welcome to "bloomberg market day ." ♪ from bloomberg's world headquarters in new york, good afternoon. i am david gora. albertsons calls off its ipo. dudley today says the economy is performing well, but the latest economic data could have fed chair janet yellen have second thoughts about a rate hike later next year. first, let's head to the market desk with bloomberg's julie hyman. yeah, the highs of the session are gaining steam throughout the day. the s&p and the nasdaq are now up that are than 1%.

some of it has to do with better than estimated economic data. take a look at the group data. you will see the breadth of the group data. in other words, a lot of green on your screen. health care, utilities, health care, a really interesting combination of defense or cyclical groups. within health care, i wanted to take a look at the movers there. some of the pharmaceutical makers are helping to lead the game. and pfizerohnson have really bounced back, but not only the traditional pharma, we are seeing some of the i/o stack -- some of the biotech stock do well. there was a little bit of a relief rally as the democratic defenders in the debate did not talk about putting a cap on the

drug rates. onid: i was noticing there your map that you had financials on the top. julie: we have had all lot of earnings today. i want to get to some of the big cap ones. we will get to that in about 10 minutes. but goldman sachs had a really interesting turnaround. trading revenue has fallen, which is what we have seen across a number of large banks. turneds number has around and there is a little bit more optimism. , a rebounding after its earnings scored in yesterday and finally citigroup, or finally i should say two days ago, and citigroup rising along this trend of cutting costs. citigroup numbers leading vestments.in david: and mark crumpton at the news desk. isk: president obama

abandoning his goal of taking all troops out of afghanistan before he leaves office. the president says he plans to keep more than 5500 troops there when he leaves office. we have madema: and a norm is stabilizing afghanistan. afghani's are making it a difficult but genuine progress. this modest but meaningful extension of our presidency waltzed into our missions can make a real difference. --is the right thing to do extension of our plan and it is an extension of our mission and it can make a real difference. it is the right thing to do. president benjamin netanyahu said he is open to meeting with president mahmoud abbas. he saidt netanyahu said

a meeting could be "potentially useful." he has accused mahmoud abbas of inciting violence. havejapan, and ukraine disputes with russia. and david, back over to you. david: the biggest ipo of the year is make in its trading debut this morning. shares are flat. ofis below the target range $18-$20 per share. spoke with the ceo today and asked him why the ideal price was so low. >> we are a company that has taken a very long view. we have an unbelievable client ace and an unbelievable in vest or base and we feel very good

about the future. so i think it is important to take this next up on the journey, this step of continuing to grow the company and continuing the leveraging and continuing to refinance it. david: erik schatzker joins me now. , something you asked about the ceo was the enormous amount of debt that they had. they've got $1,000,000,000.5 in debt -- $1.5 billion in debt and if you look at what they pay on an comelized basis, you can to the conclusion that it is almost 8%. they are spending 8% in interest payments and it works out to about $1.6 million and it means that they have an interest coverage ratio of one. by s&p standards, that is terrible. david: they are a rare company.

rare company, but the competition is ramping up and you have players like square and stripe and some other folks getting in the game. david: there is even bigger players, there is chase, for evenle, and then there are more established players on the point of sales side. first data has a lot of contenders that they would have to contend with. they want to convince investors that there is a good, long-term story here. >> they are going to have to take the long term because they are going to have to take the debt load before they can actually held on all of these services. that is really the big bet here

for them. it has been a long road for kkr and again, this long-term horizon is going to be the catch phrase here for the ceo at first data. erik: it was important for kkr to exit the deal. in fact, for a long time, kkr was losing money. but to go back to the question, ,f you don't mind, alex long-term isn't a crazy idea. --may not be reporting rewarding shareholders right now, but at it italy, it is a legacy business, but they can see now the path forward technologically and because they already have those merchants in their network, it is much less expensive for them to convert them over to point of sales technology than it is for a

company like square to go out and speak to the choir to those merchants through sales and marketing expenses. so by playing a long-term it game, they may be able to -- long-term game, they may be able to win this war of attrition. andd: you bring up square, what did we learn yesterday from their filing of the ipo? alex: a little bit more point, aon to erik's lot of these players has been the local dog walker and the local coffee shop. thatare pushing this idea they are going to march up that chain. but this shows how disastrous that starbucks deal was for them. wascost of that revenue actually more than they were making and they are actually going to end that relationship next year. david: making them a smaller

company. alex: they don't have the clout that first data does, but they are seeing as some of this new breed of processor and someone who is not dealing with this old legacy's nest. the 11th percent -- 11% growth data. supposed to be a bellwether for the whole idea of the season here. what does it say about where we are headed? : it does illustrate that some of the financial backers, whether it is kkr in the case of first data or the backers behind the case of square, it seems like there is a sense of urgency. you could take a look at the financials and be offended that somebody is trying to take this company public. it's financials, are, again --

its financials are, again, showing that they are terrible. this is not a bad way to look at it. it does raise some questions about how successful this company can be over the long-term. going back to your question, you wonder where the ipo window is going to close with the market slowing and the economy slowing -- the possibility that interest rates are going to rise. if interest rate are going to rise, that is a big problem for data. there is a whole lot of room to pay attention to interest and if the economy slows, that doesn't look good for square. david: talking about urgency, you saw albertson's holding back. alex: that is keeping some of these investors for -- investors from taking a huge risk. david: thank you so much alex

and erik schatzker. coming up on "bloomberg market day," raising interest rate this year. the fedsook at what will raise this year. plus we will head to brazil and looking at petrol. those stories and more, coming up ahead on "bloomberg market day." ♪

david: welcome back to "bloomberg market day." gora.avid bureau -- david we are looking at some of the businesses outperforming today. interestok at net margins, that is one measure of types of earnings this year, and there have been companies upbeat on loan growth. --bounds because of loans the expenses rose which is different than the trends that we have been hearing about from some other banks.

we got some preliminary numbers from seagate, and they are not doing well at all. they were some of the worst performers on s&p 500. out withny is coming its first-quarter revenue and gross margin, in particular, on a preliminary races, and once -- and some of those numbers are lower than demand. and finally, garman is also one of the worst performing stocks in today's session. it came out with a preliminary number for the third quarter -- in is also one of the worst performing stocks in today's session. it came out with a preliminary number for the third quarter. previously, let's look at how garmin has done against a

competitor, fitbit. garminhas done well and is down 25%. we have seen potentially a little bit of market share. surprises me is its largest segment is automotive. david: gps in the car. data is raising questions about whether the feds will raise interest rates this year. they showed no sign of inflation moving toward the fed target of 2%. retail sales rose just 1/10 of 1% last month. william dudley says he still favors a rate hike this year. a domesticsee economy performing pretty well. the housing sector is recovering and investment is rising.

david: dudley also said that some economic news shows that the economy is slowing. she us now is denny blanche lancheflower. we see no inflation, we see poor retail sales. it is worrying. interesting thing that dudley actually said is he talked about whether he wanted to raise rates based on what he thought was going to happen. but he said something rather telling, he said it was a forecast and not a commitment. there could be a 30% raise in december and i inc. -- 30 in december and i don't think they

are going to raise rates this aar and the fed has become bit more bullish was the membership will change in january. david: i just want to take a look at my terminal here and gauge a look at those increase changes. 39 and 53 int march, so that is a take on what economists are thinking about. taylorbill dudley with and bill dudley rejecting the taylor rule out of hand. i think that is right, but the story also reports that the rule was never met -- meant to be followed mechanically. when you look at the rule, it really depends on what you put into it. i think we have the evidence right now that shows the thatbility is better --

flex ability is better than tight rules. perhaps if you put the right things into the rules, interest rate could be strongly negative, and that would suggest that you would do stimulus. members of the fed would be fighting about what goes into the rule, and what measures go into certain things. i think it was an interesting intervention by my old friend john who said that his view should not be followed mechanically. bill dudley said we should not follow it mechanically. old friend, john, i love it. the data, purely, or are we hearing so much. i am just looking at the agenda for today, we have bill dudley and loretto master from cleveland. again, this is ahead of the blackout period. have they given a thought about a rate increase?

is thathe problem is the folks at the central bank are not psychic. was asked about this and he said because they had been so bad at forecasting things and they had been to optimistic. they hope to normalize but let's get real, there is no formal plan. they don't exactly know how to extricate themselves, and when they say they are following the data, they really are. weakroblem is the data is and certainly between now and december and now and january, there is no chance for the data to resolve this problem. so you are going to revert to better not to do anything and then the danger is to cut back to negative at some places. be careful, sit where you are,

and i see no chance really of a rate rise. david: all right, danny, that is flower joining us from dartmouth college. our next guest says now is the time when long and short term strategies will be increasingly important. that is his outlook coming up next. . ♪ david: welcome back to the

"bloomberg market day." i'm david gora. it is been a challenging day of the markets and investors mentioned that they would be closing their micro-fund. we willined now and play market meteorologist now. give us a sense of the weather with hedge funds. this is a very challenging time.

>> it has been a challenging time for any investments dreaded g. tohas been very difficult post positive returns on the year. we have had the macro driving the micro and a lot of events driving the headlines and that takes away from cash flows and underlying strategies, but it is important to remember that hedge funds are a broad category and what we are seeing is the nondirectional hedge fund strategies are faring pretty well. david: let me ask you about this as we approach the end of the near -- the year. >> what we have to keep in mind create people can different portfolios that have different types of market sensitivity and right now what we are seeing is an outperformance on the hedge funds that have less sensitivity

to the market. i think it is important to keep a long-term perspective here, so if you look at class valuations and equity valuations relative to where growth can go, it is likely to be positive, but not hitting it out of the park. what that means for urinate -- ist that means for earnings you're going to face volatility. strategies in general can be a big diversify or permit david: -- big diversifier. david: are there any bright spots that show a lot of promise? >> we are sure to be searching for price lots. however, when you look forward, and aggregate -- an aggregate quarter shows

emerging markets and it is going for us, i think the picture still looks like a long ,ollar type of somatic exposure which is the right way to be positioned over the next couple of months. david: i just wanted to point out one of the things from your notes as well. the fed disappointed some with its non-, but in other basis, you're going to have other responses. thank you so much. cindy trick with pimco. -- sam dietrich with pimco. ♪ david: from bloomberg's world

headquarters in new york, this is "bloomberg market day." i am david gora.

we are joined by mark crumpton at the bloomberg news desk. mark? mark: thank you, david. asked what shes thought of current housing and head williamment castro. he is among the best leaders in america, so i'm going to really look hard at him for anything, because that is how good he is. secretary castro is reportedly endorsing clinton for president. and former house speaker dennis hester will enter a guilty plea later this month. this is in regards to charges of paid annis hastert

former student hush money. of lying about money and this happened when he was a high school leader and wrestling coach. move.s. treasury secretary the debt limit deadline up two days to november 3. prosecutors in scotland say they have identified two libyans as suspects in the 1988 bombing of a passenger jet over lockerbie. the scottish detectives are libyan authorities before scottish detectives and american fbi agents to have permission to question these libyan suspects. and a good portion of the united states will have a wet winter but not necessarily a snowy one. oceanic atmospheric

administration, or noaa, winter in the her south but to the north it should ter winter inet the south but the north it should be dry. some: let's take a look at of the movers in the commodity market. gold is up a little bit after a two day move. it is a different story when it comes to oil. is probably because the global supply glut will continue. petrobras canceling a $2 billion deal. i believe the way the petrobras

categorize this was it was pulling back its offer. what is going on here, chris? have deals to marketas, so in this condition, it is very volatile in brazil, such as exchange rates following -- rates falling . david: the market is also embroiled in a political stand -- political scandal. tell us where that stands? we have this going out with petrobras, we have the have fiscalrying to adjustment, and with that fiscal

there was a downgrade in august and a downgrade in september, so people can buy bonds from petrobras. just askris, let me you about how the company might get out of this. what do people say the future of the company might hold? chris: i think the picture is not so good at all. the company has $60 billion maturing in debt in the next four in years, and they need to hold it over. so how they are going to do that, it is a mystery, maybe they will have to rely on banks, local banks, international banks, and development banks from china and governments that

have least this to brazil. chris, thank you very much for your time. she joins us from brazil. to --rose a -- from blaze let's bring in david webster with a preview permit what are you going to be listening for in the phone call today when the earnings are coming out? what we are really looking for is to see what happens with international margins. the revenuet of from outside in canada, and we are expecting the problems affecting the north american market are starting to slowly spread to the international markets as well. oild: first, what is this service company, and how does this oil service company fair?

david: they have been the first to take this problem. they are hired to bring in the the key technology to scan pockets of oil underground and because they have such large staff and a lot of contractors, they are the first to take the job cuts hit. david: you mentioned that schlumberger is kind of the exception. where the pockets that it is focused on? david w.: it is everywhere. all tentacles are reaching of the spots, saudi arabia and the north sea and off the coast of africa and brazil one time as well. are every where. australia and asia as well. it is everywhere. has its strategy

been? w.: it has been quite aggressive at cutting costs. it has laid off the most worker out -- workers out of everybody in the pack. but it has been sort of at the front of things to get ahead of costs and at the same time, trying to do the best it can to sort of hold on to what profit margin it can and its customers try to bring prices down and when you are at the top of everyone else, you are going to have a little bit better leverage at the guys -- and the guys at the lower end of the totem pole. earnings schlumberger are out today. what is up next? .: then we are going to look at numbers to, three, and four -- two, three, and four.

america hashow much hurt halliburton, basically, and then we will hear from baker hughes and weatherford as well. david: david, thank you so much for your time. coming up in the next hour of "bloomberg market day," the beaches may be sunny, but the commonwealth has had a stormy situation for month. -- months. is there a bailout for puerto rico? the truth about serrano's -- about theranos. whoyou won't believe netflix is blaming for its disappointing quarter. that is all coming up next. ♪ david: welcome back to the

"bloomberg market day." i am david gora. time to look at the bloomberg business flash. billion takeover from budweiser to miller. couldllion in bonds possibly be issued in multiple currencies. the takeover is the biggest consumer deal ever. "bloomberg news" has figured out is said tohe bank plan the sale of u.s. private client brokerage. that does not include deutsche

bank's u.s. private bank. u.s. investigators want answers from valiant about its drug price increases. afterave subpoenas issued the prices raised on a number of drugs this year. you can also get more news at bloomberg.com. stocks are getting it boosts. julie hyman has more from the markets desk. julie: markets are doing well today. it is broad-based financials. and spider looking etf's arer up-to-date. -- it iscan know

coming out with its earnings. citigroup was beating estimates and shares are up almost 5%. bouncing back from yesterday's losses. out goldman sachs is coming with lagging, but it turned higher and really gained strength throughout the day. as for the regional banks, we talked a little bit about them. companies like cmp financial came out with their results and we are also seeing those stocks gain. i was talking with erik schatzker, and he is looking at the efficiency of these stocks. he is seen it in to some -- seeing it improve to some extent. that is, it has been going lower over the last three years. the overall trajectory has been well.

and we saw a couple of banks, wells fargo kicked up a little again, theerall, companies are getting better at managing their expenses and that is what investors want to hear right now. way tot you can cut your a little bit that her profit. david: thank you very much. julie hyman at the market desk. and looking at puerto rico's debt, it is looking to restructure it debt. put a ricoh's about $73 billion after years of delayed debt payments. may we can get a lay of the land and see how bad things are in puerto rico. >> things are bad when you have to be in the talks with the treasury. things are pretty rocky. i would like to point out here with the story that was

reported, what i find really ateresting is that it is not bailout, it is not the federal government treasury gearing teen, what they are actually doing and what they are actually planning in their talks is twitter ricoat already collects and putting it into treasury accounts. enough to convince some bondholders that they can go ahead and exchange a bond for it. i want to get into that in just a moment. to play all, i want clip from hector the groaning -- hector negrone. hector: the problems that puerto rico faces are many. on the top of that, they have probably not dealt with the necessary realities in endorsing

the forms of the government. cut some of the expenses and probably restructure the insolvent part of the debts. david: is there much more than puerto rico can do if it is talking to the treasury department and a lot of lawmakers? our their hands kind of tied at this point? hands kind of tied at this point? >> i think they really are at this point. there is nothing more than put a rico -- that twitter rico can give. there is not a lot more to tax so there is not a lot more revenue. there is no chapter nine for bankruptcy. you can't force it. so if you have this treasury super bond, that could be something that they want.

and it could give them a lot more options and give them a constitutionally guaranteed way of repayment. ford: how difficult is this puerto rico as compared to a city or state? how different is it for puerto rico in this position? trustworthyof how they are, i think over time, puerto rico has become untrustworthy. they only missed one payment ever, but they are not transparent, so they can't really sit there and say that this money is there and that they have been reserving it. rico is not that puerto any different from the outset, but it is the choices that they have made over time that now makes them a friend. it is different than chicago or detroit, which was able to sell things. david: so we have been talking

about the super bond that is reportedly being talked about between puerto rico and the treasury department, and i should say that it was denied by the treasury department shortly thereafter. what are the steps in place for puerto rico? >> there would be puerto rico getting the availability to say, we have an exchange for you, we have some options, you can take this, and if you don't, we will be able to force you. the territory itself is not able to do that. there is a lot of controversy over whether that is allowed, because in puerto rico, it is [indiscernible] so i think there are some legal issues there. and then you have all of the political debate in congress, so will republicans really back this?

so anything that congress would do, could it be backed without furloughs in the government? there would be austerity measures, i don't know if they are going to back something like a chapter nine, which they would need approval for. quickly, you and mentioned they missed one payment. what is the timetable going forward? yields could potentially be very interesting but it isn't happening fast enough. there is a big chunk of change comingng up here -- due up. in december. possiblyan do that, they can save themselves for a little while longer. david: thank you very much for your time. coming up on the "bloomberg holmes is," elizabeth

one of the most successful investors in silicon valley. people callingw into question her strategy with theranos, coming up. ♪

david: welcome back to the "bloomberg market day." i am david gora. blood testing startup theranos has been a silicon valley darling. but apparently, it's tests are unreliable. elizabeth holmes shot back on twitter.

emily chang joins us now. company thats a has been very closely watched. whoabeth holmes is someone has been very closely watched. tell us a it about the ramifications of this sort of report. the article was shocking, a lot of shocking allegations was in this piece. let me tell you what theranos does. they have this technology, they say they have this technology where you can run blood results on a single lab test, but theranos has trade secrets. there are questions about how accurate this technology is and tother theranos was able solidify these tests. the "journal" alleges that they

have not. elizabeth holmes said on twitter that they were wrong. long when youhis, threaten to change things seated by in trench interests who will do anything to change, but in the end, nothing will deter us. aat is what she said with theranos statement. i did get a chance to sit down with elizabeth holmes last week. we talked about her company and we talked about her vision. we have not actually seen it it's yet. take a listen to what she had to say. it is reallyr us, about making sure that we build a solid foundation. we want to make sure we don't have a company that would grow too fast. but in this stage, a company can't grow too fast because the stakes are too high.

we want a framework and build on -- to build on so we can create security. this is a company that has a $9 billion valuation. expertswith independent and some doctors and we are going to try to break this down on bloomberg west. people are telling me that this is possible but it is a very early stage. so elizabeth has some questions to answer here. ofy submitted 1000 pages documentation that the "journal" apparently used. and it is blood test said that they did not take them up on the opportunity. she has an all-star board. we are talking that henry , bill frist, sam nunn, former senators, super heavy hitters on her board.

we get how they might help her negotiate through 10, but it is strange how they would help her negotiate being a health care technology company. that is something that we asked her and we brought up the fact that they have a lot of hard battles to fight in health care and in government they are trying to fight those battles. those are doubly a lot of questions and we are going to raise a lot of those questions. david: emily chang, the anchor of bloomberg west. be sure to watch her show with facebook ceo chief technology bret taylor.cer ♪

the " bloomberg

market day." betty: here's what we're watching this hour. it's a forecast, not a commitment. betty: bill dumbly speaking today, admitting recent data suggesting the economy is slowing down. looking at bank earnings, a trading revenue was hit hard the third quarter but there may be brighter times ahead. we find out how hedge funds are playing the banking sector. this year's test ipo market just got dealt another setback. our since pulled its offering at the last minute.