>> we are moments away from the closing bell. i'm alix steel. ♪ alix: u.s. stocks tumbling, the s&p down over 8% this quarter. joe: the question is, "what'd you miss?" equity markets hurtled towards their worst quarter since 2011. something's rotten in biotech, the sector getting slammed.

why this sector more than the others. joe: glencore in freefall. than $14st more billion in value. we look at the charts. alix: we have to begin with these extremely ugly markets, the dow closing off by 300 points. you're looking at one-month lows here, the worst drop in four weeks for the dow. was was unbelievable to me the volume was much higher than the 10 day average, 26% more volume than the s&p, 17% more than the dow. joe: it was one of those days where people were throwing out down.ng that isn't nailed you saw a companies like facebook and amazon which have been really strong and have great fundamentals rolling over. you saw the bio techs. one company that got slammed was

the pharmaceutical company valiance. there was a letter from a democratic committee in the house what thing to inquire about drug pricing. even though it's not going to result in legislation anytime soon, you see this we'll dump everything at action. alix: i was speaking to a tension -- technician at mkm partners. , sort of what happens next. joe: we are really not that far away from that august 24 morning when the dow fell like 1000 points and the market was down 10%. not that far from the lows again. alix: broader implications for the end of the quarter as well. we are pace for the worst quarter since september 2011.

those correlations seem to go, what's going on here? ugly, i of incredibly want to take a deep i fed my bloomberg terminal. take a look at glencore stocks versus concord credit default swaps. it is a brutal, ugly story. the yellow line you're seeing is glencore stock and a white line is the credit default swaps for 5 years. just today, you saw this cost of insuring debt rising 38% to 757 basis points. that is a huge incredible move. joe: we are getting to the point with glencore where there are real existential -- being asked about this company. people are starting to wonder. alix: you made the point in the

morning that september 16 was when glencore issued more shares and those shares are down or to 6% -- 46%. joe: i want to dive into my turn middle. this is a chart of the health care etf. normally health care writ large is considered to be a defensive category that does well at the time of market panic. this is not the case at all. it is getting slammed. dan greenhouse made the point that i attack is 20% of the health care index. biotech is 20%- of the health care index. now when you are buying into health care you are buying into a lot of speculation. we talked about the m&a boom and all the speculation around that. health care is not the defensive sector people might think it is. i want to bring in our guests to

break down this market action, mark suzuki of bank of america merrill lynch. what is going on with biotech? last fewhink over the months and years, you have seen more and more investors pile into these crowded areas of the market area what you are starting to see right now is there is cracks in that leadership. we look historically at stocks, roughly 40% of those stocks grow into their multiple and do well. that means the other 60% actually don't do well and a lot of them end up pretty ugly. when you saw with this run you've had in biotech stocks, they are basically priced for most of them doing well, not priced for 60% of them not working out. joe: the ceo of glencore lost $500 million today just breaking through the terminal. alix: that's a bad day. joe: a lot of these companies,

if you're on a pe basis -- when you see these really speculative areas, how far can they fall? p i don't tend to look at multiples for these types of stocks. a lot of them don't even have earnings today. you are buying what they're going to do why for 10 years in the future. you need to look at the individual fundamentals of each stock. when you look at it, probably 40% of them are going to do ok. a lot of the biotech space is probably overvalued. we have seen a lot of sectors retest those august lows. markets retesting august lows. what stands out as something that can shake all the other things? you have seen cracks in biotech, in media. you have seen the leadership in

the market, the crowded areas of the market even more private -- get even more crowded. today you want to be wary of these social media high-growth internet stocks were some of you will be fine. a lot of them are priced for this whole new world where all of them cannot be winners. alix: how overvalued do you think some of the stocks are? mark: it's very difficult to quantify. multiples, some of them traded 60 times. joe: something that happened that people are watching, the s&p 500 has fallen below its 12 month moving average. this was something we saw at the beginning of the last to bear markets. you can see the chart, you can see the blue line is the 12 month moving average. we've had this sharp rake and it is something we have seen at the beginning.

when you look at these technicals, do you worry about the long-term momentum decline? of chart thatnd -- you are barely optimistic about stocks. is this a kind of thing they worry that could turn into something bigger? the market is worried about what could happen here. at not a technical analyst if you look -- a lot of people are focused on the 50 day and 200 day moving average. the last time you had this a few years ago, we saw routine test in the lows. you could see another retest of the lows and the market go higher. ultimately it hinges on growth. if you start to see the reason the market sold off is, you have seen soft patch in global growth. we're on the precipice of the weakest shift in monetary policy -- biggest shift in monetary policy in a decade. alix: take a look at your target

for the s&p at the year-end, 2100. it seems relatively aggressive. what is the catalyst for that? mark: positioning and sentiment and valuation are supportive of the markets. need is a very little shift in that sentiment and you can get big moves in the market. you were talking about things not trading at their high-yield, 2011 levels. if you look at cash levels of fund managers there at host lehman -- post-lehman highs. it gives you a sense of how bearish late position -- we have an interesting chart of chinese monetary conditions as a measure of credit availability. the orange line has been ticking up a bit lately. materials, relative

performance, materials continue to underperform. this might be a sign that perhaps the chinese economy is bottoming out. yeah, that's an interesting indicator. there's other indicators that are very interesting. there was an article put out recently about the chinese beige book. looking across thousands of companies, it looked like things were getting better. if you look at the bloomberg monthly china gdp indicator, that moved up over the last few months as well. there's still a lot of risks in china. dan suzuki of bank of america merrill lynch. joe: what is this a chart of? it's an emerging market currency getting crushed.

joe: "what'd you miss?" alix: before the break we showed you a chart. joe: the world's worst performing currency this year, it had its biggest date drop in seven years today. the country was downgraded by moody's,. totally getting crushed by the commodities. glencore canceled a major project there. it's a total wreck. alix: that is what happens when commodity prices sink and producers have to shut their doors. let's get to the top headlines this afternoon. royal dutch shell is halting offshore exploration after the company spent $7 billion and ended up with a well in the arctic waters that failed to find meaningful quantities of

oil or natural gas. they will receive u.s. approval to drill offshore -- received u.s. approval to drill offshore just a few weeks ago. be the legacywill aluminum side of the business which will retain the alcoa name. the other unit will make materials for the aerospace industries. the maker of titleist golf equipment is talking to banks about an initial public offering. bloomberg news reporting the company is soliciting pitches from several institutions. the ipo could take place next year. the timing and size has not been decided. we are back with dan suzuki of bank of america merrill lynch. before the breakdown we were talking about market indicators are pointing to that there is so much bear sentiment -- bearish sentiment in the market race. you take a look at the percentage of stock that has

fallen 10% within six months that just keep on rising pretty that orange line is the s&p and the purple line is how extreme selling has gotten. these indicators aren't working. i think the percentage of companies down more than 10%, or if you want to use 15% or 20%, is correlated with how far the market goes down. don't think that tells you what will happen from here. what you need to see to get those things to reverse is any signs that growth is stabilizing or improving. once you do you can see a violent move upward in the market. joe: it's been a mess in the markets ever since the fed pulled. it's caused a lot of confusion, people almost seem upset by it. what's the connection between the fed not hiking rates and the selloff we have seen since then? mark: it's hugely connected.

you saw it on the day they announced that the market sold off. everybody was coming to terms with the idea that it would be a gradual hike. what we were expecting was 25 basis points every other meeting, one hundred basis points a year, less than half the historical rates of tightening. the reality is we're going to have the most gradual tightening we have seen in a very long time, and the markets were ok with that. what the markets were not ok with was delaying this and keeping this uncertainty overhang going. when you talk to investors, there's a general since people don't want to go all into these markets before they see what happens post the first fed hike. what will happen with these markets -- i think once you get past that, after the initial have or two, investors more confidence. delaying it by three months is a negative for markets. it really does have

implications for the dollar. bank of america had a note out last week talking about the dollar shock, as much as one percentage point off and annualized growth, and could see a drag of around 3/10 of 1%. how does the u.s. economy grow in earnings when you have that dollar drag? mark: earnings have not been growing very well. a lot of that has to do with the currency. if you look at the last couple quarters, we're estimating the currency headwinds about 4 to 5 percentage points. hugely impacted by the dollar. if you look at the performance of the multinational companies within the s&p relative to the dollar, that correlation between their performance and the dollar is the strongest levels we have seen in decades. the dollar really matters. the positive implications -- although we think the dollar

will continue to strengthen, we think the pace of that strengthening will not be near the rapid pace you've seen over the last 6 to 9 months, which means the worst is probably behind us. that, those headwinds are going to start to abate. earnings start to accelerate from the fourth quarter into next year. joe: what keeps you up at night? mark: probably china in the near term. i would like to see the pmi indicators out of china improve a bit. there's clearly a lot of credit out there, and a lot of that is focused on emerging markets. what keeps me up is any signs that will turn into a more systemic prices. i don't see anything outside of the news we see on a day-to-day basis. dan suzuki of bank of america merrill lynch. alix: when we come back, china

may not be in as bad a shape as you think. ♪

alix: before the break we said we had a chart that shows china may not be as -- in as bad a shape as you think. this orange line, the monetary conditions index is rising. it could be important, it shows credit is growing again and hopefully it could impress an increase in growth and bring about emerging market stabilization. one company that is dearly hoping for a more stabilize chinese economy is glencore. analysts warned today there was little value for shareholders should raw materials prices

persist. joe: glencore has been better after investors retreated from commodities you to the chinese slowdown. challenging environment for mining companies leads us to the question of how much value will be left her equity holders -- for equity holders if commodity prices do not improve. alix: all their money will be going to pay off debt. that is a crazy kind of call. joining us to discuss glencore is bloomberg columnist liam denning. full disclosure, i must say peter brower is the chairman of bloomberg lp, the parents of bloomberg news. a bloomberg view colin out today that said what glencore can do to recover from this slump. what is it? liam: there are two problems for glencore, one is the debt and

that is a short-term issue that needs to be dealt with. therly, that hasn't stopped slide. they're bigger problem is around the business model. the added twist with glencore is when it was ipo'd it was meant to be a slightly different beast because it had this trading business. it had grown out of the marc rich trading business from back in the 1970's and 1980's. clearly, that hasn't happened. that is leading people to question -- the whole business model and whether it makes sense with glencore to be a public company. joe: liam, is there any reason to think that glencore could have any sort of systemic quality of things that would make its promise spill into other companies? that is a source of angst.

glencore doesn't seem like that big of a deal. you see markets selling off more broadly. could glencore bleed elsewhere? liam: you mean bleed into the wider commodities market in general? alixit's possible. with thehe problem commodities market is they have always tended to operate under the radar. that is a strange thing about glencore. it was surprising they became a public company. it's hard to say whether any problems that glencore would cause a wider dislocation in the market rate it's generally unhelpful. if you look at the headlines today, we have had shell pull back in alaska, alcoa announced a split. it's clear all these business models are under a lot of stress

amidst the slumping commodity markets. a lot of companies spent a lot of money during the boom, a lot of the made a guy acquisition's and now it's all really coming home to -- big acquisitions and now it's all coming home to roost. alix: it showed how glencore's will steadily increase while the market cap will steadily decrease. do you agree with this assessment, where shareholder values could become clearly wiped out? liam: it's possible. that is the second note that glencore has seen like this in the past week. goldman put out similar notes last week. the buy that they are in. glencore was always known for being a savvy trader. it is now in the position where all it takes is a research of itsto knock 1/3 value. that is not the position it is used to being in. they will have to move really quickly to get ahead of this.

alix: it was so fascinating in your article, you were calling in some respects for glencore to go private. i think in the end necessity is the mother of invention. even egos get trumped by whatever the market says. alix: do they have any kind of hope? joe and i were talking earlier that september 16 the had a share offering, which is now down 46%. i don't think they will be able to do another rights issue. they do still have great assets. one of the things i raised in the column this morning was they could go out and sell the physical assets they got, particularly the ones they got with xstrata. is out theretrata and has a fund waiting to buy assets. it's possible they could call them back and sell to them.

alix: good stuff. liam denning, thank you very much. ♪

alix: consumer index out at

10:00 a.m. morning, in tomorrow we will have live coverage of japan's prime minister shinzo abe at 8:45 a.m. eastern time. alix: have a good night, everybody. ♪

♪ >> from our studios in new york city, this is "charlie rose." in all these discussions we are going to come back and forth. four regions are important. the prefrontal cortex is involved in executive function and decision-making and what we call character formation. defects in the prefrontal cortex can lead to an increase in aggression. -- ventraltratum