 4:00, we saw the stock shoot up to $41 a share. then, the conference call began around 5:00 p.m. saying the new products are not helping user growth. the cfo saying we are not going to see meaningful monthly active

users growth for quite some time until we reach a mass market. twitter has been seen as more of a each product, like a facebook -- niche product, not like a facebook. you are seeing the shares plunge into thee have had it morning and throughout the session. another stock plunging today is yelp. .ow down by 26% the biggest drop the stock has ever seen. this after the company came up with numbers that disappointed analysts, cutting its sales forecast. they will not be selling national advertising anymore. and revenue was down 8% even as local ad revenue rose by more than 40%. not being greeted happily today. since we are talking social media, we have to talk about facebook. .3%, reporting after

the close of trading. scarlet: thank you so much for the latest. i like the contrast between twitter and facebook. the 35:re bad news for the pentagon's most expensive weapons system ever. 35.he f f 35's wered the available for flights halftime they were needed. scarlet: general dynamics raising its forecast. it reported quarterly profit that beat analyst estimates. their defense business has rebounded. it is selling more business jets. mark: fewer americans than expected signed contracts to buy homes last month.

pending home sales fell 120% in june, the first drop this year. -- 1.8% in june. a lot of potential home buyers are being shut out by tight or standards and a limited selection of properties on the market. that report on a drop in pending home sales was accompanied by the latest numbers yesterday that showed home prices slowed this year, rising 4.9% versus 5% for the year ending in april. mark: brendan greeley and vonnie quinn spoke with robert schiller about the report. they asked him if the city rise in prices the steady rise in prices shooting more rational market for houses. robert: it's one of the least rational markets out there because doesn't easily admit professionals moving in and out. it's an amateur market. >> he said in the new york times last week that in housing, the

smart money has relatively little voice. we don't have the tools to hedge housing. robert: i've been working on them -- my colleagues created in 2006 a futures market for single-familyon our indices -- on ourfamily based indices. if you think home prices are too high, the best you can do is just not best. you cannot profit from the knowledge that they will fall. that doesn't get into the market price. brendan: a hard decision to make your a homeowner. you have to buy a home. you've talked about how dangerous it is to have the price of the home be such a huge part of a homeowner's portfolio. do you see that danger rising? robert: they are going up.

some cities, fast. it is aknow that bubble. dallas is a great performer this time. there is some excitement going on -- dallas is booming and corporate headquarters are moving in. there is a bit of excitement. that can generate over excitement. vonnie: it takes months to buy a house. there are so many people involved. completely ripe for disruption. robert: real estate has emerged as a major source -- the financial crisis came in in 2007-2008, type into a bubble in home prices. that has not been a pattern for the united states. using disruptive market.

-- it is a disruptive market. mark: coming up, the tables may have turned when it comes to the resurgence in vinyl records. scarlet: there is a great cartoon in the new yorker where ae guy is showing off turntable to a friend saying the two things that really drew me to vinyl were the expense and inconvenience. vital records and where they are headed. ♪

scarlet: the incredible comeback of vinyl may be coming to an end. the format has seen incredible run over the last decade.

in 2014.on in sales that is a 52% annual jump. vinyl sales have grown for nine straight years. they are in each product -- a niche product. only 6% of physical album sales. there's talk that they may be at point. mark: online music is the inflection point. scarlet: it's become more expensive to make final records. -- vinyl records. you have devoted fans willing to pay $35 for an album because it sounds better. mark: then, you also have to buy turntables. the expense starts to mount after a while, even though they are iconic and i believe they have a better sound. scarlet: you are a musical purist. kickstarter has funded a service that promoted itself as the x

for -- netflix for vinyl. you said, what was your first vinyl. i was a peanuts fan. my mom bought me a beethoven album when i was six years old. it was very good and they got a chance to tell charles scholz that my love of classic music was because of peanuts. liked the chipmunks rock album because i like their rendition -- my first vinyl lp that i bought with my own money, cyndi lauper. mark: we are so old school. scarlet: we will be back after this. ♪

scarlet: welcome to the bloomberg market day. i'm scarlet fu. let's get straight to the stories making news this hour. we will begin with john kerry,

once again squaring off against critics of the obama administration's historic nuclear agreement with iran today. vote on being asked to a bill without being privy to verification documents being negotiated by nuclear inspectors. says it is "absolutely astounding." kerry says they have all the details they need. >> congress will be briefed on this agreement. in a classified session. , one of our key negotiators, the day-to-day lead negotiator was briefed on it. so, we are aware of what the basics of it are. scarlet: the committee is looking at how the deal could affect iran's neighbors and the military balance of the middle

east. if federal judge in los angeles dismissing a lawsuit claiming herbalife is a pyramid scheme. he says the pension and retirement system did not prove they defrauded shareholders by concealing the company's inability to track retail sales. reducing hisceo stake in the company by 12% over a year did not raise suspicions. the judge throughout the complaint in march. fox is letting buddy -- letting everybody into the action. using the rules to let candidates with low poll numbers qualify. there will be two debates on august 6 in cleveland. one for the top 10 candidates and now, a second for the other six. that helps lindsey graham and carly fiorina. they would not have qualified under the old rule because they don't have 1%. cofounder wants to bring the procedure of the art

world to seattle. they're coproducing the seattle art fair which begins tomorrow. $450 million of contemporary art will be for sale. they're hoping to attract wealthy techcrunch partners. -- tech entrepreneurs. coming up in the next half hour: the most expensive handbags out there. she wants to distance herself rmes overretailer he animal treatment concerns. brady doesn't seem to be taking his four-game suspension laying down. a legal showdown between brady and the nfl. and lloydberg blankfein are joining forces to promote 10,000 small businesses. stephanie ruhle spoke to both of them and started by asking

how the fed's actions affect goldman sachs. blank fine: it will be interesting when we see an interest rate hike because we have not seen one for some time. have that first hike, the fed has already suggested that it will be very conservative in future hikes. if we end up with interest rates at .5% or go over time in the near future to 1% against a growth rate, it will be because the growth rate is at trend growth or higher. that would still be substantially easier financial conditions than we usually have. set of circumstances make interest rates so low while growth is so embedded because of the uncertainty that that growth is truly embedded in the fed

would rather take a risk on having rates to soft for longer and run the risk of giving up all that they've accomplished in getting the economy to where it is now. they would keep things easier for a long time. isomberg: because congress paralyzed, we don't have much of a fiscal policy and the fed has no choice but to do something's it was not designed for. i don't think monetary policy is the right way to go about it. something it was not designed for. there seems to be a lot of job creation but i don't know anybody who has gone into a business because these interest rates are at .25 versus 2.5. tax policy rates and are the guiding factors into whether an investment make sense or not, you are making the rug investment.

-- wrong investment. stephanie: it seems solely important to investors, is that the right move? there's no question that low interest rates have exacerbated the wealth gap between the poor and the rich because the rich have assets and that is what is being hyped here long-term, that is a big problem for this country and you don't solve the problem by taking things away from the rich. you saw the problem by giving opportunity to everybody and by creating jobs. some of the policies are misguided. i'm not in favor of raising the minimum wage. i think you should raise the income tax credit which does the same thing for the same people but spreads the burden across all the taxpayers rather than just a small number of business people who would cut back

employment. blankfein: these data points at a moment in time when we look the fedsh -- cos activity is data dependent. the next data point takes an zed importance and that is the way it is. stephanie: we are talking policies in a fragmented congress, coming up on election, is there a possible candidate who can help us get through this? many of us put our hands in the air we look at washington and say we are just getting in this forever. is this our opportunity? from.erg: a lot to choose it is a very long way from now until the primaries.

half the people running today won't be there then. that well be issues talked about then that we never thought about. press has to have crisis, has to have excitement and failure and scandal. they will always be creating new things. stephanie: as a businessman and boater, what is the most important issue -- businessman and voter. fein: i think this country has very diverse interests. ist i would like to see people who go to washington, not with a set of instructions to never compromise, but to go to washington to compromise.

can you imagine if this country with an agrarian south and industrial north, different religions, getting together and forming a country -- imagine if you went to the convention and each one came with the mandate and a commitment to never does to stay on the fringe of what his electorate commended. we would not have a country. i have confidence in the republic. desk at the like this, we cannot have a country now. open tothe moderate compromising and having a stable set of pretzels. -- set of principles. of --erg: we get a number a lot of focus on new york billionaires these days. my favorite one is not running. bloomberg: compromise is when

democracy -- what democracy is all about. you get a good percentage of what you want, a handful of people on the -- that is the way we come together and move. we keep thinking the wrong thing when we pick the elected leaders, particularly presidents . these are not policy jobs. these are executive jobs. you have to pick somebody who knows how to run the railroad. blocking and tackling couple making sure you can throw the switch when the lights come on. you have to make sure we control our borders and get the right leadership to get the right weapons to our troops and get great people to come and work as secretaries, all the different cabinet offices. policy is terribly important. no executive -- no president or

governor can have all the policies themselves. they had to get people come and help them formulate them on all the other topics. scarlet: that was stephanie ruhle speaking with labeling fine -- lloyd blankfein and mike bloomberg. coming up, we will hear from stephen harper about his slowing economy and what his plan is to spark growth. ♪

scarlet: welcome back to the bloomberg market day. hermes got an air for from the

full elling -- and here an earfull. alligators being scanned for products such as watches, belts and shoes. kinned their response was that it is investigating the texas bar which it does not own farm.xas alix steel joins me now. cost upwards of $60,000. crocodiles are quite costly and dangerous to raise and you need to raise them in an environment where their underbelly's do not get roughed up.

affectsyou kill them their skin. it is hard to get them to have no bite marks. it takes years to actually read them. all of that leads to the croc skins at higher prices. the bags are pricey. scarlet: there are people who erkin bagsans of b that they create closets to house them. it makes them significant portion of the luxury handbag market. are exoticbag sales animal skins. hermes is 15% of its sales. this is a driver of their business. scarlet: one thing i found interesting, crops are fairly high maintenance. they have a strict heating

routine. -- crocs are fairly high maintenance. if they have a less stressful life, they are not apt to bite each other. alix: it also leads to how you wind up killing them as well. you need to make sure the skin stays good for the end product. , the wayies the issue these animals were killed. that was part of the issue. related toer was not hermes. they go to their suppliers monthly to see how they are raising the crocodiles. scarlet: it does raise a lot of questions and has gone viral. alix: do you have a birkin back? -- bag? scarlet: you will stick with me as we check on commodity prices.

we have to begin with crude oil. we got inventory data. alix: we get here inventories fell in the west by 4.2 million barrels. that's in the u.s. gasoline dropped. there was demand for the end product. inventories are still 100 million barrels above the five-year average. that is quite high. you had another build in inventories. the end result is you make products, you are not using it, how hard will refinery's work ies? work the other relatively bullish factor, the west production fell fell --s. production that the bulls jazzed on that.

scarlet: we almost made it to $50 a barrel. alix: did not happen. traders like round numbers. scarlet: we talked so much about oil in a bear market, crude and nymex crude and brent as well. when commodity that might be in a bull market is iron ore. alix: iron ore is terrible, one of the worst performing metals and it's in a bull market. there is speculation that steel --ls are buying a barn or iron ore. it is in a bull market. think about that. it is so geared towards china and its expansion and industrialization. most analysts say this is a short-term phenomenon. bydman sachs sees $40 a ton 2017. let's see if that holds.

scarlet: they are writing it off as an extended bound. the fate lies with china. thank you so much. alix steel will take you through the market close. this can you look at the top stories at this hour. expenses climbed and profits fell at mastercard. -- ad quarter earnings stronger dollar has heard mastercard overseas. that is where the property generates most of its revenue. hurt mastercard overseas. shares up in arab red is setting a record day after the bakery chain reported that sales have rebounded -- shares of nara ra bread.pane the next round of job cuts could hurt users.

-- chevron00 jobs eliminating 1500 jobs. drillersroviders and have been the hardest hit. coming up on the bloomberg market day, a big question for suppliers, what to do with all miles, one cup he says use them to pay for college expenses. ♪

canada, starting with frequent flyer miles pilot pretty quickly.

airlines are making it harder than ever to redeem them for flights. why not cash in those points on something useful like college education? a company in canada does just that. she is the founder of higher ed -- she joins us via skype from toronto. tell us how your services work. this was a fascinating article on bloomberg.com. can anybody convert miles into money used to fund college expenses? and convertct miles those into payments for tuition, meal plan, resident fees and student loans. tell us what prompted you to link frequent flyer miles with paying for college. how did you come up with this idea? >> for me, it was my career over 25 years that led me to the conclusion that this could happen. so people are trying to pay for

higher education comes students and families. i used to work in the loyalty industry and scholarship matching websites. there are so many students that cannot qualify for scholarships but there are millions of loyalty miles unused. and weng led to another worked with the exchange and they enabled the launch of the business because they believe it is worth paying for education. scarlet: what kind of statistics or numbers can you give us to shed light on how much of those points are actually redeemed versus not used and wasted? >> that is a closely guarded pisa been permission. this piece of information. there are proximally 15 million miles -- billion miles sitting unused right now.

everything from music programs to frequent flyer programs. scarlet: this is a loyalty program. is there any plan to link other loyalty rewards programs such as other credit card points, supermarket points? ultimate goal is to enroll every loyalty program in the program. absolutely. so people can consolidate all of their points into upsetting the expenses of higher education. we would love to add more credit card programs and more -- we are loyalty fanatics. the average chain has a loyalty -- we would like to do that and expand to the u.s. and internationally. -- iet: you have signed up don't see elite schools like university of toronto on the list. what kind of feedback did you get from institutions we first approach them? -- when you first

approached them? --we have western and york we have had conversations with mcgill. it's a matter of time. we need to onboard them so we can transfer the funds directly. it's a matter of getting to the top of their priority list. scarlet: thank you so much for joining us. higheraddpoints.com. sticking with canada, a big political topic is the keystone pipeline. one of the project's biggest backers, john hoeven is predicting that president obama will reject the pipeline when congress is out of town in august. in exclusive interview, the canadian prime minister gave his outlook. prime minister harper: the american people have been clear on both sides that they support the project. there is very peculiar politics

in this ministration. -- administration. whether this project goes ahead or not, this will go ahead under a subsequent and ministration. scarlet: getting the project approved has been among his highest efforts. bradyahead, we have tom -- we will talk about his efforts to fight back against roger goodell's upholding of the four-game suspension. what the nfl players association will do next. the next up in brady versus nfl. ♪

it is noon in taipei. tom brady foust to fight his four-game suspension in his

deflategate scandal. he says there is no smoking gun. away fromre one hour earnings. how is the social network trying to sustain rapid growth in mobile business? scarlet: under fire for allegedly overcharging, we will take a look at disneyland paris. ♪ alix: let's get right to a look at the markets. definitely there is some action that we saw wednesday with a rate decision that came out. the rally seemed to be interpreted as dovish and then it went back to the flat line after that. really,ally -- scarlet: nothing changed. alix: entirely accurate. we talk a lot